2018 AGENCY FINANCIAL REPORT
USDA AGENCY FINANCIAL REPORT | 2018 

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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 the agency’s Equal 

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

discriminatory act, event, or personnel action. Contact the EEO Counselor that serves the 

agency you feel has discriminated against you. 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 as an acceptable 

alternative. 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. 

Persons with disabilities who require alternative means for communication of program 

information (Braille, large print, audiotape, etc.) should contact USDA’s Technology 

Accessible Resources Give Employment Today (TARGET) Center at (202) 720-2600 (voice 

and Telecommunication Device for the Deaf [TDD]). 

Send your completed USDA Program Discrimination 

Complaint form or letter to us by mail, fax, or email to the 

address provided on the right. Employment civil rights 

complaints will not be accepted through the email address. 

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 AGENCY FINANCIAL REPORT | 2018 

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About the Report 

The purpose of the U.S. Department of Agriculture (USDA) fiscal year (FY) 2018 Agency 

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

USDA has used Federal resources entrusted to the Department in FY 2018. USDA strives to 

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

related issues based on public policy, the best available science, and effective management. 

USDA provides economic opportunity through innovation designed to ensure rural America 

thrives; promotes agriculture production to better nourish Americans while also helping to feed 

others throughout the world; and preserves our Nation’s natural resources through 

conservation, restored forests, improved watersheds, and healthy private working lands. USDA 

has demonstrated good stewardship of taxpayer resources by putting in place well-controlled 

and well-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 2018. USDA 

will include its FY 2018 APR with its Congressional Budget Justification and will post this 

AFR online at www.usda.gov. 

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: 

• Chief Financial Officers Act of 1990; 

• Federal Managers’ Financial Integrity Act of 1982; 

• Federal Financial Management Improvement Act of 1996; 

• Government Performance and Results Act (GPRA) of 1993; 

• GPRA Modernization Act of 2010; 

• Government Management Reform Act of 1994; 

• Grants Oversight and New Efficiency (GONE) Act, Public Law (PL) 114-117; 

• Improper Payments Information Act of 2002; 

• Improper Payments Elimination and Recovery Act of 2010; 

• Improper Payments Elimination and Recovery Improvement Act of 2012 (IPERIA); 
USDA AGENCY FINANCIAL REPORT | 2018 

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

Internal Controls; 

• Office of Management and Budget Circular A-136, Financial Reporting Requirements; 

and

• Reports Consolidation Act of 2000. 

The AFR 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 www.usda.gov. 
USDA AGENCY FINANCIAL REPORT | 2018 

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Table of Contents 

MESSAGE FROM SECRETARY PERDUE ..............................................................................................VI

SECTION I: MANAGEMENT’S DISCUSSION AND ANALYSIS ............................................................... 1 

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

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

Vision Statement............................................................................................................................ 1

USDA Organization Chart1: ........................................................................................................... 2

USDA Mission Areas....................................................................................................................... 3

USDA Program Performance ......................................................................................................... 6

Future Demands, Risks, Uncertainties, Events, Conditions, and Trends ..................................14

Financial Statement Highlights....................................................................................................15

Statement of Assurance ..............................................................................................................19

Federal Managers’ Financial Integrity Act Report on Management Control............................20

Compliance with Laws and Regulations .....................................................................................32

Improper Payments Elimination and Recovery Act of 2010 as Amended ...............................39

Federal Financial Management Improvement Act Report on Financial 

Management Systems Background ............................................................................................40

Financial Management Systems Strategy ...................................................................................42

Other Management Information, Initiatives, and Issues: .........................................................48

SECTION II: FINANCIAL INFORMATION............................................................................................52

Message from the Deputy Chief Financial Officer .....................................................................52

Independent Auditors Report .....................................................................................................54

Agency Response to Auditors Report .........................................................................................74

Consolidated Financial Statements .............................................................................................75

Notes to the Consolidated Financial Statements .......................................................................79

Required Supplementary Stewardship Information ................................................................134

Required Supplementary Information ......................................................................................145

SECTION III: OTHER INFORMATION ...............................................................................................151

Response to Management Challenges .....................................................................................151

Summary of Financial Statement Audit and Management Assurances ..................................165

Payment Integrity ......................................................................................................................167

Fraud Reduction Report ............................................................................................................227

Inspector General Act Amendments of 1988: Management’s Report on Audit Follow Up .....238

Reduce the Footprint .................................................................................................................254

Civil Monetary Penalties ............................................................................................................256

Grant Oversight and New Efficiency (GONE) Act .....................................................................273

ABBREVIATIONS—ACRONYMS.......................................................................................................275
USDA AGENCY FINANCIAL REPORT | 2018 

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Message from

Secretary Perdue

In my time as U.S. Secretary of Agriculture we have accomplished a 

great deal. This would not have been possible without the finest group 

of public servants in the United States who make up the

U.S. Department of Agriculture (USDA).

Our policies have been guided by four principles that have informed

our every decision and action. First, we have helped maximize the 

ability of the men and women of America’s agriculture and 

agribusiness sector to create jobs, to produce and sell the foods and 

fiber that feed and clothe the world, and to reap the earned rewards of 

their labor. It is our aim to remove every obstacle possible and give farmers, ranchers, foresters, 

and producers every opportunity to prosper. Second, we have worked hard to prioritize 

customer service every day for American taxpayers and consumers. They will expect, and have 

every right to demand, that their government conduct the people’s business efficiently, 

effectively, and with the utmost integrity. Third, as Americans expect a safe and secure food 

supply, USDA has continued to serve in the critical role of ensuring that the food we put on the 

table to feed our families meets the strict safety standards we have established. We must never 

forget that we are the fortunate beneficiaries of past generations who put a premium on smart 

stewardship—protecting, preserving, and entrusting us with those valuable resources. And 

finally, we have kept in mind that America’s agricultural bounty comes directly from the land.

Today, those land resources sustain more than 320 million Americans and countless millions 

more around the globe. My farmer father’s words still ring true: “We’re all stewards of the

land, owned or rented, and our responsibility is to leave it better than we found it.”

Today, we are engaged in a global economy in which the United States is a world leader.

We are blessed with the ability to produce more than our citizens can consume, which implies 

that we should sell the bounty around the world. The relationship between the USDA and its 

trade representatives, as well as with the U.S. Trade Representative and the U.S. Department of 

Commerce, have been vital. The work of promoting American agricultural products to other 

countries began with those relationships and will benefit us domestically, just as it will fulfill 

the moral imperative of helping to feed the world. These ideas must also light the path we walk 

at USDA, and just as we have done during my time as Secretary, we will continue to be 

unapologetic advocates for American agriculture.
USDA AGENCY FINANCIAL REPORT | 2018 

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The USDA I envisioned in my first days as Secretary was one that is fact-based, and which 

makes data-driven, customer-focused decisions. We are working each day to make this a reality. 

We are opposed to lamenting the difficult challenges we face; instead we focus our efforts on 

finding solutions to problems. The public servants who work at USDA know that they work on 

behalf of the American people, and those people—our customers—expect results. No doubt, 

there is great talent here at this agency—probably more than at any other place in the Federal 

Government—both in the Washington Capital Region and in even greater numbers in the world 

that stretches out across America and the globe. It truly is a pleasure to learn from them. 

As a simple Georgia farm boy, making sure Americans who make their livelihood in the 

agriculture industry are thriving is near and dear to my heart. We have continued to champion 

the concerns of American agriculture and worked tirelessly to solve the issues facing our farm 

families. As shown in this report and mentioned previously, here at USDA, we strive to be the 

most efficient, most effective, and most customer-focused department in the entire Federal 

Government. The farmers, ranchers, foresters, and producers we serve are the heart of this 

country, and we would not be here without them. They deserve the best we have to offer, and 

I know that is exactly what they get from the USDA family. 

Sincerely, 

Sonny Perdue 

U.S. Secretary of Agriculture 

November 14, 2018 
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SECTION I | MANAGEMENT’S DISCUSSION 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 more than 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 

Provide leadership on agriculture, food, natural resources, rural infrastructure, nutrition, and 

related issues through fact-based, data-driven, and customer-focused decisions. 

Vision Statement 

Do right and feed everyone.
USDA AGENCY FINANCIAL REPORT | 2018 

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USDA Organization Chart1: 

Secretary 

Deputy Secretary 

Assistant to the Secretary for 

Rural Development 

• Rural Housing Service 

• Rural Utilities Service 

• Rural Business Cooperative 

Service 

Assistant Secretary 

for Civil Rights 

Assistant Secretary 

for Congressional 

Relations 

Assistant Secretary 

for Administration 

Office of the 

Inspector 

General 

Office of the 

General Counsel

Office of the 

Chief Financial 

Officer 

Office of the 

Chief Economist 

Office of 

Budget and 

Program Analysis

Office of 

Communications 

Office of 

Partnerships 

and Public 

Engagement 

Office of 

Tribal Relations 

Office of 

Hearings and 

Appeals 

Office of the 

Chief 

Information 

Officer 

Under Secretary for Food 

Safety

• Food Safety and 

Inspection Service 

Under Secretary for 

Marketing and Regulatory 

Programs 

• Agricultural Marketing 

Service 

• Animal and Plant Health 

Inspection Service 

Under Secretary for Natural 

Resources and Environment 

• Forest Service 

Under Secretary for Food, 

Nutrition, and Consumer 

Services 

• Food and Nutrition Service 

Under Secretary for Farm 

Production and 

Conservation 

• Farm Service Agency 

• Risk Management Agency 

• Natural Resources 

Conservation Service 

Under Secretary for Trade 

and Foreign Agricultural 

Affairs 

• Foreign Agricultural 

Service 

• Codex Alimentarius 

Commission 

Under Secretary for 

Research, Education, and 

Economics 

• National Institute of Food 

and Agriculture 

• Economic Research 

Service 

• National Agricultural 

Statistics Service 

• Agricultural Research 

Service This organization chart displays the names of USDA offices, agencies, and mission areas. Each office, agency, and mission area is placed within a cell connected by lines to show the 

structure and hierarchy (Under Secretary, Deputy Secretary, or Secretary) for which they fall under. An HTML version that lists USDA Agencies and Offices and USDA Mission Areas is 

also available on usda.gov. 
SECTION I | MANAGEMENT’S DISCUSSION AND ANALYSIS 

3 

USDA Mission Areas 

RURAL DEVELOPMENT 

Rural Development (RD) 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 telecommunications service. RD 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

TRADE AND FOREIGN AGRICULTURAL AFFAIRS 

Trade and Foreign Agricultural Affairs (TFAA) is American agriculture’s unapologetic advocate 

and chief advocate around the world. With a sharp focus on foreign markets, TFAA ensures that 

American producers are well equipped to sell their products and feed the world. 

• Foreign Agricultural Service

• Codex Alimentarius Commission

FOOD, NUTRITION, AND CONSUMER SERVICES 

Food, Nutrition, and Consumer Services (FNCS) works to harness the Nation’s agricultural 

abundance to end hunger and improve health in the United States. FNCS administers Federal 

domestic nutrition assistance programs. 

• Food and Nutrition Service (including Center for Nutrition Policy and Promotion) 
USDA AGENCY FINANCIAL REPORT | 2018 

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FARM PRODUCTION AND CONSERVATION 

Farm Production and Conservation (FPAC) is the Department’s focal point for the Nation’s 

farmers and ranchers and other stewards of private agricultural lands and non-industrial private 

forest lands. FPAC agencies implement programs designed to mitigate the significant risks of 

farming through crop insurance services, conservation programs, technical assistance, and 

commodity, lending, and disaster programs. 

• Farm Service Agency

• Risk Management Agency

• Natural Resources Conservation Service

NATURAL RESOURCES AND ENVIRONMENT 

Natural Resources and Environment (NRE) oversees efforts to: get our forests working again 

to make them more productive, as well as create more jobs. The focus of NRE is on ensuring 

we are good neighbors and are managing our forests effectively, efficiently, and responsibly, 

as well as working with states and local governments to ensure the utmost collaboration. 

• Forest Service

FOOD SAFETY 

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

processed egg products is safe, wholesome, and properly labeled and packaged. Food Safety 

serves in the critical role of ensuring the food we put on the table to feed our families meets the 

strict safety standards we have established. 

• Food Safety and Inspection Service

RESEARCH, EDUCATION, AND ECONOMICS 

Research, Education, and Economics (REE) 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. 

• Agricultural Research Service

• National Institute of Food and Agriculture
SECTION I | MANAGEMENT’S DISCUSSION AND ANALYSIS 

5 

• Economic Research Service

• National Agricultural Statistics Service

MARKETING AND REGULATORY PROGRAMS 

Marketing and Regulatory Programs (MRP) 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. 

• Agricultural Marketing Service

• Animal and Plant Health Inspection Service
USDA AGENCY FINANCIAL REPORT | 2018 

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USDA Program Performance 

USDA PERFORMANCE AND RESULTS FOR FY 2018 

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. 

For purposes of the Agency Financial Report (AFR), a performance summary is provided using 

the Department’s key performance indicators as a mechanism to gauge progress in achieving its 

mission. In fiscal year (FY) 2018, USDA had 35 key performance measures. 

The following tables and discussion provide a high-level description of the Department’s key 

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

process. The tables provide key performance indicator historical results and include FY 2018

preliminary results indicating anticipation in meeting/not meeting performance targets. 

Final performance information and a detailed discussion of the Department’s FY 2018 

performance results, assessment methodologies, metrics, external reviews, and documentation 

of performance data will be presented in the FY 2018 USDA Annual Performance Report. 

The report is planned to be released with the President’s 2020 budget in February and will be 

available on the USDA Performance Improvement and Accountability Web site. 

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. 
SECTION I | MANAGEMENT’S DISCUSSION AND ANALYSIS 

7 

STRATEGIC GOAL 1: ENSURE USDA PROGRAMS ARE DELIVERED 

EFFICIENTLY, EFFECTIVELY, WITH INTEGRITY, AND A FOCUS ON 

CUSTOMER SERVICE 

The Department will modernize and consolidate information technology (IT) infrastructure and 

services, as well as strengthen management and oversight of procurement, property, and 

finances to ensure our resources are deployed as effectively and efficiently as possible. We will 

create a safe and modern space within which employees can work and feel empowered to find 

innovative solutions to serve our customers’ needs and will promote accountability and 

professional development. USDA will leverage the strength and talent of our employees and 

reduce regulatory and administrative burdens to allow agencies to focus on our customers. 

Improved customer service and employee engagement will create a more effective and 

accessible USDA for all our stakeholders.

EXHIBIT 1: Strategic Goal 1 Performance Measures 

Performance Measures FY 2017 

Baseline Data 

FY 2018 

Target 

FY 2018 

Preliminary Results 

Reduce the number of data centers across 

the Department 

39 20 Met 

Maintain ranking of the Top 10 Best 

Places to Work in the Federal Government 

for large agencies by the Partnership for 

Public Service 

7 Top 10 Deferred 

Reduce the Department’s overall real 

property footprint through effective 

disposal and consolidation efforts 

(Million Square Feet) 

31.9 31.6 Deferred 1

Reduce the Department’s total number of 

light-duty fleet vehicles (Thousand) 

29.4 28.8 Met 

 

1 The release in the Corporate Property Automated Information System (CPAIS) for tracking Reduce the 

Footprint status has been delayed. There are also issues with how the General Services Administration 

data is being replicated from Rent on the Web to CPAIS and how this data is being updated in CPAIS. 
USDA AGENCY FINANCIAL REPORT | 2018 

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STRATEGIC GOAL 2: MAXIMIZE THE ABILITY OF AMERICAN 

AGRICULTURAL PRODUCERS TO PROSPER BY FEEDING AND CLOTHING 

THE WORLD 

A strong and prosperous agricultural sector is essential to the well-being of the U.S. economy. 

America’s farmers and ranchers ensure a reliable food supply, support job growth, and promote 

economic development. To maintain a competitive agricultural sector, USDA will support 

farmers and ranchers’ ability to start and maintain profitable businesses as well as offer 

financial support to producers affected by natural disasters. Furthermore, USDA’s research 

agencies will continue to introduce high-performance plants, animals, and integrated 

management options that increase the efficiency of farming practices. Lastly, USDA will also 

provide tools to producers so they are well-positioned to secure a share of a growing market for 

agricultural products. 

EXHIBIT 2: Strategic Goal 2 Performance Measures 

Performance Measures FY 2017 

Baseline Data 

FY 2018 

Target 

FY 2018 

Preliminary Result 

The annual normalized value of risk 

protection provided to agricultural 

producers through the Federal Crop 

Insurance program ($ Billion) 

$74.6 $64.0 Met 

Average number of days to process direct 

loans (Farm Service Agency) 

31 31 Met 

New markets established or expanded 

through technical assistance 

100 104 Met 

Percent of high-risk plant pests for which 

early detection surveys are conducted 

92% 93% Met

Number of National Animal Health 

Laboratory Network participating labs able 

to electronically message animal disease 

testing results to USDA 

31 35 Met 

Number of hours it takes to mobilize 

resources once it is determined that a 

Federal emergency response is needed to 

manage an agricultural outbreak 

24 24 Met 
SECTION I | MANAGEMENT’S DISCUSSION AND ANALYSIS 

9 

STRATEGIC GOAL 3: PROMOTE AMERICAN AGRICULTURAL PRODUCTS 

AND EXPORTS 

Expanding international marketing opportunities for U.S. farmers and exporters is critical to 

business and income growth across rural America. It is essential for USDA to continue its 

efforts to promote American agricultural products and exports through promotional activities, 

development of international standards, removal of trade barriers by monitoring and enforcing 

existing trade agreements, and negotiation of new trade agreements that benefit the U.S. 

agricultural economy. USDA will also partner with developing countries to move them along 

the agricultural market continuum from developing economies to developed economies with 

promising demand potential. Ultimately, this work will build the foundations for future markets 

and create long-term international relationships that advance U.S. agriculture’s exports. 

EXHIBIT 3: Strategic Goal 3 Performance Measures 

Performance Measures FY 2017 

Baseline Data 

FY 2018 

Target 

FY 2018 

Preliminary Result 

Value of agricultural exports resulting from 

participation in foreign food and 

agricultural trade shows ($ Billion) 

$1.522 $1.70 Met 

Value of trade preserved through 

resolution of foreign market access issues 

such as U.S. export detainment, restrictive 

Secure Payment System (SPS) and 

Technical Barriers to Trade (TBT) issues, 

and trade regulations ($ Billion) 

$3.63 $4.0 Met 

Percentage of Food for Progress projects 

that increase a project participant’s value 

of sales by 9% or higher 

33% 35% Met 

 

2 Baseline Data FY 2015 

3 Baseline Data FY 2015 
USDA AGENCY FINANCIAL REPORT | 2018 

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STRATEGIC GOAL 4: FACILITATE RURAL PROSPERITY AND ECONOMIC 

DEVELOPMENT 

USDA promotes rural prosperity and economic development by financing investments in rural 

utilities, housing, and businesses. When rural Americans share the same level of infrastructure 

services as the country’s urban areas, rural communities can make even greater economic 

contributions with healthy businesses and families. Just as economic and social science 

research informs decision makers regarding current trends in rural America and gaps in existing 

markets, USDA may then provide benefits to rural American businesses and citizens. USDA 

will leverage funds, stimulate private-public partnerships, and engage in collaboration to build 

rural infrastructure including the following: broadband, community facilities, safe and 

affordable housing, and health services and facilities. The Department will also provide 

capacity building to help underserved communities become thriving communities. 

EXHIBIT 4: Strategic Goal 4 Performance Measures 

Performance Measures FY 2017 

Baseline Data 

FY 2018 

Target 

FY 2018 

Preliminary Result 

Health Facilities: Percent of customers who are 

provided access to new and/or improved essential 

community facilities 

5.0% 6.8% Not Met4

Safety Facilities: Percent of customers who are 

provided access to new and/or improved essential 

community facilities 

3.7%5 4.5% Met 

Number of borrowers’ subscribers receiving new 

and/or improved electric facilities (Million) 

4.66 5.1 Met 

Number of borrowers’ subscribers receiving new 

and/or improved telecommunication services 

(Million, Noncumulative) 

0.158 0.175 Not Met7

Amount of targeted Rural Development (RD) 

investments that leverage private sector funding 

($ Billion) 

$7.0 $7.5 Met 

 

4 Most of the obligations occur in the fourth quarter, therefore it is difficult to predict the exact percentage. 

Rural Development may meet the target, although it is being reported as “not met” in this report.

5 Baseline Data FY 2014 

6 Baseline Data FY 2014 

7 A significant amount of alternative grant funding is available through the Federal Communications 

Commission (FCC) Connect America Fund II Auction (which occurred between July 24, 2018, and August 

21, 2018) and the $600 million in funding from the FY 2018 Omnibus for the Rural Utilities Service (RUS) 

Broadband Pilot Program (GP 779). The availability of these two sources of grants has negatively 

impacted the demand for this program's loan funds. 
SECTION I | MANAGEMENT’S DISCUSSION AND ANALYSIS 

11

STRATEGIC GOAL 5: STRENGTHEN THE STEWARDSHIP OF PRIVATE 

LANDS THROUGH TECHNOLOGY AND RESEARCH 

The world population is expected to reach 9.6 billion by 2050. Feeding this population will 

require adoption of new science and technologies and the implementation of science-based 

conservation plans to sustainably increase agricultural production. To ensure U.S. private 

working lands and public agricultural landscapes are conserved, the Department will provide 

technical and financial assistance using the latest technology and research available. New and 

improved practices result from fundamental and applied research to understand the complex 

interactions between human systems and the environment and transferring the resulting 

knowledge into the hands of producers and land managers through information, tools, and 

decision support. 

EXHIBIT 5: Strategic Goal 5 Performance Measures 

Performance Measures FY 2017 

Baseline Data 

FY 2018 

Target 

FY 2018 

Preliminary Result 

Soil carbon retained on cropland to improve 

yields and sequester carbon (Thousand Tons) 

140 140 Met 

Cropland with conservation applied to improve 

soil quality (Million Acres)—Environmental 

Quality Incentive Program (EQIP) 

3.0 3.0 Met 

Cropland with conservation applied to improve 

soil quality (Million Acres)—Conservation 

Technical Assistance (CTA) 

5.9 5.9 Not Met8

Tons of sediment prevented from leaving 

cropland and entering waterbodies (Million Tons) 

4.6 4.6 Met 

Working land protected by conservation 

easements (Thousand Acres) 

60.7 80.0 Met 

Acreage enrolled in Conservation Reserve 

Program (CRP) riparian and grass buffers 

(Cumulative, Million Acres) 

1.6 1.6 Met 

CRP restored wetland acreage (Million Acres) 1.9 1.9 Met 

 

8

Increasing demand for technical assistance and a potential for delay in implementation of conservation 

planned practices may present a challenge in meeting targets. The vacancies of key field staff, such as 

soil conservationists in some areas, combined with severe weather is a risk, although the agency does 

have an aggressive field hiring plan being implemented. The full impact of these risks will not be clear 

until after the fourth quarter reporting period. 
USDA AGENCY FINANCIAL REPORT | 2018 

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STRATEGIC GOAL 6: FOSTER PRODUCTIVE AND SUSTAINABLE USE OF 

OUR NATIONAL FOREST SYSTEM LANDS 

The Nation’s forests and grasslands are a fundamental part of the American landscape and are a 

legacy that the USDA Forest Service holds in trust for present and future generations. Forests 

provide clean air and water, forest and rangeland products, mineral and energy resources, jobs, 

quality habitat for fish and wildlife, recreational opportunities, and memorable experiences. 

The Forest Service plays a critical role in making America’s forests and grasslands resilient to 

threats and disturbances while mitigating wildfire risk. The Department also manages the 

National Forests and grasslands to ensure that they are healthy and sustainable—while also 

allowing rural communities to access and benefit from economic opportunities that our Nation’s 

forests offer. This work is complemented by USDA’s research in forestry, ecology, and 

economics to ensure that world-class science guides effective policies and management practices.

EXHIBIT 6: Strategic Goal 6 Performance Measures 

Performance Measures FY 2017 

Baseline Data 

FY 2018 

Target 

FY 2018 

Preliminary Result 

Percent of customers satisfied with recreation 

facilities, services, and settings on National 

Forests 

95% 95% Met 

Timber volume sold (Billion Board feet) 2.9 3.4 Met 

Percent of National Forest Systems (NFS) 

watersheds in a functioning condition 

53% 53% Met 

Annual acreage of NFS lands where final 

treatment effectively mitigates wildfire risk 

741,765 1,100,000 Met 

Annual acreage treated to reduce or maintain 

fuel conditions on NFS and non-federal lands 

2,776,486 3,000,000 Met
SECTION I | MANAGEMENT’S DISCUSSION AND ANALYSIS 

13

STRATEGIC GOAL 7: PROVIDE ALL AMERICANS ACCESS TO A SAFE, 

NUTRITIOUS, AND SECURE FOOD SUPPLY 

USDA has critical roles in preventing foodborne illness and protecting public health while also 

ensuring Americans have access to food, a healthful diet, and nutrition education in a manner 

that supports American agriculture and inspires public confidence. The Department will take a 

number of actions to achieve this goal. First, to ensure the food supply is safe, the Department 

will continue to prevent contamination and limit foodborne illness by expanding its 

modernization of food inspection systems, and USDA’s research, education, and extension 

programs will continue to provide information, tools, and technologies about the causes of 

foodborne illness and its prevention. Second, USDA will continue to develop partnerships that 

support best practices in implementing effective programs to ensure that eligible populations 

have access to programs that support their food needs. This work includes research on the 

nutritional quality of Americans’ food and diets, as well as the continuing of the discovery of

the drivers of poor diets and nutritional choices. Lastly, USDA will collaborate with partners 

and stakeholders on strategies to reduce foodborne illness and childhood obesity and to 

improve diets. USDA ensures agriculture production incorporates the best available science 

into its modernization efforts to produce food that is safer, more nutritious, and secure. 

EXHIBIT 7: Strategic Goal 7 Performance Measures 

Performance Measures FY 2017 

Baseline Data 

FY 2018 

Target 

FY 2018 

Preliminary Result 

Percentage of establishments that meet 

pathogen reduction performance standards 

75% 78% Met 

Percentage of establishments whose 

noncompliance rate decreases 120 days after 

receiving early warning alert 

70% 71.4% Met 

Percentage of American households with 

consistent, dependable access to food 

87.3%9 87.7% Deferred 

Annual percentage of eligible children 

participating in the National School Lunch 

Program (NSLP) 

58% 59% Met 

Percentage of Supplemental Nutrition 

Assistance Program (SNAP) Employment and 

Training participants engaged in education and 

skills-based training 

33%10 35% Deferred 

 

9 Baseline Data FY 2015 

10 Baseline Data FY 2016 
USDA AGENCY FINANCIAL REPORT | 2018 

14

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 services 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; 

• 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. 
SECTION I | MANAGEMENT’S DISCUSSION AND ANALYSIS 

15

Financial Statement Highlights 

BALANCE SHEET 

Total Assets 

Total assets for FY 2018 were $238,774 million. The following exhibit presents FY 2018 

total assets.

EXHIBIT 8: Total Assets ($ in millions) 

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

RD, which comprises 87% of total Departmental loans, offers both direct and guaranteed loan 

products for rural housing and rural business infrastructure. Loan programs administered by 

FSA to farmers who are temporarily unable to obtain private, commercial credit represent 11% 

of the total. The remaining 2% represents commodity loans and credit programs administered 

by the Commodity Credit Corporation (CCC). Their 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. 
USDA AGENCY FINANCIAL REPORT | 2018 

16

Total Liabilities 

Total liabilities for FY 2018 were $161,116 million. The following exhibit presents FY 2018 

total liabilities. 

EXHIBIT 9: Total Liabilities ($ in millions) 

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 

RD, the debt primarily represents financing to support electric and housing loan programs. 
SECTION I | MANAGEMENT’S DISCUSSION AND ANALYSIS 

17

Net Cost of Operations 

Net cost of operations for FY 2018 was $134,461 million. The following exhibit presents 

FY 2018 net cost of operations by mission area. 

EXHIBIT 10: Net Cost of Operations by Mission Area ($ in millions) 
USDA AGENCY FINANCIAL REPORT | 2018 

18

Statement of Budgetary Resources 

The following exhibit presents FY 2018 total budgetary resources, obligations incurred, and net 

outlays by mission area. 

EXHIBIT 11: Budgetary Resources, Obligations Incurred, and Net Outlays by Mission Area 

($ in millions) 

Mission Area Rural 

Development 

Food Safety Marketing 

and 

Regulatory 

Programs 

Natural 

Resources 

and 

Environment 

Food, 

Nutrition and 

Consumer 

Services 

Farm 

Production 

and 

Conservation 

Trade and 

Foreign 

Agricultural 

Affairs 

Research, 

Education 

and 

Economics 

Departmental 

Management 

Budgetary Resources $36,919 $1,370 $4,243 $9,641 $143,711 $47,365 $849 $4,376 $1,866 

Obligations Incurred $22,646 $1,295 $2,984 $8,476 $99,734 $35,663 $525 $3,345 $1,476 

Net Outlays $4,568 $1,055 $2,147 $6,498 $97,228 $25,451 $366 $2,778 $327 
SECTION I | MANAGEMENT’S DISCUSSION AND ANALYSIS 

19

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 three 

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, 2018, and financial reporting as of June 30, 2018. 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. 

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, 2018, and (2) internal control over reporting as of June 30, 2018. 

Sonny Perdue 

Secretary of Agriculture 

November 14, 2018 
USDA AGENCY FINANCIAL REPORT | 2018 

20

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 their programs operate efficiently 

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

systems conform to applicable laws, standards, principles, and related requirements. 

In conjunction with the Office of Inspector General (OIG) 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. 
SECTION I | MANAGEMENT’S DISCUSSION AND ANALYSIS 

21

FISCAL YEAR (FY) 2018 RESULTS 

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

reporting: Information Technology (IT) 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), Commodity Credit Corporation 

(CCC) and the Risk Management Agency (RMA). USDA also has one existing system 

non-conformance related to Funds Control Management within the CCC, which will be 

resolved by the end of fiscal year (FY) 2020. 

The Food and Nutrition Service and the Farm Service Agency (FSA) are non-compliant with 

laws and regulations related to the Improper Payments Elimination and Recovery Act of 2010, 

as amended. 

USDA has identified violations or potential violations with the Anti-deficiency Act (ADA). 

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

A detailed description and summary of the Department’s ADAs, can be found in the 

Compliance with Laws and Regulations section of this report. 

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. 
USDA AGENCY FINANCIAL REPORT | 2018 

22

SUMMARY OF OUTSTANDING MATERIAL WEAKNESSES

The following exhibit provides FY 2018 accomplishments and FY 2019 planned actions toward 

resolving the outstanding material weaknesses. 

EXHIBIT 12: Summary of Outstanding Material Weaknesses 

1. USDA Information Technology (IT) 

Material 

Weaknesses Existing 

The Department lacks an effective information security program. 

Unimplemented recommendations that address many longstanding 

weaknesses (related to risk management, configuration management, 

identity and access management, security training, information 

security continuous monitoring, incident response, and contingency 

planning) remain outstanding. 

Overall Estimated 

Completion Date FY 2020 

 FY 2018 Accomplishments: FY 2019 Planned Actions: 

During FY 2018, the Office of the Chief 

Information Officer (OCIO): 

▪ Tracked outdated Plans of Actions and 

Milestones (POA&M) identified as part of 

material weaknesses and reported progress 

to USDA leadership on a weekly basis. 

Leveraged the department’s biweekly 

scorecard reports and weekly meetings with 

our agencies; OCIO worked with specific 

agencies to achieve proper and full 

remediation of weaknesses across USDA; 

▪ Performed security assessments on select 

agencies; 

▪ Began performing penetration testing of all 

USDA agencies; 

▪ OCIO continued to assess the U.S. 

Department of Homeland Security’s (DHS) 

Cyber Hygiene Assessment reports and 

worked with agencies to remediate findings 

of critical vulnerabilities in 30 days or less; 

OCIO continued its integration of the 

Continuous Diagnostics Mitigation (CDM); 

For FY 2019, OCIO will: 

▪ Perform security assessments on select 

agencies; 

▪ Continue to perform penetration tests of 

all USDA agencies, including DHS’ Risk and 

Vulnerability Assessment (RVA) of select 

agencies with High Value Assets (HVAs); 

▪ Transition CDM Phase 2 tools to full 

operations in Q2 FY 2019;

▪ Close all outstanding OIG Federal 

Information Security Management Act 

Audit Recommendations from FY 2010 

through FY 2016;

▪ Assess, plan, design, and implement a 

consolidated Cybersecurity Operations 

organization at USDA to provide a 

centralized and enterprise-level source of 

cyber security and risk management 

controls, functions, and capabilities; 

▪ Develop processes and procedures to 

track, monitor, and enforce security 

configuration baselines for USDA servers; 
SECTION I | MANAGEMENT’S DISCUSSION AND ANALYSIS 

23

1. USDA Information Technology (IT) Continued 

FY 2018 Accomplishments: FY 2019 Planned Actions: 

▪ Continued integration of the Continuous 

Centralized configuration management 

monitoring by leveraging CDM Phase 1 tools; 

▪ Formalized internal monitoring processes into 

a Standard Operating Procedure (SOP); 

▪ Continued to mature and evolve the Change 

Advisory Board roles and responsibilities to 

meet the needs of the organization, including 

evolving to a paperless electronic process 

conducive to seamless customer service; 

▪ Transitioned CDM Phase 1 tools and CDM 

dashboard to full operations in Q2 FY 2018. 

OCIO maintained operations of CDM Phase 1 

tools and CDM dashboard through Q4 

FY 2018; and 

▪ In collaboration with USDA agencies and 

mission areas, OCIO defined a high-level 

strategy for “further enforcing” Personal 

Identity Verification (PIV) authentication for 

logical system access throughout USDA, 

a high-level milestone for accomplishing that 

strategy, and a process to oversee and 

measure progress. 

▪ Develop and implement a plan of action 

for deploying interim solutions to 

address recommendations from OIG 

Audit Reports on Improper Usage of 

USDA’s Information Technology 

Resources and Security Over Select 

USDA Agencies’ Networks and Systems; 

begin developing and executing 

solutions requirements and 

implementation plans for standing 

centralized, enterprise-wide solutions, 

processes, and procedures; and 

▪ Initiate planning and execution to 

deploy CDM Phase 3 tools. 
USDA AGENCY FINANCIAL REPORT | 2018 

24

2. Financial Management—Natural Resources Conservation Service (NRCS) 

Material Weakness 

Existing 

NRCS needs improved controls over obligations and undelivered 

orders (UDO), as well as accounting and controls over expenses. 

Overall Estimated 

Completion Date FY 2019 

FY 2018 Accomplishments: FY 2019 Planned Actions: 

During FY 2018, NRCS: 

▪ Re-engineered the process for reviewing 

data files to ensure invalid upward and 

downward adjustments are identified and 

negated in a timely manner; 

▪ Improved the transparency of recording 

and liquidating obligations by utilizing new 

systems, such as the use of ezFedGrants; 

▪ Implemented a confirmation process, 

including negative confirmations, for all 

divisions to ensure direct-entry expense 

accruals outside the scope of the corporate 

accrual process are recorded; and

▪ Implemented a corporate accrual process 

to record accruals for all 41xx and 25xx 

Budget Object Code transactions at the 

macro level to ensure expense accruals for 

the majority of the unliquidated obligation 

population are recorded. 

NRCS will: 

▪ Enhance processes and NRCS feeder 

systems to improve monitoring of activity in 

U.S. Standard General Ledger (USSGL) 4871 

and 4881; 

▪ Continue to improve the transparency of 

recording and liquidating obligations by 

utilizing new systems, such as the use of 

ServiceNow; and 

▪ Review all grant UDOS and validate period 

of performance. 
SECTION I | MANAGEMENT’S DISCUSSION AND ANALYSIS 

25

2. Financial Management—Commodity Credit Corporation (CCC) 

Material Weaknesses 

Existing 

CCC needs to address material weaknesses related to accounting 

estimates (prior year material weakness downgraded to a significant 

deficiency for FY 2018) and Accounting for Budgetary Transactions 

(FY 2018). 

Overall Estimated 

Completion Date FY 2019 

 FY 2018 Accomplishments: FY 2019 Planned Actions:

During FY 2018, CCC: 

▪ Refined 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; 

▪ Designed and implemented processes, 

procedures, and controls to ensure data 

used in its accounting estimates are 

complete and accurate. This included 

procedures to review and validate 

published prices prior to calculating the 

accrual to ensure the latest prices are 

considered within the calculation. 

In addition, if published prices are 

subsequently updated prior to year-end, 

evaluate the impact and determine if 

adjustments are necessary. Ensure the 

manual calculation of Fruits and 

Vegetables (FAV) acres considers the 

appropriate planted acres; 

▪ Updated the Agriculture Risk Coverage 

and Price Loss Coverage (ARC/PLC) SOP 

to indicate that the most reliable data 

must be used for the estimate which, in 

the absence of contrary evidence, is 

presumed to be the latest available data; 

▪ Conducted meetings with the Farm 

Programs’ management and staff to 

CCC will: 

▪ Continue to implement effective UDO 

monitoring controls at the program level, to 

assess the accuracy and validity of open 

obligations, and the accounting execution, if 

necessary, as a result of the programmatic 

monitoring reside with the CCC accountants; 

▪ Provide necessary training to the County field 

offices’ personnel over the requirements of 

OMB A-11 for recording obligations, and, 

ensure program handbooks are up to date 

regarding execution and related accounting; 

▪ Begin the process to implement effective 

automated and/or manual controls to 

evaluate the relationship between a CRP

annual rental contract and CRP cost share 

contract; and develop and implement data 

analytic routines and management review 

controls related to program UDO populations 

to identify and correct for abnormalities in 

the data; 

▪ Update documentation and continue to 

strengthen management controls related to 

the annual ARC/PLC UDO calculation to 

ensure that it is performed at a level of 

precision to include relevant and accurate 

data elements, such as enrollments and crop 

prices that reflect the documentation 

submitted by the producer and approved by 

management; 
USDA AGENCY FINANCIAL REPORT | 2018 

26

2. Financial Management—Commodity Credit Corporation (CCC) Continued 

FY 2018 Accomplishments: FY 2019 Planned Actions: 

update procedures to ensure items 

requiring manual calculation to complete 

the ARC/PLC payment process (particularly 

FAV) be reviewed with responsible 

state/county personnel prior to the annual 

stress lab or actual payment runs; 

▪ Updated SOPs to emphasize the 

importance of adequate supervisory review 

and approval of the estimates by 

appropriate levels of management, 

including review of the sources of relevant 

factors, development of assumptions, and 

reasonableness of assumptions and 

resulting estimates. These reviews should 

be at a sufficient level of precision to detect 

errors in the estimates that would be 

material to the financial statements. In 

addition, these reviews should also include 

an evaluation of adjusting entries recorded 

because of the executed methodology; 

▪ Performed a detailed review of the export 

credit reform loans to include potentially 

writing down the relevant facts and 

circumstances unique to each loan and 

documenting procedures performed for 

each loan (or obligor) to evidence the 

review; 

▪ Established and documented a process for 

reviewing credit reform loan portfolios 

and established written SOPs to write off 

non-performing loans that ensure manual 

journal entries are reviewed at the 

appropriate level of precision. CCC 

conducted training sessions with the 

subject matter experts responsible for 

overseeing this process; 

▪ CCC completed an Accrual Review 

Methodology SOP that enhanced review 

▪ Implement processes, procedures, and 

controls to ensure accurate recognition of 

adjustments to delivered orders are posted 

into the accounting systems and perform 

periodic reviews of the accounting events 

to validate the results of recorded 

transactions; 

▪ Implement effective internal controls to 

review and reconcile the general ledger 

account inter-relationships, between 

borrowing authority and other budgetary 

accounts; 

▪ Record borrowing authority at the 

appropriate program level to prevent 

abnormal balances, which will assist in 

meaningful account review and 

reconciliation; 

▪ Continue to evaluate all budgetary general 

and subsidiary ledgers to ensure they reflect 

the appropriate accounting and reporting 

guidance provided by OMB and the U.S. 

Department of the Treasury (Treasury); 

▪ Continue to ensure the month-end 

reconciliations for significant accounts are 

performed in a timely manner and reviewed 

at the appropriate precision levels through 

the implementation of dollar materiality 

thresholds that are monitored by 

management. Reconciled differences 

identified should be corrected in a timely 

manner in the subsidiary or General Ledger 

(GL). Researched and identified existing 

unknown differences per Account 

Reconciliation and Analysis Policy; 

▪ Continue with the execution of the existing 

OMB A-123, Appendix A Corrective Action 

Plan over Accounting Estimates by further 

improving and enhancing the analysis, 
SECTION I | MANAGEMENT’S DISCUSSION AND ANALYSIS 

27

2. Financial Management—Commodity Credit Corporation (CCC) Continued 

FY 2018 Accomplishments: FY 2019 Planned Actions: 

controls to validate the completeness and 

accuracy of the data being used in the grant 

calculator (estimate methodology) and related 

look-back analysis. This process was refined to 

include a more thorough review and analysis 

using other source documentation and an 

assessment of the data used to complete the 

advances/accruals for the grant portfolio; 

▪ Implemented processes, procedures, and 

controls to improve the accuracy and 

timeliness of the Fund Balance with Treasury 

(FBWT) reconciliation, including reconciliations 

of related child agency FBWT accounts; 

▪ Ensured the month-end reconciliations for 

significant accounts were performed in a timely 

manner and reviewed at the appropriate 

precision levels through the implementation of 

dollar materiality thresholds that were 

monitored by management. Reconciled 

differences identified should be corrected in a 

timely manner in the subsidiary or GL. 

Researched and identified existing unknown 

differences per Account Reconciliation and 

Analysis Policy; 

▪ Developed effective information and 

communication processes to ensure 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; 

▪ Continued to implement processes, procedures, 

and effective controls to enable the timely 

preparation of financial statements and 

sufficient evidential matter to support 

accounting transactions; 

review, and recordation process; and 

▪ Continue with the execution of the 

existing OMB A-123, Appendix A 

Corrective Action Plan. 
USDA AGENCY FINANCIAL REPORT | 2018 

28

2. Financial Management—Commodity Credit Corporation (CCC) Continued 

FY 2018 Accomplishments: FY 2019 Planned Actions: 

▪ Continued with the execution of the existing 

OMB A-123, Appendix A Corrective Action 

Plan, Maintaining, Controlling, and 

Monitoring the CORE GL by further improving 

and enhancing CCC reconciliations and 

account analysis; and 

▪ Continued to refine the reconciliation process 

for unexpended appropriations, cumulative 

results of operations, allocation transfers, 

unapportioned authority, allotments, UDOs, 

delivered orders, expended appropriations, 

and operating expenses. 

2. Financial Management—Risk Management Agency (RMA)) 

Material Weaknesses 

Existing 

RMA needs to develop change controls over the program production 

model used to calculate actuarial projections to avoid inadvertent 

modifications to the model. 

Overall Estimated 

Completion Date FY 2019 

FY 2018 Accomplishments: FY 2019 Planned Actions:

RMA will: 

▪ Create separate libraries of the program code 

for production calculations and sensitivity or 

other analysis; 

▪ Implement peer reviews of calculation; and

▪ Continue process of review of inputs in the 

model. 
SECTION I | MANAGEMENT’S DISCUSSION AND ANALYSIS 

29

SUMMARY OF OUTSTANDING SYSTEM NON-CONFORMANCE 

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

is included in the FFMIA Report on Financial Management Systems (Exhibit 13). 

The weakness involves component agency-specific deficiencies for CCC. 

The following exhibit provides FY 2018 accomplishments and FY 2019 planned actions toward 

resolving the Department’s outstanding system non-conformance. 

EXHIBIT 13: Summary of Outstanding System Non-Conformance 

1. Funds Control Management 

System Non-conformance 

Existing 

CCC system improvements needed in recording obligations at

the transactional level. 

Overall Estimated 

Completion Date FY 2020

FY 2018 Accomplishments: FY 2019 Planned Actions: 

During FY 2018 CCC: 

▪ Developed and implemented necessary 

policies, procedures, and controls at the 

appropriate level of precision to record, 

monitor, and validate UDO balances 

periodically and, when necessary, 

deobligate UDOs in a timely manner 

(appropriate FY) at the individual producer 

and/or transaction level; 

▪ Designed and implemented effective 

internal controls to periodically (quarterly) 

review and validate UDO balances with 

sufficient input from the program offices 

and financial management to timely 

identify UDOs that should be deobligated; 

▪ Performed a detailed review of the 

individual contracts that make up the 

Conservation Reserve Program UDO 

balances to ensure they are appropriately 

accounted for and are valid UDOs of CCC; 

▪ Developed an overall 48XX UDO Plan, 

documenting at a high level the risks, 

system issues, and potential manual 

controls by program. Completed analysis 

CCC will: 

▪ Continue to evaluate all budgetary 

general and subsidiary ledgers to ensure 

they reflect the appropriate accounting 

and reporting guidance provided by OMB 

and the U.S. Treasury; 

▪ Continue with the execution of the 

existing OMB A-123, Appendix A 

Corrective Action Plan for Funds Control 

and Budgetary Accounting; 

▪ Continue to partner with Deputy 

Administrator Farm Programs and 

Information Technology Services Division 

toward completing software modifications 

that will 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 in order to prepare for 

Financial Management Modernization 

Initiative implementation; and 
USDA AGENCY FINANCIAL REPORT | 2018 

30

2. 1. Funds Control Management Continued 

FY 2018 Accomplishments: FY 2019 Planned Actions: 

of controls by program. Completed analysis 

and corrective plan for all known and 

unknown differences in 48XX balances; 

▪ Provided training sessions to instruct 

individuals processing, reviewing, and 

approving UDO balances to review the open 

obligations at the individual 

contract/producer level; 

▪ Developed a methodology for the “past” and 

current crop years for the ARC/PLC program 

at an appropriate level of precision to 

accurately account for the “do not pay” direct 

attributions that may get resolved. 

Management’s methodology should be 

consistent with the historical evidence 

maintained by management; 

▪ Implemented necessary policies, procedures, 

and/or trainings to instruct individuals 

processing, reviewing, and approving 

ARC/PLC payments in the County Offices to 

de-obligate [at the individual producer level] 

the undelivered orders that will not be paid 

due to payment attributions that cannot be 

resolved and will result in a position where 

the producer will not be paid; 

▪ Updated and performed ARC/PLC lookback 

analysis in FY 2018 Q1 and Q2; 

▪ Updated the ARC/PLC Obligation paper, when 

necessary, based on the results of ARC/PLC 

lookback analysis; 

▪ Completed analysis and corrective plan for all 

known and unknown differences in ARC/PLC 

balances; 

▪ Implement the FSA/CCC Financial 

Improvement Program that will be a 

multi-phased, multi-year project to 

move all financial management 

processes from FPAC and its affiliated 

agencies’ accounting and feeder 

systems to FMMI. FSA will need to 

remediate its feeder systems to create 

auditable financial data to integrate 

with FMMI. 
SECTION I | MANAGEMENT’S DISCUSSION AND ANALYSIS 

31

2. 1. Funds Control Management Continued 

FY 2018 Accomplishments: FY 2019 Planned Actions: 

▪ Continued to partner 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

▪ Implemented the ARC County Pilot Program 

with the electronic Funds Management 

System/County Operated Facility to achieve 

full funds control at a transaction level. 
USDA AGENCY FINANCIAL REPORT | 2018 

32

Compliance with Laws and Regulations 

In the prior fiscal year (FY), the U.S. Department of Agriculture (USDA) did not publish their 

civil monetary penalty initial catch-up inflation adjustments by December 31, 2016. 

The Department also did not submit complete, accurate, and timely files by April 30, 2017, as 

required by the Digital Accountability and Transparency Act (DATA Act) of 2014. However, 

during FY 2018, to comply with the Federal Civil Penalties Inflation Adjustment Act of 1990, 

as amended, (the IAA), USDA published an initial catch-up inflation adjustment rule in the 

Federal Register. The Department is compliant with the IAA. In addition, USDA is compliant 

with the DATA Act. USDA submitted DATA Act data each quarter in FY 2018. 

USDA continues to improve in its submission of quality, timely, accurate, and complete data. 

USDA remains noncompliant or potentially noncompliant with the Anti-deficiency Act (ADA) 

identified in the following table, as well as in the Improper Payments Elimination and 

Recovery Act of 2010 (IPERA) as Amended and Federal Financial Management Improvement 

Act sections of this report. 

The Department has developed strategies to reduce and/or mitigate these violations during 

FY 2019. The following tables provide further details of each violation. 

ANTI-DEFICIENCY ACT 

EXHIBIT 14: ADA Violations Reported to the President and Congress During FY 2018 

Agency: Office of the Secretary (USDA/OSEC) 

Violation: (ADA) 31 United States Code 1301, 1342 

Year Identified 

FY 2017 

Description Status 

USDA/OSEC, from the prior administration, violated the purpose statute, 

improperly augmented several of its appropriations, and violated the ADA 

when it obligated several of its appropriations for the expenses of 

separately funded USDA components. USDA improperly relied on the 

Economy Act to enter into interagency agreements, under which the 

agency obligated its appropriations for (1) Rural Development Salaries and 

Expenses, (2) Food and Nutrition Service, Nutrition Programs 

Administration, and (3) Office of Civil Rights, for personnel details that did 

not actually occur. Instead, these appropriations were used for the salaries 

and benefits of employees performing work for separately funded USDA 

components. The Economy Act was referenced as the authority to transfer 

the appropriations. The purpose statute was violated when the incorrect 

appropriation was used for the salaries and benefits in question and 

improperly augmented the appropriations of these other USDA 

components. USDA incurred obligations in excess of appropriations and 

therefore violated the ADA. 

ADA violation was 

reported to Congress 

and the President on 

August 27, 2018. 
SECTION I | MANAGEMENT’S DISCUSSION AND ANALYSIS 

33

EXHIBIT 15: ADA Violations Pending Submission to the President and Congress. 

The violations include three prior years and four newly identified during FY 2018. 

AGENCY Description of Violation Status 

Commodity 

Credit 

Corporation 

(CCC) 

PRIOR YEAR: FY 2016, expenditures for CCC 

interest to the U.S. Department of the Treasury 

(Treasury) exceeded amounts initially 

apportioned by the Office of Management and 

Budget (OMB). CCC expended approximately 

$46.1 million in interest to Treasury, more than 

the apportioned amount of $29.9 million. 

After review by OGC and 

OMB, it was determined 

that a violation occurred. 

The ADA violation is in the 

process of being reported to 

Congress and the President. 

Office of 

Advocacy and 

Outreach 

(OAO) 

PRIOR YEAR: The OAO identified an ADA 

violation for FYs 2011 and 2012 under the Food, 

Conservation, and Energy Act of 2008, Public 

Law 110-234 (Farm Bill of 2008). OAO awarded 

more than $19 million for “Outreach and 

Assistance for Socially Disadvantaged and 

Veteran Farmers and Ranchers” (Section 2501) 

Grants in excess of amounts permitted by the 

Farm Bill of 2008. 

The ADA violation is in the 

process of being reported to 

Congress and the President. 

Office of the 

Chief Financial 

Officer/ 

National 

Finance Center 

(OCFO/NFC) 

PRIOR YEAR: The NFC managed web pages for the 

New Orleans chapter of the Association of 

Government Accountants (AGA), which is a 

non-governmental organization, on the NFC Web

site at no cost to AGA. An investigation into this 

situation determined in FY 2017 that NFC has 

been maintaining the AGA web pages since 1999. 

The ADA violation pertaining 

to the services NFC provided 

for maintaining the AGA 

web pages is in the process 

of being reported to 

Congress and the President. 

CCC FY 2018: Agriculture Risk Coverage-County 

(ARC-CO) (occurred in the prior fiscal year but 

was identified in the current fiscal year): 

On November 10, 2016, the Office of 

Management and Budget (OMB) approved an 

ARC-CO apportionment providing a total of 

$850,924,690 for crop year 2017 ARC funding. 

This funding was divided between ARC-CO 

($775,924,690) and Agricultural Risk CoverageIndividual County ($75,000,000). As part of fiscal 

year-end close for FY 2017, CCC recorded an 

obligation of $2,319,369,741.34 for crop year 

2017 ARC-CO. This exceeded the apportioned 

amount by $1,543,445,051. 

The ADA violation is in the 

process of being reported to 

Congress and the President. 
USDA AGENCY FINANCIAL REPORT | 2018 

34

AGENCY Description of Violation Status 

Farm Service 

Agency (FSA) 

FY 2018: FSA issued a contract for Information 

Technology investments including the CCC 

Budget Formulation (CCC BF) system. The CCC 

BF was not included in the approved Acquisition 

Approval Request (AAR). The AAR and the 

contract will be amended to include $300,000 

for CCC BF. The FY 2018 Consolidated 

Appropriation Act, Section 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 written 

approval by the Chief Information Officer.”

After review by OGC, it was 

determined that a violation 

occurred. The ADA violation 

is in the process of being 

reported to Congress and 

the President. 

FSA FY 2018: Government Collections during 

shutdown—Field staff spent time verifying 

deposit transactions. These deposit verifications 

were not part of the orderly shutdown activities. 

After review by OGC, it was 

determined that a violation 

occurred. The ADA violation 

is in the process of being 

reported to Congress and 

the President. 

FSA FY 2018: FSA identified an ADA violation with the 

U.S. Warehouse Act. FSA business practices 

dating back to FY 2000 supported Warehouse 

User Activities with Administrative S&E funds for 

direct and indirect costs. The user fee collections 

were not adequate to fully fund the costs, and 

S&E funds were used and not reimbursed; 

therefore, improperly augmenting the User Fee

program. When FSA adjusted its accounts to 

correct the error, the user fee account was 

deficient, resulting in an ADA violation. 

After review by OGC, it 

was determined that a 

violation occurred. 

The ADA violation is in 

the process of being 

reported to Congress and 

the President. 
SECTION I | MANAGEMENT’S DISCUSSION AND ANALYSIS 

35

EXHIBIT 16: Determined Not to be an ADA Violation. 

AGENCY Description of Violation Status 

OCFO/NFC PRIOR YEAR: The NFC managed web pages 

for the Federal Executive Board (FEB), which 

is a quasi-governmental entity. Working 

Capital Fund (WCF) monies may have been 

used for the web service, and use of the 

WCF to provide unreimbursed services to 

the FEB would be an ADA violation if no 

other funds are available to reimburse the 

WCF. Funds other than those in the WCF 

may have been available to pay for services 

to the FEB. 

After conducting research, it was 

determined that the 

administrative expenses of the 

FEB—which include the hosting 

of web pages—are not charged 

to the WCF. Rather, those costs 

are covered by (1) an 

interagency agreement between 

NFC and the Agricultural 

Research Services agency in New 

Orleans that provides direct 

reimbursement for some FEB 

administrative expenses, and 

(2) the remaining FEB costs are

included as overhead and 

administrative expenses in 

reimbursable agreements to 

NFC’s customers. Therefore, 

NFC’s hosting of the FEB web 

pages is not an ADA violation. 
USDA AGENCY FINANCIAL REPORT | 2018 

36

Potential ADA Violations—one prior year and 9 new potential violations were identified 

during FY 2018. These occurrences are pending results from research and investigation for a 

determination as to whether or not a violation actually occurred. This table provides a 

description and status. 

EXHIBIT 17: Potential ADA Violations Identified During FY 2018 

AGENCY Description of Violation Status 

CCC FY 2017: The prior year accounting 

treatment for obligations related to the 

Conservation Reserve Program—Annual 

Rental contracts was determined to be in 

error. Only the annual portion of the 

contract values was recorded as an 

obligation. 

The Office of the General 

Counsel (OGC) 

determined that the error 

was not an ADA violation; 

however, the incident has 

been referred to GAO for 

additional investigation 

and determination. 

CCC FY 2018: Emergency Forestry Conservation 

Reserve Program—CCC failed to record the 

obligation for the full value of the long-term 

contract when the contact was signed. CCC 

obligated a total of $2,230,309 for long-term 

contracts. 

The Office of the General 

Counsel (OGC) 

determined that the error 

was not an ADA violation; 

however, the incident has 

been referred to GAO for 

additional investigation 

and determination. 

CCC FY 2018: FAS/Food for Progress—

The Foreign Agriculture Service paid Food for 

Progress freight invoices from administrative 

funds. There was a zero balance in the 

administrative funds for this agreement; 

however, there were funds available as a 

result of downward adjustments. 

Agency is seeking an OGC 

opinion. 

CCC FY 2018: Puerto Rico Tree Assistance Program 

(TAP)— Contracts approved from prior fiscal 

years. TAP contracts from FY 2014 through 

FY 2017 were approved but not recorded into 

the program application timely. An obligation 

is triggered when an application is approved 

via a producer’s and FSA representative’s 

signature. CCC received input from the Puerto 

Rico District Directors that indicates that 

there are 1,973 unrecorded TAP contracts 

representing 2014, 2015 and 2017. 

Pending a determination. 
SECTION I | MANAGEMENT’S DISCUSSION AND ANALYSIS 

37

AGENCY Description of Violation Status 

CCC FY 2018: FSA/CCC: Non-Insured Assistance 

Program (NAP) Frost Freeze (FFN) (occurred 

in the prior fiscal year but identified in the 

current fiscal year)—During the 

reclassification process in FY 2018, CCC 

discovered NAP payments exceeding 

apportionments by $888. Documentation of 

the background, and Statement of Facts and 

Analysis was still underway as of 

September 30, 2018. 

Pending determination. 

CCC FY 2018: Agriculture Risk Coverage (ARC) 

(occurred in the prior fiscal year but was 

identified in current fiscal year)—In FY 2018, 

CCC identified crop year 2017 enrollments 

for the ARC program that exceeded available 

funding. 

Pending a determination. 

CCC FY 2018: United States Agency for 

International Development (USAID) grants 

(occurred in the prior fiscal year, but 

identified in the current fiscal year)—

Pursuant to the Grants Oversight and New 

Efficiency (GONE) Act, CCC is required to 

report quarterly, the number of federal grant 

and cooperative agreement awards and 

balances of USAID (CCC child agency) for 

which closeout has not yet occurred, but for 

which the period of performance has 

elapsed more than two years with zero and 

undisbursed balances. At the end of 3rd 

quarter FY 2018, USAID reported grants that 

had not been closed out in the greater than 

5-years category. As part of the grant 

closeout in FY 2018, it was determined in 

some cases that additional funds were 

needed to fully execute agreements and 

perform the closeout. As a result, FY 2018 

funds were used. 

Pending a determination. 
USDA AGENCY FINANCIAL REPORT | 2018 

38

AGENCY Description of Violation Status 

CCC FY 2018: Biomass Crop Assistance Program 

(BCAP) (occurred in the prior fiscal year but 

was identified in the current fiscal year)—

During the FY 2017 Quarterly Unliquidated 

Obligations (ULO) Certification process, the 

program office identified 12 contracts as 

invalid and requiring deobligation that were 

in fact deobligated through a Data Change 

Request (DCR) in the electronic Funds 

Management System (eFMS). After further 

analysis in FY 2018, the program office 

determined that such contracts were still 

valid. However, there were no funds 

available in FY 2018 to re-establish the 

related obligations. 

Pending a determination. 

National Institute 

of Food and 

Agriculture (NIFA) 

FY 2018: USDA’s OIG office completed a 3-

year audit in August 2018 on NIFA Formula 

Grant Program Controls Over Fund 

Allocations to States. To date, NIFA has not 

received the final disposition from the 

review. An earlier draft of the OIG report 

indicated there could be potential reportable 

ADA violations. NIFA is working with USDA’s 

OGC to determine if there will be actual ADA 

violations based on the final report. 

NIFA is waiting on the 

final letter from OIG 

regarding the review. 

Office of 

Partnerships and 

Public Engagement 

(OPPE) 

FY 2018: A potential ADA related to 

cooperative agreements may exist. OPPE 

may have exceeded its authority by charging 

USDA agencies for cooperative agreements 

that the agencies lacked legislative authority 

to enter into. 

OPPE is waiting an OGC 

determination. 
SECTION I | MANAGEMENT’S DISCUSSION AND ANALYSIS 

39

Improper Payments Elimination and 

Recovery Act of 2010 as Amended 

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

Improper Payment Elimination and Recovery Act of 2010 as Amended (IPERA). The Office of 

Inspector General’s FY 2017 Compliance with IPERA Requirements (Audit Report 50024-

0013-11, dated May 2018) found that two USDA agencies were noncompliant. The following 

exhibit identifies the noncompliance related to IPERA and target dates by which the 

deficiencies will be mitigated. The summary of corrective actions can be found in the Payment 

Integrity Management Section III of this report. 

EXHIBIT 18: Outstanding Initiative to Achieve Compliance 

Initiative Section of Noncompliance Agency/Program Target 

Completion Date 

Improper Payments Elimination and Recovery Act of 2010, as amended by the 

Improper Payments Elimination and Recovery Improvement Act of 2012 

Publish improper payment 

estimates for all high-risk 

programs and activities 

Food and Nutrition Service 

(FNS) Supplemental Nutrition 

Assistance Program 

11/15/2018 

FNS Child and Adult Care Food 

Program 11/15/2020 

Publish and meet annual 

reduction targets for each 

program assessed to be at risk 

and measured for improper 

payments 

FNS National School Lunch 

Program (NSLP) 11/15/2018 

FNS School Breakfast Program 

(SBP) 11/15/2018 

FNS Special Supplemental 

Nutrition Program for Women, 

Infants, and Children (WIC)

11/15/2018 

Farm Service Agency 

Noninsured Assistance Program 11/15/2018 

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) 

FNS NSLP 11/15/2020 

FNS SBP 11/15/2020 
USDA AGENCY FINANCIAL REPORT | 2018 

40

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 

decision-making, 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 information technology (IT) noncompliance is also 

reported as a material weakness and is included in the Federal Managers’ Financial Integrity 

Act Report on Management Control. Failure to resolve prior-year recommendations identified 

by USDA’s Office of Inspector General (OIG) has prevented the Department from mitigating 

repeated deficiencies and from receiving a quality rating on the five Cybersecurity Framework 

security functions. 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. 

The following exhibit contains the outstanding initiatives to achieve compliance. 

EXHIBIT 19: Initiatives to be Completed 

Outstanding Initiatives to Achieve FFMIA Compliance 

Initiative Section of Noncompliance Agency Target 

Completion Date 

Information 

Technology 

FFMS requirements and 

information security policies, 

procedures, and/or practices. 

Multiple 12/31/2020 

Financial 

Management Federal accounting standards and 

USSGL at the transaction level. 

Natural Resources 

Conservation 

Service 

9/30/2019 

Federal accounting standards and 

USSGL at the transaction level. 

Commodity Credit 

Corporation 9/30/2019 
SECTION I | MANAGEMENT’S DISCUSSION AND ANALYSIS 

41

FISCAL YEAR 2018 RESULTS 

During fiscal year (FY) 2018, 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 2017 Agency 

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

the transaction level due to deficiencies identified for the CCC and NRCS. Additionally, as 

reported in the FFMIA section of this report, USDA continues to have weaknesses in IT 

controls and FFMS requirements that result in noncompliance 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 budgetary transactions. The financial management systems did not record certain 

accounting events at the transaction level in accordance with the USSGL. Significant progress 

was made in accounting for obligation activity. CCC was able to provide detailed populations 

for both beginning balance and current year obligation activity for audit testing purposes. 

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. 
USDA AGENCY FINANCIAL REPORT | 2018 

42

Financial Management Systems Strategy 

The Financial Management Systems (FMS) component of the Office of the Chief Financial 

Officer (OCFO) is responsible for providing timely, accurate, and complete financial 

information to U.S. Department of Agriculture (USDA) agencies to enable them to execute the 

mission of USDA. Specifically, FMS provides cloud-based, Commercial Off-the-Shelf (COTS) 

Enterprise Resource Planning (ERP) software that provides USDA Agencies with the 

functionality they need to distribute, obligate, expend, and report on the funds entrusted to them 

by Congress. 

FMS Operates as an Internal Shared Services Provider to USDA agencies, pooling resources to 

offer cost-effective systems and support through the consolidation of functions, standard 

processing, and repeatable processes. 

FINANCIAL MANAGEMENT LINES OF BUSINESS 

FMS’ mission as an internal Financial Shared Service Provider is to provide reliable, 

cost-effective, employee-centric systems and services to USDA organizations, thus allowing 

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 Lines of Business 

vision. The three key components of this vision are communication, governance, and operations. 

By executing these components, USDA will deliver a successful shared service offering. 

FMS’ 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; 
SECTION I | MANAGEMENT’S DISCUSSION AND ANALYSIS 

43

• Purchase card payments; 

• Lease accounting; 

• Intragovernmental payments; 

• Intragovernmental collections; 

• Receivable management; 

• Property accounting; 

• Child care; 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 

configured ERP solution built for financials. FMS’ primary objectives for this shared services 

effort are to provide the following: 

• An enterprise financial management service that allows customers to reap the benefits 

of faster, less expensive, and less risky services as compared to starting with a new ERP 

or financial management implementation; 

• 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. 
USDA AGENCY FINANCIAL REPORT | 2018 

44

RECENT ACCOMPLISHMENTS AND SHORT TERM PLANS 

The COTS ERP Systems, Applications, and Products (SAP) offering is housed in the FMS 

Division. Under the Financial Management Modernization Initiative (FMMI), this system has 

become the USDA financial management solution that covers almost all USDA accounting 

activity. Over $70 billion per year in grants activity has been added over the past 3 years, which 

means that the USDA core accounting system supports the majority of USDA financial 

transaction processing. Over the next few years, Forest Service Grants will come on board. 

FUTURE PLANS 

As part of the Farm Production and Conservation (FPAC) consolidation effort, the Commodity 

Credit Corporation’s (CCC) grants will also become part of the core accounting solution. At that 

point, almost all USDA grants activity will be in FMMI. The final major type of program 

activity in USDA relates to loans. The first release of the new CCC accounting structure in 

FMMI will go live in October 2019. It will put loan activity in FMMI for the first time. 

FMS will roll the remaining CCC accounting transactions into FMMI over the next 2 years. 

Forest Service and CCC grants are complex and are estimated to take 2 years for full 

implementation. 

By the end of the 2-year development period, the SAP infrastructure used by the FMMI will be 

nearing the end of its useful life. SAP has notified USDA of its plans for major systems 

upgrades, and FMS has begun to analyze the impact of the changes. The guiding principles of 

FMS are: 

• Eliminate custom-built products when possible, due to the cost of maintaining them; 

• Increase the amount of automation when feasible, such as with automated testing tools 

and process robotics; and 

• Change outdated processes where appropriate. 

With these principles in mind, and with careful planning for IT upgrades, USDA will keep pace 

with the constant advancements in technology. 

SUCCESSES DURING FISCAL YEAR (FY) 2018 

• Implemented a new Automated Cash Reconciliation Worksheet System (ACRWS) that 

replaced obsolete technology and provided an enhanced automated cash reconciliation

process for USDA; 
SECTION I | MANAGEMENT’S DISCUSSION AND ANALYSIS 

45

• Implemented improvements to the Digital Accountability and Transparency Act 

(DATA) processing that streamlined the error correction process and significantly 

reduced the number of errors contained in File C (transaction-level financial 

information on agency procurements and awards). This reduced the time required for 

agencies to research File C errors and allowed USDA to report a better representation of 

USDA’s data to Treasury; 

• Conducted an in-depth analysis of the existing FMMI infrastructure and identified areas 

for consolidation of data or decommissioning of obsolete servers. This resulted in 

17 servers being decommissioned and a savings in excess of $350,000 per year; 

• Successfully migrated the following to the cloud: the Financial Statements Data 

Warehouse (FSDW), Reconciliation of Intra-Governmental Payment and Collection 

(IPAC) Transactions for Agriculture (RITA), and Automated Cash Reconciliation 

Worksheet System (ACRWS). Due to the age of the previous infrastructure, this 

migration provided a technical refresh of the hardware, software, and network 

components that will enable USDA to improve the stability, security, and efficiency of 

the systems. In addition, this migration is in alignment with USDA Departmental 

Regulation (DR) on cloud computing (DR 3650-001) and will serve to consolidate all 

FMS applications into a single Cloud Hosting environment; 

• Successfully migrated the FMMI lower-level environments to a new data center in the 

cloud. The new data center has a top-tier data center certification with greater fault 

tolerance and redundancy, which will serve to improve the stability and availability of 

USDA systems; 

• Implemented Attunity’s Gold Client software, which will result in a significant 

reduction in the amount of time and manual effort required to perform data refreshes to 

mirror production in the lower FMMI test environments. Gold Client will allow the 

testers to execute test scenarios with production-like data, which will result in increased 

accuracy of test results and reliability of software deployed to production; 

• Upgraded Solution Manager, a configuration management tool, to version 7.2, which 

focused on the risk of identified vulnerabilities not being addressed by the vendor, as the 

product was reaching end-of-life at the end of 2017. In addition, this implementation 

resulted in more robust SAP early watch reports that issued notifications to the Basis team 

of possible areas of concern or improvement to the system configuration for action prior 

to problems occurring; 

• Provided functional, technical, and testing support for the implementation of 

approximately 200 software changes that either enhanced the functionality of FMMI or 

corrected issues with the software. These changes impacted all functional areas of FMMI 

to improve usability and accuracy, and to reduce the number of errors encountered; 
USDA AGENCY FINANCIAL REPORT | 2018 

46

• Corrected issues with the Work in Progress (WIP) process in the Corporate Property 

Automated Information System (CPAIS) Personal Property. This resolved an audit 

finding identified by the Office of Inspector General (OIG); 

• Corrected issues with the FMMI outbound interface to CPAIS Personal Property, which 

was responsible for a multitude of receipts missing from CPAIS Personal Property. 

This issue was identified by the Office of Contracting and Procurement (OCP) as the 

highest priority issue. These corrections improve the accuracy of the property data 

stored and reported in CPAIS Personal Property; 

• Completed the fiscal year (FY) 2017 Federal Real Property Profile (FRPP) 

reporting/data submission to the General Services Administration (GSA) for USDA. 

The data submission to GSA complied with the FY 2017 FRPP changes and satisfied 

the mandatory reporting requirement; 

• Successfully exported data from the Management Information Tracking System (MITS) 

into Microsoft Access and developed reports in the required format to be used for data 

conversion in the new Governance, Risk, and Compliance (GRC) Archer system. 

The data conversion is necessary in order to have historical audit tracking information 

in the GRC Archer system; 

• Executed an orderly transition from the U.S. Department of Veterans Affairs involving 

personnel and contracts; 

• Deployed 2,500 new grant agreements through the Natural Resources Conservation 

Service (NRCS) ezFedGrants, the Department’s grants management solution; 

• Provided training to a few hundred new users on EzFedGrants;

• Performed planning requirements and design prototyping for Interagency Agreement 

(IAA) implementation into the ezFedGrants Enterprise; 

• Began design and implementation of Forest Service ezFedGrants pilot; 

• Provided approximately 500 interactions per month through Grants Helpdesk Support; 

• Completed ezFedGrants Pega assessment and began design and implementation of 

enhancements; 

• Began implementation of ezFedGrants enhancements for the Animal and Plant Health 

Inspection Service (APHIS); 

• Implemented formula grants and other functionality for the National Institute of Food 

and Agriculture (NIFA); and 
SECTION I | MANAGEMENT’S DISCUSSION AND ANALYSIS 

47

• Conducted Marketing and Customer Outreach through: 

o Association of Government Accountants (AGA); 

o National Extension and Research Administrative Officers Conference 

(NERAOC); 

o USDA’s Financial Management Training (FMT); and 

o PegaWorld (ezFedGrants external portal). 

In summary, USDA has re-focused its efforts on internal development, taken steps to stay 

technically relevant, and worked to reduce costs by taking advantage of automation opportunities. 
USDA AGENCY FINANCIAL REPORT | 2018 

48

Other Management Information, Initiatives, 

and Issues: 

DIGITAL ACCOUNTABILITY AND TRANSPARENCY ACT (DATA ACT) 

In May 2014, the Digital Accountability and Transparency (DATA) Act was enacted. This Act 

extends Federal Funding Accountability and Transparency Act (FFATA) reporting by adding 

additional data elements to the previous FFATA reporting on financial assistance and 

procurements. The U.S. Department of Treasury (Treasury) and the Office of Management and 

Budget (OMB) are responsible for implementing the Act. Federal agencies are required to 

produce seven files as listed below and report them to the Treasury Broker (Broker) quarterly: 

EXHIBIT 20: Government-Wide Requirements 

File Description Submission Frequency 

File A—Appropriations 

Account data 

Summary financial 

data 

Agency submits to Data 

Broker 

Quarterly 

File B—Object Class/ 

Program Activity data 

Summary financial 

data 

Agency submits to Data 

Broker 

Quarterly 

File C—Award Financial 

data 

Detailed financial/ 

award data 

Agency submits to Data 

Broker 

Quarterly

File D1—Procurement 

data 

Detailed procurement 

award data 

External— 

(FPDS to Data Broker) 

Daily/Pulled 

Quarterly11

File D2—Financial 

Assistance data 

Detailed assistance 

award data 

External— 

(FABS to Data Broker) 

Semi-Monthly/ 

Pulled Quarterly12

File E—Additional 

Awardee Attributes 

Awardee/ 

recipient data 

External— 

(SAM.gov to Data Broker) 

Quarterly 

File F—Sub-award 

Attributes 

Sub-award data External— 

(FSRS to Data Broker) 

Quarterly 

 

11 USDA’s file D1 data is reported daily to FPDS-NG. It is pulled into the Treasury Broker 

quarterly as part of USDA’s quarterly DATA Act submission. 

12 USDA’s file D2 data is reported semi-monthly to USAspending.gov. It is pulled into the 

Treasury Broker quarterly as part of USDA’s quarterly DATA Act submission.
SECTION I | MANAGEMENT’S DISCUSSION AND ANALYSIS 

49

Government-wide Implementation 

OMB and Treasury issue guidance for implementation of the DATA Act. The latest OMB 

guidance is OMB Memorandum 18-16. This guidance instructs Federal Agencies to develop a 

DATA Act Data Quality Plan for implementation in fiscal year (FY) 2019. In the last two 

quarters of FY 2018, USDA staff worked on several Chief Financial Officers Council 

committees to develop a DATA Act Playbook and a Data Quality Plan template that USDA 

will leverage to comply with the OMB Memorandum. 

Treasury maintains data elements and guidelines for reporting in the DATA Act Information 

Model Schema (DAIMS). Version 1.2 of DAIMS is being used for FY 2018. DAIMS 1.3 will 

be implemented in FY 2019. USDA is fully compliant with DAIMS 1.2 and is set to be 

compliant with DAIMS 1.3 in FY 2019. 

USDA Implementation 

The Office of the Chief Financial Officer (OCFO) oversees the DATA Act implementation for 

USDA. OCFO’s Financial Management Services (FMS) manages a data repository for the 

Department to collect and report all DATA Act elements to the Treasury Broker for publication 

on the USAspending.gov Web site. This data repository contains the data necessary to create 

Files A-C.

USDA reports the following information in compliance with the DATA Act: 

• Files A-C: The data for Files A-C come from three sources: 

o Data is pulled from the Financial Management Modernization Initiative (FMMI) 

General Ledger (GL). 

o The Rural Development (RD) and Farm Service Agencies (FSA) use separate 

GLs (RD and FSA also have FMMI activity) and submit file A-C data to the 

repository. 

o USDA is also a Financial Shared Service Provider, servicing 23 small 

government agency clients. All USDA and customer data are held in the FMMI 

repository. 

USDA submitted third-quarter 2018 data to the USAspending.gov Beta Web site in 

August 2018. USDA reported all Treasury symbols in File A as being error-free. 

The Department was 99.9 percent accurate in reporting on Budget Object 

Classification Codes and Program Activity codes in File B. The awards financial 

attributes data in File C was 77 percent accurate, a significant improvement over the 

prior quarters. 
USDA AGENCY FINANCIAL REPORT | 2018 

50

• File D1: Data is submitted as frequently as daily to Federal Procurement Data System 

(FPDS). The Treasury Broker pulls in all data submitted to FPDS at quarter end for 

reconciliation purposes. 

• File D2: Data is submitted from Agencies and components to USAspending.gov for 

posting. Error records are sent back to the Agencies for correction and resubmission. 

For third-quarter 2018, Files D1 and D2 reported contracts and Federal financial 

assistance data, respectively. As of June 30, 2018, USDA reported 45,982 procurement 

award transactions with a dollar value of $3.5 billion and 452,406 Federal financial 

assistance award transactions with a dollar value of $74.6 billion. 

• Files E and F: Data is pulled by the Treasury broker quarterly; this data is not 

maintained in Agency systems. 

Fourth-quarter data will be reported in November 2018. USDA is focused on improving data 

quality. In the fourth quarter, USDA implemented warnings to assist USDA Agencies and Staff 

Offices to report financial assistance and procurement award identification numbers (IDs) to its 

GLs. These warnings are designed to prompt users to ensure Award IDs are captured. Missing 

Award IDs represent a significant error problem in File C. As Agencies address transactions and 

associate the correct Award ID or mark the transaction as not DATA Act reportable, matching 

transactions in the GLs to the Awards reported in files D1 and D2 will improve. OCFO began 

training agencies in August 2017 and will conduct several such trainings to assist the agencies 

with this task. The level of effort and research required to address transactions without Award 

IDs, or marked as not reportable, will take several reporting quarters to complete. 

At least four USDA agencies are 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 Contracting and Procurement (OCP) to ensure that 

procurement reporting will adhere to DATA Act requirements. Together, OCFO and OCP 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 FSA. 
SECTION I | MANAGEMENT’S DISCUSSION AND ANALYSIS

51

LIMITATIONS OF FINANCIAL STATEMENT

The principal financial statements are prepared to report the financial position and results of 

operations of the reporting entity, pursuant to the requirements of 31 United States Code (U.S.C.) 

3515(b). The statements are prepared from the books and records of the entity in accordance with 

Federal Generally Accepted Accounting Principles (GAAP) and the formats prescribed by the 

Office of Management and Budget (OMB). Reports used to monitor and control budgetary 

resources are prepared from the same books and records. The financial statements should be read 

with the realization that they are for a component of the U.S. Government.
USDA AGENCY FINANCIAL REPORT | 2018 

52

Section II: 

Financial Information

Message from the Deputy Chief 

Financial Officer 

As Deputy 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) 2018. This report shows the progress we’ve made to 

provide fiscally sound, cost-effective program delivery. We are 

accountable to the American taxpayer and 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 goal of ensuring 

USDA programs are delivered efficiently, effectively, with integrity and a focus on customer 

service. The mission of the Office of the Chief Financial Officer (OCFO), is to provide 

world-class financial management policy, systems and services so our customers can focus on 

their core mission. 

USDA made significant progress in FY 2018. Some of our accomplishments include: 

• After two years of presenting a Balance Sheet only opinion; USDA achieved a full 

scope unmodified audit opinion on all principal statements. 

• Made significant improvement in audit recommendation closures. USDA agencies 

closed 44 audits, representing 321 recommendations during FY 2018. These 

recommendations represent a 28% increase over the number closed in FY 2017. 

• Despite challenges in the early part of FY 2017, USDA has been compliant with the 

DATA Act since the third quarter of FY 2017 and each quarter thereafter including the 

quarter ending September 30, 2018. 

• USDA is compliant with the GONE Act and achieved a 50% reduction of aged grants 

and cooperative agreements against the FY 2017 GONE Act baseline. 

• USDA agencies implemented innovative processes such as Robotics Process Automation 

and PayPal payments to improve operational efficiency and customer experience. 
SECTION II | FINANCIAL INFORMATION 

53

• USDA was awarded $15 million from the Technology Modernization Fund at GSA for 

Information Technology (IT) modernization. This was the result of the enacted 

Modernizing Government Technology (MGT) Act which has provided an exceptional 

opportunity to update the Department’s legacy IT infrastructure. OCFO's Working 

Capital fund will be tracking these expenditures as we work in collaboration with the 

Chief Information Officer to modernize IT. 

• The Food Nutrition Service moved USDA into the top five Federal entities utilizing the 

Treasury Offset Program; recovering an unprecedented $207 million in delinquent 

Supplemental Nutrition Assistance Program (SNAP) recipient debt in FY 2018 and 

more than $2.2 billion since the inception of the program. 

FY 2018 at USDA can best be described as the “Year of Renewed Focus.” Throughout this year, 

we have taken a hard look at our operations and have made rigorous efforts to drive enterprise 

solutions, eliminate redundancies, modernize information technology and centralize 

administrative functions under Business Center models. Through these efforts, we are making 

USDA the most efficient, effective, and customer-focused department in the federal government. 

We are proud of our hard-working employees’ accomplishments at USDA. We remain 

steadfast and committed to making greater financial management improvements in FY 2019. 

At every level, we are committed to be 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. 

Lynn M. Moaney 

Deputy Chief Financial Officer 

November 15, 2018 
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REPORT 50401-0016-11 1

Independent Auditors Report

Independent Auditor’s Report

Lynn Moaney

Deputy Chief Financial Officer

Office of the Chief Financial Officer

The United States Department of Agriculture’s (USDA) Office of Inspector General (OIG) 

audited the consolidated financial statements of the Department for fiscal year 2018. 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 

on these financial statements.

The “Findings and Recommendation” section presents the material weaknesses and significant 

deficiencies in internal control and instances of noncompliance with laws and regulations, as of 

and for the year ended September 30, 2018. Exhibit A summarizes the current year status of the 

prior year open audit recommendation. 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 financial statements of USDA, which comprise 

the balance sheet as of September 30, 2018, and the related consolidated statement of net cost 

and changes in net position; and the combined statement of budgetary resources for the fiscal 

year then ended and the related notes to the financial statements (hereinafter referred to as the 

“consolidated financial statements”). The objective of our audit was to express an opinion on the 

fair presentation of these consolidated financial statements.

Management’s Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated 

financial statements 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 statements that are 

free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on 

our audit. We conducted 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 19-01, Audit Requirements for Federal Financial Statements. Those standards 

and OMB Bulletin 19-01 require that we plan and perform the audit to obtain reasonable 

assurance about whether the consolidated financial statements are free from material 

misstatement.
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2 REPORT 50401-0016-11

An audit involves performing procedures to obtain audit evidence about the amounts and 

disclosures in the consolidated financial statements. The procedures selected depend on the 

auditor’s judgement, including the assessment of the risks of material misstatement of the 

consolidated financial statements, 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 statements 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 statements. Our audit also included 

performing such other procedures as we considered necessary in the circumstances.

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 Statements

In our opinion, the consolidated financial statements referred to above present fairly, in all 

material respects, the financial position of USDA as of September 30, 2018, and its net cost, 

changes in net position, and budgetary resources for the year then ended, in accordance with 

accounting principles generally accepted in the U.S.

Other Matters 

Required Supplementary Information

Accounting principles generally accepted in the U.S. issued by the Federal Accounting Standards 

Advisory Board (FASAB) require that the Management’s Discussion and Analysis (MD&A), 

Required Supplementary Information (RSI) 1

, and Required Supplementary Stewardship 

Information be presented to supplement the consolidated financial statements. Although the RSI 

is not a part of the consolidated financial statements, FASAB considers this information to be an 

essential part of financial reporting for placing the consolidated financial statements in 

appropriate operational, economic, or historical context. We have applied certain limited 

procedures to the RSI in accordance with auditing standards generally accepted in the U.S., 

which consisted of inquiries of management about the methods of preparing the RSI and 

comparing the information for consistency with management’s responses to our inquiries, the 

consolidated financial statements, and other knowledge we obtained during our audit of the 

consolidated financial statements. 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.

1 The RSI consists of the Deferred Maintenance and Repairs, Statement of Budgetary Resources (by component),

and Risk Assumed Information, which are included with the financial statements.
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AUDIT REPORT 50401-0016-11 3

Other Information

Our audit was conducted for the purpose of forming an opinion on the consolidated financial 

statements as a whole. The “Message from the Secretary” and “Other Information” sections are 

presented for purposes of additional analysis, and are not a required part of the consolidated 

financial statements or the required supplementary information. This information has not been 

subjected to the auditing procedures applied in our audit of the consolidated financial statements 

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 statements, 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 statements, but not for the purpose of expressing an opinion on the 

effectiveness of USDA’s internal control. Accordingly, we do not express an opinion on the 

effectiveness of USDA’s internal control. 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 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 statements 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.

OMB Bulletin 19-01 requires us to describe significant deficiencies and material weaknesses 

identified during our audit, and in the event that no material weaknesses were identified, to so 

report. In our fiscal year 2018 audit, 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 unliquidated obligations.

We determined that the first two deficiencies are also material weaknesses. These deficiencies 

are discussed in this report in the “Findings and Recommendation,” Sections 1 and 2.
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Report on Compliance with Laws, Regulations, Contracts, and Grant Agreements

As part of obtaining reasonable assurance about whether USDA’s consolidated financial 

statements are 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 effect on the determination of 

material amounts and disclosures in the consolidated financial statements. 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 compliance with FFMIA was not an objective of our engagement, and 

accordingly, we do not express such an opinion. The results of our tests of FFMIA disclosed 

instances, described in more detail in Finding 4 in the “Findings and Recommendation,” 

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.

As discussed in Finding 5 of the “Findings and Recommendation,” 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 2018, 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. 2

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.

2 IPERA amended the Improper Payments Information Act of 2002, Public Law 107-300. These two laws address 

improper payment requirements.
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AUDIT REPORT 50401-0016-11 5

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 effect on the determination of material amounts and disclosures in the consolidated 

financial statements.

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, internal control over financial reporting may not 

prevent, or detect and correct misstatements due to fraud or error.

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 

amounts and disclosures in the consolidated financial statements that we deemed applicable to 

USDA’s consolidated financial statements for the fiscal year ended September 30, 2018. We 

caution that noncompliance may occur and not be detected by these tests.

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 year, prior year internal control 

deficiencies, and prior year noncompliance issues. The status of these items is presented in 

Exhibits A, B, and C.
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6 AUDIT REPORT 50401-0016-11

Purpose of the Report on Internal Control Over Financial Reporting and the Report on 

Compliance with Laws, Regulations, Contracts, and Grant Agreements

The purpose of the “Report on Internal Control Over Financial Reporting” and the “Report on 

Compliance with Laws, Regulations, Contracts, and Grant Agreements” sections of this report is 

solely to describe the scope of our testing of internal control and compliance and the results of 

that testing, and not to provide an opinion on the effectiveness of USDA’s internal control or 

compliance. These reports are an integral part of an audit performed in accordance with 

government auditing standards in considering USDA’s internal control and compliance. 

Accordingly, these reports are not suitable for any other purpose. 

Gil H. Harden

Assistant Inspector General for Audit

Washington, D.C.

November 14, 2018
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AUDIT REPORT 50401-0016-11 7

Findings and Recommendation

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). In addition, improvements are needed in internal 

controls over estimating losses on insurance claims related to Federal Crop Insurance 

Corporation/Risk Management Agency (FCIC/RMA). 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 a material weakness 

related to accounting for budgetary transactions. 

• 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.

• One component of USDA’s financial reporting, FCIC/RMA, disclosed a material 

weakness related to review of estimated loss calculations.

In its FMFIA Report on Management Control for fiscal year 2018, the Department reported the

above material weakness for overall financial management with the following corrective action 

plans:

• CCC, in fiscal year 2019, plans to continue to evaluate and refine processes for account 

reconciliations and analysis. Some of these actions include updating guidance and 

improving timeliness of analysis, review, and recordation processes.

• NRCS, in fiscal year 2019, plans to enhance processes and NRCS feeder systems to 

improve monitoring of USSGL activity and continue to improve the transparency of 

recording and liquidating obligations.

• FCIC/RMA, in fiscal year 2019, plans to implement change controls over the model used 

to calculate actuarial projections.

Since USDA has actions planned and in progress, we are making no further recommendations 

herein.
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8 AUDIT REPORT 50401-0016-11

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 during fiscal 

year 2018. 3

USDA continues to take positive steps to improve its IT security posture, but many longstanding 

weaknesses remain. In fiscal years 2009 through 2017, OIG made 67 recommendations for 

improving the overall security of USDA’s systems. Forty-seven recommendations are 

completed and 20 open recommendations are overdue, an improvement over the 27 open 

recommendations in fiscal year 2017. Testing shows weaknesses still exist in six of the closed 

recommendations.

Testing also identified weaknesses in eight subject areas as defined for review by FISMA: risk 

management, configuration management, identity and access management, data protection and 

privacy, security training, information security continuous monitoring, incident response, and 

contingency planning.

The report notes the Office of the Chief Information Officer (OCIO) continues to take positive 

steps towards improving the Department’s security posture. For instance, for the Continuous 

Diagnostic and Mitigation project, the Department should expand its continuous diagnostic 

capabilities by increasing network sensor capacity, automating sensor collections, prioritizing 

risk alerts, and increasing the coordination with agencies by sharing and reconciling IT technical 

information. This is a positive step to attain a higher security capability.

OCIO generally agreed with the findings in the report and stated it has developed corrective 

actions and project plans to address prior year recommendations. Eight new recommendations 

were issued based on security weaknesses identified in fiscal year 2018.

In addition, OIG conducted an audit of Security Over Select USDA Agencies’ Networks and 

Systems. 4 We reviewed: (1) relevant laws, regulations, and industry best practices in order to 

gain sufficient knowledge to evaluate USDA’s IT security posture and (2) each entity’s 

responses to OIG’s IT security survey and follow-up interviews. We found that the Department 

did not fully implement these Federally-mandated controls. The Department concurred with our 

findings and recommendations. As a result, we are making no further recommendations in this 

report.

3 Audit Report 50501-0018-12, U.S. Department of Agriculture, Office of the Chief Information Officer, 

Fiscal Year 2018 Federal Information Security Modernization Act, issued October 2018. 4 Audit Report 50501-0017-12, Security Over Select USDA Agencies’ Networks and Systems, issued September 

2018.
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AUDIT REPORT 50401-0016-11 9

Section 2: Significant Deficiency in Internal Control Over Financial 

Reporting

Finding 3: Controls Over Unliquidated Obligations Can Be Strengthened

For several years, our report identified deficiencies with controls over inactive unliquidated 

obligations (ULO). 5 This year, our review disclosed that additional improvements are needed.

We reviewed the completeness of ten obligation certifications submitted to the Department for 

the third quarter of fiscal year 2018; and for those agencies, further reviewed a nonstatistical 

selection of 137 obligation balances for validity. We found that 17 ULOs were invalid and 

should have been deobligated prior to the sample date because no future expenditures were 

expected. In addition, we found that 19 intra-departmental ULOs were valid but should have 

been liquidated in a prior fiscal year. These ULOs inappropriately remained open in part 

because USDA agencies failed to bill, or submit final payments, to other USDA agencies.

We also found that the ULO certification cutoff dates, cutoff amounts, and transaction types 

were inconsistent among the agencies tested because each agency developed its own criteria 

query to obtain the certification population. In addition, we statistically sampled 32 obligation 

balances, which were not included as part of the agency certifications. We found one balance 

which was invalid because it was an adjustment that lacked support.

The U.S. Department of the Treasury’s (Treasury) annual closing guidance (Treasury 

Bulletin 2018-07, Yearend Closing, dated July 31, 2018), 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.

Management generally agreed with our findings and will continue to implement controls over 

unliquidated obligations.

5 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.
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Recommendation 1: 

Develop an ULO Aging Report in FMMI that reconciles to the general ledger to help ensure that 

the ULO populations that agencies certify to the Office of Chief Financial Officer (OCFO) are 

consistent, accurate and complete.
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AUDIT REPORT 50401-0016-11 11

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 2018, 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 an ineffective 

information security program due to many longstanding weaknesses with outstanding 

recommendations. See Finding 2 of this report for more details.

Additionally, in its FFMIA report, the Department noted noncompliance for two of its 

component agencies relating to financial management, described below.

1. CCC was not compliant with Federal accounting standards for weaknesses in the 

accounting for budgetary transactions. The financial management system did not record 

certain accounting events at the transaction level in accordance with the USSGL. 

Significant progress was made in accounting for obligation activity. CCC was able to 

provide detailed populations for both beginning balances and current year obligation 

activity for audit testing purposes.

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 of this report for more details on CCC and NRCS issues.

Due to planned actions, we are making no further recommendations in this report.
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Finding 5: Anti-Deficiency Act Violations

In fiscal year 2018, the Department reported several actual and potential ADA violations in its 

Agency Financial Report. These violations are discussed in detail below.

In fiscal year 2017, the Office of the Secretary violated the Purpose statute, improperly 

augmented several of its appropriations, and violated the ADA when it obligated several of its 

appropriations for the expenses of separately funded USDA components. USDA improperly 

relied on the Economy Act to enter into interagency agreements, under which the agency 

obligated its appropriations for (1) Rural Development Salaries and Expenses, (2) Food and 

Nutrition Service, Nutrition Programs Administration, and (3) Office of Civil Rights, for 

personnel details that did not actually occur. Instead, these appropriations were used for the 

salaries and benefits of employees performing work for separately funded USDA components. 

The Economy Act was referenced as the authority to transfer the appropriations. The Purpose 

statute was violated when the incorrect appropriation was used for the salaries and benefits in 

question and improperly augmented the appropriations of these other USDA components. 

USDA incurred obligations in excess of appropriations and therefore violated the ADA. The 

ADA violation was reported to Congress and the President on August 27, 2018.

In fiscal year 2016, CCC identified an ADA violation for expenditures for CCC interest to the 

Treasury exceeded amounts initially apportioned by OMB. CCC expended approximately $46.1 

million in interest to Treasury, more than the apportioned amount of $29.9 million. 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 years 2011 

and 2012, under the Food, Conservation, and Energy Act of 2008, Public Law 110-234 (Farm 

Bill of 2008). OAO awarded more than $19 million for “Outreach and Assistance for Socially 

Disadvantaged and Veteran Farmers and Ranchers” (Section 2501) Grants in excess of amounts 

permitted by the Farm Bill of 2008. The ADA violation is in the process of being reported to 

Congress and the President.

In fiscal year 2017, the National Finance Center (NFC) identified an ADA violation. The NFC 

managed Web pages for the New Orleans chapter of the Association of Government Accountants 

(AGA), which is a non-governmental organization, on the NFC Web site at no cost to AGA. An 

investigation into this situation determined in fiscal year 2017 that NFC has been maintaining the 

AGA Web pages since 1999. The ADA violation pertaining to the services NFC provided for 

maintaining the AGA Web pages is in the process of being reported to Congress and the 

President.

In fiscal year 2018, CCC identified an ADA violation. Agriculture Risk Coverage-County 

(ARC-CO) (occurred in the prior fiscal year but was identified in the current fiscal year). On 

November 10, 2016, OMB approved an ARC-CO apportionment providing a total of 

$850,924,690 for crop year 2017 ARC funding. This funding was divided between ARC-CO 

($775,924,690) and Agricultural Risk Coverage-Individual County ($75,000,000). As part of 

fiscal year-end close for fiscal year 2017, CCC recorded an obligation of $2,319,369,741.34 for 

crop year 2017 ARC-CO.
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AUDIT REPORT 50401-0016-11 13

This exceeded the apportioned amount by $1,543,445,051. The ADA violation is in the process 

of being reported to Congress and the President.

In fiscal year 2018, the Farm Service Agency (FSA) identified an ADA violation. FSA issued a 

contract for IT investments including the CCC Budget Formulation CCC (BF) system. The CCC 

BF was not included in the approved Acquisition Approval Request (AAR). The AAR and the 

contract will be amended to include $300,000 for CCC BF. The fiscal year 2018 Consolidated 

Appropriation Act, Section 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 written approval by the Chief Information Officer.” After

review by the Office of the General Counsel (OGC), it was determined that a violation occurred. 

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

In fiscal year 2018, FSA identified an ADA violation. Government Collections during 

shutdown—Field staff spent time verifying deposit transactions. These deposit verifications 

were not part of the orderly shutdown activities. After review by OGC, it was determined that a 

violation occurred. The ADA violation is in the process of being reported to Congress and the 

President.

In fiscal year 2018, FSA identified an ADA violation with the U.S. Warehouse Act. FSA 

business practices dating back to fiscal year 2000, supported Warehouse User Activities with 

Administrative S&E funds for direct and indirect costs. The user fee collections were not 

adequate to fully fund the costs, and S&E funds were used and not reimbursed; therefore, 

improperly augmenting the User Fee program. When FSA adjusted its accounts to correct the 

error, the user fee account was deficient, resulting in an ADA violation. After review by OGC, it 

was determined that a violation occurred. The ADA violation is in the process of being reported 

to Congress and the President.

In fiscal year 2017, NFC identified an ADA violation. The NFC managed web pages for the 

Federal Executive Board (FEB), which is a quasi-governmental entity. Working Capital Fund 

(WCF) monies may have been used for the web service, and use of the WCF to provide 

unreimbursed services to the FEB would be an ADA violation if no other funds are available to 

reimburse the WCF. Funds other than those in the WCF may have been available to pay for 

services to the FEB. After conducting research, it was determined that the administrative 

expenses of the FEB – which include the hosting of web pages – are not charged to the WCF. 

Rather, those costs are covered by (1) an interagency agreement between NFC and the 

Agricultural Research Service agency in New Orleans that provides direct reimbursement for 

some FEB administrative expenses, and (2) the remaining FEB costs are included as overhead 

and administrative expenses in reimbursable agreements to NFC’s customers. Therefore, NFC’s 

hosting of the FEB web pages is not an ADA violation.

Potential ADA Violations—one prior year and 9 new potential violations were identified during 

FY 2018. These occurrences are pending results from research and investigation for a 

determination as to whether or not a violation actually occurred.
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14 AUDIT REPORT 50401-0016-11

In fiscal year 2017, CCC identified a potential ADA violation. The prior year accounting 

treatment for obligations related to the Conservation Reserve Program-Annual Rental contracts 

was determined to be in error. Only the annual portion of the contract values was recorded as an 

obligation. OGC determined that the error was not an ADA violation; however, the incident has 

been referred to the Government Accountability Office (GAO) for additional investigation and 

determination.

In fiscal year 2018, CCC identified a potential ADA violation for Emergency Forestry 

Conservation Reserve Program. CCC failed to record the obligation for the full value of the 

long‐term contract when the contact was signed. CCC obligated a total of $2,230,309 for long‐

term contracts. OGC determined that the error was not an ADA violation; however, the incident 

has been referred to GAO for additional investigation and determination.

In fiscal year 2018, CCC identified a potential ADA violation for Foreign Agricultural 

Service/Food for Progress. The Foreign Agricultural Service paid Food for Progress freight 

invoices from administrative funds. There was a zero balance in the administrative funds for this 

agreement; however, there were funds available as a result of downward adjustments. The 

agency is seeking an OGC opinion.

In fiscal year 2018, CCC identified a potential ADA violation for Puerto Rico Tree Assistance 

Program (TAP) – Contracts approved from prior fiscal years. TAP contracts from fiscal year 

2014 through 2017 were approved but not recorded into the program application timely. An 

obligation is triggered when an application is approved via a producer’s and FSA 

representative’s signature. CCC received input from the Puerto Rico District Directors that 

indicates that there are 1,973 unrecorded TAP contracts representing 2014, 2015 and 2017.

Pending a determination.

In fiscal year 2018, FSA/CCC identified a potential ADA violation for FSA/CCC Non‐Insured 

Assistance Program (NAP) Frost Freeze (occurred in the prior fiscal year but identified in the 

current fiscal year). During the reclassification process in fiscal year 2018, CCC discovered 

NAP payments exceeding apportionments by $888. Documentation of the background, and 

Statement of Facts and Analysis was still underway as of September 30, 2018. Pending 

determination.

In fiscal year 2018, CCC identified a potential ADA violation for ARC (occurred in the prior 

fiscal year but was identified in current fiscal year). In fiscal year 2018, CCC identified crop 

year 2017 enrollments for the ARC program that exceeded available funding. Pending a 

determination.

In fiscal year 2018, CCC identified a potential ADA violation for the United States Agency for 

International Development (USAID) grants (occurred in the prior fiscal year, but identified in the 

current fiscal year). Pursuant to the Grants Oversight and New Efficiency Act, CCC is required 

to report quarterly, the number of federal grant and cooperative agreement awards and balances 

of USAID (CCC child agency) for which closeout has not yet occurred, but for which the period 

of performance has elapsed more than 2 years with zero and undisbursed balances. At the end of 
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AUDIT REPORT 50401-0016-11 15

third quarter fiscal year 2018, USAID reported grants that had not been closed out in the greater 

than 5‐years category. As part of the grant closeout in fiscal year 2018, it was determined in

some cases that additional funds were needed to fully execute agreements and perform the 

closeout. As a result, fiscal year 2018 funds were used. Pending a determination.

In fiscal year 2018, CCC identified a potential ADA violation for Biomass Crop Assistance 

Program (occurred in the prior fiscal year but was identified in the current fiscal year). During 

the fiscal year 2017 Quarterly ULO Certification process, the program office identified 12 

contracts as invalid and requiring deobligation that were in fact deobligated through a Data 

Change Request in the electronic Funds Management System. After further analysis in fiscal 

year 2018, the program office determined that such contracts were still valid. However, there 

were no funds available in fiscal year 2018 to re‐establish the related obligations. Pending a 

determination.

In fiscal year 2018, the National Institute of Food and Agriculture (NIFA) identified a potential 

ADA violation. USDA’s OIG office completed a 3‐year audit in August 2018 on NIFA Formula 

Grant Program Controls Over Fund Allocations to States. To date, NIFA has not received the 

final disposition from the review. An earlier draft of the OIG report indicated there could be 

potential reportable ADA violations. NIFA is working with USDA’s OGC to determine if there 

will be actual ADA violations based on the final report.

In fiscal year 2018, the Office of Partnerships and Public Engagement (OPPE) identified a 

potential ADA violation related to cooperative agreements may exist. OPPE may have exceeded 

its authority by charging USDA agencies for cooperative agreements that the agencies lacked 

legislative authority to enter into. Pending an OGC determination.
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16 AUDIT REPORT 50401-0016-11

Abbreviations 

AAR......................Acquisition Approval Request 

ARC......................Agriculture Risk Coverage

ARC-CO.................Agriculture Risk Coverage-County

ADA............................Anti-Deficiency Act

AGA ........................... Association of Government Accountants

CCC.............................Commodity Credit Corporation

BF.........................Budget Formulation

CFO.............................Chief Financial Officer

DATA Act...............Digital Accountability and Transparency Act of 2014

FASAB...................Federal Accounting Standards Advisory Board 

FCIC..................... Federal Crop Insurance Corporation

FEB ............................Federal Executive Board

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 

FSA .............................Farm Service Agency

GAO ........................... Government Accountability Office

IT................................. information technology

IPERA ........................ Improper Payments Elimination and Recovery Act of 2010

MD&A...................Management’s Discussion and Analysis

NAP......................Non‐Insured Assistance Program

NFC ............................National Finance Center

NIFA.....................National Institute of Food and Agriculture 

NRCS.......................... Natural Resources Conservation Service

OAO............................Office of Advocacy and Outreach

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

OPPE......................Office of Partnerships and Public Engagement

RMA.....................Risk Management Agency

RSI .............................. required supplementary information

S&E.......................salary and expense

TAP.......................Tree Assistance Program

Treasury ...................... U.S. Department of the Treasury

ULO ............................ unliquidated obligations

U.S. .............................United States of America

USAID...................United States Agency for International Development

USSGL........................ U.S. Standard General Ledger

USDA..........................United States Department of Agriculture

WCF......................Working Capital Fund
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AUDIT REPORT 50401-0016-11 17

Exhibit A: Summary of Open Recommendation from Prior Year

Report 50401-0013-11, U.S. Department of Agriculture’s Consolidated Balance Sheet for 

Fiscal Year 2017, issued November 15, 2017.

Finding 3: Controls Over Unliquidated Obligations Can be Strengthened

Recommendation 1

Provide additional oversight to ensure that financial reporting controls over ULOs are 

strengthened and maintained.

Departmental Status

OCFO is working to address the recommendation.

OIG Results

We continue to find similar deficiencies related to ULOs and have issued a repeat Finding 3 and 

recommendation.
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18 AUDIT REPORT 50401-0016-11

Exhibit B: Status of Prior Year Material Weaknesses and 

Significant Deficiencies

This table reports the fiscal year 2018 status of material weaknesses and significant deficiencies 

reported in fiscal year 2017.

Control Deficiency 2017 Status 2018 Status

Overall Financial 

Management Material Weakness Material Weakness

Overall Information 

Technology Security Program Material Weakness Material Weakness

Financial Reporting Controls Significant Deficiency Significant Deficiency
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AUDIT REPORT 50401-0016-11 19

Exhibit C: Status of Prior Year Noncompliance Findings

Report 50401-0013-11, U.S. Department of Agriculture’s Consolidated Balance Sheet for 

Fiscal Year 2017, issued November 15, 2017.

Finding 4: 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 2018, 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 5: ADA Violations

Reported Noncompliance

In fiscal year 2017, the Department reported seven actual and four potential ADA violations in 

its Agency Financial Report. Specifically, FSA reported an ADA exceeding OMB approved 

apportionment request by $302,823.57, FS identified an ADA related to the agency’s 

employment of non-U.S. citizens, OCFO obligated funds for IT on four occasions prior to an 

approved AAR from the CIO, and OAO identified an ADA exceeding the amount available for 

“Outreach and Assistance for Socially Disadvantaged and Veteran Farmers and Ranchers” 

grants. The first three ADA were reported to Congress and the President and the last is in the 

process of being reporting to Congress and the President.

Also, CCC identified a potential ADA with expenditures for interest to Treasury that appear to 

have exceeded amounts initially apportioned by OMB; NFC managing Web pages for New 

Orleans AGA Chapter on NFC Web Site at no cost since 1999; OSEC violated the Purpose 

statute, and improperly augmented several of its appropriations when it obligated several of its 

appropriations for the expenses of separately funded USDA components; and CCC prior year 

accounting treatment for obligations related to the Conservation Reserve Program annual rental 

contracts was determined to be in error. These potential ADAs are in the process of being 

researched to make final determinations.

Also in fiscal year 2017, the Department reported a potential ADA by Foreign Agriculture 

Service associated the fiscal year 2009 appropriation; however, after further research, it was 

determined that it was not an ADA violation.
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20 AUDIT REPORT 50401-0016-11

Status

As discussed in Finding 5, this weakness continues to exist.

Finding 6: DATA Act Non-Compliance

Reported Noncompliance

In Audit Report 11601-0001-22, USDA’s 2017 Compliance with the DATA Act, issued 

November 2017, OIG identified USDA’s noncompliance with the Digital Accountability and 

Transparency Act of 2014 (DATA Act). Specifically, we found while USDA submitted and 

certified second quarter files to Treasury’s broker by the reporting deadline, the files were 

incomplete and of insufficient quality.

Status

Closed. Final action for the five recommendations from Audit Report 11601-0001-22, USDA’s 

2017 Compliance with the DATA Act, was achieved during fiscal year 2018.
74

USDA AGENCY FINANCIAL REPORT | 2018

Agency Response to Auditors Report

United States

Department of

Agriculture

Office of the Chief

Financial Officer

1400 Independence

Avenue, SW

Washington, DC

20250

November 14, 2018

TO: Phyllis K. Fong 

Inspector General

Office of Inspector General

FROM: Lynn Moaney /S/

Deputy Chief Financial Officer 

SUBJECT: U.S. Department of Agriculture’s Consolidated Financial Statements for 

Fiscal Year 2018

The Department is pleased to respond to your audit report on the consolidated financial

statements for fiscal year 2018.

We concur with the findings in the report. We generally agree with the 

recommendations in the report and will develop corrective 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
SECTION II | FINANCIAL INFORMATION 

75

Consolidated Financial Statements 

CONSOLIDATED BALANCE SHEET 

As of September 30, 2018 ($ in millions) 

Item 2018 

Assets (Note 2): 

Intragovernmental: 

Fund Balance with Treasury (Note 3) $132,350

Investments (Note 5) 228 

Accounts Receivable, Net (Note 6) 78

Other (Note 11) 9 

Total Intragovernmental 132,665

Cash and Other Monetary Assets (Note 4) 236 

Investments (Note 5) 3 

Accounts Receivable, Net (Note 6) 1,114 

Direct Loan and Loan Guarantees, Net (Note 7) 101,947 

Inventory and Related Property, Net (Note 8) 46 

General Property, Plant, and Equipment, Net 

(Note 9) 

2,224 

Other (Note 11) 539 

Total Assets 238,774 

Stewardship PP&E (Note 10) 

Liabilities (Note 12): 

Intragovernmental: Accounts Payable 3 

Debt (Note 13) 119,423 

Other (Note 15) 9,910 

Total Intragovernmental 129,336 

Accounts Payable 1,854 

Loan Guarantee Liability (Note 7) 502 

Federal Employee and Veteran Benefits 892 

Environmental and Disposal Liabilities (Note 14) 200 

Benefits Due and Payable 5,074 

Other (Notes 15 & 16) 23,258 

Total Liabilities 161,116 

Commitments and Contingencies (Note 17) 

Net Position: 

Unexpended Appropriations - Funds From 

Dedicated Collections (Note 18) 

168 

Unexpended Appropriations - All Other Funds 65,238 

Cumulative Results of Operations - Funds From 

Dedicated Collections(Note 18) 

2,243 

Cumulative Results of Operations - All Other 

Funds 

10,009 

Total Net Position - Funds From Dedicated 

Collections 

2,411 

Total Net Position - All Other Funds 75,247 

Total Net Position 77,658 

Total Liabilities and Net Position 238,774 

2018

Assets (Note 2):

Intragovernmental:

Fund Balance with Treasury (Note 3) $ 132,350

Investments (Note 5) 228

Accounts Receivable, Net (Note 6) 78

Other (Note 11) 9

Total Intragovernmental 132,665

Cash and Other Monetary Assets (Note 4) 236

Investments (Note 5) 3

Accounts Receivable, Net (Note 6) 1,114

Direct Loan and Loan Guarantees, Net (Note 7) 101,947

Inventory and Related Property, Net (Note 8) 46

General Property, Plant, and Equipment, Net (Note 9) 2,224

Other (Note 11) 539

Total Assets 238,774

Stewardship PP&E (Note 10)

Liabilities (Note 12):

Intragovernmental:

Accounts Payable 3

Debt (Note 13) 119,423

Other (Note 15) 9,910

Total Intragovernmental 129,336

Accounts Payable 1,854

Loan Guarantee Liability (Note 7) 502

Federal Employee and Veteran Benefits 892

Environmental and Disposal Liabilities (Note 14) 200

Benefits Due and Payable 5,074

Other (Notes 15 & 16) 23,258

Total Liabilities 161,116

Commitments and Contingencies (Note 17)

Net Position:

Unexpended Appropriations - Funds From Dedicated Collections (Note 18) 168

Unexpended Appropriations - All Other Funds 65,238

Cumulative Results of Operations - Funds From Dedicated Collections(Note 18) 2,243

Cumulative Results of Operations - All Other Funds 10,009

Total Net Position - Funds From Dedicated Collections 2,411

Total Net Position - All Other Funds 75,247

Total Net Position 77,658

Total Liabilities and Net Position 238,774

The accompanying notes are an integral part of these statements.
USDA AGENCY FINANCIAL REPORT | 2018 

76

CONSOLIDATED STATEMENT OF NET COST 

For the Year Ended September 30, 2018 ($ in millions) 

Item 2018

Rural Development: 

Gross Costs $ 6,987 

Less: Earned Revenue 3,831 

Net Costs 3,156 

Food Safety: 

Gross Costs 1,342 

Less: Earned Revenue 242

Net Costs 1,100 

Marketing and Regulatory Programs: 

Gross Costs 2,660 

Less: Earned Revenue 1,204 

Net Costs 1,456 

Natural Resources and Environment: 

Gross Costs 7,871 

Less: Earned Revenue 852

Net Costs 7,019 

Food, Nutrition, and Consumer Services: 

Gross Costs 98,033 

Less: Earned Revenue 57

Net Costs 97,976 

Farm Production and Conservation: 

Gross Costs 20,512 

Less: Earned Revenue 1,080 

Net Costs 19,432 

Trade and Foreign Agricultural Affairs: 

Gross Costs 470

Less: Earned Revenue 59

Net Costs 411

Research, Education, and Economics: 

Gross Costs 3,000 

Less: Earned Revenue 146

Net Costs 2,854 

Departmental Management:

Gross Costs 1,333 

Less: Earned Revenue 276

Net Costs 1,057 

Total Gross Costs 142,208 

Less: Total Earned Revenue 7,747 

Net Cost of Operations (Note 19) $ 134,461 

2018

Rural Development:

 Gross Costs $ 6,987

 Less: Earned Revenue 3,831

 Net Costs 3,156

Food Safety: 

 Gross Costs 1,342

 Less: Earned Revenue 242

 Net Costs 1,100

Marketing and Regulatory Programs:

 Gross Costs 2,660

 Less: Earned Revenue 1,204

 Net Costs 1,456

Natural Resources and Environment:

 Gross Costs 7,871

 Less: Earned Revenue 852

 Net Costs 7,019

Food, Nutrition, and Consumer Services:

 Gross Costs 98,033

 Less: Earned Revenue 5 7

 Net Costs 97,976

Farm Production and Conservation:

 Gross Costs 20,512

 Less: Earned Revenue 1,080

 Net Costs 19,432

Trade and Foreign Agricultural Affairs:

 Gross Costs 470

 Less: Earned Revenue 5 9

 Net Costs 411

Research, Education, and Economics:

 Gross Costs 3,000

 Less: Earned Revenue 146

 Net Costs 2,854

Departmental Management:

 Gross Costs 1,333

 Less: Earned Revenue 276

 Net Costs 1,057

Total Gross Costs 142,208

Less: Total Earned Revenue 7,747

Net Cost of Operations (Note 19) $ 134,461

The accompanying notes are an integral part of these statements. 
SECTION II | FINANCIAL INFORMATION 

77

CONSOLIDATED STATEMENT OF CHANGES IN NET POSITION 

For the Year Ended September 30, 2018 ($ in millions) 

Item 

Funds From 

Dedicated 

Collections 

(Note 18) 

All Other 

Funds Eliminations 

Consolidated 

Total 

Unexpended Appropriations: 

Beginning Balances $ 156 $ 55,947 $ 0 $ 56,103

Budgetary Financing Sources: 

Appropriations Received 12 148,936 0 148,948 

Appropriations Transferred In (Out) 0 1 0 1 

Other Adjustments 0 -8,764 0 -8,764 

Appropriations Used 0 -130,882 0 -130,882 

Total Budgetary Financing Sources 12 9,291 0 9,303 

Total Unexpended Appropriations 168 65,238 0 65,406 

Cumulative Results of Operations: 

Beginning Balances 2,270 2,989 0 5,259 

Budgetary Financing Sources: 

Other Adjustments 0 -285 0 -285 

Appropriations Used 0 130,882 0 130,882 

Non-exchange Revenue 0 8 0 8 

Donations and Forfeitures of Cash and 

Equivalents 

1 1 0 2 

Transfers In (Out) without Reimbursement 513 10,345 1,220 12,078 

Other Financing Sources (Non-Exchange): 

Transfers In (Out) without Reimbursement 0 1,219 -1,220 -1 

Imputed Financing 54 3,288 -2,355 987 

Other 33 -2,250 0 -2,217 

Total Financing Sources 601 143,208 -2,355 141,454 

Net Cost of Operations -628 -136,188 2,355 -134,461 

Net Change -27 7,020 0 6,993 

Cumulative Results of Operations 2,243 10,009 0 12,252 

Net Position $ 2,411 $ 75,247 $ 0 $ 77,658 

Funds From

Dedicated

Collections All Other Consolidated

(Note 18) Funds Eliminations Total

Unexpended Appropriations:

Beginning Balances $ 156 $ 55,947 $ - $ 56,103

 Budgetary Financing Sources:

 Appropriations Received 12 148,936 - 148,948

 Appropriations Transferred In (Out) - 1 - 1

 Other Adjustments - (8,764) - (8,764)

 Appropriations Used - (130,882) - (130,882)

Total Budgetary Financing Sources 12 9,291 - 9,303

 Total Unexpended Appropriations 168 65,238 - 65,406

Cumulative Results of Operations:

Beginning Balances 2,270 2,989 - 5,259

Budgetary Financing Sources:

Other Adjustments - (285) - (285)

Appropriations Used - 130,882 - 130,882

Non-exchange Revenue - 8 - 8

Donations and Forfeitures of Cash and Equivalents 1 1 - 2

Transfers In (Out) without Reimbursement 513 10,345 1,220 12,078

Other Financing Sources (Non-Exchange):

Transfers In (Out) without Reimbursement - 1,219 (1,220) (1)

Imputed Financing 54 3,288 (2,355) 987

Other 33 (2,250) - (2,217)

Total Financing Sources 601 143,208 (2,355) 141,454

Net Cost of Operations (628) (136,188) 2,355 (134,461)

Net Change (27) 7,020 - 6,993

Cumulative Results of Operations 2,243 10,009 - 12,252

Net Position $ 2,411 $ 75,247 $ - $ 77,658

The accompanying notes are an integral part of these statements. 
USDA AGENCY FINANCIAL REPORT | 2018 

78

COMBINED STATEMENT OF BUDGETARY RESOURCES 

For the Year Ended September 30, 2018 ($ in millions) 

Item Budgetary 

Non-Budgetary Credit 

Reform Financing 

Accounts 

Budgetary Resources: 

Unobligated balance from prior year budget authority, net 60,455 3,470 

Appropriations (discretionary and mandatory) 143,914 0 

Borrowing authority (discretionary and mandatory) 9,888 17,208 

Spending authority from offsetting collections (discretionary and 

mandatory) 

 9,838 5,567 

Total budgetary resources 224,095 26,245 

Status of Budgetary Resources: 

New obligations and upward adjustments (total) (Note 23) 157,385 18,759 

Unobligated balance, end of year: 

Apportioned, unexpired accounts 20,869 6,547 

Exempt from apportionment, unexpired accounts 1 0 

Unapportioned, unexpired accounts 12,845 939 

Unexpired unobligated balance, end of year 33,715 7,486 

Expired unobligated balance, end of year 32,995 0 

Total unobligated balance, end of year 66,710 7,486 

Total budgetary resources 224,095 26,245 

Outlays, Net: 

Outlays, net (discretionary and mandatory) 139,567 3,705 

Distributed offsetting receipts (-) -962 -1,892 

Agency outlays, net (discretionary and mandatory) $ 138,605 $ 1,813 

Non-Budgetary

Credit Reform

Financing

Budgetary Accounts

Budgetary Resources:

Unobligated balance from prior year budget authority, net 60,455 3,470

Appropriations (discretionary and mandatory) 143,914 -

Borrowing authority (discretionary and mandatory) 9,888 17,208

Spending authority from offsetting collections (discretionary and mandatory) 9,838 5,567

Total budgetary resources 224,095 26,245

Status of Budgetary Resources:

New obligations and upward adjustments (total) (Note 23) 157,385 18,759

Unobligated balance, end of year:

Apportioned, unexpired accounts 20,869 6,547

Exempt from apportionment, unexpired accounts 1 -

Unapportioned, unexpired accounts 12,845 939

Unexpired unobligated balance, end of year 33,715 7,486

Expired unobligated balance, end of year 32,995 -

Total unobligated balance, end of year 66,710 7,486

Total budgetary resources 224,095 26,245

Outlays, Net:

Outlays, net (discretionary and mandatory) 139,567 3,705

Distributed offsetting receipts (-) (962) (1,892)

Agency outlays, net (discretionary and mandatory) $ 138,605 $ 1,813

The accompanying notes are an integral part of these statements. 
SECTION II | FINANCIAL INFORMATION

79

Notes to the Consolidated Financial Statements

As of September 30, 2018 ($ 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 eight distinct mission areas and their agencies that execute these missions. See 

MD&A for listing of the missions and the agencies within each mission.

Consolidation

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 (SBR) 

which is presented on a combined basis. The financial statements are prepared in accordance 

with generally accepted accounting principles for the Federal Government, except for the 

presentation of comparative data.

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 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.
USDA AGENCY FINANCIAL REPORT | 2018 

80

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 FY 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 FY 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.

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.
SECTION II | FINANCIAL INFORMATION

81

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, respectively, 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 

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.
USDA AGENCY FINANCIAL REPORT | 2018 

82

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.

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 
SECTION II | FINANCIAL INFORMATION

83

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.

Budget and Accrual Reconciliation

SFFAS 53, Budget and Accrual Reconciliation (BAR) amends requirements for a reconciliation 

between budgetary and financial accounting information established by SFFAS 7, Accounting 

for Revenue and Other Financing Sources and Concepts for Reconciling Budgetary and 

Financial Accounting. The BAR explains the relationship between the entity’s net outlays on a

budgetary basis and the net cost of operations during the reporting period. SFFAS 53 is effective 

for FY 2019, but early implementation is permitted. USDA chose to adopt the new format for 

FY 2018 presented in Note 30. 
USDA AGENCY FINANCIAL REPORT | 2018 

84

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. 

Item FY 2018 

Intragovernmental: Fund balance with Treasury $277

Intragovernmental: Accounts Receivable 186

Subtotal Intragovernmental 463

With the Public: Cash and other monetary 

assets 

46

With the Public: Accounts receivable 149

Subtotal With the Public 195 

Total non-entity assets 658

Total entity assets 238,116 

Total Assets $ 238,774 

FY 2018

Intragovernmental:

Fund balance with Treasury $ 277

Accounts Receivable 186

Subtotal Intragovernmental 463

With the Public:

Cash and other monetary assets 46

Accounts receivable 149

Subtotal With the Public 195

Total non-entity assets 658

Total entity assets 238,116

Total Assets $ 238,774

NOTE 3: FUND BALANCE WITH TREASURY 

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. 

Status of Fund Balance with Treasury: FY 2018 

Unobligated Balance: Available 27,417 

Unobligated Balance: Unavailable 46,823 

Obligated Balance not yet Disbursed 78,722 

Borrowing Authority not yet Converted to Fund Balance -44,123 

Authority Granted Prior to Credit Reform for Rental Assistance Grants -33 

Non-Budgetary Fund Balance with Treasury 23,544 

Total $ 132,350 

FY 2018

Status of Fund Balance with Treasury:

Unobligated Balance:

 Available 27,417

 Unavailable 46,823

Obligated Balance not yet Disbursed 78,722

Borrowing Authority not yet Converted to Fund Balance (44,123)

Authority Granted Prior to Credit Reform for Rental Assistance Grants (33)

Non-Budgetary Fund Balance with Treasury 23,544

Total $ 132,350
SECTION II | FINANCIAL INFORMATION 

85

NOTE 4: CASH AND OTHER MONETARY ASSETS 

For FY 2018, cash mostly consists of Federal crop insurance escrow of $119 million, deposits in 

transit of $71 million and single family housing escrow of $46 million 

FY 2018

Cash $ 236

NOTE 5: INVESTMENTS 

FY 2018 Item Cost 

Amortized 

(Premium) 

Discount 

Interest 

Receivable 

Investments, 

Net

Market Value 

Disclosure 

Intragovernmental: Non-marketable 

Par value 0 0 0 0 0 

Market-based (Amortization method: Straight Line) 227 0 1 228 228 

Total $ 227 0 $ 1 $ 228 $ 228 

With the Public: AARC $ 3 0 0 $ 3 $ 3 

Total $ 3 0 0 $ 3 $ 3 

FY 2018 Amortized Market

Amortization (Premium) Interest Investments, Value

Method Cost Discount Receivable Net Disclosure

Intragovernmental:

Non-marketable

Par value $ - $ - $ - $ - $ -

Market-based Straight Line 227 - 1 228 228

Total $ 227 $ - $ 1 $ 228 $ 228

With the Public:

AARC $ 3 $ - $ - $ 3 $ 3

Total $ 3 $ - $ - $ 3 $ 3

NOTE 6: ACCOUNTS RECEIVABLE, NET 

FY 2018 Item Accounts Receivable, Gross 

Allowance for Uncollectible 

Accounts Accounts Receivable, Net 

Intragovernmental $ 78 0 $78 

With the Public 1,170 -56 1,114 

Total $ 1,248 -56 1,192 

Criminal Restitution $ 4 $ -4 0 

FY 2018

Accounts 

Receivable, 

Gross

Allowance for 

Uncollectible 

Accounts

Accounts 

Receivable, 

Net

Intragovernmental $ 78 $ - $ 78

With the Public 1,170 (56) 1,114

Total $ 1,248 $ (56) $ 1,192

Criminal Restitution $ 4 $ (4) $ -
USDA AGENCY FINANCIAL REPORT | 2018 

86

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 2018 was $101,947 million. Loans 

exempt from the Federal Credit Reform Act of 1990 represent $475 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 2018. 

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 $4,102 million during FY 2018. 

Table 2 shows the subsidy cost allowance balances for FY 2018. 

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 2018 was $112 million. 

Table 3 illustrates the breakdown of total subsidy expense for FY 2018 by program. 
SECTION II | FINANCIAL INFORMATION 

87

Direct loan volume was $9,221 million in FY 2018. 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 2018 were $150,891 million in outstanding 

principal and $134,691 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 $502 million during FY 2018. 

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 2018 was negative 

$160 million. Table 8 illustrates the breakdown of total subsidy expense for FY 2018 by program. 

Guaranteed loan volume was $24,758 million in FY 2018. Volume distribution between mission 

area and program is shown in Table 9. 

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 2018 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 2018 cohorts. These rates cannot be applied to the 
USDA AGENCY FINANCIAL REPORT | 2018 

88

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 FPAC mission 

area through the FSA and the CCC, and in the RD mission area. 

Farm Production and Conservation (FPAC) Mission Area 

The FPAC mission area helps keep America’s farmers and ranchers in business as they face the 

uncertainties of weather and markets. FPAC delivers commodity, credit, conservation, disaster, 

and emergency assistance programs that help strengthen and stabilize the agricultural economy. 

FPAC 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. 

CCC’s foreign programs provide economic stimulus to both the U.S. and foreign markets, while 

giving humanitarian assistance to the most disadvantaged 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 
SECTION II | FINANCIAL INFORMATION 

89

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 2017 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. 

EXHIBIT 21: Farm Production and Conservation List of Programs 

Farm Service Agency 

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 

Commodity Credit Corporation 

General Sales Manager Export Credit Guarantee 

Program 

Facility Program Guarantee 

P.L. 480 Title 1 Program 

Direct Farm Storage Facility 

Direct Sugar Storage Facilities 

Rural Development (RD) Mission Area 

RD offers both direct and guaranteed loans administered through three agencies with unique 

missions to bring prosperity and opportunity to rural areas. Each year, RD programs create or 

preserve tens of thousands of rural jobs and provide or improve the quality of rural housing, 

business, and utilities. To leverage the impact of its programs, RD is working with state, local, 

and Indian tribal governments, as well as private and nonprofit organizations and user-owned 

cooperatives. RD is able to 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. 

Rural Housing programs provide affordable, safe, and sanitary housing and essential community 

facilities to rural communities. They also help finance new or improved housing for moderate, 
USDA AGENCY FINANCIAL REPORT | 2018 

90

low, and very low-income families each year. Other programs help rural communities to finance, 

construct, enlarge or improve fire stations, libraries, hospitals and medical clinics, industrial 

parks, and other community facilities. 

Rural Business programs promote a dynamic business environment in rural America. These 

programs work in partnership with the private sector and community-based organizations to 

provide financial assistance and business planning. They also provide technical assistance to 

rural businesses and cooperatives, conduct research into rural economic issues, and provide 

cooperative educational materials to the public. 

Rural Utilities programs help to improve the quality of life in rural America through a variety of 

loan programs for electric energy, telecommunications, and water and environmental projects. 

These programs leverage scarce Federal funds with private capital for investing in rural 

infrastructure, technology, and development of water resources. 

EXHIBIT 22: Rural Development List of Programs 

Rural Housing Program 

Single Family Housing Direct 

Loans (including Self-Help 

Loans) 

Single Family Housing Loan 

Guarantees 

Single Family Housing Repair 

Loans 

Rural Rental Housing Direct 

Loan 

Rural Rental Housing Loan 

Guarantees 

Farm Labor Housing Loans 

Community Facilities Direct 

Loans and Loan Guarantees 

Rural Business Program 

Business and Industry Loan 

Guarantees 

Intermediary Relending 

Program Loans 

Rural Microentrepreneur 

Assistance Program 

Rural Economic Development 

Loans 

Rural Energy for America 

Program Loan Guarantees 

Biorefinery Renewable 

Chemical, and Bio-based 

Product Manufacturing 

Assistance Program Loan 

Guarantees 

Rural Utilities Program 

Water and Waste Disposal 

Direct Loans, Loan 

Guarantees 

Water and Waste Disposal 

Technical Assistance 

Rural Broadband Direct Loans 

and Loan Guarantees 

Electric and 

Telecommunications Direct 

Loans and Loan Guarantees 

Distance Learning and 

Telemedicine Loans 
SECTION II | FINANCIAL INFORMATION 

91

Events and Changes Having a Significant and Measurable Effect on Subsidy Rates, 

Subsidy Expense, and Subsidy Reestimates 

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 2018 reestimate 

process resulted in a $227 million increase in the post-1991 estimated cost of the direct loan 

portfolio and a $180 million decrease in the post-1991 estimated cost of the guaranteed loan 

portfolio, primarily comprised of the following programs. 

Direct Loans 

The Direct Community Facility Program had a net upward reestimate of $134 million. Cohorts 

2015 through 2017 had an upward reestimate of $161 million due primarily to projected 

borrowing rates from Treasury rising higher than initially budgeted. Treasury rates on older 

cohorts do not change as Treasury sets fixed borrowing rates on each cohort after 90% of the 

loans have been disbursed. 

The Direct Water and Environmental Program had an upward reestimate of $72 million, 

representing less than one percent of the outstanding principal. The majority of the reestimate 

was caused by projected borrowing rates from Treasury rising higher than initially budgeted for 

the 2015 through 2017 cohorts. 

Guaranteed Loans 

The Guaranteed Single Family Housing Section 502 program is the largest of RD’s guaranteed 

housing program and is a portion of the ($112 million) downward reestimate for the overall 

Housing Guaranteed Loan Programs. The Guaranteed Single Family Housing Section 502 

Program had an overall downward reestimate of ($100 million). The downward reestimate of 

($100 million) is the result of a downward reestimate of ($93 million) in the Blended component 

of the program and a downward reestimate of ($7 million) in the Purchase component of the 

program. The Blended component’s change is attributed to the upward reestimates for cohorts 

2011 through 2017, along with a larger offsetting downward reestimate for cohort 2018 of 

$111 million, or less than one percent of the outstanding principal, due to projected losses lower 

than originally budgeted. In the Blended component of the program, the upward reestimate for 
USDA AGENCY FINANCIAL REPORT | 2018 

92

cohorts 2011 through 2017 is due to the increase in projected loss claims and a decrease in 

projected annual fees, reducing the future cash flows and increasing the subsidy cost. 

The Purchase component’s change is mainly attributed to cohorts 2008 through 2010. 

The downward reestimate change in the Guaranteed Business and Industry Program is a portion 

of the overall downward reestimate in the Business and Industry Loans of ($69 million). 

The Guaranteed Business and Industry Program had an overall downward reestimate of 

($90 million), which was the result of higher projected recoveries and lower than foreclosed 

claims paid through FY 2018.

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 2018. 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, 2018, foreclosed property consisted of 1,238 rural single family housing 

dwellings, with an average holding period of 16 months. As of September 30, 2018, FSA-Farm 

Loan Program properties consist primarily of 107 farms. The average holding period for these 

properties in inventory for FY 2018 was 67 months. Certain properties can be leased to eligible 

individuals. 
SECTION II | FINANCIAL INFORMATION 

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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 $14,954 million of Rural Housing Service unpaid loan principal as of 

September 30, 2018 were receiving interest credit. If those loans receiving interest credit had 

accrued interest at the full-unreduced rate, interest income would have been approximately 

$709 million higher for FY 2018.

At the end of FY 2018, the RD portfolio contained approximately 55,938 restructured loans with 

an outstanding unpaid principal balance of $2,869 million. At the end of FY 2018, the farm loan 

portfolio contained approximately 17,739 restructured loans with an outstanding unpaid principal 

balance of $1,315 million. Direct credit and credit guarantee principal receivables in the food aid 

and export programs under rescheduling agreements as of September 30, 2018 were 

$1,005 million. 
USDA AGENCY FINANCIAL REPORT | 2018 

94

TABLE 1: Direct Loan and Loan Guarantees, Net 

FY 2018 Direct Loans 

Loans 

Receivable, 

Gross 

Interest 

Receivable 

Foreclosed 

Property 

Present Value 

Allowance 

Value of Assets Related 

to Loans 

Obligated Pre-1992 

Farm $ 227 $ 13 $ 5 $ -14 $ 231 

Export 0 0 0 0 0 

Food Aid 844 11 0 -179 676 

Housing 6,375 66 15 -25 6,431 

Community Facility 13 0 0 0 13

Electric 2,284 9 0 -1,593 700 

Telecommunications 82 0 0 0 8 2 

Water and Environmental 274 2 0 0 276 

Intermediary Relending 6 0 0 0 6 

Business and Industry 0 0 0 0 0 

Economic Development 0 0 0 0 0 

Pre-1992 Total 10,105 101 20 -1,811 8,415 

Obligated Post-1991 

Farm 11,663 186 12 -420 11,441 

Export 0 0 0 0 0 

Food Aid 612 9 0 -102 519 

Housing 17,930 126 75 -2,085 16,046 

Community Facility 8,562 65 0 -168 8,459 

Electric 47,037 296 0 -560 46,773 

Telecommunications 3,510 5 0 121 3,636 

Water and Environmental 12,506 95 0 -265 12,336 

Intermediary Relending 363 2 0 -85 280 

Business and Industry 43 0 0 -1 42

Economic Development 183 0 0 -13 170 

Post-1991 Total 102,409 784 87 -3,578 99,702 

Cushion of Credit -7,115 0 0 0 -7,115 

Total Direct Loan Program Receivables 105,399 885 107 -5,389 101,002 

Defaulted Guarantee Loans Pre-1992 

Farm 0 0 0 0 0 

Export 0 0 0 0 0 

Food Aid 0 0 0 0 0 

Community Facility 0 0 0 0 0 

Electric 0 0 0 0 0 

Telecommunications 0 0 0 0 0 

Water and Environmental 0 0 0 0 0 

Intermediary Relending 0 0 0 0 0 

Business and Industry 0 0 0 0 0 

Economic Development 0 0 0 0 0 

Defaulted Guarantee Loans Pre-1992 Total 0 0 0 0 0 

Defaulted Guarantee Loans Post-1991 

Farm 186 1 0 -185 2 

Export 439 10 0 -220 229 

Food Aid 0 0 0 0 0 

Housing 89 1 0 -57 33

Community Facility 5 0 0 0 5 

Electric 0 0 0 0 0 

Telecommunications 0 0 0 0 0 

Water and Environmental 0 0 0 0 0 

Intermediary Relending 0 0 0 0 0 

Business and Industry 260 3 0 -62 201 

Economic Development 0 0 0 0 0 

Defaulted Guarantee Loans Post-1991 Total 979 15 0 -524 470 

Total Defaulted Guarantee Loans 979 15 0 -524 470 

Loans Exempt from Credit Reform Act: 

Commodity Loans 471 5 0 -1 475 

Other Foreign Receivables 0 0 0 0 0 

Total Loans Exempt 471 5 0 -1 475 

Total Direct Loan and Loan Guarantees, Net 0 0 0 $ 101,947 

FY 2018 Loans Present Value of Assets

Direct Loans Receivable, Interest Foreclosed Value Related to

Gross Receivable Property Allowance Loans

Obligated Pre-1992

Farm $ 227 $ 13 $ 5 $ (14) $ 231

Export - - - - -

Food Aid 844 11 - (179) 676

Housing 6,375 66 15 (25) 6,431

Community Facility 13 - - - 13

Electric 2,284 9 - (1,593) 700

Telecommunications 82 - - - 82

Water and Environmental 274 2 - - 276

Intermediary Relending 6 - - - 6

Business and Industry - - - - -

Economic Development - - - - -

Pre-1992 Total 10,105 101 20 (1,811) 8,415

Obligated Post-1991

Farm 11,663 186 12 (420) 11,441

Export - - - - -

Food Aid 612 9 - (102) 519

Housing 17,930 126 75 (2,085) 16,046

Community Facility 8,562 65 - (168) 8,459

Electric 47,037 296 - (560) 46,773

Telecommunications 3,510 5 - 121 3,636

Water and Environmental 12,506 95 - (265) 12,336

Intermediary Relending 363 2 - (85) 280

Business and Industry 43 - - (1) 42

Economic Development 183 - - (13) 170

Post-1991 Total 102,409 784 87 (3,578) 99,702

Cushion of Credit (7,115) - - - (7,115)

Total Direct Loan Program Receivables 105,399 885 107 (5,389) 101,002

Defaulted Guarantee Loans

Pre-1992

Farm - - - - -

Export - - - - -

Food Aid - - - - -

Housing - - - - -

Community Facility - - - - -

Electric - - - - -

Telecommunications - - - - -

Water and Environmental - - - - -

Intermediary Relending - - - - -

Business and Industry - - - - -

Economic Development - - - - -

Pre-1992 Total - - - - -

Post-1991

Farm 186 1 - (185) 2

Export 439 10 - (220) 229

Food Aid - - - - -

Housing 89 1 - (57) 33

Community Facility 5 - - - 5

Electric - - - - -

Telecommunications - - - - -

Water and Environmental - - - - -

Intermediary Relending - - - - -

Business and Industry 260 3 - (62) 201

Economic Development - - - - -

Post-1991 Total 979 15 - (524) 470

Total Defaulted Guarantee Loans 979 15 - (524) 470

Loans Exempt from Credit Reform Act:

Commodity Loans 471 5 - (1) 475

Other Foreign Receivables - - - - -

Total Loans Exempt 471 5 - (1) 475

Total Direct Loan and Loan Guarantees, Net $ 101,947
SECTION II | FINANCIAL INFORMATION 

95

TABLE 2: Schedule for Reconciling Subsidy Cost Allowance Balances (Post-1991) Direct Loans 

Item FY 2018 

Beginning balance of the subsidy cost allowance $ 4,384 

Add: Subsidy expense for direct loans disbursed during the year by component 

Interest rate differential costs -240 

Default costs (net of recoveries) 176 

Fees and other collections -11 

Other subsidy costs -40 

Total subsidy expense prior to adjustments and reestimates -115 

Adjustments 

Loan modifications 0 

Fees received 75

Loans written off -412 

Subsidy allowance amortization -99 

Other 42 

Total subsidy cost allowance before reestimates 3,875 

Add or subtract subsidy reestimates by component 

Interest rate reestimate 499 

Technical/default reestimate -272 

Total reestimates 227 

Ending balance of the subsidy cost allowance $ 4,102 

FY 2018

Beginning balance of the subsidy cost allowance $ 4,384

Add: Subsidy expense for direct loans disbursed during the year by component

Interest rate differential costs (240)

Default costs (net of recoveries) 176

Fees and other collections (11)

Other subsidy costs (40)

Total subsidy expense prior to adjustments and reestimates (115)

Adjustments

Loan modifications -

Fees received 75

Loans written off (412)

Subsidy allowance amortization (99)

Other 42

Total subsidy cost allowance before reestimates 3,875

Add or subtract subsidy reestimates by component

Interest rate reestimate 499

Technical/default reestimate (272)

Total reestimates 227

Ending balance of the subsidy cost allowance $ 4,102
USDA AGENCY FINANCIAL REPORT | 2018 

96

TABLE 3: Subsidy Expense for Direct Loans by Program and Component 

FY 2018 Direct Loan Programs Interest 

Differential 

Defaults Fees and 

Other 

Collections 

Other Subtotal 

Subsidy 

Total 

Modifications 

Interest 

Rates 

Reestimates 

Technical 

Reestimates 

Total 

Reestimates 

Total 

Subsidy 

Expense 

Farm $ -35 $ 74 $ -1 $ 3 $ 41 0 $ -108 $ 116 $ 8 $ 49 

Export 0 0 0 0 0 0 0 -17 -17 -17 

Food Aid 0 0 0 0 0 0 0 -2 -2 -2 

Housing 22 50 0 9 81 0 16 30 46 127 

Community Facility -154 43 0 5 -106 0 42 91 133 27 

Electric -126 4 -10 -30 -162 0 538 -489 49 -113 

Telecommunications 1 4 0 -4 1 0 -36 -25 -61 -60 

Water and Environmental 43 1 0 -23 21 0 50 23 73 94 

Intermediary Relending 5 0 0 0 5 0 -2 1 -1 4 

Business and Industry 0 0 0 0 0 0 0 0 0 0 

Economic Development 4 0 0 0 4 0 -1 0 -1 3 

Total Direct Loan Subsidy Expense -240 $ 176 $ -11 $ -40 $ - 115 0 $ 499 $ -272 $ 227 $ 112 

FY 2018

Interest Fees and Other Subtotal Total Interest Rate Technical Total Total Subsidy

Differential Defaults Collections Other Subsidy Modifications Reestimates Reestimates Reestimates Expense

Direct Loan Programs

Farm $ (35) $ 74 $ (1) $ 3 $ 41 $ - $ (108) $ 116 $ 8 $ 49

Export - - - - - - - (17) (17) (17)

Food Aid - - - - - - - (2) (2) (2)

Housing 22 50 - 9 81 - 16 30 46 127

Community Facility (154) 43 - 5 (106) - 42 91 133 27

Electric (126) 4 (10) (30) (162) - 538 (489) 49 (113)

Telecommunications 1 4 - (4) 1 - (36) (25) (61) (60)

Water and Environmental 43 1 - (23) 21 - 50 23 73 94

Intermediary Relending 5 - - - 5 - (2) 1 (1) 4

Business and Industry - - - - - - - - - -

Economic Development 4 - - - 4 - (1) - (1) 3

Total Direct Loan Subsidy Expense $ (240) $ 176 $ (11) $ (40) $ (115) $ - $ 499 $ (272) $ 227 $ 112

TABLE 4: Total Amount of Direct Loans Disbursed (Post-1991) 

Direct Loan Programs FY 2018 

Farm $ 2,390 

Export 0 

Food Aid 0 

Housing 1,185 

Community Facility 1,354 

Electric 3,236 

Telecommunications 232 

Water and Environmental 766 

Intermediary Relending 19 

Business and Industry 7 

Economic Development 32 

Total Direct Loans Disbursed $ 9,221 

FY 2018

Direct Loan Programs

Farm $ 2,390

Export -

Food Aid -

Housing 1,185

Community Facility 1,354

Electric 3,236

Telecommunications 232

Water and Environmental 766

Intermediary Relending 19

Business and Industry 7

Economic Development 32

Total Direct Loans Disbursed $ 9,221
 SECTION II | FINANCIAL INFORMATION

97

TABLE 5: Guaranteed Loans Outstanding 

FY 2018 Loan Guarantee Programs Pre-1992 Outstanding 

Principal, Face Value 

Post-1991 

Outstanding 

Principal, Face Value 

Total Outstanding 

Principal, Face Value 

Pre-1992 Outstanding 

Principal, Guaranteed 

Post-1991 

Outstanding 

Principal, Guaranteed 

Total Outstanding 

Principal, Guaranteed 

Farm $ 1 $ 17,168 $ 17,169 $ 1 $ 15,473 $ 15,474 

Export 0 1,877 1,877 0 1,840 1,840 

Food Aid 0 0 0 0 0 0 

Housing 1 122,965 122,966 1 110,632 110,633 

Community Facility 0 1,142 1,142 0 1,017 1,017 

Electric 0 161 161 0 161 161 

Telecommunications 0 0 0 0 0 0 

Water and Environmental 0 91 91 0 80 80 

Intermediary Relending 0 0 0 0 0 0 

 Business and Industry 3 7,482 7,485 3 5,483 5,486 

Economic Development 0 0 0 0 0 0 

Total Guarantees Outstanding $ 5 $ 150,886 $ 150,891 $ 5 $ 134,686 $ 134,691 

Pre-1992 Post-1991 Total Pre-1992 Post-1991 Total

FY 2018

Outstanding 

Principal,

Outstanding 

Principal,

Outstanding 

Principal,

Outstanding 

Principal,

Outstanding 

Principal,

Outstanding 

Principal,

Face Value Face Value Face Value Guaranteed Guaranteed Guaranteed

Loan Guarantee Programs

Farm $ 1 $ 17,168 $ 17,169 $ 1 $ 15,473 $ 15,474 

Export - 1,877 1,877 - 1,840 1,840 

Food Aid - - - - - - 

Housing 1 122,965 122,966 1 110,632 110,633 

Community Facility - 1,142 1,142 - 1,017 1,017 

Electric - 161 161 - 161 161 

Telecommunications - - - - - - 

Water and Environmental - 91 91 - 80 80 

Intermediary Relending - - - - - - 

Business and Industry 3 7,482 7,485 3 5,483 5,486 

Economic Development - - - - - - 

Total Guarantees Outstanding $ 5 $ 150,886 $ 150,891 $ 5 $ 134,686 $ 134,691 

TABLE 6: Liability for Loan Guarantees (Present Value Method For Pre-1992 Guarantees) 

FY 2018 Loan Guarantee Programs Liabilities for Losses 

on Pre- 1992 

Guarantees Present 

Value 

Liabilities for Loan 

Guarantees on Post1991 Guarantees 

Present Value 

Total Liabilities for 

Loan Guarantees 

Farm $ 0 $ 215 $ 215 

Export 0 4 4 

Food Aid 0 0 0 

Housing 0 -212 -212 

Community Facility 0 52 52 

Electric 0 0 0 

Telecommunications 0 0 0 

Water and Environmental 0 1 1 

Intermediary Relending 0 0 0 

Business and Industry 0 442 442 

Economic Development 0 0 0 

Total Liability for Loan Guarantees $ 0 $ 502 $ 502 

FY 2018

Liabilities for 

Losses on Pre1992 

Guarantees 

Present Value

Liabilities for Loan 

Guarantees on Post1991 Guarantees 

Present Value

Total Liabilities for 

Loan Guarantees

Loan Guarantee Programs

Farm $ - $ 215 $ 215

Export - 4 4

Food Aid - - -

Housing - (212) (212)

Community Facility - 52 52

Electric - - -

Telecommunications - - -

Water and Environmental - 1 1

Intermediary Relending - - -

Business and Industry - 442 442

Economic Development - - -

Total Liability for Loan Guarantees $ - $ 502 $ 502
USDA AGENCY FINANCIAL REPORT | 2018 

98

TABLE 7: Schedule for Reconciling Loan Guarantee Liability 

Item FY 2018 

Beginning balance of the loan guarantee liability $ 794 

Add: Subsidy expense for guaranteed loans disbursed during the year by component 

Interest supplement costs 0 

Default costs (net of recoveries) 845 

Fees and other collections -824 

Other subsidy costs -1 

Total of the above subsidy expense components 20 

Adjustments 

Loan guarantee modifications 0 

Fees received 643 

Interest supplements paid -8 

Foreclosed property and loans acquired 63 

Claim payments to lenders -680 

Interest accumulation on the liability balance 10 

Other -160 

Ending balance of the loan guarantee liability before reestimates 682 

Add or subtract subsidy reestimates by component: 

Interest rate reestimate -82 

Technical/default reestimate -98 

Total of the above reestimate components -180 

Ending balance of the loan guarantee liability $ 502 

FY 2018

Beginning balance of the loan guarantee liability $ 794

Add:Subsidy expense for guaranteed loans disbursed during the year by component

Interest supplement costs -

Default costs (net of recoveries) 845

Fees and other collections (824)

Other subsidy costs (1)

Total of the above subsidy expense components 20

Adjustments

Loan guarantee modifications -

Fees received 643

Interest supplements paid (8)

Foreclosed property and loans acquired 63

Claim payments to lenders (680)

Interest accumulation on the liability balance 10

Other (160)

Ending balance of the loan guarantee liability before reestimates 682

Add or subtract subsidy reestimates by component:

Interest rate reestimate (82)

Technical/default reestimate (98)

Total of the above reestimate components (180)

Ending balance of the loan guarantee liability $ 502
 SECTION II | FINANCIAL INFORMATION

99

TABLE 8: Subsidy Expense for Loan Guarantees by Program and Component 

FY 2018 Loan Guarantee Programs 

Interest 

Differential Defaults 

Fees and 

Other

Collections Other

Subtotal 

Subsidy 

Total 

Modifications 

Interest Rates 

Reestimates 

Technical 

Reestimates 

Total 

Reestimates 

Total 

Subsidy 

Expense 

Farm $ 0 $ 25 $ -13 $ 0 $ 12 $ 0 $ 1 $ 3 $ 4 $ 16 

Export 0 0 10 -2 8 0 -1 -7 -8 0 

Food Aid 0 0 0 0 0 0 0 0 0 0 

Housing 0 623 -753 0 -130 0 -88 -25 -113 -243 

Community Facility 0 5 -1 0 4 0 0 5 5 9 

Electric 0 0 0 0 0 0 0 0 0 0 

Telecommunications 0 0 0 0 0 0 0 0 0 0 

Water and Environmental 0 0 0 0 0 0 0 0 0 0 

Intermediary Relending 0 0 0 0 0 0 0 0 0 0 

Business and Industry 0 192 -67 1 126 0 6 -74 -68 58 

Economic Development 0 0 0 0 0 0 0 0 0 0 

Total Loan Guarantee Subsidy Expense $ 0 $ 845 $ -824 $ -1 $ 20 $ 0 $ -82 $ -98 $ -180 $ -160 

FY 2018

Total

Interest Fees and Other Total Interest Rate Technical Total Subsidy

Loan Guarantee Programs Supplement Defaults Collections Other Subtotal Modifications Reestimates Reestimates Reestimates Expense

Farm $ - $ 25 $ (13) $ - $ 12 $ - $ 1 $ 3 $ 4 $ 16

Export - - 10 (2) 8 - (1) (7) (8) -

Food Aid - - - - - - - - - -

Housing - 623 (753) - (130) - (88) (25) (113) (243)

Community Facility - 5 (1) - 4 - - 5 5 9

Electric - - - - - - - - - -

Telecommunications - - - - - - - - - -

Water and Environmental - - - - - - - - - -

Intermediary Relending - - - - - - - - - -

Business and Industry - 192 (67) 1 126 - 6 (74) (68) 58

Economic Development - - - - - - - - - -

Total Loan Guarantee Subsidy Expense $ - $ 845 $ (824) $ (1) $ 20 $ - $ (82) $ (98) $ (180) $ (160)

TABLE 9: Guaranteed Loans Disbursed 

Loan Guarantee Programs 

FY 2018 Principal, Face 

Value Disbursed 

FY 2018 Principal, 

Guaranteed Disbursed 

Farm $ 3,150 $ 2,839 

Export 1,961 1,918 

Food Aid 0 0 

Housing 17,526 15,773 

Community Facility 105 93 

Electric 0 0 

Telecommunications 0 0 

Water and Environmental 2 1 

Intermediary Relending 0 0 

Business and Industry 2,014 1,553 

Economic Development 0 0 

Total Guaranteed Loans Disbursed $ 24,758 $ 22,17 

Principal, Face 

Value Disbursed

Principal, 

Guaranteed 

Disbursed

Loan Guarantee Programs

Farm $ 3,150 $ 2,839

Export 1,961 1,918

Food Aid - -

Housing 17,526 15,773

Community Facility 105 93

Electric - -

Telecommunications - -

Water and Environmental 2 1

Intermediary Relending - -

Business and Industry 2,014 1,553

Economic Development - -

Total Guaranteed Loans Disbursed $ 24,758 $ 22,177

FY 2018
USDA AGENCY FINANCIAL REPORT | 2018 

100 

TABLE 10: Administrative Expenses 

Item FY 2018 

Direct Loan Programs $ 509 

Guaranteed Loan Programs 432 

Total Administrative Expenses 941 

FY 2018

Direct Loan Programs $ 509

Guaranteed Loan Programs 432

Total Administrative Expenses $ 941

TABLE 11: Subsidy Rates For Direct Loans (percentage) 

FY 2018 Direct Loan Programs 

Interest 

Differential Defaults 

Fees and Other 

Collections Other Total 

Farm Ownership -3.60 0.17 0 -0.38 -3.81 

Farm Operating -3.10 6.84 0 0.31 4.05 

Emergency Disaster -4.06 8.72 0 0.26 4.92 

Indian Tribe Land Acquisition -26.34 0 0 0 -26.34 

Boll Weevil Eradication -0.54 0 0 -0.15 -0.69 

Indian Highly Fractionated Land 24.15 0.05 0 -1.48 22.72 

Farm Storage Facility Loan -0.97 0.02 -0.27 -0.05 -1.27 

Sugar Storage Facility Loan Program -2.37 0.03 0 0 -2.34 

Multi-Family Housing Relending Demo 29.50 0 0 -0.01 29.49 

Multi-Family Housing Revitalization Seconds 54.28 0.46 0 -0.06 54.68 

Multi-Family Housing Revitalization Zero 48.75 0.37 0 -0.20 48.92 

Community Facility Loans -12.99 3.48 0 1.42 -8.09 

Section 502 Single-Family Housing -2.37 5.13 0 1.09 3.85 

Section 515 Multi-Family Housing 26.57 0.73 0 -0.98 26.32 

Section 504 Housing Repair 15.65 -0.02 0 -3.30 12.33 

Section 514 Farm Labor Housing 27.11 0.28 0 -0.67 26.72 

Section 524 Site Development 0.45 0 0 0.71 1.16 

Section 523 Self-Help Housing 2.55 4.74 0 0.06 7.35 

Single-Family Housing Credit Sales -11.90 2.39 0 4.06 -5.45 

Rural Microenterprise Direct Loans 7.28 2.70 0 0 9.98 

Intermediary Relending Program 23.03 1.53 0 -1.47 23.09 

Rural Economic Development Loans 13.09 0.02 0 -0.18 12.93 

Water and Waste Disposal Loans 4.01 0.08 0 -3.92 0.17 

FFB Electric Loans -4.39 0.02 0 -0.79 -5.16 

Treasury Telecommunication Loans 0.14 0.37 0 -0.27 0.24 

FFB Telecommunications Loans -0.10 0.24 0 -2.63 -2.49 

FFB Guaranteed Underwriting 0 1.39 -5.25 0 -3.86 

Rural Energy Savings Program 12.48 1.29 0 -0.43 13.34 

Broadband Treasury Loans 0.14 16.74 0 -0.13 16.75 

FY 2018 Interest 

Differential Defaults

Fees and 

Other 

Collections Other Total

Direct Loan Programs

Farm Ownership (3.60) 0.17 - (0.38) (3.81)

Farm Operating (3.10) 6.84 - 0.31 4.05

Emergency Disaster (4.06) 8.72 - 0.26 4.92

Indian Tribe Land Acquisition (26.34) - - - (26.34)

Boll Weevil Eradication (0.54) - - (0.15) (0.69)

Indian Highly Fractionated Land 24.15 0.05 - (1.48) 22.72

Farm Storage Facility Loan (0.97) 0.02 (0.27) (0.05) (1.27)

Sugar Storage Facility Loan Program (2.37) 0.03 - - (2.34)

Multi-Family Housing Relending Demo 29.50 - - (0.01) 29.49

Multi-Family Housing Revitalization Seconds 54.28 0.46 - (0.06) 54.68

Multi-Family Housing Revitalization Zero 48.75 0.37 - (0.20) 48.92

Community Facility Loans (12.99) 3.48 - 1.42 (8.09)

Section 502 Single-Family Housing (2.37) 5.13 - 1.09 3.85

Section 515 Multi-Family Housing 26.57 0.73 - (0.98) 26.32

Section 504 Housing Repair 15.65 (0.02) - (3.30) 12.33

Section 514 Farm Labor Housing 27.11 0.28 - (0.67) 26.72

Section 524 Site Development 0.45 - - 0.71 1.16

Section 523 Self-Help Housing 2.55 4.74 - 0.06 7.35

Single-Family Housing Credit Sales (11.90) 2.39 - 4.06 (5.45)

Rural Microenterprise Direct Loans 7.28 2.70 - - 9.98

Intermediary Relending Program 23.03 1.53 - (1.47) 23.09 

Rural Economic Development Loans 13.09 0.02 - (0.18) 12.93 

Water and Waste Disposal Loans 4.01 0.08 - (3.92) 0.17

FFB Electric Loans (4.39) 0.02 - (0.79) (5.16)

Treasury Telecommunication Loans 0.14 0.37 - (0.27) 0.24

FFB Telecommunications Loans (0.10) 0.24 - (2.63) (2.49)

FFB Guaranteed Underwriting - 1.39 (5.25) - (3.86) 

Rural Energy Savings Program 12.48 1.29 - (0.43) 13.34 

Broadband Treasury Loans 0.14 16.74 - (0.13) 16.75 
SECTION II | FINANCIAL INFORMATION 

101 

TABLE 12: Subsidy Rates for Loan Guarantees (percentage) 

FY 2018 Guaranteed Loan Programs 

Interest 

Differential Defaults 

Fees and Other 

Collections Other Total 

Farm Ownership—Unsubsidized 0 0.99 -1.17 0 -0.18 

Farm Operating—Unsubsidized 0 2.35 -1.24 0 1.11 

Conservation—Guaranteed 0 0.78 -1.13 0 -0.35 

GSM 102 0 0.32 -0.51 0 -0.19 

Export Guarantee Program—Facilities 0 0.71 -3.57 0 -2.86 

Community Facility Loan Guarantees 0 4.16 -0.88 0 3.28 

Guaranteed 538 Multi-Family Housing 0 4.05 -7.67 0 -3.62 

Guaranteed 502 Single-Family Housing 0 3.54 -4.26 0 -0.72 

Business and Industry Loan Guarantees 0 8.02 -3.96 0 4.06 

Renewable Energy Loan Guarantees 0 5.27 -1.40 0 3.87 

Section 9003 Loan Guarantees 0 25.88 -4.72 0.08 21.24 

Water and Waste Disposal Loans 0 1.33 -0.87 0 0.46 

FY 2018 Interest 

Differential Defaults

Fees and 

Other 

Collections Other Total

Guaranteed Loan Programs

Farm Ownership—Unsubsidized - 0.99 (1.17) - (0.18)

Farm Operating—Unsubsidized - 2.35 (1.24) - 1.11

Conservation—Guaranteed - 0.78 (1.13) - (0.35)

GSM 102 - 0.32 (0.51) - (0.19)

Export Guarantee Program—Facilities - 0.71 (3.57) - (2.86)

Community Facility Loan Guarantees - 4.16 (0.88) - 3.28

Guaranteed 538 Multi-Family Housing - 4.05 (7.67) - (3.62)

Guaranteed 502 Single-Family Housing - 3.54 (4.26) - (0.72)

Business and Industry Loan Guarantees - 8.02 (3.96) - 4.06

Renewable Energy Loan Guarantees - 5.27 (1.40) - 3.87

Section 9003 Loan Guarantees - 25.88 (4.72) 0.08 21.24

Water and Waste Disposal Loans - 1.33 (0.87) - 0.46
USDA AGENCY FINANCIAL REPORT | 2018 

102 

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. 

Commodities: Unit of Measure 

FY 2018 Beginning 

Inventory Acquisitions Collateral Acquired Donations Others 

FY 2018 Ending 

Inventory 

Quantity Value Quantity Value Quantity Value Quantity Value Quantity Value Quantity Value 

Corn Meal Pounds 2 $ 1 33 $ 7 0 $ 0 -34 $ -7 0 $ 0 1 $ 1 

Blended Foods Pounds 4 2 114 39 0 0 -107 - 37 0 0 11 4 

Dry Edible Beans Cwt. 0 0 0 1 0 0 0 -1 0 0 0 0 

Dry Whole Peas Cwt. 0 6 3 64 0 0 -3 -64 0 0 0 6 

Emergency Food Ration Bars Pounds 0 0 0 0 0 0 0 0 0 0 0 0 

Grain Sorghum Bushels 0 2 12 61 0 0 -12 -60 0 0 0 3 

Lentils Dry Cwt. 0 0 0 10 0 0 0 -10 0 0 0 0 

Nonfat Dry Milk Pounds 0 0 0 0 0 0 0 0 0 0 0 0 

Rice Products Cwt., Pounds 0 1 0 10 0 0 0 -11 0 0 0 0 

Meat Pounds 0 0 0 0 0 0 0 0 0 0 0 0 

Vegetable Oil Pounds 21 13 259 127 0 0 -265 -131 0 -1 15 8 

Wheat Products Bushels, Pounds 0 0 36 175 0 0 -36 -175 0 0 0 0 

Peanuts Pounds 56 10 0 0 156 28 -12 -13 -66 -1 134 24 

Soybeans Bushels, Pounds 0 0 68 17 0 0 -68 -17 0 0 0 0 

Other Various XXXX 0 XXXX 4 XXXX 0 XXXX -4 XXXX 0 XXXX 0 

Total Commodities N/A XXXX $ 35 XXXX $ 515 XXXX $ 28 XXXX $ -530 XXXX $ -2 XXXX $ 46

(Quantities In Millions)

Commodities: Unit of Measure Quantity Value Quantity Value Quantity Value Quantity Value Quantity Value Quantity Value

Corn Meal Pounds 2 $ 1 33 $ 7 - $ - (34) $ (7) - $ - 1 $ 1

Blended Foods Pounds 4 2 114 39 - - (107) (37) - - 11 4

Dry Edible Beans Cwt. - - - 1 - - - (1) - - - -

Dry Whole Peas Cwt. - 6 3 64 - - (3) (64) - - - 6

Emergency Food Ration Bars Pounds - - - - - - - - - - - -

Grain Sorghum Bushels - 2 12 61 - - (12) (60) - - - 3

Lentils Dry Cwt. - - - 10 - - - (10) - - - -

Nonfat Dry Milk Pounds - - - - - - - - - - - -

Rice Products Cwt., Pounds - 1 - 10 - - - (11) - - - -

Meat Pounds - - - - - - - - - - - -

Vegetable Oil Pounds 21 13 259 127 - - (265) (131) - (1) 15 8

Wheat Products Bushels, Pounds - - 36 175 - - (36) (175) - - - -

Peanuts Pounds 56 10 - - 156 28 (12) (13) (66) (1) 134 24

Soybeans Bushels, Pounds - - 68 17 - - (68) (17) - - - -

Other Various XXXX - XXXX 4 XXXX - XXXX (4) XXXX - XXXX -

Total Commodities XXXX $ 35 XXXX $ 515 XXXX $ 28 XXXX $ (530) XXXX $ (2) XXXX $ 46

Beginning Inventory Acquisitions Collateral Acquired Donations Other Ending Inventory

FY 2018 FY 2018
SECTION II | FINANCIAL INFORMATION

103 

NOTE 9: GENERAL PROPERTY, PLANT, AND EQUIPMENT (PP&E), NET 

FY 2018 Category Useful Life (Years) Cost 

Accumulated 

Depreciation Net Book Value 

Land and Land Rights N/A $ 70 $ 0 $ 70 

Improvements to Land 10 – 50 757 -740 17 

Construction-in-Progress N/A 72 0 72 

Buildings, Improvements and Renovations 15 – 30 3,109 -1,986 1,123 

Other Structures and Facilities 15 – 50 1,850 -1,634 216 

Equipment 5 – 20 1,770 -1,275 495 

Assets Under Capital Lease 3 – 20 34 -29 5 

Leasehold Improvements 10 86 -78 8 

Internal-Use Software 5 – 8 1,167 -991 176 

Internal-Use Software in Development N/A 42 0 42 

Total N/A $ 8,957 $ -6,733 $ 2,224 

FY 2018 Useful Net

Life Accumulated Book

Category (Years) Cost Depreciation Value

Land and Land Rights $ 70 $ - $ 70

Improvements to Land 10 - 50 757 (740) 17

Construction-in-Progress 72 - 72

Buildings, Improvements and Renovations 15 - 30 3,109 (1,986) 1,123

Other Structures and Facilities 15 - 50 1,850 (1,634) 216

Equipment 5 - 20 1,770 (1,275) 495

Assets Under Capital Lease 3 - 20 34 (29) 5

Leasehold Improvements 10 86 (78) 8

Internal-Use Software 5 - 8 1,167 (991) 176

Internal-Use Software in Development 42 - 42

Total $ 8,957 $ (6,733) $ 2,224

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 mission of the FS is to sustain the health, diversity, and productivity of the Nation’s forests 
USDA AGENCY FINANCIAL REPORT | 2018 

104 

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 

The Agricultural Research Service (ARS) was established on November 2, 1953. Congress first 

authorized federally supported agricultural research in the Organic Act of 1862. The statute 

directed the Commissioner of Agriculture “to acquire and preserve in his department all 

information he can obtain by means of books and correspondence, and by practical and scientific 

experiments.” The scope of USDA’s agricultural research has been expanded and extended more 

than 60 times since the Department was created. 

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; Resource 

Conservation and Development (RC&D) groups; conservation districts; Federal, State, and 

Tribal agencies; and private landowners through the Southwest. Research centers are considered 
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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) supports agricultural research through the acquisition, 

curation, and dissemination of information needed to solve today’s agricultural challenges. 

The Library holds more than 3.5 million items. NAL’s content ranges from special collections 

materials dating from the early 16th century to near-real time observational research data. NAL 

was created as the departmental library for USDA in 1862 and became a national library in 1990. 

One of five national libraries of the U.S., it is also a key member of the Agriculture Network 

Information Collaborative (AgNIC) partnership. In its international role, NAL participates, as 

appropriate, in international agricultural information initiatives. 

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. 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. 
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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 established to protect and preserve scientific, scenic, geologic, watershed, 

fish, wildlife, historic, cultural and recreational values; and 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’ 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’ 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, farmland, grasslands, forest ecosystems, and restore, protect, 

maintain, and enhance the functions of floodplains. 

NRCS, on behalf of USDA, administers and owns conservation easements on private lands 

through a variety of programs. The specific uses for the land are identified under each program. 

Landowners are not allowed to withdraw from the program. However, termination or expiration 

may occur. For the purpose of reporting, all easements where NRCS is listed as a grantee of the 

easement are included in the agency’s stewardship land count. 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, 
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107 

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. 

FY 2018 (In Units) Ending Balance Additions Withdrawals

Beginning 

Balance 

Heritage Assets: National Forests 154 0 0 154 

Heritage Assets: National Grasslands 20 0 0 20 

Heritage Assets: Other Sites 173 7 -9 175 

Heritage Assets: Research Centers 34 0 0 34 

Heritage Assets: Library Collections 1 0 0 1 

Heritage Assets: Total 382 7 -9 384 

Stewardship Land: National Forests 154 0 0 154 

Stewardship Land: National Grasslands 20 0 0 20 

Stewardship Land: Research and Experimental Areas 3 0 0 3 

Stewardship Land: National Preserves and Other Areas 2 0 0 2 

Stewardship Land: Conservation Easements 18,344 390 0 17,954 

Stewardship Land: Total 18,523 390 0 18,133 

FY 2018 (In Units)

Ending Balance Additions Withdrawals

Beginning 

Balance

Heritage Assets

National Forests 154 - - 154

National Grasslands 20 - - 20

Other Sites 173 7 (9) 175

Research Centers 34 - - 34

Library Collections 1 - - 1

Total 382 7 (9) 384

Stewardship Land

National Forests 154 - - 154

National Grasslands 20 - - 20

Research and Experimental Areas 3 - - 3

National Preserves and Other Areas 2 - - 2

Conservation Easements 18,344 390 - 17,954

Total 18,523 390 - 18,133
USDA AGENCY FINANCIAL REPORT | 2018 

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NOTE 11: OTHER ASSETS 

In FY 2018, other assets included investments in trust for loan asset sales of $35 million and cost 

of loans sold of $2 million.

Item FY 2018 

Intragovernmental: Advances to Others $ 9 

Subtotal Intragovernmental 9 

With the Public: Advances to Others 502 

With the Public: Other Assets 37

Total Other Assets $548 

FY 2018

Intragovernmental:

Advances to Others $ 9

Subtotal Intragovernmental 9

With the Public:

Advances to Others 502

Other Assets 37

Total Other Assets $ 548

NOTE 12: LIABILITIES NOT COVERED BY BUDGETARY RESOURCES 

In FY 2018, other intragovernmental liabilities not covered by budgetary resources included 

accruals for Federal Employee Compensation Act (FECA) of $143 million, contract disputes 

claims payable to Treasury’s Judgment Fund of $26 million, and unemployment compensation 

of $15 million. 

In FY 2018, other liabilities with the public not covered by budgetary resources included 

estimated losses on insurance claims of $5,972 million, underwriting gain of $1,638 million, 

contingent liabilities of $923 million, unfunded leave of $602 million, Payments to States of 

$272 million, single family housing escrow of $46 million, loans paid in advance for 

multi-family housing of $24 million, and stewardship contracting product sales of $21 million. 

Item FY 2018 

Intragovernmental: Other $ 184 

Subtotal Intragovernmental 184 

With the Public: Federal employee and veterans' benefits 892 

With the Public: Environmental and disposal liabilities 200 

With the Public: Other 9,498 

Subtotal With the Public 10,590 

Total liabilities not covered by budgetary resources 10,774 

Total liabilities covered by budgetary resources 149,101 

Total liabilities not requiring budgetary resources 1,241 

Total Liabilities $ 161,116 

FY 2018

Intragovernmental:

Other $ 184

Subtotal Intragovernmental 184

With the Public:

Federal employee and veterans' benefits 892

Environmental and disposal liabilities 200

Other 9,498

Subtotal With the Public 10,590

Total liabilities not covered by budgetary resources 10,774

Total liabilities covered by budgetary resources 149,101

Total liabilities not requiring budgetary resources 1,241

Total Liabilities $ 161,116
SECTION II | FINANCIAL INFORMATION

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NOTE 13: DEBT 

FY 2018 Item Beginning Balance Net Borrowing Ending Balance 

Intragovernmental: Debt to the Treasury $ 72,598 $ 177 $ 72,775 

Intragovernmental: Debt to the Federal Financing Bank 45,433 1,215 46,648 

Total Intragovernmental 118,031 1,392 119,423 

Agency Debt: Held by the Public 0 0 0 

Total Debt $ 118,031 $ 1,392 $ 119,423 

FY 2018

Beginning 

Balance Net Borrowing Ending Balance

Intragovernmental

Debt to the Treasury $ 72,598 $ 177 $ 72,775

Debt to the Federal Financing Bank 45,433 1,215 46,648

Total Intragovernmental 118,031 1,392 119,423

Agency Debt:

Held by the Public - - -

Total Debt $ 118,031 $ 1,392 $ 119,423

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 2018, 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 2018, 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 

$145 million. These estimates will change as new sites are discovered, remedy standards change, 

and new technology is introduced. 

In FY 2018, ARS estimated the liability for cleanup of the Beltsville Agricultural Research 

Center (BARC) to be $21 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 2018, the Department estimated its liability for asbestos-related cleanup of real property to 

be $156 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. 
USDA AGENCY FINANCIAL REPORT | 2018 

110 

NOTE 15: OTHER LIABILITIES 

In FY 2018, other liabilities with related budgetary obligations with the public included 

Agricultural Risk Coverage of $1,063 million; Price Loss Coverage of $1,893 million; Grants, 

Subsidies, and Contributions of $3,770 million; Conservation Reserve Program of 

$1,845 million; and other accrued liabilities of $866 million. 

In FY 2018, other liabilities without related budgetary obligations with the public included 

Payments to States of $272 million, single family housing escrow of $46 million, loans paid in 

advance for multi-family housing of $24 million, and other accrued liabilities of $21 million. 

FY 2018 Item 

NonCurrent Current Total 

Intragovernmental: 

Other Liabilities With Related Budgetary Obligations $ 0 $ 72 $ 72 

Employer Contributions and Payroll Taxes 0 84 84 

Unfunded FECA Liability 77 66 143 

Other Unfunded Employment Related Liability 0 15 15 

Liability for Advances and Prepayments 0 1 1 

Liability for Clearing Accounts 0 -73 -73

Custodial Liability 0 60 60 

Liability for Non0entity Assets Not Reported on the Statement of Custodial Activities 0 9,582 9,582 

Other Liabilities Without Related Budgetary Obligations 26 0 26 

Subtotal Intragovernmental 103 9,807 9,910 

With the Public: 

Other Liabilities With Related Budgetary Obligations 0 9,437 9,437 

Accrued Funded Payroll and Leave 0 343 343 

Unfunded Leave 0 601 601 

Liability for Advances and Prepayments 0 155 155 

Other Deferred Credits 0 690 690 

Liability for Nonfiduciary Deposit Funds and Undeposited Collections 0 448 448 

Liability for Clearing Accounts 0 -41 -41

Actuarial Liability for Federal Insurance and Guarantee Programs 1,638 8,688 10,326 

Contingent Liabilities 0 931 931 

Capital Lease Liability 3 2 5 

Other Liabilities Without Related Budgetary Obligations 24 339 363 

Subtotal With the Public 1,665 21,593 23,258 

Total Other Liabilities $ 1,768 $ 31,400 $ 33,168 

FY 2018 Non-Current Current Total

Intragovernmental:

Other Liabilities With Related Budgetary Obligations $ - $ 72 $ 72

Employer Contributions and Payroll Taxes - 84 84

Unfunded FECA Liability 77 66 143

Other Unfunded Employment Related Liability - 15 15

Liability for Advances and Prepayments - 1 1

Liability for Clearing Accounts - (73) (73)

Custodial Liability - 60 60

Liability for Non-entity Assets Not Reported on the Statement of Custodial Activities - 9,582 9,582

Other Liabilities Without Related Budgetary Obligations 26 - 26

Subtotal Intragovernmental 103 9,807 9,910

With the Public:

Other Liabilities With Related Budgetary Obligations - 9,437 9,437

Accrued Funded Payroll and Leave - 343 343

Unfunded Leave - 601 601

Liability for Advances and Prepayments - 155 155

Other Deferred Credits - 690 690

Liability for Nonfiduciary Deposit Funds and Undeposited Collections - 448 448

Liability for Clearing Accounts - (41) (41)

Actuarial Liability for Federal Insurance and Guarantee Programs 1,638 8,688 10,326

Contingent Liabilities - 931 931

Capital Lease Liability 3 2 5

Other Liabilities Without Related Budgetary Obligations 24 339 363

Subtotal With the Public 1,665 21,593 23,258

Total Other Liabilities $ 1,768 $ 31,400 $ 33,168
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NOTE 16: LEASES

Capital Leases

USDA enters into leasing agreements through leasing authority delegated by the General Services 

Administration (GSA). USDA acquires use of various general facilities (buildings and plant 

material centers), equipment, and land with renewal options that range from 0 to 10 years and 

which are located mainly in urban areas. The portfolio includes leases with escalation clauses 

based on the Consumer Price Index (CPI), and amortization periods with a range of 8 to 25 years.

Operating Leases

USDA enters into leasing agreements through leasing authority delegated by GSA. USDA leases 

various land, buildings and equipment. 

Major non-cancelable operating leases consists primarily of office space, most with renewal 

options that range from 1 to 25 years with escalation clauses based on the CPI, and lease periods 

with a range of 1 to 30 years.

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.
USDA AGENCY FINANCIAL REPORT | 2018 

112 

Item Federal Non Federal Total 

Capital Leases: Summary of Assets Under Capital Leases 

Land and Building $ 0 34 34 

Machinery and Equipment 0 N/A N/A

Accumulated Amortization 0 -29 -29

Total 0 5 5 

Item 

Land & Buildings Machinery & Equipment Totals 

Federal Non Federal Federal Non Federal Federal Non Federal 

Capital Leases: Future Payments Due 

Fiscal Year 2019 0 4 0 0 0 4 

Fiscal Year 2020 0 3 0 0 0 3 

Fiscal Year 2021 0 3 0 0 0 3 

Fiscal Year 2022 0 2 0 0 0 2 

Fiscal Year 2023 0 2 0 0 0 2 

After 5 Years 0 2 0 0 0 2 

Total Future Lease Payments 0 16 0 0 0 16

Less: Imputed Interest 0 8 0 0 0 8 

Less: Executory Costs 0 3 0 0 0 3 

Net Capital Lease Liability 0 5 0 0 0 5 

Capital lease liabilities covered by budgetary resources 0 5 0 0 0 5 

Operating Leases: Future Payments Due for Non-Cancellable Operating Leases 

Fiscal Year 2019 29 86 0 1 29 87 

Fiscal Year 2020 22 70 0 0 22 70 

Fiscal Year 2021 18 60 0 0 18 60 

Fiscal Year 2022 15 48 0 0 15 48 

Fiscal Year 2023 13 36 0 0 13 36 

After 5 Years 49 106 0 0 49 106 

Total Future Lease Payments $ 146 $ 406 $ 0 $ 1 $ 146 $ 407 

FY 2018

Capital Leases:

Summary of Assets Under Capital Leases Federal Non Federal Total

Land and Building $ - 34 34

Machinery and Equipment -

Accumulated Amortization - (29) (29)

Total - 5 5

Future Payments Due:

Fiscal Year Federal Non Federal Federal Non Federal Federal Non Federal

2019 - 4 - - - 4

2020 - 3 - - - 3

2021 - 3 - - - 3

2022 - 2 - - - 2

2023 - 2 - - - 2

After 5 Years - 2 - - - 2

Total Future Lease Payments - 16 - - - 16

Less: Imputed Interest - 8 - - - 8

Less: Executory Costs - 3 - - - 3

Net Capital Lease Liability - 5 - - - 5

Capital lease liabilities covered by budgetary resources - 5 - - - 5

Operating Leases:

Future Payments Due for Non-Cancellable Operating Leases:

Fiscal Year

Federal Non Federal Federal Non Federal Federal Non Federal

2019 29 86 - 1 29 87

2020 22 70 - - 22 70

2021 18 60 - - 18 60

2022 15 48 - - 15 48

2023 13 36 - - 13 36

After 5 Years 49 106 - - 49 106

Total Future Lease Payments $ 146 $ 406 -$ 1$ $ 146 $ 407

Land & Buildings Machinery & Equipment Totals

Land & Buildings Machinery & Equipment Totals

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, $931 million has been accrued in the financial statements as of 

September 30, 2018. 

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 $18 million to $82 million as of September 30, 2018. 

Commitments to extend loan guarantees are estimated to be $3,857 million in FY 2018. 
SECTION II | FINANCIAL INFORMATION

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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 

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 
USDA AGENCY FINANCIAL REPORT | 2018 

114 

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. 

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. 

State, Private and International Forestry, Land and Water Conservation Fund 

The FY 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 of the Treasury established a 

new special fund, “State, Private and International Forestry, Land and Water Conservation 
SECTION II | FINANCIAL INFORMATION

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Fund.” The program expenditures include grants and an occasional land purchase, but no real 

property will be procured or constructed. 

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 
USDA AGENCY FINANCIAL REPORT | 2018 

116 

revenues from each national grassland or land utilization project are paid to the counties in 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 seven 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 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 
SECTION II | FINANCIAL INFORMATION

117 

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 

• Inspection and Weighing Services 

Animal Plant Health Inspection Service 

• Miscellaneous Contributed Funds 

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 

• Receipts for Construction of Administrative Improvements- Taos, New Mexico, Land 

Conveyance 

• Payment to Minnesota (Cook, Lake and Saint Louis Counties) 

• Licensee Program 

• Resource Management Timber Receipts 

• Quinault Special Management Area 

• MNP Rental Fee Account 

• Land Between the Lakes Management Fund 

• Administration of Rights-of-Way and Other Land Uses Fund 
USDA AGENCY FINANCIAL REPORT | 2018 

118 

• Hardwood Technology Transfer and Applied Research Fund 

• Gifts, Donations and Bequests for Forest and Rangeland Research 

• Land Between the Lakes Trust Fund 

• Timber Salvage Sales

• Expenses, Brush Disposal 

• 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 

Food Safety and Inspection Service 

• Expenses and Refunds, Inspection of Farm Products 

National Agricultural Statistics Service 

• Miscellaneous Contributed Funds 

Economic Research Service 

• Miscellaneous Contributed Funds 
SECTION II | FINANCIAL INFORMATION

119 

Office of the Secretary 

• Gifts and Bequests 

Office of Communications 

• Gifts and Bequests 

Office of General Counsel 

• Gifts and Bequests 

Office of the Inspector General 

• Inspector General Assets Forfeiture, Department of Justice 

• Inspector General Assets Forfeiture, Department of Treasury
USDA AGENCY FINANCIAL REPORT | 2018 

120 

Item 

AMS Funds for 

Strengthening 

Markets, Income, 

and Supply 

AMS Expenses 

and Refunds, 

Inspection and 

Grading of Farm 

Products 

APHIS Agricultural 

Quarantine 

Inspection User 

Fee Account 

FS Cooperative 

Work 

FS Land 

Acquisition 

FS Payments to 

States, National 

Forests Fund 

FS State, Private, 

and International 

Forestry, Land 

and Water 

Conservation 

Fund 

FS Recreation Fee 

Demonstration 

Program 

Balance Sheet As of September 30, 2018 

Fund Balance with Treasury $ 804 $ 71 $ 257 $ 132 $ 53 $ 59 $ 144 $ 113 

Investments 0 0 0 0 0 0 0 0 

Other Assets 1 20 152 11 41 1 11 4 

Total Assets 805 91 409 143 94 60 155 117 

Other Liabilities 37 60 66 79 0 249 0 3 

Total Liabilities 37 60 66 79 0 249 0 3 

Unexpended Appropriations 0 0 0 0 0 0 0 0 

Cumulative Results of Operations 768 31 343 64 94 -189 155 114 

Total Liabilities and Net Position 805 91 409 143 94 60 155 117 

Statement of Net Cost For the Period 

Ended September 30, 2018 

Gross program costs 724 223 228 115 47 327 46 91 

Less Earned Revenue 5 169 717 105 0 82 0 100 

Net Cost of Operations 719 54 -489 10 47 245 46 -9 

Statement of Changes in Net Position For 

the period Ended September 30, 2018 

Net Position Beginning of Period 519 44 296 169 92 57 143 94 

Non0Exchange Revenue 0 0 0 0 0 0 0 0 

Other Financing Sources 968 41 -442 -95 49 0 58 11 

Net Cost of Operations -719 -54 489 -10 -47 -246 -46 9 

Change in Net Position 249 -13 47 -105 2 -246 12 20 

Net Position End of Period $ 768 $ 31 $ 343 $ 64 $ 94 $ -189 $ 155 $ 114 

AMS AMS APHIS FS FS FS FS FS

Funds for 

Strengthening 

Markets, Income, and 

Supply

Expenses and 

Refunds, 

Inspection and 

Grading of Farm 

Products

Agricultural 

Quarantine 

Inspection User Fee 

Account Cooperative Work Land Acquisition

Payments to States, 

National Forests 

Fund

State, Private, and 

International 

Forestry, Land and 

Water 

Conservation Fund

Recreation Fee 

Demonstration 

Program

Balance Sheet As of September 30, 2018 12X5209 12X8015 12X5161 12X8028 12X5004 12X5201 12X5367 12X5268

Fund Balance with Treasury $ 804 $ 71 $ 257 $ 132 $ 53 $ 59 $ 144 $ 113

Investments - - - - - - - -

Other Assets 1 20 152 11 41 1 11 4

Total Assets 805 91 409 143 94 60 155 117

Other Liabilities 37 60 66 79 - 249 - 3

Total Liabilities 37 60 66 79 - 249 - 3

Unexpended Appropriations - - - - - - - -

Cumulative Results of Operations 768 31 343 64 94 (189) 155 114

Total Liabilities and Net Position 805 91 409 143 94 60 155 117

Statement of Net Cost For the Period

Ended September 30, 2018

Gross program costs 724 223 228 115 47 327 46 91

Less Earned Revenue 5 169 717 105 - 82 - 100

Net Cost of Operations 719 54 (489) 10 47 245 46 (9)

Statement of Changes in Net Position

For the period Ended September 30, 2018

Net Position Beginning of Period 519 44 296 169 92 57 143 94

Non-Exchange Revenue - - - - - - - -

Other Financing Sources 968 41 (442) (95) 49 - 58 11

Net Cost of Operations (719) (54) 489 (10) (47) (246) (46) 9

Change in Net Position 249 (13) 47 (105) 2 (246) 12 20

Net Position End of Period $ 768 $ 31 $ 343 $ 64 $ 94 $ (189) $ 155 $ 114
 SECTION II | FINANCIAL INFORMATION

121 

Item 

FS National Forest 

Fund Receipts 

FS Restoration of 

Forest Lands and 

Improvements 

FS Payments to 

Counties, National 

Grasslands 

FS Acquisition of 

Lands to 

Complete Land 

Exchanges 

FS Stewardship 

Contracting 

Product Sales 

NIFA Native 

American 

Institutions 

Endowment Fund Other Total 

Balance Sheet As of September 30, 2018 

Fund Balance with Treasury $ 176 $ 128 $ 128 $ 27 $ 41 $ 15 $ 286 $ 2,434 

Investments 0 0 0 0 0 222 8 230 

Other Assets 5 2 0 51 36 0 13 348 

Total Assets 181 130 128 78 77 237 307 3,012 

Other Liabilities 0 2 18 0 22 0 65 601 

Total Liabilities 0 2 18 0 22 0 65 601 

Unexpended Appropriations 0 0 0 0 0 167 1 168 

Cumulative Results of Operations 181 128 110 78 55 70 241 2,243 

Total Liabilities and Net Position 181 130 128 78 77 237 307 3,012 

Statement of Net Cost For the Period 

Ended September 30, 2018 

Gross program costs 0 44 24 4 54 6 238 2,171 

Less Earned Revenue 67 2 25 0 68 5 198 1,543 

Net Cost of Operations -67 42 -1 4 -14 1 40 628 

Statement of Changes in Net Position For 

the period Ended September 30, 2018 

Net Position Beginning of Period 116 193 75 81 52 226 269 2,426 

Non-Exchange Revenue 0 0 0 0 0 0 0 0 

Other Financing Sources -2 -23 34 0 -11 12 13 613 

Net Cost of Operations 67 -42 1 -3 14 -1 -40 -628 

Change in Net Position 65 -65 35 -3 3 11 -27 -15 

Net Position End of Period $ 181 $ 128 $ 110 $ 78 $ 55 $ 237 $ 242 $ 2,411 

FS FS FS FS FS NIFA

National Forest 

Fund Receipts

Restoration of 

Forest Lands and 

Improvements

Payments to 

Counties, National 

Grasslands

Acquisition of 

Lands to Complete 

Land Exchanges

Stewardship 

Contracting 

Product Sales

Native American 

Institutions 

Endowment Fund Other Total

Balance Sheet As of September 30, 2018 125008 12X5215 125896 12X5216 12X5540 12X5205

Fund Balance with Treasury $ 176 $ 128 $ 128 $ 27 $ 41 $ 15 $ 286 $ 2,434

Investments - - - - - 222 8 230

Other Assets 5 2 - 51 36 - 13 348

Total Assets 181 130 128 78 77 237 307 3,012

Other Liabilities - 2 18 - 22 - 65 601

Total Liabilities - 2 18 - 22 - 65 601

Unexpended Appropriations - - - - - 167 1 168

Cumulative Results of Operations 181 128 110 78 55 70 241 2,243

Total Liabilities and Net Position 181 130 128 78 77 237 307 3,012

Statement of Net Cost For the Period

Ended September 30, 2018

Gross program costs - 44 24 4 54 6 238 2,171

Less Earned Revenue 67 2 25 - 68 5 198 1,543

Net Cost of Operations (67) 42 (1) 4 (14) 1 40 628

Statement of Changes in Net Position

For the period Ended September 30, 2018

Net Position Beginning of Period 116 193 75 81 52 226 269 2,426

Non-Exchange Revenue - - - - - - - -

Other Financing Sources (2) (23) 34 - (11) 12 13 613

Net Cost of Operations 67 (42) 1 (3) 14 (1) (40) (628)

Change in Net Position 65 (65) 35 (3) 3 11 (27) (15)

Net Position End of Period $ 181 $ 128 $ 110 $ 78 $ 55 $ 237 $ 242 $ 2,411
NOTE 19: SUB-ORGANIZATION PROGRAM COSTS/PROGRAM COSTS BY SEGMENT 

122 

USDA AGENCY FINANCIAL REPORT | 2018 

FY 2018 Item FSA CCC NRCS RMA

FPAC Business 

Center FNS 

Rural Development: Gross Costs $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 

Rural Development: Less: Earned Revenue 0 0 0 0 0 0 

Rural Development: Net Costs 0 0 0 0 0 0 

Food Safety: Gross Costs 0 0 0 0 0 0 

Food Safety: Less: Earned Revenue 0 0 0 0 0 0 

Food Safety: Net Costs 0 0 0 0 0 0 

Marketing and Regulatory Programs: Gross Costs 0 0 0 0 0 0 

Marketing and Regulatory Programs: Less: Earned Revenue 0 0 0 0 0 0 

Marketing and Regulatory Programs: Net Costs 0 0 0 0 0 0 

Natural Resources and Environment: Gross Costs 0 0 0 0 0 0 

Natural Resources and Environment: Less: Earned Revenue 0 0 0 0 0 0 

Natural Resources and Environment: Net Costs 0 0 0 0 0 0 

Food, Nutrition, and Consumer Services: Gross Costs 0 0 0 0 0 98,793 

Food, Nutrition, and Consumer Services: Less: Earned Revenue 0 0 0 0 0 57 

Food, Nutrition, and Consumer Services: Net Costs 0 0 0 0 0 98,736 

Farm Production and Conservation: Gross Costs 2,292 9,844 4,302 5,917 1 0 

Farm Production and Conservation: Less: Earned Revenue 414 235 40 453 0 0 

Farm Production and Conservation: Net Costs 1,878 9,609 4,262 5,464 1 0 

Trade and Foreign Agricultural Affairs: Gross Costs 0 0 0 0 0 0 

Trade and Foreign Agricultural Affairs: Less: Earned Revenue 0 0 0 0 0 0 

Trade and Foreign Agricultural Affairs: Net Costs 0 0 0 0 0 0 

Research, Education, and Economics: Gross Costs 0 0 0 0 0 0 

Research, Education, and Economics: Less: Earned Revenue 0 0 0 0 0 0 

Research, Education, and Economics: Net Costs 0 0 0 0 0 0 

Departmental Management: Gross Costs 0 0 0 0 0 0 

Departmental Management: Less: Earned Revenue 0 0 0 0 0 0 

Departmental Management: Net Costs 0 0 0 0 0 0 

Total Gross Costs 2,292 9,844 4,302 5,917 1 98,793 

Less: Total Earned Revenue 414 235 40 453 0 57 

Net Cost of Operations 1,878 $ 9,609 $ 4,262 $ 5,464 $ 1 $ 98,736 

FY 2018

Rural Development:

Gross Costs $ - $ - $ - $ - $ - $ -

Less: Earned Revenue - - - - - -

Net Costs - - - - - -

Food Safety: 

Gross Costs - - - - - -

Less: Earned Revenue - - - - - -

Net Costs - - - - - -

Marketing and Regulatory Programs:

Gross Costs - - - - - -

Less: Earned Revenue - - - - - -

Net Costs - - - - - -

Natural Resources and Environment:

Gross Costs - - - - - -

Less: Earned Revenue - - - - - -

Net Costs - - - - - -

Food, Nutrition, and Consumer Services:

Gross Costs - - - - - 98,793

Less: Earned Revenue - - - - - 57

Net Costs - - - - - 98,736

Farm Production and Conservation:

Gross Costs 2,292 9,844 4,302 5,917 1 -

Less: Earned Revenue 414 235 40 453 - -

Net Costs 1,878 9,609 4,262 5,464 1 -

Trade and Foreign Agricultural Affairs:

Gross Costs - - - - - -

Less: Earned Revenue - - - - - -

Net Costs - - - - - -

Research, Education, and Economics:

Gross Costs - - - - - -

Less: Earned Revenue - - - - - -

Net Costs - - - - - -

Departmental Management:

Gross Costs - - - - - -

Less: Earned Revenue - - - - - -

Net Costs - - - - - -

Total Gross Costs 2,292 9,844 4,302 5,917 1 98,793

Less: Total Earned Revenue 414 235 40 453 - 57

Net Cost of Operations $ 1,878 $ 9,609 $ 4,262 $ 5,464 $ 1 $ 98,736

NRCS RMA

FPAC 

FSA CCC Business Center FNS
 SECTION II | FINANCIAL INFORMATION

123 

FY 2018 Item FSIS AMS APHIS FS FAS ARS 

Rural Development: Gross Costs 0 0 0 0 0 0 

Rural Development: Less: Earned Revenue 0 0 0 0 0 0 

Rural Development: Net Costs 0 0 0 0 0 0 

Food Safety: Gross Costs 1,413 0 0 0 0 0 

Food Safety: Less: Earned Revenue 244 0 0 0 0 0 

Food Safety: Net Costs 1,169 0 0 0 0 0 

Marketing and Regulatory Programs: Gross Costs 0 1,272 1,546 0 0 0 

Marketing and Regulatory Programs: Less: Earned Revenue 0 296 939 0 0 0 

Marketing and Regulatory Programs: Net Costs 0 976 607 0 0 0 

Natural Resources and Environment: Gross Costs 0 0 0 8,105 0 0 

Natural Resources and Environment: Less: Earned Revenue 0 0 0 868 0 0 

Natural Resources and Environment: Net Costs 0 0 0 7,237 0 0 

Food, Nutrition, and Consumer Services: Gross Costs 0 0 0 0 0 0 

Food, Nutrition, and Consumer Services: Less: Earned Revenue 0 0 0 0 0 0 

Food, Nutrition, and Consumer Services: Net Costs 0 0 0 0 0 0 

Farm Production and Conservation: Gross Costs 0 0 0 0 0 0 

Farm Production and Conservation: Less: Earned Revenue 0 0 0 0 0 0 

Farm Production and Conservation: Net Costs 0 0 0 0 0 0 

Trade and Foreign Agricultural Affairs: Gross Costs 0 0 0 0 510 0 

Trade and Foreign Agricultural Affairs: Less: Earned Revenue 0 0 0 0 118 0 

Trade and Foreign Agricultural Affairs: Net Costs 0 0 0 0 392 0 

Research, Education, and Economics: Gross Costs 0 0 0 0 0 0 

Research, Education, and Economics: Less: Earned Revenue 0 0 0 0 0 0 

Research, Education, and Economics: Net Costs 0 0 0 0 0 0 

Departmental Management: Gross Costs 0 0 0 0 0 1,415 

Departmental Management: Less: Earned Revenue 0 0 0 0 0 189 

Departmental Management: Net Costs 0 0 0 0 0 1,226 

Total Gross Costs 1,413 1,272 1,546 8,105 510 1,415 

Less: Total Earned Revenue 244 296 939 868 118 189 

Net Cost of Operations $ 1,169 $ 976 $ 607 $ 7,237 $ 392 $ 1,226 

FY 2018

Rural Development:

Gross Costs $ - $ - $ - $ - $ - $ -

Less: Earned Revenue - - - - - -

Net Costs - - - - - -

Food Safety: 

Gross Costs 1,413 - - - - -

Less: Earned Revenue 244 - - - - -

Net Costs 1,169 - - - - -

Marketing and Regulatory Programs:

Gross Costs - 1,272 1,546 - - -

Less: Earned Revenue - 296 939 - - -

Net Costs - 976 607 - - -

Natural Resources and Environment:

Gross Costs - - - 8,105 - -

Less: Earned Revenue - - - 868 - -

Net Costs - - - 7,237 - -

Food, Nutrition, and Consumer Services:

Gross Costs - - - - - -

Less: Earned Revenue - - - - - -

Net Costs - - - - - -

Farm Production and Conservation:

Gross Costs - - - - - -

Less: Earned Revenue - - - - - -

Net Costs - - - - - -

Trade and Foreign Agricultural Affairs:

Gross Costs - - - - 510 -

Less: Earned Revenue - - - - 118 -

Net Costs - - - - 392 -

Research, Education, and Economics:

Gross Costs - - - - - 1,415

Less: Earned Revenue - - - - - 189

Net Costs - - - - - 1,226

Departmental Management:

Gross Costs - - - - - -

Less: Earned Revenue - - - - - -

Net Costs - - - - - -

Total Gross Costs 1,413 1,272 1,546 8,105 510 1,415

Less: Total Earned Revenue 244 296 939 868 118 189

Net Cost of Operations $ 1,169 $ 976 $ 607 $ 7,237 $ 392 $ 1,226

FSIS AMS APHIS FS FAS ARS
USDA AGENCY FINANCIAL REPORT | 2018 

124 

FY 2018 Item NIFA ERS NASS RD DM Total 

Rural Development: Gross Costs 0 0 0 7,106 0 $ 7,106 

Rural Development: Less: Earned Revenue 0 0 0 3,842 0 3,842 

Rural Development: Net Costs 0 0 0 3,264 0 3,264 

Food Safety: Gross Costs 0 0 0 0 0 1,413 

Food Safety: Less: Earned Revenue 0 0 0 0 0 244 

Food Safety: Net Costs 0 0 0 0 0 1,169 

Marketing and Regulatory Programs: Gross Costs 0 0 0 0 0 2,818 

Marketing and Regulatory Programs: Less: Earned Revenue 0 0 0 0 0 1,235 

Marketing and Regulatory Programs: Net Costs 0 0 0 0 0 1,583 

Natural Resources and Environment: Gross Costs 0 0 0 0 0 8,105 

Natural Resources and Environment: Less: Earned Revenue 0 0 0 0 0 868 

Natural Resources and Environment: Net Costs 0 0 0 0 0 7,237 

Food, Nutrition, and Consumer Services: Gross Costs 0 0 0 0 0 98,793 

Food, Nutrition, and Consumer Services: Less: Earned Revenue 0 0 0 0 0 57 

Food, Nutrition, and Consumer Services: Net Costs 0 0 0 0 0 98,736 

Farm Production and Conservation: Gross Costs 0 0 0 0 0 22,356 

Farm Production and Conservation: Less: Earned Revenue 0 0 0 0 0 1,142 

Farm Production and Conservation: Net Costs 0 0 0 0 0 21,214 

Trade and Foreign Agricultural Affairs: Gross Costs 0 0 0 0 0 510 

Trade and Foreign Agricultural Affairs: Less: Earned Revenue 0 0 0 0 0 118 

Trade and Foreign Agricultural Affairs: Net Costs 0 0 0 0 0 392 

Research, Education, and Economics: Gross Costs 1,390 97 223 0 0 3,125 

Research, Education, and Economics: Less: Earned Revenue 43 5 24 0 0 261 

Research, Education, and Economics: Net Costs 1,347 92 199 0 0 2,864 

Departmental Management: Gross Costs 0 0 0 0 1,417 1,417 

Departmental Management: Less: Earned Revenue 0 0 0 0 1,060 1,060 

Departmental Management: Net Costs 0 0 0 0 357 357 

Total Gross Costs 1,390 97 223 7,106 1,417 145,643 

Less: Total Earned Revenue 43 5 24 3,842 1,060 8,827 

Net Cost of Operations $ 1,347 $ 92 $ 199 $ 3,264 $ 357 $ 136,816 

FY 2018

Rural Development:

Gross Costs $ - $ - $ - $ 7,106 $ - $ 7,106

Less: Earned Revenue - - - 3,842 - 3,842

Net Costs - - - 3,264 - 3,264

Food Safety: 

Gross Costs - - - - - 1,413

Less: Earned Revenue - - - - - 244

Net Costs - - - - - 1,169

Marketing and Regulatory Programs:

Gross Costs - - - - - 2,818

Less: Earned Revenue - - - - - 1,235

Net Costs - - - - - 1,583

Natural Resources and Environment:

Gross Costs - - - - - 8,105

Less: Earned Revenue - - - - - 868

Net Costs - - - - - 7,237

Food, Nutrition, and Consumer Services:

Gross Costs - - - - - 98,793

Less: Earned Revenue - - - - - 57

Net Costs - - - - - 98,736

Farm Production and Conservation:

Gross Costs - - - - - 22,356

Less: Earned Revenue - - - - - 1,142

Net Costs - - - - - 21,214

Trade and Foreign Agricultural Affairs:

Gross Costs - - - - - 510

Less: Earned Revenue - - - - - 118

Net Costs - - - - - 392

Research, Education, and Economics:

Gross Costs 1,390 97 223 - - 3,125

Less: Earned Revenue 43 5 24 - - 261

Net Costs 1,347 92 199 - - 2,864

Departmental Management:

Gross Costs - - - - 1,417 1,417

Less: Earned Revenue - - - - 1,060 1,060

Net Costs - - - - 357 357

Total Gross Costs 1,390 97 223 7,106 1,417 145,643

Less: Total Earned Revenue 43 5 24 3,842 1,060 8,827

Net Cost of Operations $ 1,347 $ 92 $ 199 $ 3,264 $ 357 $ 136,816

NIFA ERS NASS RD DM TOTAL
 SECTION II | FINANCIAL INFORMATION

125 

FY 2018 Item

Intradepartmental 

Eliminations GRAND TOTAL 

Rural Development: Gross Costs $ -119 $ 6,987 

Rural Development: Less: Earned Revenue -11 3,831 

Rural Development: Net Costs -108 3,156 

Food Safety: Gross Costs -71 1,342 

Food Safety: Less: Earned Revenue -2 242 

Food Safety: Net Costs -69 1,100 

Marketing and Regulatory Programs: Gross Costs -158 2,660 

Marketing and Regulatory Programs: Less: Earned 

Revenue 

-31 1,204 

Marketing and Regulatory Programs: Net Costs -127 1,456 

Natural Resources and Environment: Gross Costs -234 7,871 

Natural Resources and Environment: Less: Earned 

Revenue 

-16 852 

Natural Resources and Environment: Net Costs -218 7,019 

Food, Nutrition, and Consumer Services: Gross Costs -760 98,033 

Food, Nutrition, and Consumer Services: Less: Earned 

Revenue 

- 57 

Food, Nutrition, and Consumer Services: Net Costs -760 97,976 

Farm Production and Conservation: Gross Costs -1,844 20,512 

Farm Production and Conservation: Less: Earned 

Revenue 

-62 1,080 

Farm Production and Conservation: Net Costs -1,782 19,432 

Trade and Foreign Agricultural Affairs: Gross Costs -40 470 

Trade and Foreign Agricultural Affairs: Less: Earned 

Revenue 

-59 59 

Trade and Foreign Agricultural Affairs: Net Costs 19 411 

Research, Education, and Economics: Gross Costs -125 3,000 

Research, Education, and Economics: Less: Earned 

Revenue 

-115 146 

Research, Education, and Economics: Net Costs -10 2,854 

Departmental Management: Gross Costs -84 1,333 

Departmental Management: Less: Earned Revenue -784 276 

Departmental Management: Net Costs 700 1,057 

Total Gross Costs -3,435 142,208 

Less: Total Earned Revenue -1,080 7,747 

Net Cost of Operations $ -2,355 $ 134,461 

FY 2018

Intradepartmental 

Eliminations GRAND TOTAL

Rural Development:

Gross Costs $ (119) $ 6,987

Less: Earned Revenue (11) 3,831

Net Costs (108) 3,156

Food Safety: 

Gross Costs (71) 1,342

Less: Earned Revenue (2) 242

Net Costs (69) 1,100

Marketing and Regulatory Programs:

Gross Costs (158) 2,660

Less: Earned Revenue (31) 1,204

Net Costs (127) 1,456

Natural Resources and Environment:

Gross Costs (234) 7,871

Less: Earned Revenue (16) 852

Net Costs (218) 7,019

Food, Nutrition, and Consumer Services:

Gross Costs (760) 98,033

Less: Earned Revenue - 57

Net Costs (760) 97,976

Farm Production and Conservation:

Gross Costs (1,844) 20,512

Less: Earned Revenue (62) 1,080

Net Costs (1,782) 19,432

Trade and Foreign Agricultural Affairs:

Gross Costs (40) 470

Less: Earned Revenue (59) 59

Net Costs 19 411

Research, Education, and Economics:

Gross Costs (125) 3,000

Less: Earned Revenue (115) 146

Net Costs (10) 2,854

Departmental Management:

Gross Costs (84) 1,333

Less: Earned Revenue (784) 276

Net Costs 700 1,057

Total Gross Costs (3,435) 142,208

Less: Total Earned Revenue (1,080) 7,747

Net Cost of Operations $ (2,355) $ 134,461
USDA AGENCY FINANCIAL REPORT | 2018 

126

NOTE 20: COST OF STEWARDSHIP PP&E 

The acquisition cost of stewardship land in FY 2018 was $266 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. Prepayments can be made on Treasury 

borrowings without a penalty; however, they cannot be made on FFB CBOs, without a penalty.
SECTION II | FINANCIAL INFORMATION 

127 

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, 2018 was $44,123 million. 

NOTE 23: APPORTIONMENT CATEGORIES OF OBLIGATIONS INCURRED: 

DIRECT VS. REIMBURSABLE OBLIGATIONS 

FY 2018 Item Direct Reimbursable Total 

Apportionment by Fiscal Quarter $ 44,690 $ 2,001 $ 46,691 

Apportionment for Special Activities 119,616 1,410 121,026 

Exempt from Apportionment 8,418 9 8,427 

Total Obligations Incurred $ 172,724 $ 3,420 $ 176,144 

FY 2018

Direct Reimbursable Total

Apportionment by Fiscal Quarter $ 44,690 $ 2,001 $ 46,691

Apportionment for Special Activities 119,616 1,410 121,026

Exempt from Apportionment 8,418 9 8,427

Total Obligations Incurred $ 172,724 $ 3,420 $ 176,144

NOTE 24: UNDELIVERED ORDERS AT THE END OF THE PERIOD 

FY 2018 Item Federal Non Federal 

Paid $ 2 $ 513 

Unpaid 2 ,722 58,258 

Total $ 2,724 $ 58,771 

FY 2018

Federal Non Federal

Paid $ 2 $ 513

Unpaid 2,722 58,258

Total $ 2,724 $ 58,771

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 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 
USDA AGENCY FINANCIAL REPORT | 2018 

128 

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. 
SECTION II | FINANCIAL INFORMATION 

129 

NOTE 27: EXPLANATION OF DIFFERENCES BETWEEN THE SBR AND THE 

BUDGET OF THE U.S. GOVERNMENT 

A comparison between the FY 2018 SBR and the FY 2018 actual numbers presented in the 

FY 2020 Budget cannot be performed as the FY 2020 Budget is not yet available. The FY 2020 

Budget is expected to be published in February 2019 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. 

Item FY 2018 

Revenue Activity: Sources of Collections: Miscellaneous $ 136

Total Cash Collections 136 

Accrual Adjustments -1 

Total Custodial Revenue 135 

Disposition of Collections: Transferred to Others: Treasury -119 

(Increase )/Decrease in Amounts Yet to be Transferred -16 

Net Custodial Activity $ 0 

Revenue Activity: FY 2018

Sources of Collections:

Miscellaneous $ 136

Total Cash Collections 136

Accrual Adjustments (1)

Total Custodial Revenue 135

Disposition of Collections:

Transferred to Others:

Treasury (119)

( Increase )/Decrease in Amounts Yet to be Transferred (16)

Net Custodial Activity $ -
USDA AGENCY FINANCIAL REPORT | 2018 

130 

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. 

Schedule of Fiduciary Activity For the period Ended September 30, 2018 

Item Rural Housing Insurance 

Fund FY 2018 

Fiduciary net assets, beginning of year $ 116

Fiduciary revenues 0 

Contributions 445 

Investment earnings 0 

Gain (Loss) on disposition of investments, net 0 

Administrative and other expenses 0 

Disbursements to and on behalf of beneficiaries -437 

Increases/(Decrease) in fiduciary net assets 8 

Fiduciary net assets, end of year $ 124

Rural Housing

Insurance

Fund

FY 2018

Fiduciary net assets, beginning of year $ 116

 Fiduciary revenues -

 Contributions 445

 Investment earnings -

 Gain (Loss) on disposition of investments, net -

 Administrative and other expenses -

 Disbursements to and on behalf of beneficiaries (437)

Increases/(Decrease) in fiduciary net assets 8

Fiduciary net assets, end of year $ 124

Schedule of Fiduciary Activity

For the period Ended September 30, 2018

Fiduciary Net Assets As of September 30, 2018 

Item Rural Housing Insurance 

Fund FY 2018 

Fiduciary Assets: Cash and cash equivalents $ 124

Fiduciary Assets: Investments 0 

Fiduciary Assets: Other assets 0 

Fiduciary Liabilities 0 

Less: Liabilities 0 

Total Fiduciary Net Assets $ 124

Rural Housing 

Insurance

Fund

FY 2018

Fiduciary Assets

 Cash and cash equivalents $ 124

 Investments -

 Other assets -

Fiduciary Liabilities -

 Less: Liabilities -

Total Fiduciary Net Assets $ 124

Fiduciary Net Assets

As of September 30, 2018
SECTION II | FINANCIAL INFORMATION 

131 

NOTE 30: BUDGET AND ACCRUAL RECONCILIATION 

Budgetary and financial accounting information differ. Budgetary accounting is used for 

planning and control purposes and relates to both the receipt and use of cash, as well as reporting 

the federal deficit. Financial accounting is intended to provide a picture of the government’s 

financial operations and financial position so it presents information on an accrual basis. 

The accrual basis includes information about costs arising from the consumption of assets and 

the incurrence of liabilities. The reconciliation of net outlays, presented on a budgetary basis, and 

the net cost, presented on an accrual basis, provides an explanation of the relationship between 

budgetary and financial accounting information. The reconciliation serves not only to identify 

costs paid for in the past and those that will be paid in the future, but also to assure integrity 

between budgetary and financial accounting. 

The reconciliation explains the relationship between the net cost of operations and net outlays by 

presenting (1) components of net cost that are not part of net outlays (e.g. depreciation and 

amortization expenses of assets previously capitalized, change in asset/liabilities); 

(2) components of net outlays that are not part of net cost (e.g. acquisition of capital assets); and 

(3) other temporary timing difference (e.g. prior period adjustments due to correction of errors). 

The analysis below illustrates this reconciliation by listing the key differences between net cost 

and net outlays. 

Other components of net operating cost not part of the budgetary outlays includes primarily cost 

capitalization offset, advances and prepayments, contingent liabilities, principal payable to 

Bureau of the Fiscal Service/Federal Financing Bank, other liabilities with/without related 

budgetary obligations, and subsidy payable to the financing account. 

Other components of the budget outlays that are not part of net operating cost includes primarily 

net borrowing authority and collections for others. 
USDA AGENCY FINANCIAL REPORT | 2018 

132 

FY 2018 Item Intragovernmental With The Public Total

Net Cost of Operations $ 7,497 $ 126,964 $ 134,461 

Components of Net Operating Cost Not Part of the Budgetary Outlays: 

Property, plant, and equipment depreciation 0 -344 -344 

Property, plant, and equipment disposal & reevaluation 0 15 15 

Year-end credit reform subsidy re-estimates -1,307 0 -1,307 

Other 1 95 96 

Increase/(decrease) in assets: 

Accounts receivable 57 671 728 

Loans receivable 0 2,115 2,115 

Other assets 6 360 366 

(Increase)/decrease in liabilities not affecting Budget Outlays: 

Accounts payable 29 -608 -579 

Salaries and benefits -1 5 4 

Insurance and guarantee program liabilities 0 -2,285 -2,285 

Environmental and disposal liabilities 0 0 0 

Other liabilities (Unfunded leave, unfunded FECA, actuarial FECA) -62 6,823 6,761 

Other financing sources: Imputed financing -987 0 -987 

Total Components of Net Operating Cost Not Part of the Budget Outlays -2,263 6,847 4,584 

Components of the Budget Outlays That Are Not Part of Net Operating Cost 

Acquisition of capital assets 0 108 108 

Acquisition of inventory 0 29 29 

Transfers out (in) without reimbursement 6 0 6 

Other -9 1,239 1,230 

Total Components of Budgetary Outlays That Are Not Part of Net Operating Cost -3 1,376 1,373 

Net Outlays 5,231 135,187 140,418 

Related Amounts on the Statement of Budgetary Resources 

Outlays, Net N/A N/A 143,272 

Distributed offsetting receipts N/A N/A -2,854 

Agency Outlays, Net N/A N/A $ 140,418 

FY2018

Intragovernmental With The Public Total

 Net Cost of Operations $ 7,497 $ 126,964 $ 134,461

 Components of Net Operating Cost Not Part of the Budgetary Outlays:

 Property, plant, and equipment depreciation - (344) (344)

 Property, plant, and equipment disposal & reevaluation - 15 15

 Year-end credit reform subsidy re-estimates (1,307) - (1,307)

 Other 1 95 96

 Increase/(decrease) in assets:

 Accounts receivable 57 671 728

 Loans receivable - 2,115 2,115

 Other assets 6 360 366

 (Increase)/decrease in liabilities not affecting Budget Outlays:

 Accounts payable 29 (608) (579)

 Salaries and benefits (1) 5 4

 Insurance and guarantee program liabilities - (2,285) (2,285)

 Environmental and disposal liabilities - - -

 Other liabilities (Unfunded leave, unfunded FECA, actuarial FECA) (62) 6,823 6,761

 Other financing sources:

 Imputed financing (987) - (987)

 Total Components of Net Operating Cost Not Part of the Budget Outlays (2,263) 6,847 4,584

 Components of the Budget Outlays That Are Not Part of Net Operating Cost

 Acquisition of capital assets - 108 108

 Acquisition of inventory - 29 29

 Transfers out (in) without reimbursement 6 - 6

 Other (9) 1,239 1,230

 Total Components of Budgetary Outlays That Are Not Part of Net Operating Cost (3) 1,376 1,373

 Net Outlays 5,231 135,187 140,418

 Related Amounts on the Statement of Budgetary Resources

 Outlays, Net 143,272

 Distributed offsetting receipts (2,854)

 Agency Outlays, Net $ 140,418
SECTION II | FINANCIAL INFORMATION

133

NOTE 31: DISCLOSURE ENTITIES AND RELATED PARTIES

The Department exercises significant influence over the policy decisions of the Milk Market 

Orders Assessment Fund.

The Secretary of Agriculture is authorized by the Agricultural Marketing Agreement Act of

1937, as amended under certain conditions to issue Federal milk marketing orders establishing 

minimum prices which handlers are required to pay for milk purchased from producers. There 

are currently 10 Federally-sanctioned milk market orders in operation. Market administrators are 

appointed by the Secretary and are responsible for carrying out the terms of specific marketing 

orders. Their operating expenses are financed by assessments on regulated handlers and partly by 

deductions from producers, which are reported to the Agricultural Marketing Service (AMS). 

Most of these funds are collected and deposited in checking and savings accounts in local banks

and disbursed directly for direct disbursement by the market administrator. A portion of the 

funds collected may be invested in securities such as certificates of deposit. Expenses of local 

offices are met from an administrative fund and a marketing service fund, which are prescribed 

in each order. The administrative fund is derived from prorated handler assessments. 

The marketing service fund of the individual order disseminates market information to producers 

who are not members of a qualified cooperative. It also provides for the verification of the 

weights, sampling, and testing of milk from these producers. The cost of these services is borne 

by such producers. The maximum rates for administrative assessment and for marketing services 

are set forth in each order and adjustments below these rates are made from time to time upon 

recommendations by the market administrator and upon approval of the AMS to provide reserves 

at about a six-month operating level. Upon termination of any order, the statute provides for 

distributing the proceeds from net assets pro rata to contributing handlers or producers.

The AMS reports this account in the President’s Budget because milk marketing administration 

staff are excepted service. Salaries, health insurance, TSP contributions and all other federal 

benefits are paid by the marketing order funds and as a result there are no costs to the Federal 

government. As a result, corresponding dollars are reported for presentation purposes only.

In FY 2018, the non-Federal costs of administrating Federal milk marketing orders, including

salaries and expenses, travel, and rent for office space was estimated to be $57 million.

The AMS Funds for Strengthening Markets, Income and Supply (Section 32) account is used to 

fund the Secretary’s oversight responsibilities of Marketing Orders. 
USDA AGENCY FINANCIAL REPORT | 2018 

134 

Required Supplementary Stewardship Information 

STEWARDSHIP INVESTMENTS (UNAUDITED) 

Item FY 2018 Expense 

Non-Federal Physical Property: 

Food and Nutrition Service: Supplemental Nutrition Assistance Program $ 15 

Food and Nutrition Service: Special Supplemental Nutrition Program 6 

National Institute of Foods and Agriculture: Extension 1890 Facilities Program 20 

Total Non-Federal Property $ 41 

Human Capital: 

National Institute of Foods and Agriculture: Higher Education and Extension Programs $ 572 

Food and Nutrition Service: Supplemental Nutrition Assistance Program 85 

Agricultural Research Service: National Agricultural Library 26 

Risk Management Agency: Risk Management Education 11 

Natural Resources Conservation Service: National Volunteer Program 8 

Total Human Capital $ 702 

FY 2018

Expense

Non-Federal Physical Property:

Food and Nutrition Service

Supplemental Nutrition Assistance Program $ 15

Special Supplemental Nutrition Program 6

National Institute of Foods and Agriculture

Extension 1890 Facilities Program 20

Total Non-Federal Property $ 41

Human Capital:

National Institute of Foods and Agriculture

Higher Education and Extension Programs $ 572

Food and Nutrition Service

Supplemental Nutrition Assistance Program 85

Agricultural Research Service

National Agricultural Library 26

Risk Management Agency

Risk Management Education 11

Natural Resources Conservation Service

National Volunteer Program 8

Total Human Capital $ 702
SECTION II | FINANCIAL INFORMATION 

135 

Research and Development FY 2018 Expense 

Basic Research: 

Agricultural Research Service: Human Nutrition $ 44 

Agricultural Research Service: Product Quality/Value Added 51 

Agricultural Research Service: Livestock Production 47 

Agricultural Research Service: Crop Production 121 

Agricultural Research Service: Food Safety 56 

Agricultural Research Service: Livestock Protection 47 

Agricultural Research Service: Crop Protection 101 

Agricultural Research Service: Environmental Stewardship 110 

National Institute of Foods and Agriculture: Land-grant University System 846 

Forest Service 59 

Total Basic Research $ 1,482 

Applied Research: 

Agricultural Research Service: Human Nutrition $ 35 

Agricultural Research Service: Product Quality/Value Added 41 

Agricultural Research Service: Livestock Production 38 

Agricultural Research Service: Crop Production 97 

Agricultural Research Service: Food Safety 45 

Agricultural Research Service: Livestock Protection 38 

Agricultural Research Service: Crop Protection 81 

Agricultural Research Service: Environmental Stewardship 87 

National Institute of Foods and Agriculture: Land-grant University System 314 

Forest Service 244 

Economic Research Service: Economic and Social Science 86 

National Agricultural Statistics Service: Statistical 5 

Natural Resources Conservation Service: Plant Materials Centers 12 

Natural Resources Conservation Service: Soil Survey Research 1 

Total Applied Research $ 1,124 

Development: 

Agricultural Research Service: Human Nutrition $ 9 

Agricultural Research Service: Product Quality/Value Added 10 

Agricultural Research Service: Livestock Production 9 

Agricultural Research Service: Crop Production 24 

Agricultural Research Service: Food Safety 11 

Agricultural Research Service: Livestock Protection 10 

Agricultural Research Service: Crop Protection 20 

Agricultural Research Service: Environmental Stewardship 22 

National Institute of Foods and Agriculture: Land-grant University System 532 

Forest Service 6 

National Agricultural Statistics Service: Statistical 4 

Total Development $ 657 

Total Research and Development $ 3,263 

FY 2018

Expense

Research and Development:

Basic Research: 

Agricultural Research Service

Human Nutrition $ 44

Product Quality/Value Added 51

Livestock Production 47

Crop Production 121

Food Safety 56

Livestock Protection 47

Crop Protection 101

Environmental Stewardship 110

National Institute of Foods and Agriculture

Land-grant University System 846

Forest Service 59

Total Basic Research 1,482$ 

Applied Research: 

Agricultural Research Service

Human Nutrition $ 35

Product Quality/Value Added 41

Livestock Production 38

Crop Production 97

Food Safety 45

Livestock Protection 38

Crop Protection 81

Environmental Stewardship 87

National Institute of Foods and Agriculture

Land-grant University System 314

Forest Service 244

Economic Research Service

Economic and Social Science 86

National Agricultural Statistics Service

Statistical 5

Natural Resources Conservation Service 

Plant Materials Centers 12

Soil Survey Research 1

Total Applied Research 1,124$ 

Development: 

Agricultural Research Service

Human Nutrition 9$ 

Product Quality/Value Added 10

Livestock Production 9

Crop Production 24

Food Safety 11

Livestock Protection 10

Crop Protection 20

Environmental Stewardship 22

National Institute of Foods and Agriculture

Land-grant University System 532

Forest Service 6

National Agricultural Statistics Service

Statistical 4

Total Development $ 657

Total Research and Development 3,263$ 
USDA AGENCY FINANCIAL REPORT | 2018 

136

NON-FEDERAL PHYSICAL PROPERTY

Food and Nutrition Service (FNS)

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 (NIFA)

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

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’ 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.

Outcome data for the E&T program is only available through the third quarter. As of this period,

FNS’ E&T program has placed 241,898 work registrants subject to the 3 month SNAP 

participant limit and 906,410 work registrants not subject to the limit in either job-search, job 

training, job-workfare, education, or work experience.
SECTION II | FINANCIAL INFORMATION 

137 

Agricultural Research Service (ARS) 

The National Agricultural Library (NAL) provides services directly to the staff of USDA and to 

the public, primarily via its Web site, https://www.nal.usda.gov. As the world’s leading 

agricultural library, NAL has expertise in information and knowledge management, and a wide 

variety of subject areas related to agriculture and food, including nutrition and food safety, 

animal welfare, natural resources, invasive species, lifecycle assessment, and long-term 

agroecosystem research. 

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 FY 2018, 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 120,000 in FY 2018. 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 

$11 million in FY 2018. 

Natural Resources Conservation Service (NRCS) 

NRCS’s investment in human capital is primarily for education and training programs that are 

intended to increase or maintain national economic productive capacity. Human capital 

investment also seeks to produce outputs and outcomes that provide evidence of maintaining or 

increasing national productive capacity. 

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 
USDA AGENCY FINANCIAL REPORT | 2018 

138 

competitive agricultural economy; enhance the natural resource base and the environment; and 

provide economic opportunities for rural citizens, communities, and society as a whole. 

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. 

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. 

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. 
SECTION II | FINANCIAL INFORMATION 

139 

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 

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 
USDA AGENCY FINANCIAL REPORT | 2018 

140 

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 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. 

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. 

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. 
SECTION II | FINANCIAL INFORMATION 

141 

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. 

National Agricultural Library 

The library provides services directly to the staff of USDA and to the public, primarily via the 

NAL Web site. NAL is the premier library for collecting, managing, and disseminating 

agriculture information. It delivered about 38 million page views to over 5 million customers in 

FY 2018. 

Buildings and Facilities 

As the principal intramural scientific research agency of the Department of Agriculture, ARS 

operates an extensive network of more than 100 federally owned research facilities. These 

facilities are strategically located throughout the U.S., reflective of the wide geographic diversity 

and site specificity of agricultural production; distinct climatic and agroecosystem zones; and the 

numerous research partners, cooperators, and customers/users with which ARS works. These 

specialized laboratories and facilities are essential for ARS’ scientists and support personnel to 

carry out the agency’s mission. 

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. 
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142 

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. 

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. 
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143 

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 

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 2018 accomplishments include the following: 

• 41 new interagency agreements and contracts 

• 25 interagency agreements and contracts continued 

• 1,794 articles published in journals 

• 146 articles published in all other publications 

• 2 patents granted 

• 3 patent licenses executed 
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144 

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) 

NASS conducts research to improve the statistical methods and related technologies used to 

produce U.S. agriculture statistics. The research agenda has two primary areas of emphasis: the 

National Agriculture Statistics Service estimation program and the Census of Agriculture 

program. For each, the goal is the development of improved estimates at lower cost, with 

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 exploring approaches to reducing respondent burden and model-based estimates. 

The use of previously reported, remotely sensed, and administrative data have the potential to 

substantially reduce respondent burden, but can also introduce bias. Assessing the best ways to 

use these data and continue to produce precise statistics is a major effort. Models 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. 

Natural Resources Conservation Service (NRCS) 

NRCS Plant Materials Centers (PMC) are research farms engaging in applied research and 

development as defined in SFFAS No. 8. Overall efforts of PMCs include the selection of plants 

and the development of plant technology used by NRCS and conservation partners for the 

application of vegetation to solve natural resource issues on private and public lands. 

The NRCS Soil Science Division (SSD) conducts soil survey research and provides leadership 

for the National Cooperative Soil Survey (NCSS), which is responsible for the soils inventory of 

the United States and interpreting this information to “help people help the land” through natural 

resource conservation. 
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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 370,000 miles of roads, of which 65,000 miles 

are for passenger vehicles; over 159,000 miles of trails for motorized and non-motorized use; 

nearly 13,400 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 379,000 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, 

224 buildings, and about 221 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

Policies for ranking and prioritizing DM&R activities for most assets, except bridges, are based 

on condition surveys performed on a 5-year revolving schedule. Bridge class assessments occur 

on a 2-year revolving schedule. To-date, surveys of all administrative buildings, dams, bridges, 

roads open to passenger cars, and recreation sites have been accomplished. The agency’s DM&R

for NFS passenger car roads is determined annually from random sample surveys providing a

moderate level of confidence in the accuracy of the data reported. 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.
USDA AGENCY FINANCIAL REPORT | 2018 

146 

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; 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). 

Detailed management guidelines are contained in FSM 2330, Publicly Managed Recreation 

Opportunities, and forest- and regional-level user guides. Quality standards for developed 
SECTION II | FINANCIAL INFORMATION 

147 

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. 

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. 

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 

Asset Category FY 2018 Ending Balance FY 2018 Beginning Balance

General PP&E $ 5,648 $ 5,342 

Heritage Assets 180 149 

Total $ 5,828 $ 5,491 

FY 2018

Ending Balance

FY 2018 

Beginning Balance

Asset Category

General PP&E $ 5,648 $ 5,342

Heritage Assets 180 149

Total $ 5,828 $ 5,491
USDA AGENCY FINANCIAL REPORT | 2018 

148 

STATEMENT OF BUDGETARY RESOURCES (UNAUDITED) 

FY 2018 Item

FSA 

Budgetary

FSA NonBudgetary 

Financing 

Accounts 

CCC

Budgetary 

CCC NonBudgetary 

Financing 

Accounts 

NRCS 

Budgetary 

RMA

Budgetary 

FPAC 

Business 

Center 

Budgetary 

FNS 

Budgetary 

FSIS 

Budgetary 

AMS 

Budgetary 

APHIS 

Budgetary 

Budgetary Resources: 

Unobligated balance from prior year budget authority, net 544 218 3,276 75 4,925 584 0 39,173 92 255 743 

Appropriations (discretionary and mandatory) 4,605 0 1,815 0 5,202 6,553 1 104,479 1,070 1,536 1,331 

Borrowing authority (discretionary and mandatory) 0 3,198 9,888 340 0 0 0 0 0 0 0 

Spending authority from offsetting collections (discretionary and mandatory) 370 1,813 46 87 65 3,760 0 59 208 180 198 

Total budgetary resources 5,519 5,229 15,025 502 10,192 10,897 1 143,711 1,370 1,971 2,272 

Status of Budgetary Resources: 

New obligations and upward adjustments (total) (Note 23) 2,740 2,879 14,384 345 4,999 10,315 1 99,734 1,295 1,464 1,520 

Unobligated balance, end of year: Apportioned, unexpired accounts 2,626 1,976 341 74 2,550 578 0 8,012 58 166 640 

Exempt from apportionment, unexpired accounts 0 0 0 0 0 0 0 0 0 1 0 

Unapportioned, unexpired accounts 78 374 299 83 -7 0 0 6,179 0 320 4 

Unexpired unobligated balance, end of year 2,704 2,350 640 157 2,543 578 0 14,191 58 487 644 

Expired unobligated balance, end of year 75 0 1 0 2,650 4 0 29,786 17 20 108 

Unobligated balance, end of year (total) 2,779 2,350 641 157 5,193 582 0 43,977 75 507 752 

Total budgetary resources 5,519 5,229 15,025 502 10,192 10,897 1 143,711 1,370 1,971 2,272 

Budget Authority and Outlays, Net 

Outlays, net (discretionary and mandatory) 2,117 679 12,442 -90 3,991 6,525 1 97,234 1,069 1,107 1,219 

Distributed offsetting receipts (-) 0 -178 -1 -30 -5 0 0 -6 -14 -169 -10 

Agency outlays, net (discretionary and mandatory) $ 2,117 $ 501 $ 12,441 $ -120 $ 3,986 $ 6,525 $ 1 $ 97,228 $ 1,055 $ 938 $ 1,209 

FY 2018 FSA CCC NRCS RMA

FPAC

Business 

Center FNS FSIS AMS APHIS

Non-Budgetary Non-Budgetary

Financing Financing

Budgetary Accounts Budgetary Accounts Budgetary Budgetary Budgetary Budgetary Budgetary Budgetary Budgetary

Budgetary Resources:

Unobligated balance from prior year budget authority, net 544 218 3,276 7 5 4,925 584 - 39,173 9 2 255 743

Appropriations (discretionary and mandatory) 4,605 - 1,815 - 5,202 6,553 1 104,479 1,070 1,536 1,331

Borrowing authority (discretionary and mandatory) - 3,198 9,888 340 - - - - - - -

Spending authority from offsetting collections (discretionary and mandatory) 370 1,813 4 6 8 7 6 5 3,760 - 5 9 208 180 198

Total budgetary resources 5,519 5,229 15,025 502 10,192 10,897 1 143,711 1,370 1,971 2,272

Status of Budgetary Resources:

New obligations and upward adjustments (total) (Note 23) 2,740 2,879 14,384 345 4,999 10,315 1 99,734 1,295 1,464 1,520

Unobligated balance, end of year:

Apportioned, unexpired accounts 2,626 1,976 341 7 4 2,550 578 - 8,012 5 8 166 640

Exempt from apportionment, unexpired accounts - - - - - - - - - 1 -

Unapportioned, unexpired accounts 7 8 374 299 8 3 (7) - - 6,179 - 320 4

Unexpired unobligated balance, end of year 2,704 2,350 640 157 2,543 578 - 14,191 5 8 487 644

Expired unobligated balance, end of year 7 5 - 1 - 2,650 4 - 29,786 1 7 2 0 108

Unobligated balance, end of year (total) 2,779 2,350 641 157 5,193 582 - 43,977 7 5 507 752

Total budgetary resources 5,519 5,229 15,025 502 10,192 10,897 1 143,711 1,370 1,971 2,272

Budget Authority and Outlays, Net 

Outlays, net (discretionary and mandatory) 2,117 679 12,442 (90) 3,991 6,525 1 97,234 1,069 1,107 1,219

Distributed offsetting receipts (-) - (178) (1) (30) (5) - - (6) (14) (169) (10)

Agency outlays, net (discretionary and mandatory) 2,117$ $ 501 12,441$ $ (120) 3,986$ 6,525$ 1$ 97,228$ 1,055$ $ 938 1,209$ 
 SECTION II | FINANCIAL INFORMATION

149 

FY 2018 Item

FS

Budgetary 

FAS 

Budgetary 

ARS 

Budgetary 

NIFA 

Budgetary 

ERS 

Budgetary 

NASS 

Budgetary 

RD 

Budgetary 

RD NonBudgetary 

Financing 

Accounts 

DM 

Budgetary 

Total 

Budgetary 

Total NonBudgetary 

Financing 

Accounts 

Budgetary Resources: 

Unobligated balance from prior year budget authority, net 1,540 187 297 610 4 6 7,853 3,177 366 60,455 3,470 

Appropriations (discretionary and mandatory) 7,290 406 1,386 1,573 87 192 5,957 0 431 143,914 0 

Borrowing authority (discretionary and mandatory) 0 0 0 0 0 0 0 13,670 0 9,888 17,208 

Spending authority from offsetting collections (discretionary and mandatory) 811 256 160 35 2 24 2,595 3,667 1,069 9,838 5,567 

Total budgetary resources 9,641 849 1,843 2,218 93 222 16,405 20,514 1,866 224,095 26,245 

Status of Budgetary Resources: 

New obligations and upward adjustments (total) (Note 23) 8,476 525 1,413 1,619 91 222 7,111 15,535 1,476 157,385 18,759 

Unobligated balance, end of year: Apportioned, unexpired accounts 1,108 163 413 666 0 0 3,210 4,497 338 20,869 6,547 

 Exempt from apportionment, unexpired accounts 0 0 0 0 0 0 0 0 0 1 0 

Unapportioned, unexpired accounts 52 9 1 -86 0 0 5,985 482 11 12,845 939 

Unexpired unobligated balance, end of year 1,160 172 414 580 0 0 9,195 4,979 349 33,715 7,486 

Expired unobligated balance, end of year 5 152 16 19 2 0 99 0 41 32,995 0 

Unobligated balance, end of year (total) 1,165 324 430 599 2 0 9,294 4,979 390 66,710 7,486 

Total budgetary resources 9,641 849 1,843 2,218 93 222 16,405 20,514 1,866 224,095 26,245 

Budget Authority and Outlays, Net 

Outlays, net (discretionary and mandatory) 7,234 369 1,148 1,344 87 190 3,140 3,116 350 139,567 3,705 

Distributed offsetting receipts (-) -736 -3 -25 30 0 4 -4 -1,684 -23 -962 -1,892 

Agency outlays, net (discretionary and mandatory) 6,498 $ 366 $ 1,123 $ 1,374 $ 87 $ 194 $ 3,136 $ 1,432 $ 327 $ 138,605 $ 1,813 

FY 2018 FS FAS ARS NIFA ERS NASS RD DM

Non-Budgetary Non-Budgetary

Financing Financing

Budgetary Budgetary Budgetary Budgetary Budgetary Budgetary Budgetary Accounts Budgetary Budgetary Accounts

Budgetary Resources:

Unobligated balance from prior year budget authority, net 1,540 187 297 610 4 6 7,853 3,177 366 60,455 3,470

Appropriations (discretionary and mandatory) 7,290 406 1,386 1,573 8 7 192 5,957 - 431 143,914 -

Borrowing authority (discretionary and mandatory) - - - - - - - 13,670 - 9,888 17,208

Spending authority from offsetting collections (discretionary and mandatory) 811 256 160 3 5 2 2 4 2,595 3,667 1,069 9,838 5,567

Total budgetary resources 9,641 849 1,843 2,218 9 3 222 16,405 20,514 1,866 224,095 26,245

Status of Budgetary Resources:

New obligations and upward adjustments (total) (Note 23) 8,476 525 1,413 1,619 9 1 222 7,111 15,535 1,476 157,385 18,759

Unobligated balance, end of year:

Apportioned, unexpired accounts 1,108 163 413 666 - - 3,210 4,497 338 20,869 6,547

Exempt from apportionment, unexpired accounts - - - - - - - - - 1 -

Unapportioned, unexpired accounts 5 2 9 1 (86) - - 5,985 482 1 1 12,845 939

Unexpired unobligated balance, end of year 1,160 172 414 580 - - 9,195 4,979 349 33,715 7,486

Expired unobligated balance, end of year 5 152 1 6 1 9 2 - 9 9 - 4 1 32,995 -

Unobligated balance, end of year (total) 1,165 324 430 599 2 - 9,294 4,979 390 66,710 7,486

Total budgetary resources 9,641 849 1,843 2,218 9 3 222 16,405 20,514 1,866 224,095 26,245

Budget Authority and Outlays, Net 

Outlays, net (discretionary and mandatory) 7,234 369 1,148 1,344 8 7 190 3,140 3,116 350 139,567 3,705

Distributed offsetting receipts (-) (736) (3) (25) 3 0 - 4 (4) (1,684) (23) (962) (1,892)

Agency outlays, net (discretionary and mandatory) 6,498$ $ 366 1,123$ 1,374$ $ 8 7 $ 194 3,136$ $ 1,432 $ 327 $ 138,605 $ 1,813

TOTAL
USDA AGENCY FINANCIAL REPORT | 2018 

150 

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 $7,849 million as of September 30, 2018. 
SECTION III | OTHER INFORMATION 

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Section III: 

Other Information

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 

provides an annual assessment of the previous year’s challenges to determine if they 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. 

Based on OIG’s review of the challenges cited in fiscal year (FY) 2017, it concluded that these 

challenge areas continue to be critical for the Department. No challenges have been removed or 

added to this year’s report. Each challenge includes a discussion of the Department’s progress 

in addressing it as well as what remains to be done, if applicable. 

The following narratives summarize: 

• OIG-recognized management challenges; 

• USDA’s FY 2018 agency accomplishments; and 

• FY 2019 planned actions to address these management challenges. 

CHALLENGE 1: 

MANAGEMENT NEEDS TO IMPROVE OVERSIGHT AND ACCOUNTABILITY 

FOR ITS PROGRAMS 

USDA, much like other agencies and departments throughout the Government, faces challenges 

in overseeing its many programs. USDA employs nearly 100,000 employees in 16 agencies and 

19 staff offices; in total, these employees operate approximately 300 programs responsible for 

delivering about $143 billion in public services annually. Overseeing these programs to ensure 
USDA AGENCY FINANCIAL REPORT | 2018 

152 

that every dollar spent accomplishes its intended results for United States (U.S.) agriculture and 

the American public poses significant challenges for USDA program managers.

USDA managers are responsible for establishing an effective internal control system, ensuring 

a culture of compliance with those controls, and holding employees accountable for 

implementing those controls. Managers use internal controls to ensure programs achieve 

intended results efficiently and effectively, and they provide for program integrity and proper 

stewardship of USDA’s resources. 

OIG DETERMINED THE FOLLOWING: 

• Agricultural Marketing Service (AMS) needs to strengthen its controls over the 

approval and oversight of international trade arrangements and agreements for the 

import of organic products into the United States; 

• AMS’ process for determining equivalency of organic standards of foreign countries 

when compared to U.S. standards lacks transparency; 

• AMS’ National Organic Program officials maintain documentation of the process to 

resolve differences between U.S. and foreign organic standards, but they did not have a 

methodology in place to disclose the results of that process to stakeholders; 

• Food and Nutrition Service (FNS) needs to improve its monitoring and oversight of the 

Summer Food Service Program (SFSP). FNS’ primary monitoring control for ensuring 

SFSP integrity lacked the necessary documentation to confirm whether it was 

completed correctly and contained valid conclusions; and 

• Office of Homeland Security and Emergency Coordination (OHSEC) had not 

adequately overseen and coordinated USDA’s efforts to prevent, detect, and respond 

to agroterrorism. 

CORRECTIVE ACTIONS COMPLETED AND PLANNED: 

Agricultural Marketing Service 

The National Organic Program has updated its description of the equivalency procedure on the 

AMS Web site. The description states, “If USDA determines that the foreign government’s 

organic system is equivalent, the two governments exchange official letters and the terms of 

equivalency arrangement, including any product exception if the systems are not equivalent in 

specific areas. Once this process is complete, AMS will publicly disclose on its Web site the 

terms of the determination and the final resolution of differences between the U.S. and foreign 

government’s system.” In March 2019, AMS will publish a proposed rule that will include a 

side-by-side analysis of the foreign government’s organic system to the U.S. system, and other 

organic enforcement-related items. 
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153 

Food and Nutrition Service 

In FY 2018, FNS convened a committee to address the key corrective actions needed to 

improve monitoring and oversight of the SFSP. FNS began and will continue its efforts to 

implement and/or disseminate the following: 

• A centralized Management Evaluation (ME) documentation and work paper 

management protocol for agency use during all SFSP ME reviews; 

• Instructions detailing requirements of the aforementioned protocol and a requirement 

that ME reviewers document affirmative findings within the ME Tool workbook; and 

• Training materials for FNS staff to learn and institutionalize improved ME 

documentation protocols. 

Office of Homeland Security and Emergency Coordination 

OHSEC developed, implemented, and provided oversight to agencies based on the 

Agroterrorism Prevention, Detection, and Response Standard Operating Procedures. 

These procedures standardized and consolidated annual data calls; instituted the tracking of 

agency responses to the data calls; and prescribed a methodology to obtain information from 

agencies regarding the purpose, frequency, and outcomes of exercises related to agroterrorism. 

A data call was completed in FY 2018 to support the Sector Annual Report and the Homeland 

Security Presidential Directive (HSPD)-9 Report. To date, no USDA agencies have reported 

any agroterrorism-related exercises, however, OHSEC will solicit updates again in the first 

quarter of FY 2019. Additionally, OHSEC is in the process of revising Departmental 

Regulation (DR) 1800-001 “Incident Preparedness, Response, and Recovery” and 

Departmental Manual (DM)1800-001 “Incident Preparedness, Response, and Recovery” to 

codify the process of how OHSEC will oversee and coordinate USDA’s agroterrorism 

prevention, detection, and response activities. In FY 2020, OHSEC will work with the 

U.S. Department of Homeland Security (DHS); the U.S. Food and Drug Administration; other 

federal agencies, State, local, Tribal and territorial partners; academia and private-sector 

stakeholders to update the Food and Agriculture Sector Specific Plan.
USDA AGENCY FINANCIAL REPORT | 2018 

154 

CHALLENGE 2: 

INFORMATION TECHNOLOGY SECURITY NEEDS CONTINUOUS 

IMPROVEMENT 

As technology advances, so do the threats to information technology (IT) security. While 

USDA has taken actions to improve its IT security, the Department continues to display 

weaknesses in planning, managing, and overseeing its cybersecurity initiatives. This, in turn, 

affects USDA’s compliance with standards for safeguarding IT systems, as directed in the 

Federal Information Security Modernization Act of 2014 (FISMA). USDA senior management 

needs to ensure that agencies and offices understand that their individual IT security posture 

directly affects the degree to which USDA complies with FISMA and other security guidance. 

For USDA to attain a sustainable and secure IT posture, all 35 of its agencies and offices must 

consistently implement Departmental policy based on a standard methodology. When every 

agency and office complies with USDA’s policies, USDA as a whole will be compliant with 

FISMA and, more importantly, have a sustainable security posture. 

USDA must efficiently manage vast amounts of data to accomplish its mission of providing 

benefits and services to the American public. Critical information stored in USDA IT systems 

includes agriculture statistics that drive domestic and global markets or data from inspection 

systems that ensure food safety. USDA employees must be able to access, use, and 

communicate this information reliably and in a timely manner. Members of the public apply for 

and access many USDA programs, benefits, and other services through online or mobile portals, 

which can require the transfer of personal information. USDA has a responsibility to safeguard 

this information by protecting the security, confidentiality, and integrity of its IT infrastructure. 

OIG DETERMINED THE FOLLOWING: 

The Department faces great challenges in complying with the 2014 FISMA: 

• The Office of the Chief Information Officer (OCIO) has not implemented corrective 

actions that the Department committed to in response to prior OIG recommendations. 

Of the 67 recommendations made by OIG in FYs 2009 through 2016, OCIO has made 

progress in implementing corrective action; 27 recommendations are outstanding, and 

26 are overdue and require OCIO to issue critical policy and corrective action; and 

• OCIO policies and programs designed to address FISMA requirements have not been 

completed or fully implemented, and USDA has not fully developed an organizational 

perspective that includes a comprehensive governance structure and organization-wide 

risk management strategy. 
SECTION III | OTHER INFORMATION 

155 

CORRECTIVE ACTIONS COMPLETED OR PLANNED: 

Office of the Chief Information Officer 

OCIO continues to work closely with DHS on the installation, configuration, and testing of 

Phase 1 of the Operational Readiness Review of Continuous Diagnostics and Mitigation 

(CDM) components throughout the USDA Enterprise. OCIO will continue to work closely with 

DHS on the planning and design for Phase 2 of CDM implementation at USDA. 

In FY 2018, OCIO developed a plan to document corrective actions on all open audit 

recommendations using the Agile approach. OCIO assigned a team of subject matter experts to 

document corrective actions and request final action from the Department. OCIO anticipates 

closing 50 percent of the open audit recommendations by the end of FY 2018, and closing the 

remainder by the end of FY 2019. 

OCIO continues to coordinate IT Security Risk Management activities with the component 

agencies. OCIO and the agencies have prioritized efforts to correct deficiencies of specific IT 

security control elements and meet bi-weekly with agencies to review compliance progress. 

OCIO anticipates completing corrective actions in FY 2019. 

CHALLENGE 3: 

USDA NEEDS TO STRENGTHEN PROGRAM PERFORMANCE AND 

PERFORMANCE MEASURES 

Designing, developing, and implementing programs that reliably achieve their intended results 

has been a recurring challenge for the Department. OIG found that agencies do not have adequate 

reviews or controls in place to supply the metrics necessary to evaluate program performance. 

In some programs, the strategy for measuring performance is missing altogether. As a result, 

some agencies are using inaccurate or unreliable data in program performance reports. 

USDA manages approximately 300 programs that provide a variety of services and financial 

assistance to the American public. This diverse portfolio of programs means that, for the 

Department to serve as a diligent steward of Federal funds, USDA must have well-designed 

programs with clear goals and performance measures. 

The Government Performance and Results Modernization Act of 2010 set requirements for 

regular and recurring program performance assessment. In keeping with the law, an agency 

should have controls 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 allow the 

Department to fairly evaluate its programs’ successes and failures. 
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OIG DETERMINED THE FOLLOWING:

• Foreign Agricultural Service (FAS) had not updated its Country Strategy Statements 

(CSS) to align with the goals and objectives contained in the Strategic Plan; 

• FAS needs to incorporate clear, outcome-based performance measures into the 

2013 CSS that align with the FAS and USDA strategic goals; and 

• FAS needs to coordinate with the Department to update the performance measures related 

to trade policy and trade promotion in the Performance and Accountability Report and the 

Annual Performance Plan. This will allow FAS to better capture overall agency 

effectiveness and achievements and include goals related to the U.S. market share. 

CORRECTIVE ACTIONS COMPLETED OR PLANNED: 

Foreign Agricultural Service 

FAS is working with the USDA’s Office of Budget and Program Analysis to update the 

performance measures related to trade policy and trade promotion that are included in the 

USDA Agency Financial Report and included in the Annual Performance Report and Plan. 

Guidance for the annual review of CSS will be issued in 2019. This guidance will align to the 

2019 FAS Strategic Plan and will properly align performance indicators. 

CHALLENGE 4: 

USDA NEEDS TO STRENGTHEN CONTROLS OVER IMPROPER PAYMENTS 

AND FINANCIAL MANAGEMENT 

USDA continues to be noncompliant with Federal requirements for improper payments. Also, 

USDA needs to address internal control deficiencies to resolve ongoing problems with financial 

management and reporting. 

The Department’s annual financial reports provide the public, Congress, and the President with

information about the nearly $143 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. OIG reviews the Department’s financial reports annually, as required by law, 

to verify accuracy and compliance with Federal rules regarding high-dollar overpayments and 

improper payments. Improper payments occur when funds go to the wrong or ineligible recipient, 

the proper recipient receives an incorrect amount of funds or uses funds in an improper manner, 

or documentation is not available to support a payment. Not all improper payments involve fraud 

or waste; payment errors are sometimes inadvertent or based on missing documentation. 

Regardless of origin, improper payments affect the integrity of Federal programs. 
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OIG DETERMINED THE FOLLOWING: 

USDA did not comply with all requirements set by the Improper Payments Information Act 

(IPIA) of 2002, as amended, for the seventh consecutive year. USDA reported improper 

payments information for 10 programs identified as susceptible to significant improper 

payments and complied with three of the six requirements. However, six of 10 high-risk 

programs did not comply with one or more requirements as follows: (1) publishing an improper 

payment estimate as required; (2) meeting annual reduction targets; and/or (3) publishing gross 

improper payment rates of less than 10 percent. 

• FNS should submit to Congress proposed statutory changes to bring the Supplemental 

Nutrition Assistance Program (SNAP) into compliance; and 

• Farm Service Agency (FSA) needs to submit a plan to the Senate Committee on 

Homeland Security and Governmental Affairs, the House Committee on Oversight and 

Government Reform, and the Office of Management and Budget describing the actions 

that the agency will take to make the Noninsured Crop Disaster Assistance Program 

(NAP) compliant. 

Another opportunity for progress relates to the need for additional oversight over financial 

reporting controls. OIG determined that: 

• USDA needs to provide additional oversight to ensure that financial reporting controls 

over unliquidated obligations are strengthened and maintained; 

• Commodity Credit Corporation (CCC) should design and implement processes, 

procedures, and controls to ensure data used in its accounting estimates are complete 

and accurate; and 

• The Natural Resources Conservation Service (NRCS) has material weaknesses in 

internal control in accounting for obligations and expenses. 

CORRECTIVE ACTIONS COMPLETED OR PLANNED FOR IPIA: 

Food and Nutrition 

On June 28, 2017, the USDA Deputy Secretary submitted FNS’ strategy for addressing 

SNAP’s noncompliance of the Improper Payments and Recovery Act (IPERA) to Congress. 

Farm Service Agency 

FSA has met measurable milestones and has enacted multiple corrective actions including: 

• Issuance of Notice NAP-188, which required each State to create a NAP review team to 

analyze selected NAP payments for errors and to correct those errors within 30 days;
USDA AGENCY FINANCIAL REPORT | 2018 

158 

• Issuance of Notice NAP-189, which emphasized the responsibility of the County Office 

to maintain signatures and dates in the approved yield software; and 

• Development and implementation of automated payment software to aid in the 

reduction of administrative and process errors. 

CORRECTIVE ACTIONS COMPLETED OR PLANNED FOR FINANCIAL REPORTING: 

Office of the Chief Financial Officer 

The Office of the Chief Financial Officer (OCFO) provided additional oversight to ensure that 

controls over financial reporting were strengthened and maintained, including those over 

Unliquidated Obligations (ULO) and transactions resulting in negative (abnormal) fund 

balances. The following corrective actions were completed: 

• Required agencies and staff offices with ULO deficiencies resulting from the 2017 audit 

to create corrective action plans to remediate deficiencies; 

• Monitored component agencies’ progress in completing remediation of existing 

corrective action plans related to the ULO process; 

• Performed spot testing of component agencies’ ULO testing results;

• Developed a standard testing plan for abnormal balances; 

• Enhanced monitoring of monthly abnormal balance reports; and 

• Performed standard testing for abnormal balances. 

• Also, OCFO provided oversight to ensure that property is classified properly, including

Work-in-Progress (WIP) and lease agreements. 

OCFO completed the following corrective actions: 

• Reviewed disclosure requirements for leases with agencies at the Coordinating 

Committee meetings; 

• Issued OCFO Bulletin 17-06, “Leases Financial Statement Disclosure,” that provided 

Departmental guidance to USDA agencies to improve the process for collecting and 

disclosing lease data in the financial statements; 

• Compiled lease data for footnote disclosure and updated Lease Note 16 in the FY 2017 

Agency Financial Report; 

• Issued OCFO Bulletin, “Reviewing and Tracking Property, Plant, and Equipment 

Work-in-Progress,” that provided guidance to USDA agencies for reviewing and 

tracking any property, plants, and equipment; and 

• Reviewed accounting for WIP with FSA and the Forest Service (FS). 
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Commodity Credit Corporation 

CCC finalized its plan for implementation of the estimation methodology for accruals and 

advances. CCC also implemented and documented a review process to ensure that estimation 

methodology and look-back analyses are reviewed with the appropriate level of precision to 

determine the reasonableness of the accrual or advance calculation. The process was redefined 

to include management’s assessment of the validity of the estimates, as well as the accuracy 

and completeness of the data used to complete the advances and accruals for the grant portfolio. 

Also, CCC completed enhancements to the calculator that address classification, hybrid grants, 

cash basis reporting, and multi-funding. 

Natural Resources Conservation Service 

NRCS implemented a six-digit budget fiscal year that will provide accessible, searchable, and 

reliable data. The new structure will allow the agency to track agency spending and facilitate 

the identification of upward and downward adjustments. Currently, NRCS is compensating for 

the lack of enhancements in the new upward/downward remediation process until the ProTract 

enhancements are completed. 

NRCS implemented the Reconciliation Exception report to ensure completed acquisitions and 

agreements have been recorded in the FMMI. NRCS will analyze and verify the validity of the 

results from the Integrated Acquisition System (IAS) and FMMI will implement ServiceNow to 

ensure all completed acquisitions and agreements are being recorded in the financial system. 

To determine if NRCS is achieving objectives and addressing risks related to operational 

processes, NRCS will develop, document, and implement a process to evaluate the roles of 

service organizations, assess controls at those service organizations, and identify and assess the 

complementary end-user controls (CUECs) of those service organizations. 

CHALLENGE 5: 

USDA NEEDS TO IMPROVE OUTREACH EFFORTS 

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 Department has stressed the importance of civil rights, highlighting that significant 

progress needs to be made in working with communities when addressing past civil rights 

issues. Due to the public’s perception of USDA regarding how it has historically treated 

members of socially disadvantaged groups, the Department is continually challenged to find 

effective ways to encourage and support all citizens in their agribusiness endeavors, especially 

those within underrepresented groups. 
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USDA has emphasized its efforts to improve outreach to socially disadvantaged farmers and 

ranchers, including new and beginning farmers and ranchers, local and regional food producers, 

veterans, disabled individuals, women, or minorities as defined by the Federal Civil Rights and

Americans with Disabilities legislation. FSA conducts outreach through planned activities that 

raise awareness of FSA programs. Traditional outreach methods include activities such as the 

following: (1) publishing articles in newsletters and local newspapers; (2) making 

announcements through local radio and television stations; and (3) partnering with 

community-based groups, non-governmental organizations, or other USDA agencies to 

organize or attend public meetings, fairs, or other farm-related events. FSA’s method of 

program outreach also includes the use of innovative marketing methods that specifically target 

underrepresented groups in order to: (1) educate the public about FSA programs and services;

(2) eliminate participation barriers; and (3) increase program participation.

One of FSA’s programs whose equity and effectiveness depends on conscious, targeted 

outreach is the Microloan Program. FSA’s Microloan Program is designed to better serve the 

unique financing needs of beginning, niche, and small family farm operations, including those 

owned by socially disadvantaged farmers. Furthermore, the Agricultural Act of 2014 created a 

permanent authorization for the Microloan Program and made additional changes such as 

exempting beginning and military veteran producers from term limits and providing these 

producers with an optional lower interest rate (applicable in years when regular interest rates 

are higher). The Microloan Program offers flexible access to credit and serves as an attractive 

loan alternative for smaller farm operations, including non-traditional farm operations that 

often face limited financing options.

OIG DETERMINED THE FOLLOWING:

The Department has made progress in improving its outreach efforts when OIG or other third 

parties, such as the Government Accountability Office (GAO), have identified deficiencies. 

Since OIG’s review of the Microloan Program, the FSA national office not only reports its 

outreach efforts to the Administrator quarterly, but has also added an outreach component 

performance measure to all field employees’ evaluations, allotted outreach funding to States, 

and increased funding to States to cover outreach-related travel expenses. Regular reporting of 

these enhanced outreach efforts will provide transparency and an opportunity for FSA to 

conduct ongoing performance assessments to identify areas for further improvement. 

The Department has addressed all recommendations OIG has currently issued. OIG looks

forward to the positive impact of more effective outreach encouraging the participation of 

underrepresented groups. 
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CHALLENGE 6: 

FOOD SAFETY INSPECTIONS NEED IMPROVED CONTROLS 

The Food Safety and Inspection Service (FSIS) took action to improve food safety and the 

humane handling of animals at the plants FSIS inspects. However, OIG has found that FSIS 

continues to face challenges gathering reliable data to help ensure safety verification tasks are 

completed, effective, and consistent. FSIS also continues to face challenges in training, 

documenting, tracking, overseeing, testing, and verifying that the Nation’s commercial supply 

of meat, poultry, and egg products complies with regulatory requirements. 

The Federal Meat Inspection, Poultry Products Inspection, and Egg Products Inspection Acts 

authorize FSIS to regulate food ingredients used in the production of meat, poultry, and egg 

products. According to these acts, any meat, poultry, or egg product intended for human 

consumption must have proper labeling declaring major allergens in any amount, even trace 

amounts. Therefore, any ingredient used in producing meat, poultry, and egg products and 

intended for human consumption must have proper labeling to declare the inclusion of any of 

the eight major (“Big 8”) allergens defined by the Federal Food, Drug, and Cosmetic Act. 

FSIS has implemented a number of actions to alert and protect the American public by ensuring 

the proper identification and labeling of allergens in meat, poultry, and egg products. One of 

these actions included the release of a directive to FSIS inspectors, which provided verification 

instructions to guide inspectors in their duty to ensure that products with allergens are properly 

labeled. Proper identification and labeling of potential allergens in food products is critical to 

FSIS’ ability to protect vulnerable populations with food allergies and sensitivities. 

OIG DETERMINED THE FOLLOWING: 

• FSIS has weaknesses in how they oversee the plant inspection process, collect critical 

information, comply with humane handling requirements, and schedule food safety 

assessments; 

• FSIS did not always follow corrective actions as designed to prevent reported 

conditions from recurring. FSIS officials either did not effectively monitor or did not 

hold their staff accountable when these actions did not correct the problems identified; 

• FSIS must enhance its methods of verifying labels for undeclared allergens to that of a 

more robust approach; 

• FSIS needs to improve how it monitors and documents food safety tasks specific to 

allergens; and 

• FSIS must develop and document, as part of its annual ongoing equivalence verification 

audit planning process, how foreign countries are selected for ongoing equivalence 

verification audits. 
USDA AGENCY FINANCIAL REPORT | 2018 

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CORRECTIVE ACTIONS COMPLETED AND PLANNED: 

Food Safety and Inspection Service 

FSIS incorporated a graded approach to conduct periodic follow-up reviews on the 

effectiveness of the corrective actions implemented from the prior audit recommendations in 

the 2007 and 2008 audits into its management control audit processes. 

FSIS has conducted a comprehensive review of directives and notices associated with allergens 

to ensure that allergen verification is a Priority 313 Task in all appropriate directives and 

notices. The agency finalized updates to FSIS Directive 7230.1, “Ongoing Verification of 

Product Formulation and Labeling Targeting the Eight Most Common (“Big 8”) Food 

Allergens,” which is the policy document associated with allergens. FSIS is also finalizing the 

Big 8 Formulation Verification Task questionnaire that will accompany the directive. 

FSIS reviewed the “Big 8” formulation verification task instructions in the Public Health 

Information System (PHIS) to ensure consistency with the instructions in FSIS Directive 

7230.1, “Ongoing Verification of Product Formulation and Labeling Targeting the Eight Most 

Common (“Big 8”) Food Allergens.” FSIS updated the PHIS “Inspector Task Guidance” 

instructions to ensure consistency with FSIS Directive 7230.1 instructions.

On July 26, 2018, FSIS re-issued Directive 9780.1, “Verifying the Ongoing Equivalence of 

Foreign Food Safety Inspection Systems” that provided updated instructions to FSIS personnel 

with clarifying procedures for annual planning and the selection process for annual ongoing 

equivalence verification audits. Specifically, the instructions in the directive outlined 

procedures for annual planning and the selection process that must be completed and outlined 

by FSIS’ International Audit Branch in collaboration with the FSIS International Equivalence 

Staff for annual ongoing equivalence verification audits. These FSIS Directive 9780.1 

instructions will be completed by July 31 of each calendar year in order to have an approved 

Audit Schedule of Foreign Countries Decision Memorandum for the next fiscal year. 

 

13 FSIS ranks tasks by priority from 1 to 6, with 1 as the highest priority and 6 the lowest. Based 

on the recent increase in recalls related to undeclared allergens, FSIS has identified the allergen 

formulation verification task as a priority 3. 
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CHALLENGE 7: 

FNS NEEDS TO STRENGTHEN SNAP MANAGEMENT CONTROLS 

Although FNS has endeavored to improve management controls for SNAP, weaknesses 

continue to exist in controls over benefit distribution and quality control (QC) processes. 

The potential exists for billions of dollars of taxpayer-funded assistance not to be delivered or 

used as intended. 

As the largest benefit program within USDA and one of the largest in the Federal Government, 

SNAP presents a unique challenge for the program’s managers. In FY 2017, SNAP provided 

monthly food assistance for over 42 million low-income individuals and disbursed almost 

$64 billion in benefits. 

Given SNAP’s size and significance, fraud, waste, and abuse are critical concerns. OIG’s audit 

focused on improving the efficiency of program administration and maintaining the integrity of 

Federal funds. Further, USDA loses hundreds of millions of dollars every year to fraud and 

crime associated with SNAP and other FNS food assistance programs.

OIG DETERMINED THE FOLLOWING: 

• States have weakened the QC process by using third-party consultants and error review 

committees to mitigate QC-identified errors instead of reporting them; 

• FNS’ current two-tier process is vulnerable to State abuses, does not meet SNAP 

regulatory requirements, and does not have sufficient FNS oversight; 

• Some authorized SNAP retailers listed owners whose Social Security Numbers 

belonged to either people who were deceased or underage; 

• FNS has not designed controls that would allow the data to reveal problems between the 

two information systems FNS uses to administer SNAP; 

• FNS needs to finalize procedures to identify and reconcile discrepancies between the 

two information systems; and 

• FNS needs to issue a clarification memorandum reiterating the importance of FNS and 

State agency compliance with FNS Instruction 113-1, “Civil Rights Compliance and 

Enforcement—Nutrition Programs and Activities.” 
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CORRECTIVE ACTIONS COMPLETED AND PLANNED: 

Food and Nutrition Service 

FNS is awaiting completion of the study titled, “Feasibility of Revising the SNAP Quality 

Control Review Process.” The results of the study will determine what actions FNS will need 

to implement a one-tier QC system. 

FNS completed their review of 1,819 owners on the Death Master File to verify the identity of 

the owners, and took the necessary action to correct data that was incorrect, and removed any 

owners who were no longer living. 

FNS is currently researching and determining the procedures necessary to design controls to 

identify deceased and underage owners and correct or update this information as needed. 

FNS will be updating FNS Instruction 113-1 and will be issuing a memorandum reiterating the 

importance of FNS employees, and State agencies’ compliance with the Instruction that 

enforces the prohibition against discrimination in all FNS nutrition programs.

The OIG USDA Management Challenges Report issued August 31, 2018, may be viewed in its 

entirety at the following Web site: https://www.usda.gov/oig/webdocs/ 

MgmtChallenges2018.pdf
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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 23 and Exhibit 24. 

EXHIBIT 23: Summary of Financial Statement Audit 

Audit Opinion: Unmodified 2018 Consolidated Financial Statement Audit 

Restatement: No

Material Weakness Beginning 

Balance New Resolved Consolidated Ending Balance 

Improvement Needed in 

Financial Management 1 N/A N/A N/A 1 

Improvement Needed in 

Information Technology 

Security and Controls 

1 N/A N/A N/A 1 

TOTAL MATERIAL 

WEAKNESSES 2 N/A N/A N/A 2 

EXHIBIT 24: SUMMARY OF MANAGEMENT ASSURANCES

Effectiveness of Internal Control Over Reporting (FMFIA § 2)

Statement of Assurance: Modified 

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 
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Effectiveness of Internal Control Over Operations (FMFIA § 2)

Statement of Assurance: Unmodified 

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 Federal 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 

NON-CONFORMANCES 1 N/A N/A N/A N/A 1 

Compliance with Section 803 (A) of the Federal Financial Management Improvement Act (FFMIA) 

Item Agency Auditor 

1. Federal Financial Management 

System Requirements Lack of compliance noted Lack of compliance noted 

2. Applicable Federal 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 
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Payment Integrity 

The U.S. Department of Agriculture (USDA)—through its diverse portfolio of approximately 

300 programs, products, and services—touches the daily lives of almost every American. 

These diverse USDA programs provide for the following; the fighting of forest fires, feeding 

school children, preserving our Nation’s natural resources, improving water quality, enhancing 

private working lands’ health, and providing agricultural producers with disaster recovery 

assistance. Collectively, USDA efforts promote a healthy American agricultural industry, 

providing food, feed, fiber, and timber to meet the expanding needs of America and the world 

at large. 

As a result, USDA’s inherent responsibility to properly steward our taxpayer resources is a top 

financial management priority. USDA managers work diligently to ensure that the right 

payment is made to the right individual or entity at the right time and for the approved 

purposes. USDA financial managers test transactions to determine which programs are 

susceptible to payment errors or making “improper payments.”

During fiscal year (FY) 2018, USDA had nine programs that have been identified as 

susceptible to significant improper payments with outlays of approximately $97.68 billion. 

These programs are statistically sampled every year to ensure that the corrective actions are 

effective at reducing improper payments while still allowing program participants to get the 

access they need. 

USDA initiated Enterprise Risk Management (ERM), which provides a strategically aligned 

portfolio view of organizational challenges and insight on how to most effectively prioritize 

resource allocations, ensuring successful mission delivery. In the context of improper payments, 

the ERM framework can be used to assist in the management of payment integrity risk. 

Leadership manages the payment integrity risk of an agency to allow it to achieve its strategic, 

operations, reporting, or compliance objectives. Following are a few examples of how payment 

integrity risk cuts across an agency’s strategic, operations, reporting and compliance objectives: 

• Strategic—Achieving payment integrity in core programs and mission; 

• Operations—Ensuring payments to eligible recipients and managing fraud risk; 

• Reporting—Managing data integrity risk related to the Agency Financial Report and 

www.paymentaccuracy.gov reporting; 

• Compliance—Improper Payments Legislation, the Office of Management and Budget 

(OMB) Guidance, and Privacy Laws. 
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Collectively, USDA efforts resulted in statistically validating the Farm Service Agency’s (FSA) 

Loan Deficiency Payments (LDP) program, which improved its payment integrity levels above 

reporting thresholds and is no longer considered susceptible to significant improper payments 

by the Office of Inspector General (OIG) and the Office of Management and Budget (OMB). 

As a result, FSA’s LDP program has been removed from the OMB list of programs susceptible 

to significant improper payments during FY 2018. 

WHAT ARE IMPROPER PAYMENTS? 

OMB Circular A-123, Appendix C defines an improper payment as: 

“Any payment that should not have been made or that was made in an incorrect 

amount (including overpayments and underpayments) under statutory, 

contractual, administrative, or other legally applicable requirements; and 

Includes any payment to an ineligible recipient, any payment for an ineligible

good or service, any duplicate payment, any payment for a good or service not 

received (except for such payments where authorized by law), and any payment 

that does not account for credit for applicable discounts.” 

EXHIBIT 25: USDA Payment Outlook (in billions)

The pie chart provides a snapshot of USDA’s improper payments that are reported in this 

year’s Agency Financial Report (AFR). As the chart demonstrates, most of USDA’s outlays are 

made properly per the OMB definition above and the Improper Payments Information Act 

(IPIA), as amended. 
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ARE IMPROPER PAYMENTS REQUIRED TO BE REPORTED? 

Yes. 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) do the following: requires 

executive agencies to 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 susceptible to significant improper payments is also referred to as a high-risk 

program within USDA’s AFR. 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. Readers can obtain more detailed information on improper payments and 

information published in past AFRs at PaymentAccuracy.gov. 

RISK ASSESSMENT SECTION 

In FY 2017, USDA’s Office of the Chief Financial Officer (OCFO) began conducting a 

“Risk Assessment Methodology Pilot” to leverage existing Office of Management and Budget 

(OMB) Circular A-123, Appendix A, assessment methods to meet the OMB Circular A-123, 

Appendix C, risk assessment deliverable. If successfully implemented, this initiative would 

reduce USDA employees’ burden of utilizing two different risk assessment methods to evaluate 

USDA’s programs and activities and increase objectivity of the risk assessment method. 

In FY 2018, the following five programs participated in the Risk Assessment Methodology Pilot: 

1. Animal and Plant Health Inspection Service (APHIS) Salaries and Expenses 

2. APHIS Indemnity Program 

3. APHIS Buildings and Facilities 

4. APHIS Trust Funds 

5. APHIS Cooperative Agreements 

OCFO made the decision not to onboard other U.S. Department of Agriculture (USDA) 

agencies to the OMB Circular A-123 pilot due to possible changes to the risk assessment 

methodology in the revised OMB Circular A-123, Appendix C, which was published in June 

2018. USDA will analyze the revised OMB Circular A-123, Appendix C, along with the results 

and lessons learned from the Risk Assessment Methodology Pilot, to determine if this strategy 

is potentially feasible for other USDA low-risk programs and activities. 
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170 

OCFO guidance states “programs that are at possible risk of being declared susceptible to 

making significant improper payments may be required to perform full statistical sampling that 

meets the requirements for high-risk programs.” In FY 2018, OCFO required the Farm Service 

Agency’s (FSA) Agriculture Risk Coverage and Price Loss Coverage (ARC/PLC) to perform a 

full statistical sample. The results concluded that the program was above the threshold of a 

program susceptible to significant improper payments, with an improper payment amount of 

$214.46 million and an error rate of 2.73 percent. In FY 2019, FSA’s ARC/PLC will be 

required to complete all the requirements of a program susceptible to significant improper 

payments using FY 2018 data. 

OCFO issued guidance for the OMB Circular A-123, Appendix C, risk assessment process and 

performed extensive reviews on the risk assessments of USDA’s programs and activities. 

The following evaluation criteria are included as part of USDA’s risk assessment process: 

1. Whether the program or activity reviewed is new to the agency; 

2. The complexity of the program or activity reviewed, particularly with respect to 

determining correct payment amounts; 

3. The volume of payments made annually; 

4. Whether payments or payment eligibility decisions are made outside of the agency, for 

example, by a State or local government, or a regional Federal office; 

5. Recent major changes in program funding, authorities, practices, or procedures; 

6. The level, experience, and quality of training for personnel responsible for making 

program eligibility determinations or certifying that payments are accurate; and 

7. Significant deficiencies in the audit reports of the agency including, but not limited to, 

the agency’s Inspector General or the Government Accountability Office (GAO) audit 

report findings, or other relevant management findings that might hinder accurate 

payment certification. 

While USDA is cited in the Catalog of Federal Domestic Assistance (CFDA) as having 

approximately 300 programs; similar programs were grouped together to help identify and 

report improper payments. This resulted in a USDA program inventory list of 144 programs for 

IPERA reporting purposes. Nine of these programs are considered significant risk of improper 

payments, and 135 programs are considered low risk of improper payments. Risk assessments 

for low-risk programs are completed on a 3-year rotation cycle. During FY 2018, the following 

34 programs completed risk assessments and were determined to be low risk: 
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EXHIBIT 26: Programs that Conducted Risk Assessments in FY 2018

No. Program Name 

1 Agricultural Marketing Service (AMS) Commodity Purchase Programs 

2 AMS Salaries and Expenses 

3 AMS Grants Programs 

4 Commodity Credit Corporation (CCC) Administrative Contracts 

5 CCC Emergency Assistance for Livestock, Honeybees, and Farm Raised Fish 

6 CCC Marketing Programs 

7 CCC Tobacco Transition Payment Program 

8 CCC Tree Assistance Program

9 Farm and Foreign Agricultural Service (FFAS) Salaries and Expenses 

10 Farm Service Agency (FSA) Agricultural Credit Insurance Fund Program Account 

11 Food and Nutrition Service (FNS) Food Distribution Program on Indian Reservations 

12 Food Safety and Inspection Service (FSIS) Salaries and Expenses 

13 FSIS Cooperative State Food and Safety Inspections 

14 Forest Service (FS) Forest and Rangeland Research 

15 FS Permanent Appropriations 

16 FS State and Private Forestry 

17 FS Stewardship Contracting Product Sales 

18 FS Working Capital Fund 

19 Natural Resources Conservation Service (NRCS) Watershed Programs 

20 National Institute of Food and Agriculture (NIFA) Extension Activities 

21 NIFA Integrated Activities 

22 NIFA Research and Education Activities 

23 Office of Inspector General (OIG) Salaries and Expenses 

24 Rural Business Service (RBS) Grant Programs 

25 RBS Guaranteed Loan Programs 

26 Rural Housing Service (RHS) Community Program Grants 

27 RHS Direct Community Facility Loans 

28 RHS Direct Single Family Housing 
USDA AGENCY FINANCIAL REPORT | 2018 

172 

No. Program Name 

29 RHS Guaranteed Single Family Housing Loans 

30 RHS Multi-Family Housing Preservation and Revitalization Demo Program: 

514/516 Loans/Grants & 515 Loans 

31 Rural Utilities Service (RUS) Congressional Earmarked Funds 

32 RUS Grants- Other- Electric- Telecom- Water and Environmental Programs (WEP) 

33 RUS Revolving Loan Fund Program 

34 RUS Water and Waste Guaranteed Loans 

USDA has nine programs susceptible to significant improper payments (also referred to as 

high-risk programs within USDA’s Agency Financial Report): 

EXHIBIT 27: Programs Determined to be Susceptible to Making Significant Improper Payment 

Agency Name Program Name 

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) 

Child and Adult Care Food Program (CACFP) 

Farm Service Agency/Commodity 

Credit Corporation (FSA/CCC) 

Livestock Forage Disaster Program (LFP) 

Noninsured Crop Disaster Assistance Program (NAP)

Natural Resources Conservation 

Service (NRCS) 

Farm Security and Rural Investment Act Program 

(FSRIP) 

Risk Management Agency (RMA) Federal Crop Insurance Corporation (FCIC) 
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SAMPLING AND ESTIMATION SECTION 

When programs are susceptible to significant improper payments, USDA is required to conduct 

an annual sample that complies with OMB Circular A-123, Appendix C. This is accomplished by 

conducting a statistically valid sample or an OMB-approved alternative methodology. 

The following is a list of USDA’s high-risk programs and a brief description of the sampling 

processes used as a standard statistically valid sample or justification for utilizing an 

OMB-approved alternative methodology: 

1. FNS SNAP 

a. FNS requires states to pull a monthly random sample from the population of households 

receiving SNAP benefits for that given month. Most States draw the samples 

systematically (i.e. using a constant sampling interval); however, some States employ 

simple random or stratified sampling techniques. The sample universe represents 

payments made in the prior fiscal year. 

b. Change in sampling process: None. 

2. FNS NSLP 

a. Access, Participation, Eligibility, and Certification Study-II (APEC-II) established 

estimates of erroneous payments due to certification error and non-certification 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 estimates generated by the model represent payments made in 

school year 2016–2017. 

b. Change in sampling process: Non-certification error was previously made up of two 

components (meal claiming and counting error). FNS removed meal claiming from the 

non-certification error. Meal claiming error does not result in the payment of federal 

funds for services not delivered, nor does it result in the payment of funds for services 

delivered to ineligible recipients. Meal claiming is a standard of service error; 

eliminating it does not have any monetary impact. Meal claiming is typically triggered 

by a child’s failure to select a required fruit or vegetable. 

c. Justification: Using the OMB-approved alternative methodology is currently the only 

way to report an improper payment rate for these programs. 

3. FNS SBP 

a. APEC-II established estimates of erroneous payments due to certification error and 

non-certification error for school year 2012–2013. FNS generates an annual update for 

the improper payment measurements of both components using statistical techniques 
USDA AGENCY FINANCIAL REPORT | 2018 

174 

based on the findings of this study. The estimates generated by the model represent 

payments made in school year 2016–2017. 

b. Change in sampling process: Non-certification error was previously made up of two 

components (meal claiming and counting error). FNS removed meal claiming from the 

non-certification error. Meal claiming error does not result in the payment of federal 

funds for services not delivered, nor does it result in the payment of funds for services 

delivered to ineligible recipients. Meal claiming is a standard of service error; 

eliminating it does not have any monetary impact. Meal claiming is typically triggered 

by a child’s failure to select a required fruit or vegetable. 

c. Justification: Using the OMB-approved alternative methodology is currently the only 

way to report an improper payment rate for these programs. 

4. FNS WIC 

a. Estimates of improper payments in 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 2016 through September 2017. 

b. Change in sampling process: None. 

c. Justification: Using the OMB-approved alternative methodology is currently the only 

way to report an improper payment rate for these programs. 

5. FNS CACFP 

a. In lieu of producing a program-wide improper payment measure, FNS has identified the 

Family Day Care Home (FDCH) component of this program as potentially high risk. 

FNS periodically measures the level of erroneous payments due to sponsor error for the 

two types of program reimbursement (Tier 1 and Tier 2). FNS is developing a model 

using statistical techniques based on the findings of these studies. 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. The latest CACFP study used sample payments made in 

August 2014 through July 2015. The improper payment measures presented do not 

include improper payments associated with the Adult Day Care component or 

Child Care Centers. 
SECTION III | OTHER INFORMATION 

175 

b. Change in sampling process: None. 

c. Justification: Using the OMB-approved alternative methodology is currently the only

way to report an improper payment rate for these programs. 

6. FSA/CCC LFP 

a. FSA determined a sample from the payments made in the prior fiscal year using a 

95-percent confidence interval of plus or minus 3 percentage points. 

b. Change in sampling process: FSA adapted a more rigorous sampling methodology. 

Previously, FSA had a 90-percent confidence interval of plus or minus 2.5 percentage 

points. 

7. FSA/CCC NAP 

a. FSA determined a sample from the payments made in the prior fiscal year using a 

95-percent confidence interval of plus or minus 3 percentage points. 

b. Change in sampling process: FSA adapted a more rigorous sampling methodology. 

Previously, FSA had a 90-percent confidence interval of plus or minus 2.5 percentage 

points. 

8. NRCS FSRIP 

a. NRCS determined a sample from the payments made in the prior fiscal year using a 

95-percent confidence interval of plus or minus 3 percentage points. 

b. Change in sampling process: NRCS has expanded the universe of statistically sampled 

payments to include Technical Assistance payments related to contracts executed in 

Internal Audit Services (IAS), contracts executed in Protracts, and Cooperative 

Agreements not related to easements. The inclusion of these payments broadens the 

population of NRCS Farm Bill assistance-related activities, enabling additional testing 

that demonstrates NRCS’ commitment to reducing improper payments. NRCS adapted 

a more rigorous sampling methodology. Previously, NRCS had a 90-percent confidence 

interval of plus or minus 2.5 percentage points. 

9. RMA FCIC 

a. RMA’s sample resulted in a confidence interval of 95-percent plus or minus 

2.5 percentage points. The sampling period is for the reinsurance year (RY) 2016, 

which is based on the yearly reinsurance agreements in effect with Approved Insurance 

Providers (AIPs) July 2015 to June 2016. 

b. Change in sampling process: None. 
USDA AGENCY FINANCIAL REPORT | 2018 

176 

PAYMENT INTEGRITY OUTLOOK SECTION 

Below are USDA’s high-risk programs, sampling and estimation results. See the annotated notes for programs that are flatlining their future 

year improper payment reduction target. Please refer to the Sampling and Estimation Section for additional information on the sampling 

timeframe of each program susceptible to significant improper payments. 

EXHIBIT 28: Payment Integrity Outlook Table ($ in millions)

Program 

Current 

Year (CY) 

Outlays $ 

CY Properly Paid CY Improperly Paid Current Year +1 Estimated 

Total % Total $ Total % Total $ 

Over 

Payment $ 

Under 

Payment $ Outlays $ IP % IP $ 

Food and Nutrition 

Service (FNS) 

Supplemental 

Nutrition Assistance 

Program (SNAP) 

[Note #1] 

$63,592.72 93.70% $59,584.95 6.30% $4,007.77 $3,301.13 $706.64 $63,592.72 6.30% $4,007.36 

FNS National School 

Lunch Program 

(NSLP) 

$12,249.74 90.57% $11,094.34 9.43% $1,155.40 $799.44 $355.96 $12,494.74 9.14% $1,142.23 

FNS School Breakfast 

Program (SBP) $4,251.89 88.96% $3,782.58 11.04% $469.31 $298.66 $170.65 $4,379.45 10.77% $471.68 
 SECTION III | OTHER INFORMATION 

177 

Program 

Current 

Year (CY) 

Outlays $ 

CY Properly Paid CY Improperly Paid Current Year +1 Estimated 

Total % Total $ Total % Total $ 

Over 

Payment $ 

Under 

Payment $ Outlays $ IP % IP $ 

FNS Special 

Supplemental 

Nutrition Program 

for Women, Infants, 

and Children (WIC) 

$3,604.98 94.61% $3,410.75 5.39% $194.23 $108.01 $86.22 $3,604.80 3.88% $139.87 

FNS Child and Adult 

Care Food Program 

(CACFP) 

[Note #2]

$720.97 99.46% $717.08 0.54% $3.89 $2.93 $0.96 $716.79 0.54% $3.87 

Farm Service Agency 

(FSA) Livestock 

Forage Disaster 

Program (LFP) 

$353.35 88.08% $311.24 11.92% $42.11 $41.65 $0.46 $394.00 9.90% $39.00 

FSA Noninsured Crop 

Disaster Assistance 

Program (NAP) 

$162.98 83.65% $136.34 16.35% $26.64 $26.05 $0.59 $150.00 9.90% $14.85 

Natural Resources 

Conservation Service 

(NRCS) Farm Security 

and Rural 

Investment Act 

Programs (FSRIP) 

$2,570.96 99.17% $2,549.69 0.83% $21.27 $21.27 $0.00 $3,439.00 0.82% $28.30 
USDA AGENCY FINANCIAL REPORT | 2018 

178 

Program 

Current 

Year (CY) 

Outlays $ 

CY Properly Paid CY Improperly Paid Current Year +1 Estimated 

Total % Total $ Total % Total $ 

Over 

Payment $ 

Under 

Payment $ Outlays $ IP % IP $ 

Risk Management 

Agency 

(RMA)Federal Crop 

Insurance 

Corporation (FCIC) 

Program Fund 

$10,170.27 98.19% $9,986.11 1.81% $184.16 $153.79 $30.37 $7,883.00 1.80% $141.89 

USDA Total $97,677.86 93.75% $91,573.08 6.25% $6,104.78 $4,752.93 $1,351.85 $96,654.50 6.20% $5,989.05 

Note #1: SNAP currently lacks a sufficient baseline to accurately project future reduction target rates. SNAP assigned error rates to 9 of 

53 SNAP State agencies due to various reasons. Additionally, current legislative proposals are being considered that would 

significantly affect the improper payment rate in future years. The uncertainty created by these variables does not allow accurate 

future reduction target rate projections at this time, hence the need to flatline the CY+1 reduction target. 

Note #2: CACFP’s most recent sample-based estimate of 0.54 percent has a 90-percent confidence interval that ranges from 0.17 percent 

to 0.92 percent. FNS is working toward the development of a model to estimate CACFP Family Day Care Home tiering error rate in 

the years between sample-based studies. However, when the agency finalizes its model-based methodology, it will not be capable 

of measuring error any more precisely than the estimates generated by the agency’s sample-based studies. Once the agency 

conducts the next iteration in that series of studies, it will be able to set a new reduction target and measure progress toward a 

target that falls within the existing 0.17 percent–0.92 percent range. In short, until the next study, the CACFP tiering error rate is 

best described as less than 1 percent, hence the need to flatline the CY+1 reduction target. 
 SECTION III | OTHER INFORMATION 

179 

The table below displays supplemental information, providing a breakdown of specific USDA programs to the component reporting level. 

EXHIBIT 29: Program Component Reporting Table ($ in millions)

Program 

Current Year (CY) 

Outlays $ 

Current Year Improperly Paid 

Total % Total $ Overpayment $ Underpayment $ 

FNS NSLP Total Program $12,249.74 9.43% $1,155.40 $799.44 $355.96 

FNS NSLP Certification Error $12,249.74 8.59% $1,051.78 $750.11 $301.67 

FNS NSLP Counting Error $12,249.74 0.85% $103.62 $49.33 $54.29 

FNS SBP Total Program $4,251.89 11.04% $469.31 $298.66 $170.65 

FNS SBP Certification Error $4,251.89 9.87% $419.50 $287.27 $132.23 

FNS SBP Counting Error $4,251.89 1.17% $49.81 $11.39 $38.42 

FNS WIC Total Program $3,604.98 5.39% $194.23 $108.01 $86.22 

FNS WIC Certification Error $3,604.98 2.55% $91.79 $91.79 $0.00 

FNS WIC Vendor Error $3,604.98 2.84% $102.44 $16.22 $86.22 
USDA AGENCY FINANCIAL REPORT | 2018 

180 

The following table provides information on the estimated amount of improper payments made 

directly by the Government and the amount of improper payments made by recipients of 

Federal money. 

EXHIBIT 30: Improper Payment Additional Breakdown Table ($ in millions)

Program Federal Government Recipients of Federal Money 

FNS SNAP $0.00 $4,007.77 

FNS NSLP $0.00 $1,155.40 

FNS SBP $0.00 $469.31 

FNS WIC $0.00 $194.23 

FNS CACFP $0.00 $3.89 

FSA LFP $42.11 $0.00 

FSA NAP $26.64 $0.00 

NRCS FSRIP $21.27 $0.00 

RMA FCIC $0.00 $184.16 

Total $90.02 $6,014.76 
SECTION III | OTHER INFORMATION 

181 

DISCUSSION OF HIGH-PRIORITY PROGRAMS SECTION 

The criteria for determining when a program is high priority are found in Office of 

Management and Budget (OMB) Circular A-123, Appendix C. High-priority programs are 

programs that report more than the $2 billion threshold in improper payments. USDA currently 

has three programs designated as high priority, and the following narrative addresses the 

additional reporting requirements that come with that designation. 

1. FNS SNAP 

• USDA reports three additional measures for the Supplemental Nutrition Assistance 

Program (SNAP) on https://paymentaccuracy.gov/program/supplemental-nutritionassistance-program/. 

o The first is the measure that breaks out State-reported error rates by type and source 

of error: Agency, Client, or Other. The information will help the agency and States 

to identify and prevent root causes of error. 

o The second is the measure that shows the national aggregate error rate for the 

program. It incorporates each State’s individual error rate into one aggregate, 

providing an early indicator of national trends. 

o The third is the measure providing the number of States with error rates better or 

worse than the previous year. 

• The following narrative describes how SNAP’s corrective actions were specifically 

tailored to better reflect the unique processes, procedures, and risks involved in the 

program. This program’s actual corrective actions to prevent future improper payments 

can be found in the Improper Payment Corrective Actions Section.

o Food and Nutrition Service (FNS) activities are guided by effective best practices 

developed over the years with State agencies and data analytics identifying the root 

causes of payment errors. FNS assesses sanctions for consecutive years of poor 

performance and requires States to implement corrective action plans to create 

incentives for greater payment accuracy. FNS works with State partners, through 

technical assistance and by offering competitive grants, to help States implement 

process improvements in their eligibility processes. FNS also provides technical 

assistance regarding new system development, greater use of technology, and data 

matching, which are also proven methods to positively impact payment accuracy. 

FNS also has regulatory prerequisites requiring States to collect overpayments and 

to address underpayments to help ensure, as partners, that we take our fiscal 

responsibility seriously in administering this critical nutrition assistance program. 
USDA AGENCY FINANCIAL REPORT | 2018 

182 

• The following narrative describes the actions FNS has taken or plans to take to recover 

improper payment: 

o The National payment error rate is determined by calculating the weighted average 

of all the individual State error rates. A State’s payment error rate is the 

combination of the overpayment error rate and the underpayment error rate resulting 

in a SNAP payment error rate. Overpayments are benefits issued to households that 

they are not entitled to receive. Underpayments occur when households are entitled 

to more benefits than they receive. However, starting in fiscal year (FY) 2015, FNS 

conducted reviews of the integrity of the State processes for measuring the payment 

error rate. In most States, the reviews found practices that, intentionally or 

unintentionally, biased the results of the quality control (QC) system. Due to this 

bias, FNS was unable to determine an official national payment error rate for 

FY 2016 (October 2015–September 2016). 

2. FNS NSLP 

• USDA reports two supplemental measures for the National School Lunch Program 

(NSLP) on https://paymentaccuracy.gov/program/national-school-lunch-program/. 

These are below: 

o The first is the percent of students directly certified for free school meals as a 

percentage of all students certified for free meals. The figure is updated annually 

based on information reported to FNS by State each October. This figure summarizes 

State and school district success in transitioning from traditional applications that 

exhibit relatively high error rates, to direct certification, with much lower error rates. 

o The second is the number of State agencies that receive State Technology Grants 

from USDA. This figure is an indirect measure of State agency investments in 

technology improvements and automation that reduces the risk of human error, 

particularly in recordkeeping, 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. 

• The following narrative describes how NSLP’s corrective actions were specifically 

tailored to better reflect the unique processes, procedures, and risks involved in the 

program. This program’s actual corrective actions to prevent future improper payments 

can be found in the Improper Payment Corrective Actions Section.

o The FNS activities have been guided by FNS research findings. The 2015 Access, 

Participation, Eligibility and Certification (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 determines 
SECTION III | OTHER INFORMATION 

183 

whether the meals served are reimbursable, and (4) when meal counts are 

aggregated and submitted for reimbursement. Utilizing these research findings, 

FNS has tailored its efforts to specifically address the issues cited. 

• The following narrative describes the actions FNS has taken or plans to take to recover 

improper payment: 

o Current statutory authority allows FNS to recover improper payments from State 

agencies when identified through reviews, audits or other operational oversight 

activities. Improper payments identified in this manner are recovered from States 

through direct billing and offset of future program payments earned. Further, our 

statutory authority does not support collection of improper payments identified 

based on a statistical sample or estimation procedure, as used to develop the national 

estimates of improper payments reported here. 

3. FNS SBP 

• USDA reports two supplemental measures for the School Breakfast Program (SBP) on 

https://paymentaccuracy.gov/program/national-school-breakfast-program/. These are 

below: 

o The first is the percentage of students directly certified for free school meals as a 

percentage of all students certified for free meals. The figure is updated annually 

based on information reported to FNS by individual States each October. This figure 

summarizes State and school district success in transitioning from traditional 

applications that exhibit relatively high error rates, to direct certification, with much 

lower error rates. 

o The second is the number of State agencies that receive State Technology Grants 

from USDA. This figure is an indirect measure of State agency investments in 

technology improvements and automation that reduces the risk of human error, 

particularly in recordkeeping, 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. 

• The following narrative describes how SBP’s corrective actions were specifically 

tailored to better reflect the unique processes, procedures, and risks involved in the 

program. This program’s actual corrective actions to prevent future improper payments 

can be found in the Improper Payment Corrective Actions Section.

o The FNS activities have been guided by FNS research findings. 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 determines whether the meals served are reimbursable, and (4) when meal 
USDA AGENCY FINANCIAL REPORT | 2018 

184 

counts are aggregated and submitted for reimbursement. Utilizing these research 

findings, FNS has tailored its efforts to specifically address the issues cited. 

• The following narrative describes the actions FNS has taken or plans to take to recover 

improper payment: 

o Current statutory authority allows FNS to recover improper payments from State 

agencies when identified through reviews, audits, or other operational oversight 

activities. Improper payments identified in this manner are recovered from States 

through direct billing and offset of future program payments earned. Further, our 

statutory authority does not support collection of improper payments identified 

based on a statistical sample or estimation procedure, as used to develop the national 

estimates of improper payments reported here. 
 SECTION III | OTHER INFORMATION 

185 

IMPROPER PAYMENT ROOT CAUSE CATEGORIES SECTION 

EXHIBIT 31: Improper Payments Root Causes Table ($ in millions) 

Reason for Improper Payment 

FNS SNAP FNS NSLP [Note #1] FNS SBP [Note #1]

Overpayments Underpayments Overpayments Underpayments Overpayments Underpayments

Program Design or Structural Issue 0 0 $430.85 $257.31 $151.09 $113.89 

Inability to Authenticate 

Eligibility 

Inability to Access Data 0 0 0 0 0 0 

Data Needed Does Not Exist 0 0 0 0 0 0 

Failure to Verify 

Death Data 0 0 0 0 0 0 

Income Data 0 0 0 0 0 0 

Excluded Party Data 0 0 0 0 0 0 

Prisoner Data 0 0 0 0 0 0 

Other Eligibility 0 0 0 0 0 0 

Administrative or Process 

Error Made By 

Federal Agency 0 0 0 0 0 0 

State and Local Agency $1,527.33 $608.13 $368.59 $98.65 $147.57 $56.76 

Other Party 0 0 0 0 0 0 

Medical Necessity 0 0 0 0 0 0 

Insufficient Documentation to Determine 0 0 0 0 0 0 

Other Reason [Note #1] $1,773.80 $98.51 0 0 0 0 

TOTAL $3,301.13 $706.64 $799.44 $355.96 $298.66 $170.65 
USDA AGENCY FINANCIAL REPORT | 2018 

186 

Reason for Improper Payment 

FNS WIC FNS CACFP FSA LFP 

Overpayments Underpayments Overpayments Underpayments Overpayments Underpayments 

Program Design or Structural Issue 0 0 0 0 0 0 

Inability to Authenticate 

Eligibility

Inability to Access Data 0 0 0 0 0 0 

Data Needed Does Not Exist 0 0 0 0 $11.87 $0.03

Failure to Verify 

Death Data 0 0 0 0 0 0 

Income Data 0 0 0 0 $0.38 0 

Excluded Party Data 0 0 0 0 0 0 

Prisoner Data 0 0 0 0 0 0 

Other Eligibility 0 0 0 0 0 0 

Administrative or Process 

Error Made By 

Federal Agency 0 0 0 0 $14.47 $0.43 

State and Local Agency $108.01 $86.22 $2.93 $0.96 0 0 

Other Party 0 0 0 0 0 0 

Medical Necessity 0 0 0 0 0 0 

Insufficient Documentation to Determine 0 0 0 0 $14.93 0 

Other Reason 0 0 0 0 0 0 

TOTAL $108.01 $86.22 $2.93 $0.96 $41.65 $0.46 
 SECTION III | OTHER INFORMATION 

187 

Reason for Improper Payment 

FSA NAP NRCS FSRIP RMA FCIC 

Overpayments Underpayments Overpayments Underpayments Overpayments Underpayments 

Program Design or Structural Issue 0 0 0 0 0 0 

Inability to Authenticate 

Eligibility 

Inability to Access Data 0 0 0 0 0 0 

Data Needed Does Not Exist $0.68 0 0 0 $108.22 $15.66 

Failure to Verify 

Death Data 0 0 0 0 0 0 

Income Data $0.21 0 0 0 0 0 

Excluded Party Data 0 0 0 0 0 0 

Prisoner Data 0 0 0 0 0 0 

Other Eligibility 0 0 $12.12 0 0 0 

Administrative or Process 

Error Made By 

Federal Agency $15.20 $0.59 $9.15 0 0 0 

State and Local Agency 0 0 0 0 0 0 

Other Party 0 0 0 0 $45.57 $14.71 

Medical Necessity 0 0 0 0 0 0 

Insufficient Documentation to Determine $9.96 0 0 0 0 0 

Other Reason 0 0 0 0 0 0 

TOTAL $26.05 $0.59 $21.27 $0.00 $153.79 $30.37 

Note #1: The Other Reason Root Cause Category is made up of payments caused by the client; however, these errors are not administrative 

or process errors. 
USDA AGENCY FINANCIAL REPORT | 2018 

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IMPROPER PAYMENT CORRECTIVE ACTIONS SECTION

In the spring of 2018, USDA agencies analyzed transactions from fiscal year (FY) 2017 and the 

results are published in the FY 2018 Agency Financial Report (AFR). Please keep this in mind 

if narratives cite FY 2017 transactions in this report. Since USDA reports improper payments 

one year in arrears, corrective actions taken to reduce improper payments in FY 2018 have not 

been reflected in the improper payment amount of this report. USDA continues to enact 

specific corrective actions to resolve root causes of improper payments and strategically 

strengthen program integrity while ensuring access to program and activities. 

All programs and activities determined to have improper payments exceeding the susceptible to 

significant improper payment thresholds (See Part I.B.1) must put in place a corrective action 

plan to prevent and reduce the improper payment amount. The tables below describe the 

actions taken and planned for each high-risk program that is above the reporting threshold

(error rate equal or above 1.5 percent and improper payment amount of $10 million or more). 

Office of Management and Budget (OMB) Circular A-136, dated July 30, 2018, states the 

following: “Agencies should also describe the results of actions taken to address the root causes 

and the planned or actual completion date of the actions taken to address each root cause.” 

Some of the corrective actions offer an indication of the impact it will have on addressing a 

root cause; however, in most cases, a series of corrective actions have cumulative impacts in 

improving payment accuracy.
SECTION III | OTHER INFORMATION 

189 

➔

➔

➔

EXHIBIT 32: Program Corrective Actions Table ($ in millions) 

PROGRAM: FNS SNAP 

Root Cause (See Exhibit 31) Administrative or Process Errors Made by: 

State or Local Agency 

Amount Associated with the Root 

Cause (See Exhibit 31) $2,135.46 (millions) 

Estimated Completion Date September 2019 

Supplemental Nutrition Assistance Program (SNAP) Corrective Actions: 

▪ Legislation requires that States with a high error rate for 2 or more subsequent years pay a 

financial liability to SNAP. States have the option to invest 50 percent of this financial liability 

back into the SNAP program and hold the remaining 50 percent in abeyance, which must be 

paid if the State’s error rate does not improve in the upcoming year. The 50 percent invested 

back into the program is called new investment. States must target their new investment 

money toward correcting the issues that caused the State’s error rate. Each State conducts a 

root cause analysis to determine the causes for their errors as part of the new investment 

plan. New investments are completely State funded and not eligible for Federal matching. 

In the past, States have used their new investment funds to undertake a document 

scanning project to ensure that client documents are more easily accessible, providing 

training to help eligibility workers better understand and follow SNAP rules, and a rewrite of 

the State’s policy manual so it is easier for workers to read, access, and understand. 

▪ Business Process Reengineering (BPR) is the analysis and redesign of a process or workflow 

to achieve greater efficiency. When States apply BPR to their SNAP certification process, 

the resulting savings in staff time create an opportunity to channel savings into activities 

that improve customer service, application processing timeliness, payment accuracy, and 

negative errors. FNS is currently facilitating BPR in three States. 

▪ The Process and Technology Improvement Grants (PTIGs) provide grantees with funding to 

improve the quality and efficiency of operations and processes in SNAP offices. Grantees 

often combine BPR initiatives with modernization efforts to improve the accuracy and 

efficiency of the certification process so that eligible SNAP participants receive the correct 

amount of benefits they are entitled to, thus reducing the amount of improper payments. 

Each year, FNS awards a total of five million dollars in PTIG grants to States. 
USDA AGENCY FINANCIAL REPORT | 2018 

190 

PROGRAM: FNS SNAP 

Root Cause (See Exhibit 31) ➔ Other Reason (Client-Caused) 

Amount Associated with the Root Cause 

(See Exhibit 31) ➔ $1,872.31 (millions) 

Estimated Completion Date ➔ September 2019 

SNAP Corrective Actions: 

SNAP’s corrective actions are the same across type of payment error. To avoid repetition of the 

same corrective actions, please read SNAP’s corrective actions located in the Administrative or 

Process Errors Made by: State or Local Agency root cause, found above. 

Program: FNS NSLP 

Root Cause (See Exhibit 31) ➔ Program Design or Structural Issue 

Amount Associated with the Root Cause 

(See Exhibit 31) ➔ $688.16 (millions) 

Estimated Completion Date ➔ November 2019 

Root Cause (See Exhibit 31) ➔

Administrative or Process Errors Made by: 

State or Local Agency 

Amount Associated with the Root Cause 

(See Exhibit 31) ➔ $467.24 (millions) 

Estimated Completion Date ➔ November 2019 

National School Lunch Program (NSLP) Corrective Actions: 

▪ FNS evaluated its definition of improper payment error(s) for this program and determined 

previously identified ‘meal claiming’ error (those errors typically triggered by a child’s 

failure to select a required fruit or vegetable) did not affect the eligibility status of the 

recipient, nor whether the right recipient received the right benefit. FNS conferred with 

OMB on the change in error definition for FY 2018. 

▪ Modified process for assessing fiscal action across a School Food Authority (SFA) for 

certification error identified during a State Agency Administrative Review (AR). 

▪ Updated AR guidance for School Year (SY) 2018–2019; the guidance provides clarifications 

on resource management and more accurately assesses fiscal action. 
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191 

▪ Conducted AR webinars for State agencies in Spring and Summer of 2018; continue to 

assess technical assistance needs and provide any needed guidance and training. 

▪ Conducted webinars on how to complete the new FNS-640 (Administrative Review Data 

Report) for State agencies and State systems vendors; SFAs began reporting data on the 

new form in May 2018. The new form provides higher quality data to support research into 

school meal program error. 

▪ Conducted the fifth year of a demonstration project in selected school districts and States 

to test the potential for direct certification for free school meals using Medicaid data. 

▪ Awarded direct certification grants to three States to fund projects associated with 

improving their direct certification rates. 

▪ Provided technical assistance aimed at improving direct certification of children using the 

Food Distribution Program on Indian Reservations (FDPIR) participant data. 

▪ Continued management of a contracted research portfolio to measure and study the 

underlying causes of improper payments in FNS programs and to test solutions designed to 

reduce error. 

▪ Development of a new process to improve the quality of data collected on the FNS-742, the 

Verification Collection Report. This is a collaboration with the General Services 

Administration’s 18F, an office tasked with improving the business of government through 

technology-based solutions. 

▪ Development of a voluntary, self-administered testing protocol to assist software vendors 

in evaluating the functionality of their web-based applications for school meals. 

▪ Collaboration with seven other Federal agencies and a nonprofit organization to develop 

and judge a public challenge competition aimed at identifying new ideas to validate 

applicant eligibility for means-tested assistance programs.

▪ Promotion of USDA’s integrity focused web-based model school meal application through 

policy memo and presentation at national conferences and trainings. 

▪ Continue to work with State and local agencies to ensure that eligible school districts have 

the information needed to make informed local decisions about Community Eligibility 

Provision (CEP) participation. CEP eliminates the use of household income applications; 

it relies instead on direct certification which has a lower certification error rate. 

▪ Offer States Administrative Review and Training (ART) grants to implement training and 

technology solutions to reduce and prevent administrative errors in local educational 

agencies (LEAs) that are at high risk for such errors.

▪ Continue to lead and coordinate meetings of the Child Nutrition State Systems Workgroup 

made up of State agencies and FNS regional and national office representatives. 

The purpose of this workgroup is to identify priorities for State and local automation to 

improve accountability, monitoring, training, and data quality. 

▪ Conduct the fourth national technology training for State agencies and technology vendors, 

“Child Nutrition (CN) Access & Accountability through Technology” in 2018. The training is 

focused on developing State agency skills and knowledge in technology-related areas that 

can improve program integrity. 
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192 

▪ Annually award Child Nutrition Technology Innovation competitive grants to States to 

implement innovative technology solutions to improve accountability, data accuracy, 

performance measurement, and the capacity to identify and target error-prone areas in 

Child Nutrition Programs at the State and LEA or sponsor levels. 

▪ Annually approve State Agency direct certification Continuous Improvement Plans to 

improve the effectiveness of their direct certification processes. 

Program: FNS SBP 

Root Cause (See Exhibit 31) ➔ Program Design or Structural Issue 

Amount Associated with the Root Cause 

(See Exhibit 31) ➔ $264.98 (millions) 

Estimated Completion Date ➔ November 2019 

Root Cause (See Exhibit 31) ➔

Administrative or Process Errors Made by: 

State or Local Agency 

Amount Associated with the Root Cause 

(See Exhibit 31) ➔ $204.33 (millions) 

Estimated Completion Date ➔ November 2019 

SBP Corrective Action: 

SBP’s corrective actions are the same across type of payment error. To avoid repetition of the 

same corrective actions, please read NSLP’s corrective actions located in the Program Design or 

Structural Issue root cause, found above. 
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Program: FNS WIC 

Root Cause (See Exhibit 31) ➔

Administrative or Process Errors Made by: 

State or Local Agency 

Amount Associated with the Root Cause 

(See Exhibit 31) ➔ $194.23 (millions) 

Estimated Completion Date ➔ January 2019 

Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) 

Corrective Actions: 

▪ In FY 2017, FNS began a 2-year management evaluation (ME) focus on funding and 

participation. The most recent target area was chosen because access to WIC benefits and 

services is dependent on appropriate management of program funds and caseload. FNS 

analyzes program integrity MEs to determine trends and to inform policy, guidance, and 

technical assistance. 

▪ In September 2017, FNS released a comprehensive WIC Vendor Management and Food 

Delivery Handbook, which includes topical guidance designed to help State agencies 

effectively develop, assess, and implement key vendor management and cost containment 

system components. FNS currently is working on the first update to the Handbook, which 

will include two additional chapters: Vendor Cost Containment and Monitoring and Audits. 

Additionally, FNS will release several tip sheets designed for WIC State agencies, including: 

administrative review of WIC vendors, high-risk vendor identification, EBT vendor 

agreement provisions, and above 50-percent vendor cost neutrality assessments. 

▪ In early FY 2019, FNS plans to provide resources, including trainings, worksheets, and 

toolkits to WIC State agencies on cost neutrality assessments for above 50-percent 

vendors, the development of vendor peer group systems, and the development of 

high-risk vendor indicators. 
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194 

Program: FNS CACFP 

Root Cause (See Exhibit 31) ➔

Administrative or Process Errors Made by: 

State or Local Agency

Amount Associated with the Root Cause 

(See Exhibit 31) ➔ $3.89 (millions) 

Estimated Completion Date ➔ November 2019 

Child and Adult Care Food Program (CACFP) Corrective Actions: 

▪ Released a redesigned CACFP Meal Benefit Income Eligibility Application based on FNS NSLP 

paper prototype application. 

▪ Engaged in the identification of key factors and barriers to day care home provider 

participation in CACFP, including barriers and challenges to program operations, tiering, 

and claims. 

▪ Annually award Child Nutrition Technology Innovation competitive grants to States to 

implement innovative technology solutions to improve accountability, data accuracy, 

performance measurement, and the capacity to identify and target error-prone areas in 

Child Nutrition Programs at the State and LEA or sponsor levels. 

▪ Conduct routine management evaluations of State agencies, to ensure State agency 

compliance with program regulations. 

▪ Finalize contracted study of improper program payments in CACFP child care centers, which 

will allow FNS to report a more complete set of improper payment figures for CACFP in 

satisfaction of Improper Payments Elimination and Recovery Act of 2010 (IPERA) 

requirements. 
SECTION III | OTHER INFORMATION 

195 

Program: FSA LFP 

Root Cause (See Exhibit 31) ➔

Inability to Authenticate Eligibility: 

Data Needed Does Not Exist 

Amount Associated with the Root Cause 

(See Exhibit 31) ➔ $11.90 (millions) 

Estimated Completion Date ➔ November 2018 

Root Cause (See Exhibit 31) ➔

Administrative or Process Errors Made by: 

Federal Agency 

Amount Associated with the Root Cause 

(See Exhibit 31) ➔ $14.90 (millions) 

Estimated Completion Date ➔ November 2018

Livestock Forage Disaster Program (LFP) Corrective Actions: 

▪ Agency is implementing an LFP software enhancement that automatically reads and 

imports eligible acreage data from the Farm Service Agency (FSA)-578 Report of Acreage 

into the Commodity Credit Corporation (CCC)-853 LFP Application. Training was provided to 

State offices to implement software enhancements and to review the Improper Payments 

Information Act of 2002 (IPIA) results, with the requirement that State offices provide 

equivalent training to field offices. 

▪ Issued a notice to field offices to review IPIA results, and reinforce and outline program 

policies and procedures for what is acceptable evidence for documenting each LFP 

applicant’s grazing land ownership and/or leasing, ensuring that it is on file before the 

application is approved. 
USDA AGENCY FINANCIAL REPORT | 2018 

196 

Program: FSA LFP 

Root Cause (See Exhibit 31) ➔ Insufficient Documentation to Determine 

Amount Associated with the Root Cause 

(See Exhibit 31) ➔ $14.93 (millions) 

Estimated Completion Date ➔ November 2018 

LFP Corrective Actions: 

▪ Notice issued to field offices to reinforce program policies and procedures, outlining what is 

acceptable evidence for documenting eligible forage, livestock, and acreage. 

▪ Notice to field offices addressed what is acceptable documentation for determining 

producer eligibility including ensuring farm operating plans, acreage reports, adjusted gross 

income certifications, and highly erodible land conservation and wetland conservation 

certifications are completed prior to application approval and payment. 

▪ Training provided to State offices to implement software enhancements and to review IPIA 

results, with the requirement that State offices provide equivalent training to field offices. 

Program: FSA LFP 

Root Cause (See Exhibit 31) ➔ Failure to Verify: Income Data 

Amount Associated with the Root Cause 

(See Exhibit 31) ➔ $0.38 (millions) 

Estimated Completion Date ➔ November 2018 

LFP Corrective Actions: 

▪ Notice issued to field offices to reinforce program policies and procedures, outlining what is 

acceptable documentation for determining producer eligibility including ensuring farm 

operating plans, acreage reports, adjusted gross income certifications, and highly erodible 

land conservation and wetland conservation certifications are completed prior to 

application approval and payment. 

▪ Training provided to State offices to implement software enhancements and to review IPIA 

results, with the requirement that State offices provide equivalent training to field offices. 
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197 

Program: FSA NAP 

Root Cause (See Exhibit 31) ➔

Administrative or Process Errors Made by: 

Federal Agency 

Amount Associated with the Root Cause 

(See Exhibit 31) ➔ $15.79 (millions) 

Actual Completion Date ➔ September 2018 

Noninsured Crop Disaster Assistance Program (NAP) Corrective Actions: 

Implemented NAP software to automate the computation of unit acres/pay group when 

calculating NAP payments. This action took place in June 2017. 

Proposed training for new Program Specialists in the State Offices and Program Technicians in 

the County Offices who are responsible for NAP. This Train the Trainer Training was proposed 

for State and selected County Office employees from across the county, to then be presented 

locally. In addition, specific training is targeted for Alabama. This action took place in 

September 2018. 

Program: FSA NAP 

Root Cause (See Exhibit 31) ➔ Insufficient Documentation to Determine 

Amount Associated with the Root Cause 

(See Exhibit 31) ➔ $9.96 (millions) 

Estimated Completion Date ➔ November 2018 

NAP Corrective Actions: 

Training needs have been identified. The ongoing Office of Inspector General (OIG) 

investigation will provide valuable information to correct records and proceed with 

overpayment collections. The Production, Emergencies, and Compliance Division (PECD) 

encouraged training to occur prior to September 28, 2018. The Train the Trainer Training was 

proposed for State and selected County Office employees from across the county, to then be 

presented locally. In addition, specific training is targeted for Alabama. 
USDA AGENCY FINANCIAL REPORT | 2018 

198 

Program: FSA NAP 

Root Cause (See Exhibit 31) ➔ Failure to Verify: Income Data 

Amount Associated with the Root Cause 

(See Exhibit 31) ➔ $0.21 (millions) 

Actual Completion Date ➔ June 2017 

Root Cause (See Exhibit 31) ➔

Inability to Authenticate Eligibility: 

Data Needed Does Not Exist 

Amount Associated with the Root Cause 

(See Exhibit 31) ➔ $0.68 (millions) 

Actual Completion Date ➔ June 2017 

NAP Corrective Actions: 

Automated NAP software became available for the 2017 crop year. This software validates that 

all eligibility records have been updated and that payments are authorized to be issued. 

The payment process has been integrated into the automation process. 
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199 

Program: RMA FCIC 

Root Cause (See Exhibit 31) ➔

Administrative or Process Errors Made by: 

Other Party 

Amount Associated with the Root Cause 

(See Exhibit 31) ➔ $60.28 (millions) 

Estimated Completion Date ➔ June 2019 

Federal Crop Insurance Corporation (FCIC) Corrective Actions: 

Each year, the Risk Management Agency (RMA) provides a broad overview to the private sector 

Approved Insurance Providers (AIPs) of the types of errors identified during the Improper

Payments Elimination and Recovery Improvement Act of 2012 (IPERIA) review process. 

To address the diverse types of administrative or process errors (e.g., acreage reporting, actual 

production history [APH], application, claim), RMA will provide a more detailed analysis to the 

AIPs to help them better identify and control the specific types of problems, such as a signature 

type, which are contributing to the errors. 

Program: RMA FCIC 

Root Cause (See Exhibit 31) ➔

Inability to Authenticate Eligibility: 

Data Needed Does Not Exist 

Amount Associated with the Root Cause 

(See Exhibit 31) ➔ $123.88 (millions) 

Estimated Completion Date ➔ September 2019 

FCIC Corrective Actions: 

Almost half of the Inability to Authenticate errors were related to Audit of Production History, 

which includes the acceptability of production records and the accuracy of production 

certification. To clarify consequences of production certification audits, RMA made changes in 

the 2018 Crop Insurance Handbook outlining exceptions to assigned yield procedures. 

In addition, for the 2019 Crop Insurance Handbook, RMA will be editing the production 

evidence language to improve clarity and minimize burdensome reporting requirements for 

acceptable records. Action will be completed by December 2018.

Acreage reporting issues were the other primary cause of Inability to Authenticate errors. 

A Regional Compliance Office, in collaboration with RMA’s Business Analytics Division and 

geographic information system (GIS) specialists, will be conducting a program review to help 

identify land that is chronically unavailable for planting and/or ineligible for inclusion on an 

acreage report. Action will be completed by September 2019.
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200 

INTERNAL CONTROL OVER PAYMENT INTEGRITY SECTION 

USDA programs have implemented internal controls to prevent improper payments. USDA 

programs are: 

• Enhancing communication of updated policies and guidance to the field offices; 

• Encouraging managers to 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. 

ACCOUNTABILITY SECTION

The following steps were taken to ensure that agency managers are held accountable for 

reducing and recovering improper payments: 

Food and Nutrition Service (FNS)

For items 1–3 which follow, 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, 

beginning in 2005. 

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 the Supplemental Nutrition 

Assistance Program (SNAP), National School Lunch Program (NSLP), School 

Breakfast Program (SBP), Special Supplemental Nutrition Program for Women, Infants, 

and Children (WIC), and Child and Adult Care Food Program (CACFP) is to continue 

management improvements. 

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. 
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201 

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-reduction goals, to use 

multiple strategies to support payment accuracy, even as program participation increases. 

Farm Service Agency (FSA) 

The following steps were completed by September 2017 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-2993, all FSA 

employees have performance elements that are aligned with applicable strategic goals 

and objectives from FSA’s FY 2016–FY 2018 Strategic Plan. Goal #4, Objectives 4.1 

and 4.2, 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-2993.

3. COF employees, including the County Executive Director, are responsible for making 

payments to producers and following all administrative steps in doing so. Employees 

will be evaluated through their performance plans on program delivery, as well as 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. 

5. FSA’s 2016-2018 Strategic Plan, in accordance with USDA’s effort to develop 

comprehensive internal controls, quality assurance processes and systems, and 

compliance with the IPIA, incorporates 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 

RMA Strategic Plan—“Safeguarding the integrity of the Federal crop insurance 

program.” The Strategic Plan goal was to reduce the improper payment rate from 
USDA AGENCY FINANCIAL REPORT | 2018 

202 

5.23 percent in 2013 to 4.9 percent by 2018. RMA exceeded its strategic targets, and the 

actual improper payment rate was 1.81 percent in FY 2018. 

2. RMA incorporated standards in the FY 2018 annual performance plans to ensure that 

compliance personnel conduct 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 Regional Compliance Offices 

(RCOs) conducted IPERIA reviews between April 2017–March 2018 using statistical 

sampling and data mining reports. 

AGENCY INFORMATION SYSTEMS AND OTHER INFRASTRUCTURE 

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 sponsor and site, a full and 

rigorous assessment of the rate of improper payments is extremely complex. 

Currently, FNS has two CACFP studies looking at alternative methodologies for 

developing a reliable measurement for the meal claims component. The two studies are 

expected to be completed by December 2018 and April 2019. 

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 

regarding the development of additional guidance, training, and policy options. 

3. The FNS FY 2018 Budget requested an increase in funding for the following program

integrity line items to establish and maintain effective internal controls to reduce 

improper payments as follows: 
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203 

a. Child Nutrition (CN) Training and Technical Assistance—an increase of $565,000 was 

requested ($13,137,000 enacted for FY 2017). Effective and continual training and 

technical assistance are necessary to help States properly administer the CN 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 for State agencies. This request reflects an increase in Federal activity 

associated with this project, including implementation of the new requirements. 

b. CN Payment Accuracy—an increase of $454,000 was requested ($10.562 million 

enacted for FY 2017). 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. 

FNS’ FY 2018 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. 

Administrative Reviews—$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. 

FSA 

FSA has the internal controls, human capital, information systems, and other infrastructure 

needed to reduce improper payments. 

RMA 

One of RMA’s primary tools for assessing approved insurance providers’ (AIPs) compliance 

with all crop insurance program requirements is the AIP Performance Review (APR). During

fiscal year 2018, RMA completed APRs of six AIPs to evaluate their internal controls in order 

to 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 to manage the 

program. The 2018 Budget includes about $74 million in discretionary appropriations for these 

costs. In addition, the Federal Crop Insurance Act authorizes the transfer of up to $9 million

each fiscal year from mandatory funding to the RMA S&E account for program compliance 

and integrity reviews. 
USDA AGENCY FINANCIAL REPORT | 2018 

204 

BARRIERS SECTION 

FNS

FNS is committed to ensuring that eligible individuals and families have access to the nutrition 

assistance they need while it works to reduce the risk of improper payments. Some program 

provisions designed to ensure access pose the greatest risk to program integrity. While the risks 

vary by program, some general characterizations can be made: 

Program administration is highly decentralized and involves a myriad of governmental and 

non-governmental organizations. For example, there are approximately 68,000 child and adult 

care centers, 700 Family Day Care Home (FDCH) sponsoring organizations, and 

approximately 103,000 FDCH providers through which CACFP benefits are distributed. 

Similarly, the NSLP and the SBP rely on nearly 98,800 schools and institutions to serve meals 

to 30 million children consistent with program rules. Many of these organizations 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. 

The entire cost of program benefits and a significant portion of administrative expenses 

incurred by State agencies are funded by Federal appropriations. Federal funding strengthens 

the nutrition safety net with national eligibility standards and rules to ensure program access, 

but it also means that USDA relies on States and localities to ensure the proper management of 

billions of dollars in Federal funds.

Any approach to reducing school meals improper payments must: 

1. Improve accuracy without compromising access for low-income families. A process 

that keeps eligible children from participating would undermine the program; 

2. Not increase the burden on schools and other partner institutions. Many schools 

consider the program burdensome now. Adding burden could discourage schools from 

participating, decreasing access for some low-income children; 

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 (e.g. Title I, State, and 

local education funding). As these needs contribute to the problem, a solution may also 

require new commitments from those users. 

SNAP benefits are processed and administered by State agencies, with FNS oversight. The Food 

and Nutrition Act of 2008, as amended, provides for incentives in the form of financial bonuses 

and disincentives in the form of financial penalties to encourage States to accurately issue SNAP 
SECTION III | OTHER INFORMATION 

205 

benefits and maintain low improper payment rates. FNS provides oversight and technical 

assistance to States in measuring and reporting improper payments. Since FNS does not provide 

benefits directly to recipients, the Program must work through its State administering agencies to 

measure, monitor, and address improper payments. In recent years, SNAP FNS has made efforts 

to strengthen program integrity regarding improper payment measurement. It has instituted new 

procedures to strengthen monitoring and has conducted reviews of all State agency error rate 

measurements to identify areas for improvement and to require corrective action for States where 

data collection issues were identified. 

FSA 

FSA rarely encounters statutory or regulatory barriers in the pursuit of overpayments. If an

overpayment is established, from no fault of the customer, and if the overpayment is not 

discovered within 90 days of the payment issued, the producer can be removed from liability 

based on the Finality Rule, which is described as follows: The U.S. Department of Agriculture 

Reorganization Act of 1994, Section 281, 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.” 

Prior to the 2008 Farm Bill, all receivables over 10 years old were written off if the receivable

was not secured by collateral, a judgment, or pending litigation. With the 2008 Farm Bill, the 

elimination of the 10-year statute of limitation enhanced the pursuit of overpayments. The Farm 

Service Agency pursues all overpayments until they are determined to be uncollectible because

of death of the customer, bankruptcy discharging the debt, or inability to pay (no assets).

All payments for a customer with open receivables will be automatically offset and applied 

against any open receivables the customer may have in FSA’s receivable system. 

FSA’s pursuit of delinquent debt, including overpayments, is in accordance with the Debt 

Collection Improvement Act. Delinquent receivables are referred to the U.S. Department of the 

Treasury and the Treasury Offset Program (TOP) to ensure that Federal payments are 

offset. Due process is provided to the customer for each overpayment (initial notification, first, 

and second demand letter). After due process has been given to the producer, annual reminder 

letters are mailed to the producer with outstanding receivables. FSA uses LexisNexis to assist 

with locating producers and finding more current information on debtors. 

RMA 

RMA is not subject to any critical statutory or regulatory barriers to reducing improper payments.
USDA AGENCY FINANCIAL REPORT | 2018 

206 

RECAPTURE OF IMPROPER PAYMENTS REPORTING 

USDA is required to conduct payment recapture auditing on all programs with over $1 million 

in annual expenditures or provide justification that a payment recapture audit program would

not be cost effective, per OMB Circular A-123 Appendix C. USDA utilized FY 2017 actual 

outlay information to determine which programs meet the $1 million payment recapture 

auditing requirement. The following results highlight the payment recapture activities 

completed in FY 2018: 

1. USDA recaptured approximately $0.25 million from its Supplier Credit Recovery Audit 

contractor (0.04 percent of USDA’s total identified overpayments), $204.81 million 

from USDA programs’ internal payment recapture audits (34.00 percent of USDA’s 

total identified overpayments), and $371.59 million outside of payment recapture audits 

(60.92 percent of USDA’s total identified overpayments). Results are shown in the 

Exhibit 34: Overpayments Recaptured through Payment Recapture Audits. 

2. USDA distributed $201.60 million in recovered funds in accordance with IPERA as 

shown in Exhibit 36: Disposition of Funds Recaptured.

3. Fifty eight programs participated in the Supplier Credit Recovery Audit, and 42 programs 

developed internal payment recapture plans, which were approved by 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 

Part III Section C. 5 and 6, 40 programs submitted a cost-effective waiver to OMB. A list 

of programs categorized by recovery auditing activity is provided in the table below: 
 SECTION III | OTHER INFORMATION 

207 

EXHIBIT 33: List of Programs Categorized by Recovery Auditing Activity Table 

No. Program Name

Supplier Credit 

Recovery Audit 

Internal Payment 

Recapture Audit 

Programs with Approved 

Waivers-Based Cost 

Effectiveness [Note #3]

Programs with less than 

$1 million in FY 2017 

Expenditures [Note #7] 

1 Agricultural Marketing Service (AMS) 

Commodity Purchase Programs 

✓ Unchecked Unchecked Unchecked

2 AMS Grants Programs ✓ Unchecked Unchecked Unchecked

3 AMS Salaries and Expenses ✓ Unchecked Unchecked Unchecked

4 Animal and Plant Health Inspection 

Service (APHIS) Buildings and Facilities 

✓ Unchecked Unchecked Unchecked

5 APHIS Cooperative Agreements ✓

6 APHIS Indemnity Program ✓ Unchecked Unchecked Unchecked

7 APHIS Salaries and Expenses ✓ Unchecked Unchecked Unchecked

8 APHIS Trust Funds ✓ Unchecked Unchecked Unchecked

9 Agricultural Research Service (ARS) 

Buildings and Facilities 

✓ Unchecked Unchecked Unchecked

10 Commodity Credit Corporation (CCC) 

Administrative Contracts Unchecked ✓ Unchecked Unchecked

11 CCC Agricultural Wool Apparel

Manufacturers Trust Funds Unchecked ✓ Unchecked Unchecked

12 CCC Agriculture Risk Coverage and 

Price Loss Coverage Unchecked ✓ Unchecked Unchecked

13 CCC Biomass Crop Assistance Program Unchecked ✓ Unchecked Unchecked
USDA AGENCY FINANCIAL REPORT | 2018 

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No. Program Name

Supplier Credit 

Recovery Audit 

Internal Payment 

Recapture Audit 

Programs with Approved 

Waivers-Based Cost 

Effectiveness [Note #3]

Programs with less than 

$1 million in FY 2017 

Expenditures [Note #7] 

14 CCC Conservation Reserve Program Unchecked ✓ Unchecked Unchecked

15 CCC Cotton Transition Assistance 

Program Unchecked ✓ Unchecked Unchecked

16 CCC Dairy Domestic Donations Unchecked Unchecked Unchecked ✓

17 CCC Dairy Indemnity Unchecked ✓ Unchecked Unchecked

18

CCC Emergency Assistance for 

Livestock, Honeybees, and Farm 

Raised Fish Program

Unchecked ✓ Unchecked Unchecked

19 CCC Emergency Forestry Conservation 

Reserve Unchecked ✓ Unchecked Unchecked

20 CCC Export 416 Ocean Transportation ✓ Unchecked Unchecked ✓

21 CCC Export Guarantee Program Level Unchecked ✓ Unchecked ✓

22 CCC Farm Storage Facility Loan Unchecked ✓ Unchecked Unchecked

23 CCC Feedstock Flexibility Program Unchecked Unchecked Unchecked ✓

24 CCC Food for Progress Program 

[Note #1] 

✓ ✓ Unchecked Unchecked

25 CCC Hazardous Waste Activities Unchecked ✓ Unchecked Unchecked

26 CCC Hurricane Sandy—Emergency 

Forest Restoration Program Unchecked ✓ Unchecked Unchecked

27 CCC Livestock Forage Disaster Program Unchecked ✓ Unchecked Unchecked

28 CCC Livestock Indemnity Program Unchecked ✓ Unchecked Unchecked
 SECTION III | OTHER INFORMATION 

209 

No. Program Name

Supplier Credit 

Recovery Audit 

Internal Payment 

Recapture Audit 

Programs with Approved 

Waivers-Based Cost 

Effectiveness [Note #3]

Programs with less than 

$1 million in FY 2017 

Expenditures [Note #7] 

29 CCC Loan Deficiency Payments Unchecked ✓ Unchecked Unchecked

30 CCC Margin Protection Program for 

Dairy Producers Unchecked ✓ Unchecked Unchecked

31 CCC Marketing Assistance Loan

Program Unchecked ✓ Unchecked Unchecked

32 CCC Marketing Programs Unchecked ✓ Unchecked Unchecked

33 CCC Noninsured Crop Disaster 

Assistance Program Unchecked ✓ Unchecked Unchecked

34 CCC Pima Agriculture Cotton Trust 

Fund Unchecked ✓ Unchecked Unchecked

35 CCC Supplemental Revenue Assistance 

Payments Program Unchecked ✓ Unchecked ✓

36 CCC Tobacco Transition Payment 

Program 

Unchecked ✓ Unchecked ✓

37 CCC Trade Adjustment Assistance 

Program Unchecked Unchecked Unchecked ✓

38 CCC Tree Assistance Program Unchecked ✓ Unchecked Unchecked

39 CCC Upland Cotton Economic 

Adjustment Assistance Program Unchecked ✓ Unchecked Unchecked

40 Office of Civil Rights (CR) Salaries and 

Expenses 

✓ Unchecked Unchecked Unchecked
USDA AGENCY FINANCIAL REPORT | 2018 

210 

No. Program Name

Supplier Credit 

Recovery Audit 

Internal Payment 

Recapture Audit 

Programs with Approved 

Waivers-Based Cost 

Effectiveness [Note #3]

Programs with less than 

$1 million in FY 2017 

Expenditures [Note #7] 

41 Departmental Management (DM) 

Agriculture Buildings and Facilities 

✓ Unchecked Unchecked Unchecked

42 DM Biobased Markets Program ✓ Unchecked Unchecked Unchecked

43 DM Hazardous Materials Management ✓ Unchecked Unchecked Unchecked

44

Foreign Agricultural Service (FAS) 

McGovern-Dole Food for Education 

Grants 

✓ Unchecked Unchecked Unchecked

45 Farm and Foreign Agricultural Services 

(FFAS) Salaries and Expenses ✓ Unchecked Unchecked Unchecked

46 Food and Nutrition Service (FNS) 

America Samoa Unchecked Unchecked ✓ Unchecked

47 FNS Child and Adult Care Food 

Program 

✓ Unchecked Unchecked Unchecked

48 FNS Commonwealth of the Northern 

Mariana Islands Unchecked Unchecked ✓ Unchecked

49 FNS Commodity Supplemental Food 

Program 

✓ Unchecked Unchecked Unchecked

50 FNS The Emergency Food Assistance 

Program 

✓ Unchecked Unchecked Unchecked

51 FNS Farmers Market Nutrition 

Program Unchecked Unchecked ✓ Unchecked
 SECTION III | OTHER INFORMATION 

211 

No. Program Name

Supplier Credit 

Recovery Audit 

Internal Payment 

Recapture Audit 

Programs with Approved 

Waivers-Based Cost 

Effectiveness [Note #3]

Programs with less than 

$1 million in FY 2017 

Expenditures [Note #7] 

52 FNS Food Distribution Program on 

Indian Reservations 

✓ Unchecked Unchecked Unchecked

53 FNS National School Lunch Program ✓ Unchecked Unchecked Unchecked

54 FNS Nutrition Assistance—Puerto Rico Unchecked Unchecked ✓ Unchecked

55 FNS Salaries and Benefits ✓ Unchecked

56 FNS School Breakfast Program Unchecked Unchecked ✓ Unchecked

57 FNS Senior Farmers Market Nutrition 

Program Unchecked Unchecked ✓ Unchecked

58 FNS Special Milk Program Unchecked Unchecked ✓ Unchecked

59

FNS Special Supplemental Nutrition 

Program for Women, Infants and 

Children 

Unchecked Unchecked ✓ Unchecked

60 FNS Summer Food Service Program ✓ Unchecked Unchecked Unchecked

61 FNS Supplemental Nutrition Assistance 

Program Unchecked Unchecked ✓ Unchecked

62

Food Safety and Inspection Service 

(FSIS) Cooperative State Food Safety 

and Inspection 

Unchecked Unchecked ✓ Unchecked

63 FSIS Salaries and Expenses ✓ Unchecked Unchecked Unchecked

64

Farm Service Agency (FSA) Agricultural 

Credit Insurance Fund 

—Program Account 

Unchecked ✓ Unchecked Unchecked
USDA AGENCY FINANCIAL REPORT | 2018 

212 

No. Program Name

Supplier Credit 

Recovery Audit 

Internal Payment 

Recapture Audit 

Programs with Approved 

Waivers-Based Cost 

Effectiveness [Note #3]

Programs with less than 

$1 million in FY 2017 

Expenditures [Note #7] 

65 FSA Emergency Conservation Program Unchecked ✓ Unchecked Unchecked

66 FSA Emergency Forest Restoration 

Program Unchecked ✓ Unchecked Unchecked

67 FSA Grassroots Source Water 

Protection Program Unchecked ✓ Unchecked Unchecked

68 FSA Hurricane Sandy 

—Emergency Conservation Program Unchecked Unchecked Unchecked ✓

69 FSA Public Law 480 ✓ Unchecked Unchecked Unchecked

70 FSA Reforestation Pilot Program Unchecked Unchecked Unchecked ✓

71 FSA Reimbursement Transportation 

Cost Payment Program Unchecked ✓ Unchecked Unchecked

72 FSA State Mediation Grants Unchecked ✓ Unchecked Unchecked

73 Forest Service (FS) Capital 

Improvement and Maintenance

✓ Unchecked Unchecked Unchecked

74 FS Forest and Rangeland Research ✓ Unchecked Unchecked Unchecked

75 FS Permanent Appropriations ✓ Unchecked Unchecked Unchecked

76 FS Trust Funds ✓ Unchecked Unchecked Unchecked

77 FS Hurricane Sandy—Capital 

Improvement and Maintenance

Unchecked Unchecked Unchecked ✓

78 FS Hurricane Sandy—Emergency 

Forest Restoration Program

✓ Unchecked Unchecked ✓
 SECTION III | OTHER INFORMATION 

213 

No. Program Name

Supplier Credit 

Recovery Audit 

Internal Payment 

Recapture Audit 

Programs with Approved 

Waivers-Based Cost 

Effectiveness [Note #3]

Programs with less than 

$1 million in FY 2017 

Expenditures [Note #7] 

79 FS Land Acquisition ✓ Unchecked Unchecked Unchecked

80 FS Management of National Forest 

Lands for Subsistence Uses 

✓ Unchecked Unchecked Unchecked

81 FS National Forest System ✓ Unchecked Unchecked Unchecked

82 FS Range Betterment Fund ✓ Unchecked Unchecked Unchecked

83 FS State and Private Forestry ✓ Unchecked Unchecked Unchecked

84 FS Stewardship Contracting Product 

Sales 

✓ Unchecked Unchecked Unchecked

85 FS Wildland Fire Management ✓ Unchecked Unchecked Unchecked

86 FS Wildland Fire Management 

—Suppression 

✓ Unchecked Unchecked Unchecked

87 FS Working Capital Fund ✓ Unchecked Unchecked Unchecked

88

National Institute of Food and 

Agriculture (NIFA) Community Foods 

Project 

Unchecked ✓ Unchecked Unchecked

89 NIFA Extension Activities Unchecked ✓ Unchecked Unchecked

90 NIFA Integrated Activities Unchecked ✓ Unchecked Unchecked

91 NIFA Research and Education Activities Unchecked ✓ Unchecked Unchecked

92

Natural Resources Conservation 

Service (NRCS) Conservation Technical 

Assistance (non-Farm Bill) 

✓ Unchecked Unchecked Unchecked
USDA AGENCY FINANCIAL REPORT | 2018 

214 

No. Program Name

Supplier Credit 

Recovery Audit 

Internal Payment 

Recapture Audit 

Programs with Approved 

Waivers-Based Cost 

Effectiveness [Note #3]

Programs with less than 

$1 million in FY 2017 

Expenditures [Note #7] 

93 NRCS Farm Security and Rural 

Investment Act Program (FSRIP) ✓ Unchecked Unchecked Unchecked

94 NRCS Plant Materials Centers ✓ Unchecked Unchecked Unchecked

95 NRCS Snow Survey and Water Supply 

Forecasting 

✓ Unchecked Unchecked Unchecked

96 NRCS Soil Surveys ✓ Unchecked Unchecked Unchecked

97 NRCS Watershed Programs ✓ Unchecked Unchecked Unchecked

98 Office of Advocacy and Outreach for 

Socially Disadvantaged Farmers 

✓ Unchecked Unchecked Unchecked

99 Office of Budget and Program Analysis 

Salaries and Expenses 

✓ Unchecked Unchecked Unchecked

100 Office of the Chief Economist Salaries 

and Expenses 

✓ Unchecked Unchecked Unchecked

101 Office of the Chief Financial Officer 

Salaries and Expenses 

✓ Unchecked Unchecked Unchecked

102 Office of the Chief Information Officer 

Salaries and Expenses 

✓ Unchecked Unchecked Unchecked

103 Office of the General Counsel (OGC) 

Salaries and Expenses 

✓ Unchecked Unchecked Unchecked

104 Office of Hearings and Appeals Salaries 

and Expenses 

✓ Unchecked Unchecked Unchecked
 SECTION III | OTHER INFORMATION 

215 

No. Program Name

Supplier Credit 

Recovery Audit 

Internal Payment 

Recapture Audit 

Programs with Approved 

Waivers-Based Cost 

Effectiveness [Note #3]

Programs with less than 

$1 million in FY 2017 

Expenditures [Note #7] 

105 Office of Inspector General (OIG) 

Salaries and Expenses 

✓ Unchecked Unchecked Unchecked

106 Office of the Secretary Salaries and 

Expenses 

✓ Unchecked Unchecked Unchecked

107 Rural Business-Cooperative Service 

(RBS) Grant Programs Unchecked Unchecked ✓ Unchecked

108 RBS Guaranteed Loan Programs Unchecked Unchecked ✓ Unchecked

109 RBS Payment Programs Unchecked Unchecked ✓ Unchecked

110 RBS Relending Programs Unchecked Unchecked ✓ Unchecked

111 Rural Development (RD) Salaries and 

Expenses 

✓ Unchecked Unchecked Unchecked

112 Rural Housing Service (RHS) 

Community Program Grants Unchecked Unchecked ✓ Unchecked

113 RHS Direct Community Facility Loans Unchecked Unchecked ✓ Unchecked

114 RHS Direct Single Family Housing Unchecked ✓ Unchecked

115

RHS Farm Labor Housing Loans 

(Section 514) Farm Labor Housing 

Grants (Section 516) 

Unchecked Unchecked ✓ Unchecked

116 RHS Guaranteed Community Facility 

Loans Unchecked Unchecked ✓ Unchecked

117 RHS Guaranteed Single Family Housing 

Loans Unchecked ✓ Unchecked Unchecked
USDA AGENCY FINANCIAL REPORT | 2018 

216 

No. Program Name

Supplier Credit 

Recovery Audit 

Internal Payment 

Recapture Audit 

Programs with Approved 

Waivers-Based Cost 

Effectiveness [Note #3]

Programs with less than 

$1 million in FY 2017 

Expenditures [Note #7] 

118 RHS Guaranteed Multi-Family Housing 

(MFH) Loans (Section 538 Loans) Unchecked Unchecked ✓ Unchecked

119 RHS Housing Loans and Grants—Other Unchecked Unchecked ✓ Unchecked

120

RHS MFH Preservation & Revitalization 

Demo Program: 514/516 Loans/Grants 

& 515 Loans 

Unchecked Unchecked ✓ Unchecked

121 RHS Rental Assistance Program Unchecked ✓ Unchecked Unchecked

122 RHS Rural Community Development 

Initiative Grants Unchecked Unchecked ✓ Unchecked

123

RHS Rural Rental Housing Loans 

(Section 515 Direct Rural Rental 

Housing Loans) 

Unchecked Unchecked ✓ Unchecked

124 RHS Voucher Program (Section 542) 

[Note #1] 

✓ ✓ Unchecked Unchecked

125 Rural Utilities Service (RUS) Broadband 

Telecom Loans—Treasury Rate Unchecked Unchecked ✓ Unchecked

126 RUS Community Connect Grants Unchecked Unchecked ✓ Unchecked

127 RUS Congressional Earmarked Funds Unchecked Unchecked ✓ Unchecked

128

RUS Electric Loan Programs [Catalog of 

Federal Domestic Assistance (CFDA) 

10.850]—Direct Treasury Rate 

Unchecked Unchecked ✓ ✓
 SECTION III | OTHER INFORMATION 

217 

No. Program Name

Supplier Credit 

Recovery Audit 

Internal Payment 

Recapture Audit 

Programs with Approved 

Waivers-Based Cost 

Effectiveness [Note #3]

Programs with less than 

$1 million in FY 2017 

Expenditures [Note #7] 

129

RUS Electric Loan Programs (CFDA 

10.850)—Federal Financing Bank (FFB) 

Guaranteed 

Unchecked Unchecked ✓ Unchecked

130 RUS Rural Energy Savings Program Unchecked Unchecked Unchecked ✓

131 RUS Grants—Other Electric 

—Telecom. WEP Unchecked Unchecked ✓ Unchecked

132 RUS Public Television Digital Transition 

Grants

Unchecked Unchecked ✓ Unchecked

133 RUS Revolving Loan Fund Program Unchecked Unchecked ✓ Unchecked

134

RUS Rural Telecommunications 

Hardship Loans 

—Direct Telecom. Loans 

Unchecked Unchecked ✓ Unchecked

135 RUS Rural Telecommunications Loans 

—FFB Telecom. Loans Unchecked Unchecked ✓ Unchecked

136 RUS Rural Telecommunications Loans 

—Treasury Telecom. Loans Unchecked Unchecked ✓ Unchecked

137 RUS Rural Utilities Electric Program 

—Direct 5 percent Unchecked Unchecked ✓ Unchecked

138 RUS Rural Utilities Electric Program 

—Municipal Rate Unchecked Unchecked ✓ ✓

139

RUS Water and Waste Disposal 

Systems for Rural Communities 

—Grant 

Unchecked Unchecked ✓ Unchecked
USDA AGENCY FINANCIAL REPORT | 2018 

218 

No. Program Name

Supplier Credit 

Recovery Audit 

Internal Payment 

Recapture Audit 

Programs with Approved 

Waivers-Based Cost 

Effectiveness [Note #3]

Programs with less than 

$1 million in FY 2017 

Expenditures [Note #7] 

140

RUS Water and Waste Disposal 

Systems for Rural Communities 

—Loans [Note #2] 

✓ Unchecked ✓ Unchecked

141

RUS Water and Waste Disposal 

Systems Loans and Grants Section 

306C

Unchecked Unchecked ✓ Unchecked

142 RUS Water and Waste Guaranteed 

Loans Unchecked Unchecked ✓ Unchecked

143 Research, Education, and Economics 

(REE) Salaries and Expenses ✓ Unchecked Unchecked Unchecked

144 Risk Management Agency Federal 

Crop Insurance Corporation Unchecked ✓ Unchecked Unchecked
SECTION III | OTHER INFORMATION

219 

Overpayment Recaptures with and without Recapture Audit Programs 

USDA had mechanisms in place to collect overpayments, even prior to the establishment of 

official payment recapture audits. For the FY 2018 AFR Recapture reporting period [Note #4], 

USDA recovered $371.59 million out of the identified $381.01 million through methods 

outside of Recapture Audit Programs (See Exhibit 35: Overpayment Recaptured Outside of 

Recapture Audit for additional breakout). The table below provides detailed information 

regarding the recoveries collected through official payment recapture audits. 

EXHIBIT 34: Overpayments Recaptured through Payment Recapture Audits Table ($ in millions) 

[Note #4]

Program or Activity 

Amount 

Identified

Amount 

Recaptured

CY Recapture 

Rate

CY +1 

Recapture 

Rate Target

Supplier Credit Recovery 

Audit Program [Note #5] $0.25 $0.25 100.00% 100.00% 

APHIS Internal Program $0.10 $0.00 0.00% 50.00% 

FSA/CCC Internal 

Program $195.86 $186.64 95.29% 96.00% 

NIFA Internal Program $15.98 $6.80 42.55% 43.00% 

RD Internal Programs $5.31 $4.62 87.01% 88.00% 

RMA—Federal Crop 

Insurance Corporation 

[Note #6] 

$11.40 $6.75 59.21% 100.00%

TOTAL $228.90 $205.06 N/A N/A 
USDA AGENCY FINANCIAL REPORT | 2018 

220 

EXHIBIT 35: Overpayment Recaptured Outside of Recapture Audit Programs ($ in millions) 

[Note #4]

Program or Activity Amount Identified Amount Recaptured Recapture Rate 

AMS $0.00 $0.00 N/A 

APHIS $0.06 $0.06 100.00% 

DA $0.00 $0.00 N/A 

FAS $0.09 $0.09 100.00% 

FNS $353.19 $353.19 100.00% 

FS $2.98 $2.54 85.23% 

FSA $4.94 $5.93 120.04%14

FSIS $0.00 $0.00 N/A 

GIPSA $0.00 $0.00 N/A 

NAD/OAO $0.00 $0.00 N/A 

NRCS $3.51 $1.11 31.62%

OCFO/OBPA/OCIO $0.00 $0.00 N/A 

OGC $0.00 $0.00 N/A 

OIG $0.00 $0.00 N/A 

OSEC/OCE $0.00 $0.00 N/A 

RBS $0.02 $0.00 0.00% 

REE $16.21 $8.66 53.42% 

RHS $0.01 $0.02 200.00% 

RMA $0.00 $0.00 N/A 

RUS $0.00 $0.00 N/A 

OCR $0.00 $0.00 N/A 

Total $381.01 $371.59 97.53% 

 

14 The amount recaptured can be higher than the amount identified within a specific time 

period given the nature of collections. Collection of overpayments occur after the identification 

of the overpayment which can lapse into other reporting periods and there may be instances 

that require multiple collections (such as a payment plan for individuals who have a lower 

income) in order to return the overpayment in full. 
 SECTION III | OTHER INFORMATION 

221 

USDA recaptured $205.06 million dollars of which $187.89 million or 91.63% was returned to the Treasury, $13.71 million or 6.68% was 

returned to agencies for the original program purpose, and $3.46 million or 1.69% was used for Other purposes, as described in Exhibit 36 below. 

EXHIBIT 36: Disposition of Funds Recaptured Through Payment Recapture Audit Programs Table ($ in millions) 

Program or 

Activity 

Amount Recovered Type of Payment Agency Expenses to Administer the Program Payment Recapture Auditor FeesFinancial Management Improvement Activities Original Purpose To OIG Returned to Treasury Other 

Justification for “Other” 

Amounts 

Supplier Credit 

Recovery Audit 

Program 

[Note #5] 

$0.25 Contracts $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.25 Funds in "Other" Column 

have not been distributed. 

APHIS Internal 

Program $0.00 Grants $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 N/A 

FSA/CCC Internal 

Program $186.64 Loans Other $0.00 $0.00 $0.00 $0.66 $0.00 $185.98 $0.00 N/A 

NIFA Internal 

Program $6.80 Grants $0.00 $0.00 $0.00 $6.30 $0.00 $0.50 $0.00 N/A 

RD Internal 

Program $4.62 Loans Grants $0.00 $0.00 $0.00 $0.00 $0.00 $1.41 $3.21 Funds in "Other" Column have not been distributed. 

RMA—Federal 

Crop Insurance 

Corporation 

$6.75 Other $0.00 $0.00 $0.00 $6.75 $0.00 $0.00 $0.00 N/A

Total $205.06 N/A $0.00 $0.00 $0.00 $13.71 $0.00 $187.89 $3.46 See justifications above. 
USDA AGENCY FINANCIAL REPORT | 2018 

222 

EXHIBIT 37: Aging of Outstanding Overpayments Identified in the Payment Recapture Audits Table ($ 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 

Justification for 

Amounts Determined 

not to be Collectable 

Supplier Credit Recovery 

Audit Program N/A $0.00 $0.00 $0.00 0.00 N/A 

APHIS Internal Program N/A $0.00 $0.00 $0.00 $0.00 N/A 

FSA/CCC Internal 

Program 

Loans/ 

Other $7.77 $2.72 $0.25 $0.06 

Write-offs due to finality 

rule, relief granted, 

deceased debtor, and 

small balances 

NIFA Internal Program N/A $0.40 $0.10 $1.30 $0.00 N/A 

RD Internal Program 

Loans 

Grants 

$1.32 $1.06 $5.13 $0.00 N/A 

RMA—Federal Crop 

Insurance Corporation Other $0.06 $0.41 $1.30 $0.00 N/A 

TOTAL [Note #6] N/A $9.55 $4.29 $7.98 $0.06 See justification above. 

Note #1: The Food for Progress Program and RD Voucher Program (Section 542) are participating in both the Supplier Credit Recovery Audit 

Program and in their respective agencies’ Internal Program. 

Note #2: The RUS Water and Waste Disposal Systems for Rural Communities—Loans is participating in the Supplier Credit Recovery Audit 

Program and are covered under RD’s waiver (waiver mentioned in Note #3). 

Note #3: OMB was notified of FNS’ determination in October 2016. FNS determined they would be unable to conduct an official payment 

recapture audit on its programs because States make payments to FNS program recipients. RD’s and FSIS’ justifications were 

provided in the FY 2016 AFR. 

Note #4: The FY 2018 AFR Recapture Reporting Period consists of 4th Qtr. FY 2017, 1st Qtr. FY 2018, 2nd Qtr. FY 2018, and 3rd Qtr. FY 2018. 
 SECTION III | OTHER INFORMATION 

223 

Note #5: The Supplier Credit Recovery Audit’s reporting timeframe is September 29, 2017, through July 11, 2018. 

Note #6: USDA has a total of $21.82 million dollars in amounts outstanding (i.e., 9.53 percent of the total overpayments identified through 

payment recapture audits). USDA has a total of $0.06 million dollars in amounts determined to not be collectable (i.e. 0.03 percent 

of the total overpayments identified through payment recapture audits). 

Note #7: These programs or activities had less than $1 million in FY 2017 expenditures. Outlay levels can vary year to year, which is why 

some of these programs are currently conducting recovery auditing despite being under the $1 million IPERA threshold. 
USDA AGENCY FINANCIAL REPORT | 2018 

224

AGENCY REDUCTION OF IMPROPER PAYMENTS WITH THE DO NOT PAY 

INITIATIVE SECTION

Personal Identity Verification (PIV) Conversion

The U.S. Department of Agriculture (USDA) continued to expand its use of the Do Not Pay 

(DNP) Portal in fiscal year (FY) 2018 in the development and use of Personal Identity 

Verification (PIV) card/LincPass conversion access for USDA DNP portal users. USDA DNP 

Portal users expressed that the major difficulty in using the DNP Portal was the multi-tiered 

Public Key Infrastructure (PKI) token logon to the DNP Portal. USDA presented the issue to 

the U.S. Department of the Treasury (Treasury) and soon after was engaged in a 

PIV/LincPass pilot project.

USDA Office of the Chief Financial Officer (OCFO) collaborated with the Treasury, Bureau of 

the Fiscal Service, and the DNP Business Center to provide a simplified logon. USDA’s Office 

of the Chief Financial Officer (OCFO) managed the internal implementation of the pilot to 

include the demonstration, testing, and documentation of the process for conversion from the 

multi-tiered PKI token logon to PIV card/LincPass access. USDA’s OCFO selected USDA’s 

Rural Development (RD) agency to test, pilot, and track implementation of user access from 

the multi-tiered PKI Token logon to PIV card/LincPass access. 

USDA’s OCFO selected RD because it had many users (more than 1,800), which covered a 

wide area across the United States and the U.S. protectorates, to capture lessons learned and to 

document the best practices to be applied throughout the agency. USDA recognized the need to 

reduce the number of users by identifying those whose current duties did not require access to 

the DNP Portal. USDA conferred with RD and their Local Security Administrators (LSAs) to 

verify conversion of creditable users and created a roll-out plan for more than 1,500 users, 

while concurrently deactivating RD users who no longer needed access to the DNP Portal. 

Overall, USDA converted more than 1,500 users to the PIV card/LincPass access in less than 

45 days.

In addition, USDA created internal conversion guidance for PIV card/LincPass access to 

include a frequently asked questions sheet that assists users with information technology error 

notification answers. USDA is currently tracking and updating a packet of lessons learned, 

which it will share with Treasury, with the hope that it can be used government-wide. USDA 

has been successful in increasing portal user activity in the DNP portal. After the conversion, a 

deliberative metric assessment was conducted on RD user activity using statistical data 

provided by DNP. Although there has been a decrease in users from the previous fiscal year, 

users have responded positively to the change in access point-based on the table below. 
SECTION III | OTHER INFORMATION 

225 

EXHIBIT 38: DNP Portal Usage for RD from June 2017 to June 2018 

Usage June 2017 June 2018 Increase 

Total DNP Portal Logins 3,867 6,987 80.68% 

Total DNP Portal Searches 7,149 13,296 85.98% 

USDA’s OCFO is currently creating a roll-out plan for all USDA-enrolled agencies to convert 

from PKI token to PIV card/LincPass access to verify accurate use of Federal funds and reduce 

improper payments. 

As part of the 2018 Annual Government-wide Financial Management Conference, which is 

hosted by the U.S. Department of the Treasury, USDA PIV card transition was presented as a 

best practice and lessons learned. 

USDA and DNP Databases 

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 Farm Service Agency (FSA) FY 2018 new enrollees, Guaranteed Loans, 

and Direct Loans Divisions on a post-payment basis. Several additional programs use 

this database in pre-award activities in the DNP portal. All USDA payments made 

through Treasury are checked against this database on a post-payment basis. 

2. The General Services Administration’s System for Award Management (SAM) 

database is checked at pre-award for most contracts, grants, cooperative agreements, 

and insurance programs. All USDA payments made through Treasury are checked 

against this database on a post-payment basis. 

3. The Credit Alert System or Credit Alert Interactive Voice Response System (CAIVRS) 

of the U.S. Department of Housing and Urban Development is used by USDA loan 

programs at time of award. RD signed a memorandum of understanding with Treasury 

and updated its system of records notice (SORN). RD began transmitting its CAIVRS 

data to Treasury in June 2017. 

4. RD is using the Debt Check Database of the Treasury (Debt Check) for most pre-award 

verifications. 

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. 
USDA AGENCY FINANCIAL REPORT | 2018 

226 

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 the food and nutrition programs 

are required to use prisoner data when making awards. 

USDA’s use of these databases is through the DNP portal and directly from the database 

providers. However, RD utilizes the DNP portal for single searches on pre-award checks, 

pre-approval, and pre-disbursement checks.

USDA and DNP ADJUDICATION 

USDA is utilizing DNP adjudication during the payment integration function, which allows 

USDA agencies to detect a payment to a deceased individual. USDA verification eligibility 

activities for deceased individuals are now adjudicated within the DNP Portal. Matches for 

deceased individuals were made in the DNP Portal. After some due diligence, USDA 

determined that the payments were legitimate because they needed to be made to the estate 

rather than to the deceased individual. USDA’s OCFO is in the process of joining the FSA’s 

guaranteed loans and direct loans for post-payment review in FY 2018. DNP payment 

integration review and adjudication within the Portal has enabled USDA to identify and correct 

issues with long-term contracts and awards. Improved internal controls are now in place to 

update payment records with USDA’s long-term business partners as ownership changes. 

USDA DELIVERABLES 

USDA has completed a SORN for USDA’s RD to transmit CAIVRS data to Treasury’s DNP 

Portal. USDA is working to complete a similar SORN process for USDA’s FSA to transmit 

CAIVRS data to Treasury’s DNP Portal. 

The USDA National Finance Center has amended the SORN OCFO-10. They are continuing the 

process to complete the Computer Matching Agreement (CMA) for continuous monitoring for 

the Financial Management Modernization Initiative or accounting system to communicate with 

Treasury’s DNP Portal. USDA is working with the DNP Business Center in its efforts to engage 

the state of Tennessee in accordance with the Federal Improper Payments Coordination Act.
SECTION III | OTHER INFORMATION

227

Fraud Reduction Report

OVERVIEW

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

Responsibility for Internal Control, the U.S. Department of Agriculture (USDA) is in the 

process of implementing a Departmental-Level Enterprise Risk Management (ERM) program 

that effectively identifies risks; assesses, analyzes, and prioritizes those risks; and formulates

and documents the risks. To date, a number of USDA agencies have implemented ERM. 

The implementation of ERM has helped agencies to better identify risk and vulnerabilities and 

take appropriate action to reduce and prevent fraud. As the Department continues to implement 

the requirement of OMB Circular A-123, the Department will use agency best practices to 

identify and minimize risks and vulnerabilities to prevent fraud. Outlined below are specific 

actions the Department is taking to integrate fraud risk prevention and monitoring into the 

management of internal controls.

RISK ASSESSMENT:

The A-123 Appendix A, Assessment of Internal Control over Financial Reporting, annual risk 

assessment incorporates specific internal and external fraud risk questions in the “Inherent Risk 

Considerations” section. The questions allow the respondent to rate the risk of the agency’s

process as either highly susceptible, susceptible, or not susceptible to fraud. The overall risk 

rating is dependent on the agency’s responses, and is tallied along with other risk responses, to 

determine the level and frequency of testing.

Additionally, as a requirement of the Statement on Auditing Standards (SAS) No. 122, 

Clarification and Recodification, specifically Audit (AU) Section 240, Consideration of Fraud 

in a Financial Statement Audit, the Office of the Chief Financial Officer (OCFO) disseminates

and consolidates responses to a fraud questionnaire among USDA’s financial community.

TECHNOLOGY:

The A-123 Appendix A annual assessment includes 15 automated, continuously monitored, 

financial controls. The controls are configured in the USDA financial system to detect potential 

fraud/misuse. Configuration changes are immediately reported as exceptions to responsible 

control owners and first-line supervisors, and the Internal Controls Division has the ability to 

run real-time system reports to further monitor exceptions. An oversight workflow is 

established where the OCFO’s Internal Audit and Compliance Group is responsible for 

assigning remediation tasks to correct any exception issues. Reports are available to be 

communicated to the USDA agencies at any time.
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ENTITY LEVEL CONTROLS:

USDA agencies and staff offices are required to complete an annual Entity Level Control 

(ELC) assessment. The ELC assessment was recently updated to comply with the most current 

Government Accountability Office (GAO)—Standards for Internal Control in the Federal 

Government (“Green Book”). The assessment includes GAO Principle 8, which assesses fraud

risk. Attributes include: (1) types of fraud, (2) fraud risk factors, and (3) responses to fraud 

risks. Objectives include: (1) identifying fraud risks based on fraud risk factors, (2) assessing 

identified fraud risks for significance, and (3) properly responding to identified fraud risks.

ACCESS CONTROLS:

The USDA consolidated financial systems’ access controls are managed through the 

Governance Risk and Compliance (GRC) Access Control module. Access controls are 

configured to prevent conflicting accounting roles unless there is an immediate need that is 

fully documented, mitigated, and supported by compensating controls. There is a standard 

process for the review and approval of mitigating controls to ensure that control strategies are 

properly documented and carried out by the requesting agency.

SEGREGATION OF DUTY: 

USDA’s consolidated financial system is configured in such a way that conflicting roles are 

prohibited, which ensures proper segregation of duty (SOD). Those who initiate a transaction in 

the financial system are not allowed to also approve that same transaction. There are also

financially significant, agency-specific SOD controls that are documented and tested annually 

during the A-123, Appendix A assessment. The strict prohibition of conflicting roles reduces 

the risk of fraud.

ADDITIONAL FRAUD RISK INTEGRATION EFFORTS:

During fiscal year (FY) 2018, the OCFO participated in the OMB Fraud Working Group, 

whose mission is “to improve the sharing and development of best practices and data analytics 

techniques for detecting, preventing, and responding to fraud, including improper payments.” 

Several Federal agencies shared implementation practices and pilots, including the 

U.S. Department of the Treasury (Treasury) and the Veterans Administration (VA) which built 

a government-wide playbook “to assist agencies in identifying, prioritizing, and responding to 

fraud, waste, and abuse.” Treasury issued the draft playbook in early August for review and 

comment, with input from USDA. OCFO also independently met with Treasury and the VA to 

benchmark against their fraud risk assessment and fraud risk profile, and to better understand 

how to integrate the existing external financial reporting assessment into an evolving fraud risk 

management structure.
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In addition, OCFO met with the USDA Office of Inspector General to understand the existing 

confirmed fraud cases (including those related to improper payments), and the reporting and 

adjudication process. That information, coupled with USDA cases recently reported in the 

Fraud Digest, allowed for OCFO to submit the most significant program and financial fraud 

types for consideration to include in the consolidated Federal Fraud Taxonomy, updated and 

managed by OMB.

In compliance with A-123, OCFO also included a fraud assertion in the FY 2018 Assurance 

Statement Template. The USDA component agencies’ and staff office’s progress on the 

establishment of strategies, procedures, and other steps to curb fraud were then gauged and 

consolidated in the Agency Financial Report. All component agencies and staff offices reported 

that financial and administrative controls were established to identify and assess fraud risks, 

and control activities were designed and implemented to prevent, detect, and respond to fraud, 

including improper payments. 

Component agencies and staff offices also assessed the fraud risk principle in the Standards for 

Internal Control for Federal Government and OMB Circular A-123, with respect to leading 

practices for managing fraud risk; assessed risks and vulnerabilities to fraud, including payroll, 

beneficiary payments, grants, large contracts, and purchase and travel cards, as applicable; and 

established strategies, procedures, and other steps to curb fraud as part of internal control 

activities operating during the normal course of business.

*The agency transactional control objectives to reduce fraud risk (a subset of the full A-123, 

Appendix A control library) are included in the tables following this section.

SPECIFIC USDA COMPONENT AGENCIES REPORTED THE FOLLOWING 

DEVELOPMENTS RELATED TO THE MANAGEMENT OF FRAUD RISK:

Farm Service Agency (FSA) established internal controls over agency programs and 

operations by issuing program and administrative guidance to help curb fraud.

FSA has controls over segregation of duties to prevent fraud when disbursing funds. Examples 

include policies that prevent the same person from certifying and signing payments. When 

delegating employees to disburse payments, employees acknowledge that payments that they 

certify and/or sign must be issued in accordance with the Commodity Credit Corporation (CCC) 

bylaws. Annual reviews are conducted to determine whether delegations should be revoked. 

FSA also requires expenditure corrections to be reviewed by someone other than the individual 

responsible for issuing the original payment. 
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230 

A whistleblower hotline is also administered by FSA where employees and producers can 

report actual and suspected program violations by employees and producers. Complaints are 

investigated to determine validity. 

FSA developed an in-depth risk assessment process based on ERM principles to identify risks, 

including fraud risks, associated with FSA programs. 

FSA piloted this “deep dive” process on the Livestock Forage Disaster Program (LFP). 

The assessment included a survey completed by employees that implemented LFP in the prior 

3 years. The survey included questions specifically related to identifying fraud risk leveraging 

GAO’s Fraud Risk Management Framework. Findings were summarized and shared with the 

LFP program management for review and action. 

The Food and Nutrition Service (FNS) implemented the Supplemental Nutrition Assistance 

Program (SNAP) Fraud Framework that combines innovations in the use of analytics with 

concepts and practices from industry in order to more effectively detect potential fraud and 

improve administration and oversight. It offers individual states the flexibility to choose 

techniques that best fit their needs, recognizing that fraud is not a static concept and that one 

size does not fit all. Components of the framework include: (1) Organizational Management, 

(2) Performance Measurement, (3) Recipient Integrity Education, (4) Fraud Detection, 

(5) Investigations and Dispositions, (6) Analytics and Data Management, and (7) Learning 

and Development. 

The Risk Management Agency’s (RMA) Federal Crop Insurance Program is a 

self-certification program where participants certify as to the correctness of information (acres, 

share, production, etc.) as a basis for program participation. This information may be subject to 

further review and verification to determine its accuracy. For this type of program, the primary 

root causes of errors and improper payments are due to the individual program participants, 

(producers, Approved Insurance Providers (AIPs), agents, and/or loss adjusters) failure to 

correctly interpret, provide, and/or process information in accordance with policy and/or 

procedure requirements for determining eligibility and program payment amounts. 

The AIPs and agents are to review the System for Award Management (SAM) and other 

suspension and debarment systems before providing policies and payments. 

The strategies for identifying and controlling fraud include reviews such as: 

• Data Mining-Initiated Reviews—RMA has an agreement with the Center for 

Agribusiness Excellence (CAE) to conduct data mining. Results of CAE’s data mining 

are used to detect potential cases of fraud, waste, or abuse by: (1) developing scenarios 

of potential program abuse by farmers, insurance agencies, and loss adjusters; and 

(2) querying the database containing crop insurance data and information on weather, 
SECTION III | OTHER INFORMATION 

231 

soil, and land surveys to generate reports and lists of participants with anomalous claim 

payments. For example, RMA develops an annual list of producers (i.e., a spot-check 

list) whose operations warrant an on-site inspection because their claims exhibit 

patterns consistent with the potential for fraud and abuse. 

• Program Reviews—RMA conducts Program Reviews to evaluate the overall performance 

of a specific program. Program Reviews may be broad or limited in scope, and either 

nationwide or regional. Program Reviews may involve both crop-specific programs and 

insurance concepts such as Crop Revenue Coverage or Prevented Planting. 

• Special Investigations—RMA’s Special Investigations Branch investigates alleged 

fraud, waste, and abuse and identifies reasons the abuse occurred. Special Investigations 

Branch (SIB) reviews high-profile, highly complex cases involving multiple subjects

spread over wide geographic areas. 

• Special Reviews—RMA conducts Special Reviews in response to allegations of 

noncompliance with Federal crop insurance laws, policies, agreements/contracts, or 

approved procedures. RMA receives complaints or requests for Special Reviews from 

various sources including Office of Inspector General hotlines, general public 

complaints, congressional inquiries, the Farm Service Agency or other USDA offices, 

AIP officials, etc. 

• Standard Reinsurance Agreements (SRAs) Required Reviews—SRAs establish the 

terms and conditions under which AIPs that sell and service policies have to operate. 

Under the 2016 SRA, AIPs are to conduct reviews, including inspections of policies for 

which anomalies or large claims have been identified through data mining, and report 

the results to RMA. 

RMA is aware of the self-certification aspect of the program and the potential vulnerabilities it 

presents, but is confident the coordination with AIPs and policyholders will limit the risk 

associated with this regulatory barrier. In addition, the Acreage Crop Reporting Streamlining 

Initiative (ACRSI) replaces duplicative crop reporting of common acreage information by 

producers. Three USDA agencies (Natural Resources Conservation Service [NRCS], FSA, and 

RMA) have established a memorandum of understanding to create a common data set of 

acreage reporting documentation used to verify participant’s self-certification information. 

Rural Development’s (RD) ERM framework includes a Risk Taxonomy, which provides a 

consistent structure for identifying and classifying risks into logical groups. The Risk 

Taxonomy includes a “Fraud & Criminal Activity” sub-category. RD has provided training to 

all levels of personnel across the organization on ERM concepts, which included a focus on the 

Risk Taxonomy and how staff can use it. 
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232 

THE USDA DEPARTMENTAL STAFF OFFICES REPORTED THE FOLLOWING 

PROGRESS: 

Office of the Chief Financial Officer (OCFO) 

Grants—System edits have been built and identified in the ezFedGrants module in the 

Financial Management Modernization Initiative (FMMI) for more than half of the required 

objectives in the A-123, Appendix A, Grants Cycle. Potential risks in eligibility, segregation of 

duties, completeness, accuracy, and validity are mitigated through automated preventive 

controls. The controls minimize the risk of grants being awarded to ineligible recipients; users 

being able to perform incompatible duties; and incomplete, inaccurate, invalid, untimely award 

information, obligations, and payments. 

USDA agencies and staff offices that have deployed to ezFedGrants are National Institute of 

Food and Agriculture (NIFA), Animal and Plant Health Inspection Service (APHIS), Office of 

Advocacy and Outreach (OAO), NRCS, Agricultural Marketing Service (AMS) and Foreign 

Agricultural Service (FAS). OCFO is currently piloting the EzFedGrants module with Forest 

Service (FS) and RMA. 

Payroll—At the USDA National Finance Center (NFC), logical access controls are 

implemented and separation of duties are enforced as a preventive measure to lessen the 

likelihood of fraud. Role-based access is used (employees are assigned roles) to ensure that 

conflicting access is not assigned to employees. Access for payroll-related activities is

segregated to ensure that no one employee has all the access to create a fictitious (ghost) 

employee and obtain a salary for this ghost employee. 

Based on the roles that are established for NFC’s systems, it is very difficult to create a 

fictitious employee and get that employee paid (unless there is collusion, which cannot be 

prevented). To create a fictitious employee and get that employee paid, you would need the 

access to: 

• create a position or assign an individual to a position that already exists; 

• enter all the personnel actions in the Human Resources (HR) system for the employee 

accession and establish the employee on the database; and 

• establish the employee in the Time and Attendance (T&A) system, enter the time and 

attendance record for the employee in the T&A system, and approve/certify the time 

and attendance record for the employee in the system. 

The HR and T&A access listed above are segregated via role-based access so that no one 

employee can create a fictitious employee and disburse payment. In addition, there is separation 

of duties between the person who enters a payroll action and the person who approves that 
SECTION III | OTHER INFORMATION 

233 

action. Where separation of duties is not feasible, compensating controls are in place as a 

detective measure to identify potential fraud. Payroll Operations Branch personnel have the 

access to enter manual payment requests for agencies they service and also approve the payment 

requests if the payment is made to a non-NFC employee or is less than $5,000 gross. 

All payments to NFC personnel or payments over $5,000 gross require special approval. 

Alternatively, a manual payment may be processed in the NFC Special Payroll Processing 

System (SPPS). All manual payments processed by NFC personnel are logged for an 

independent review by a separate section in the Payroll Operations Branch. This independent 

group reviews all manual payments processed for NFC personnel as well as a sample of manual 

payments processed for other agencies. 

NFC’s HR, T&A, and payroll systems are designed with hundreds of edits that would help 

prevent errors up front. For example, a T&A payment cannot be made for a Social Security 

Number (SSN) that is not in NFC’s database, and there are edits to ensure that the employees 

are paid according to their established pay plan and pay rate. Changes to pay plans and pay 

rates could only be made through the established configuration management process. 

As a service organization providing payroll services, NFC’s function is to process payroll based 

on the data entered into and processed by NFC’s systems. It is the customer’s responsibility to 

ensure that inputs are complete, accurate, and authorized, and it is the customer’s responsibility to 

review payroll outputs to ensure that what NFC processed is complete and accurate. For agencies 

that use FMMI, the payroll accounting data is available in FMMI. For agencies that do not use 

FMMI, NFC makes the payroll accounting data file available to them via a mainframe scheduled 

job. In addition, NFC provides various reporting tools for extracting the payroll data for review. 

Payroll information is available in NFC’s Insight system, as well as the Reporting Center. 

Travel Cards—The OCFO Fiscal Policy Division (FPD) restricts travel charge card use by 

blocking 922 Merchant Category Codes (MCCs); this prevents cardholders from successfully 

completing transactions with these vendors. 

Additionally, the OCFO FPD uses the Visa IntelliLink Compliance Management tool to 

identify and detect possible travel charge card misuse. This is a web-based modular application 

designed to provide sophisticated information services including analytics and investigative 

reporting, misuse detection, program compliance, regulatory compliance, spend management, 

and support for strategic sourcing. Our travel charge card vendor, U.S. Bank, provides access to 

this tool. 

OCFO FPD uses this application to identify possible charge card misuse, flag cases for review, 

route cases to the responsible agency/staff offices, record agency comments, and provide a final 

classification for each case. Using Visa IntelliLink, the FPD developed seven business rules to 
USDA AGENCY FINANCIAL REPORT | 2018 

234 

identify instances of potential misuse of the travel charge card; these rules, as listed below, are 

run on a monthly basis:

• Blocked MCCs 2—Identifies attempted transactions with merchants whose MCC is 

blocked/restricted for the travel charge card program (blocked MCCs are a method to 

prevent fraudulent activities); 

• Cash Test—Provides a listing of accounts with large ATM transactions; 

• Cash Withdrawal with no associated Travel—Provides ATM and cash transactions that 

do not have associated travel (air, hotel, car rental, and rail) reservations within 

3 business days before official travel begins or are after the last day of official travel; 

• Restaurant/Bar multiple charges over $100 in a 7-day period—Provides transactions 

with MCCs for restaurants and bars, where the billing amount was over $100 and 

occurred more than once in a 7-day period; 

• Spender—Provides normal travel transactions that are unusually high in their amount; 

• Unauthorized Travel System—Searches for non-ConcurGov or Travel Management 

Center (TMC) travel system use; and 

• Predictor Test—Transactions with a high score (from 90 to 95) indicates the predictive 

level of potential transaction misuse. The ‘Predictor Score’ is a proprietary algorithm 

developed by Visa to detect misuse. 

Once the tests are run, questionable transactions are checked, and cases of potential misuse are 

sent to the associated Agency/Staff Office data mining Point of Contact (POC) for a response. 

Departmental Administration Office of Contracting and Procurement (DA-OCP) 

Contracts—Contracting personnel review contract files to ensure that justification of limited 

competition or limited-source justification is present in accordance with Federal Acquisition 

Regulation (FAR) 6.302, FAR 8.405-6, and agency procedures. 

Also, automated controls are configured in the procurement Integrated Acquisition System 

(IAS) to reduce risks and vulnerabilities that could lead to fraud. 

IAS limits the ability to select a vendor from the list of vendors received from the financial 

system. Contracting Officers are required to look at the Excluded Parties List System (EPLS) 

(accessible through the System for Award Management [SAM] and the Federal Award 

Performance and Integrity Information System [FAPIIS]) exclusions reports before awarding a 

vendor. These measures prevent vendors on the active “Do Not Pay” list from receiving awards. 
SECTION III | OTHER INFORMATION 

235 

As a segregation of duty measure, IAS access and roles are defined in the IAS user roles and 

responsibilities segregation of duty matrix documentation that outlines which users’ roles cannot 

be held by the same person. These measures prevent employees from accessing the system as 

vendors and prevents employers from acting on all aspects of a contracting transaction. 

Purchase Cards—The Departmental Administration Office of Contracting and Procurement 

(DA-OCP) has established financial and administrative controls to identify and assess fraud 

risks and has designed and implemented control activities to prevent, detect, and respond to 

fraud, including improper payments. 

The Charge Card Service Center (CCSC), Agency Program Coordinators (APCs), Local 

Agency Program Coordinators (LAPCs), Approving Officials (AOs), and the Office of 

Inspector General (OIG) monitor purchase card transactions through Access Online. 

Cardholders are required to comply with any requests for information/investigations from the 

LAPC, APC, CCSC, or Agency acquisition review offices, AOs, and other duly authorized 

organizations/individuals regarding questionable purchases.

Management and oversight of the Purchase Card Program is the responsibility of the AO, 

LAPC, and APC. AOs monitor purchasing activity of cardholders within their agency. As part 

of oversight, Coordinators are to respond to user alerts within 30 days after notifications. Alerts 

are messages to Coordinators regarding questionable transactions and transactions selected by 

statistical sampling for review and other events by the CCSC. 
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236 

EXHIBIT 39: Agency Transactional Control Objectives to Reduce Fraud Risk: 

*Subset of full A-123, Appendix A, Control Library 

Process Objective Risk 

Accounts 

Receivable 

Invoices are complete, accurate, and 

appropriately represent the fees 

due/services provided. 

Invoices generated are not complete 

and accurate, and do not 

appropriately represent the fees 

due/services provided.

Awards Contracts Contracts are awarded to eligible vendors 

(includes Do Not Pay verification). 

Contracts are awarded to inactive 

vendors or vendor record not found in 

the financial system (includes Do Not 

Pay verification). 

Charge Card 

Issuance 

Employees assigned as Approving 

Officials for purchase card transactions 

are authorized. 

Employees assigned as Approving 

Officials for purchase card 

transactions are not authorized. 

Collections Cash receipts are protected before they 

are deposited. 

Cash receipts are not protected 

before they are deposited, which may 

result in fraudulent activity. 

Credit Extension Direct loan obligations recorded in the 

general ledger are valid, pertain to the 

purpose of the appropriation, and are 

supported by documentation. 

Direct loan obligations recorded in the 

general ledger are not valid, do not 

pertain to the purpose of the 

appropriation, and are not supported 

by documentation. 

Daily Escrow 

Processing 

Loss Claims are paid to valid insurance 

companies in compliance with collateral 

arrangements included in reinsurance 

agreement. 

Loss Claims may be paid without 

appropriate risk coverage for agency. 

Disbursements Disbursements are valid and supported 

by sufficient and relevant documentation. 

Disbursements are not valid and 

supported by sufficient and relevant 

documentation. 

Grant Awards and 

Modifications 

Grants are awarded to eligible recipients 

(includes Do Not Pay verification). 

Grants are awarded to ineligible 

recipients (includes Do Not Pay 

verification). 

Loss Claims Loss Claims are for valid policy 

reinsurance year. 

Unauthorized or incomplete Loss 

Claims may be paid. 

Monitoring—

Charge Card Cycle 

Duties are adequately segregated. Users are able to perform 

incompatible duties. 

Monitoring— 

Fleet Card 

Fleet card transactions adhere to Federal 

laws and regulations within the terms of 

the fleet card agreement. 

Fleet card transactions do not adhere 

to Federal laws and regulations within 

the terms of the fleet card agreement. 
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237 

Process Objective Risk 

Monitoring—

Purchase Card 

Purchase card transactions adhere to 

Federal laws and regulations within the 

terms of the purchase card agreement. 

Purchase card transactions do not 

adhere to Federal laws and 

regulations within the terms of the 

purchase card agreement. 

Monitoring— 

Travel Card 

Travel card transactions adhere to 

Federal laws and regulations within the 

terms of the purchase card agreement. 

Travel card transactions do not adhere 

to Federal laws and regulations within 

the terms of the purchase card 

agreement. 

Payments— 

Farm Support 

Recorded obligations and payments for 

the Commodity Credit Corporation (CCC) 

farm support programs are valid (made to 

only eligible farms/producers) and are 

approved/authorized by management. 

Recorded obligations and payments 

for CCC farm support programs are 

not valid (made to ineligible 

farms/producers) and/or are not 

approved/authorized by management. 

Payroll Processing Amounts recorded in the general ledger 

for payroll are accurate, valid, and 

properly supported by sufficient and 

relevant documentation. 

Amounts recorded in the general 

ledger for payroll are not accurate, 

valid, and properly supported by 

sufficient and relevant 

documentation. 

Relocation 

Allowance 

Claims for relocation expenses are timely 

reviewed for completeness and accuracy 

in accordance with agency directives and 

Federal Travel Regulation (FTR) 

requirements. 

Claims for relocation expenses are not 

timely reviewed for completeness and 

accuracy in accordance with agency 

directives and FTR requirements. 
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238 

Inspector General Act Amendments of 1988: 

Management’s Report on Audit Follow Up

BACKGROUND 

The Inspector General Act Amendments of 1988 (Public Law [P.L.] 100–504), require that 

each agency head submit semi-annual reports to Congress on the actions taken in response to 

the 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 (AFR). 

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 can be completed. 

FISCAL YEAR RESULTS 

USDA agencies closed 44 audits during fiscal year (FY) 2018. As of September 21, 2018, OIG 

and USDA agencies reached management decisions on 37 audits. As shown in the following 

exhibit, the Department’s inventory of open audits decreased in FY 2018 by 6.8 percent from 

103 to 96. 
SECTION III | OTHER INFORMATION 

239 

EXHIBIT 40: Open Audit Inventory 

Note: The final FY 2017 ending balance was revised from 86 to 103 to include: (1) fifteen audits 

transmitted by OIG after the close of the reporting period, and (2) two additional audits 

that reached management decision in the previous fiscal year. These adjustments are 

also reflected in the beginning balances for audits with disallowed costs (DC) and/or 

Funds to Be Put to Better Use (FTBU) shown in Exhibit 42 and Exhibit 43. 

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 following bullet points (see Exhibit 41 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 1 year or more past the management decision date 

require additional reporting elements. These elements include: date issued, revised 

estimated completion date, original dollar value of DC or FTBU, and an explanation as 

to why final action has not been taken. 
USDA AGENCY FINANCIAL REPORT | 2018 

240 

EXHIBIT 41: 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 Actions that management has taken to address the audit findings and 

recommendations. 

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 44 audits that achieved final action during the fiscal year, seven contained DC. 

The number of DC audits remaining in the inventory at the end of the fiscal year is 29, with a 

monetary value of $46,000,197 (see Exhibit 42). 

EXHIBIT 42: Inventory of Audits with Disallowed Costs (DC) 

Audits with DC # of Audits Amount ($) 

Beginning of the Period (October 1, 2017) 29 $ 45,420,039 

Plus: New Management Decisions 7 $ 1,145,398 

Total Audits Pending Collection of DC 36 $ 46,565,437 

Less: Adjustments N/A ($ 60,042) 

Revised Subtotal N/A $ 46,505,395 

Less: Final Actions (Recoveries) 7 $ 505,198 

Audits with DC Requiring Final Action at the 

End of the Period (September 6, 2018) 29 $ 46,000,197 
SECTION III | OTHER INFORMATION 

241 

Exhibit 42 and Exhibit 43: include only those open audits with DC and FTBU, respectively. 

Additionally, some audits contain both DC and FTBU amounts. For this reason, the number of 

audits shown as the ending balances in Exhibit 42 and Exhibit 43 does not equal the total 

resolved audit inventory balance in Exhibit 40. The beginning balance in Exhibit 42 was 

adjusted to include five audits with DC that were transmitted by OIG after the closing of the 

reporting period. 

For DC audits that achieved final action in FY 2018, OIG and management agreed to collect 

$487,419. Based on documentation to resolve the issues identified, adjustments were made 

totaling $77,821. 

Final action occurred on two audits that involved FTBU amounts. There are nine FTBU audits 

remaining in the inventory as of September 21, 2018, with a monetary value of $188,129,917 

(see Exhibit 43:).

EXHIBIT 43: Inventory of Audits with Funds To Be Put To Better Use (FTBU) 

Audits with FTBU # of Audits Amount ($) 

Beginning of the Period (October 1, 2017) * 9 $193,110,819 

Plus: New Management Decisions 2 $4,208,971 

Total Audits Pending 11 $197,319,790 

Less: Final Actions 2 $ 9,189,873 

Audits with FTBU Requiring Final Action at the End 

of the Period (September 21, 2018) 9 $188,129,917 

Disposition of FTBU: 

 FTBU Implemented N/A $9,189,873 

 FTBU Not Implemented N/A $0

 Total FTBU Amounts for Final Action Audits N/A $9,189,873 

* The beginning inventory in Exhibit 43: was adjusted to include one audit with FTBU that was 

transmitted by OIG after the closing of the reporting period. 

The number of audits open 1 or more years without final action in FY 2018 (65) remained at 

the same level as the previous fiscal year. The ending inventory includes 22 audits that reached 

1 year past the management decision date during FY 2018. USDA agencies continue to pursue 

remediation and/or compensating controls to address many of the underlying issues identified 

in these older audits. 
USDA AGENCY FINANCIAL REPORT | 2018 

242 

EXHIBIT 44: The Number of Audits Open 1 or More Years Past the Management Decision Date 

(MDD) Remains the Same as the Previous Fiscal Year. 

Audits 1 Year or More Past MDD # of Audits 

Beginning of the period 65

Less: Audits closed 22

Subtotal FY 2018 audits 1 year or more past MDD 43

Plus: Audits that reached 1 year past MDD during FY 2018 22 

Ending balance as of September 30, 2018 65

Agencies have completed planned corrective actions, with the exception of associated DC and 

FTBU, on 11 audits (see Exhibit 45), and one audit pending judicial action.

EXHIBIT 45: Distribution of Audits Open 1 Year or More Past the Management Decision Date 

(MDD)* 

Audits Behind Schedule 

No. DC ($) FTBU ($) 

53 $5,733,837 $118,528,436 

Audits Under Collection 

No. DC ($) FTBU ($) 

11 $29,914,812 $65,669,524 

*The total audits in Exhibit 45 does not include one audit pending judicial action 
 SECTION III | OTHER INFORMATION 

243 

MANAGEMENT’S REPORT ON AUDIT FOLLOW UP 

Audits without final action 1 year or more past the Management Decision Date (MDD), and behind schedule (excluding collections) are listed 

individually in Exhibit 46. The audits are categorized by agency and reason why final action has not occurred. More detailed information on 

audits pending judicial action, and audits under collection, is available from OCFO. 

EXHIBIT 46: Audits Open 1 Year or More Past the MDD and Behind Schedule 

Agricultural Marketing Service (AMS) 

Audits Date Issued Revised 

Completion Date Audit Title 

Monetary Amount 

DC ($) FTBU ($) 

Reason Pending 

01601-0001-21 09/13/2017 9/30/2018 

National Organic Program—

International Trade Arrangements 

and Agreements 

$0 $0 Pending OCFO review 

for closure 

AMS Subtotal (1) N/A N/A N/A $0 $0 N/A 

Animal and Plant Health Inspection Service (APHIS) 

Audits Date Issued Revised 

Completion Date Audit Title 

Monetary Amount 

DC ($) FTBU ($) 

Reason Pending 

33601-0001-31 5/30/2017 9/30/2019 APHIS: Animal Welfare Act—

Marine Mammals (Cetaceans) $0 $0 Pending Administrative Action

33601-0001-41 12/09/2014 9/30/2019 Oversight of Research Facilities $0 $420,299 

Issuance of Policy 

Guidance and/or 

Legislation
USDA AGENCY FINANCIAL REPORT | 2018 

244 

Audits Date Issued Revised 

Completion Date Audit Title 

Monetary Amount 

Reason Pending 

DC ($) FTBU ($) 

50601-0001-32 09/22/2015 9/30/2019 

Controls Over APHIS’ Introduction 

of Genetically Engineered 

Organisms 

$0 $0

Pending Administrative 

Action

50601-0004-31 03/30/2016 9/30/2019 USDA’s Response to Antibiotic 

Resistance $0 $0 Pending Administrative Action 

50601-0008-TE 01/28/2005 9/30/2019 

Controls over APHIS’ Issuance of 

Genetically Engineered Organisms 

Release Permits 

$0 $0

Issuance of Policy 

Guidance and/or 

Legislation

APHIS Subtotal (5) 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 

DC ($) FTBU ($) 

Reason Pending 

50601-0006-TE 03/04/2004 12/31/2018 ARS’ Controls Over Plant Variety 

Protection and Germplasm Storage $0 $0 Pending Administrative Action 

50601-0010-AT 03/8/2004 12/31/2018 

ARS’ Follow Up Report on the 

Security of Biological Agents at 

U.S. Department of Agriculture 

Laboratories 

$0 $0

Issuance of Policy 

Guidance and/or 

Legislation 

ARS Subtotal (2) N/A N/A N/A $0 $0 N/A 
 SECTION III | OTHER INFORMATION 

245 

Commodity Credit Corporation (CCC) 

Audits Date Issued Revised 

Completion Date Audit Title 

Monetary Amount 

DC ($) FTBU ($) 

Reason Pending 

06401-0005-11 02/12/2016 9/30/2018 

CCC’s Financial Statements for 

FY 2015 and 2014 $0 $0

Issuance of Policy 

Guidance and/or 

Legislation 

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 

DC ($) FTBU ($) 

Reason Pending 

07601-0001-22 03/31/2014 12/30/2018 Private Voluntary Organization 

Grant Fund Accountability $242,676 $8,481 Pending Administrative Action 

07601-0002-23 12/05/2016 12/30/2018 

FAS’ Monitoring of the 

Administration’s Trade Agreement 

Initiatives 

$0 $0

Issuance of Policy 

Guidance and/or 

Legislation 

50601-0001-22 03/28/2013 12/30/2018 

Effectiveness of FAS’ Recent 

Efforts to Implement Measurable 

Strategies Aligned to the 

Department’s Trade Promotion 

and Policy Goals 

$0 $0

Issuance of Policy 

Guidance and/or 

Legislation

50601-0002-16 02/06/2014 12/30/2018 

Section 632(a) Transfer of Funds 

from USAID to USDA for 

Afghanistan 

$0 $0

Issuance of Policy 

Guidance and/or 

Legislation 

FAS Subtotal (4) N/A N/A N/A $242,676 $8,481 N/A 
USDA AGENCY FINANCIAL REPORT | 2018 

246 

Food, Nutrition, and Consumer Service (FNCS)

Audits Date Issued Revised 

Completion Date 

Audit Title 

Monetary Amount 

DC ($) FTBU ($) 

Reason Pending 

81099-0001-12 08/30/2017 9/30/2018 

Audit of Food, Nutrition, and 

Consumer Services FY 2015 Firm 

Fixed Price Contract Award Price 

Reasonableness Determinations 

$0 $0 Pending 

Administrative Action 

FNCS Subtotal (1) N/A N/A N/A $0 $0 N/A 

Food and Nutrition Service (FNS) 

Audits Date Issued Revised 

Completion Date Audit Title 

Monetary Amount 

DC ($) FTBU ($) 

Reason Pending 

27004-0001-22 09/25/2014 11/30/2018 

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 

27004-0001-31(1) 9/29/2017 10/05/2018 

Florida’s Controls Over Summer 

Food Service Program 

(Interim Report) 

$0 $0 

Pending 

Administrative 

Action 

27004-0003-21(1) 9/7/2017 10/05/2018 

Summer Food Service Program—

Texas Sponsor Cost—

Interim Report 

$110,670 $0

Pending 

Administrative 

Action 

27004-0004-21(1) 9/28/2017 10/05/2018 

Texas Controls Over Summer 

Food Service Program 

(Interim Report) 

$0 $0

Pending 

Administrative 

Action
 SECTION III | OTHER INFORMATION 

247 

Audits Date Issued Revised 

Completion Date Audit Title 

Monetary Amount 

Reason Pending 

DC ($) FTBU ($) 

27099-0049-TE 09/04/2007 9/30/2018 

Disaster Food Stamp Program for 

Hurricanes Katrina and Rita in 

Louisiana, Mississippi, and Texas 

$0 $0

Issuance of Policy 

Guidance and/or 

Legislation 

27601-0001-31 07/31/2013 3/31/2019

Controls for Authorizing 

Supplemental Nutrition 

Assistance Program (SNAP) 

Retailers 

$0 $6,700,000 

Issuance of Policy 

Guidance and/or 

Legislation 

27601-0002-41 09/23/2015 8/30/2019 FNS Quality Control Process for 

SNAP Error Rate $0 $0

Pending 

Administrative 

Action 

27601-0003-10 09/27/2016 10/31/2018 New Mexico SNAP 

Determination of Eligibility $9,784 $0

Pending 

Administrative 

Action 

27601-0003-22 9/29/2016 10/15/2018 SNAP Administrative Costs $3,575,424 $111,399,656 

Pending 

Administrative 

Action 

27601-0004-10 10/25/2016 10/31/2018 

Michigan’s Compliance with 

SNAP Certification of Eligible 

Households Requirements 

$12,517 $0

Pending 

Administrative 

Action 

27601-0008-10 06/14/2017 11/15/2018 Georgia SNAP Requirements for 

Participating State Agencies $1,427 $0

Pending 

Administrative 

Action 

27601-0010-10 08/09/2017 9/30/2018 

SNAP Compliance with 

Requirements for Participating 

State Agencies 

$969 $0

Pending 

Administrative 

Action 
USDA AGENCY FINANCIAL REPORT | 2018 

248 

Audits Date Issued Revised 

Completion Date Audit Title 

Monetary Amount 

Reason Pending 

DC ($) FTBU ($) 

27601-0011-10 09/14/2017 9/30/2018 

State of South Carolina’s 

Compliance with 7 CFR, Part 272 

—SNAP Requirements for 

Participating State Agencies 

$26,209 $0

Pending 

Administrative 

Action 

27601-0012-10 09/28/2017 9/30/2018 

Washington’s Compliance with 

SNAP Requirements for 

Participating State Agencies 

(7 CFR, Part 272)

$0 $0

Pending 

Administrative 

Action

27901-0002-13 01/09/2017 10/31/2018 Detecting Potential SNAP 

Trafficking Using Data Analysis $0 $0

Pending 

Administrative 

Action 

FNS Subtotal (15) N/A N/A N/A $3,737,000 $118,099,656 N/A 
 SECTION III | OTHER INFORMATION 

249 

Farm Service Agency (FSA)

Audits Date Issued Revised 

Completion Date Audit Title 

Monetary Amount 

DC ($) FTBU ($) 

Reason Pending 

03501-0001-12 05/26/2015 11/30/2018 

Review of Farm Service Agency’s 

Initiative to Modernize and Innovate 

the Delivery of Agricultural Systems 

(MIDAS) 

$0 $0

Information 

Technology (IT) System 

Implementation 

and/or Enhancements 

03601-0001-22 07/31/2014 12/30/2018 Compliance Activities $0 $0

Issuance of Policy 

Guidance and/or 

Legislation 

03601-0002-22 07/31/2014 10/1/2018 Economic Adjustment Assistance to 

Users of Upland Cotton $1,518,068 $0 Pending Administrative Action 

03601-0003-22 09/23/2015 12/30/2018 Farm Service Agency Microloans $0 $0 Pending 

Administrative Action 

03702-0001-32 12/10/2014 12/30/2018 Farm Service Agency Livestock Forage 

Program 

$208,374 $0

IT System 

Implementation 

and/or Enhancements 

50601-0003-22 01/27/2017 12/30/2018 

Coordination of USDA Farm Program 

Compliance—Farm Service Agency, 

Risk Management Agency, and Natural 

Resources Conservation Service 

$0 $0 Pending 

Administrative Action 

FSA Subtotal (6) N/A N/A N/A $1,726,442 $0 N/A 
USDA AGENCY FINANCIAL REPORT | 2018 

250 

Food Safety and Inspection Service (FSIS)

Audits Date Issued Revised 

Completion Date Audit Title 

Monetary Amount 

DC ($) FTBU ($) 

Reason Pending 

24601-0005-31 6/12/2017 9/30/2018 

Food Safety and Inspection 

Service’s Controls Over Declaring 

Allergens on Product Labels 

$0 $0

Issuance of Policy 

Guidance and/or 

Legislation

50099-0002-21 3/27/2017 9/30/2018 

Food Safety and Inspection 

Service’s Process for Handling 

Vehicle Misuse Complaints 

$0 $0 Pending Administrative 

Action

50601-0006-HY 07/15/2009 12/1/2018 

Assessment of USDA’s Controls to 

Ensure Compliance with Beef 

Export Requirements 

$0 $0

IT System 

Implementation and/or 

Enhancements 

FSIS Subtotal (3) N/A N/A N/A $0 $0 N/A 

Natural Resources Conservation Service (NRCS) 

Audits Date Issued Revised 

Completion Date Audit Title

Monetary Amount 

Reason Pending 

DC ($) FTBU ($) 

10601-0002-31 07/30/2014 12/30/2018 NRCS Conservation Easement 

Compliance $0 $0 

Issuance of Policy 

Guidance and/or 

Legislation 

NRCS Subtotal (1) N/A N/A N/A $0 $0 N/A 
 SECTION III | OTHER INFORMATION 

251 

Office of the chief financial officer (OCFO)

Audits Date Issued Revised 

Completion Date Audit Title 

Monetary Amount 

DC ($) FTBU ($) 

Reason Pending 

50016-0001-23 09/28/2017 02/28/2019 

Implementation of Suspension and 

Debarment Tools in the 

U.S. Department of Agriculture 

$0 $0

Issuance of Policy 

Guidance and/or 

Legislation

OCFO Subtotal (1) N/A N/A N/A $0 $0 N/A 

Office of the Chief Information Officer (OCIO) 

Audits Date Issued Revised 

Completion Date Audit Title 

Monetary Amount 

Reason Pending 

DC ($) FTBU ($) 

50501-0002-12 11/15/2011 9/30/2019 

Fiscal Year 2011 Federal 

Information Security 

Management Act 

$0 $0

Issuance of Policy 

Guidance and/or 

Legislation

50501-0003-12 11/15/2012 9/30/2019 

USDA, Office of the Chief 

Information Officer, Fiscal Year 

2012 Federal Information 

Security Management Act 

$0 $0

Issuance of Policy 

Guidance and/or 

Legislation 

50501-0004-12 11/26/2013 9/30/2019 

USDA, Office of the Chief 

Information Officer, Fiscal Year 

2013 Federal Information 

Security Management Act 

$0 $0

Issuance of Policy 

Guidance and/or 

Legislation 

50501-0005-12 09/26/2014 9/30/2019 

CIGIE Cloud Computing Initiative 

—Status of Cloud—Computing 

Environment Within The USDA 

$0 $0 Pending Administrative 

Action
USDA AGENCY FINANCIAL REPORT | 2018 

252 

Audits Date Issued Revised 

Completion Date Audit Title 

Monetary Amount 

Reason Pending 

DC ($) FTBU ($) 

50501-0006-12 11/07/2014 9/30/2018 

USDA, Office of The Chief 

Financial Officer, Fiscal Year 2014 

Federal Information Security 

Management Act 

$0 $0

Issuance of Policy 

Guidance and/or 

Legislation 

50501-0008-12 11/10/2015 9/30/2018 

Office of the Chief Information 

Officer, FY 2015 Federal 

Information Security 

Modernization Act 

$0 $0

Issuance of Policy 

Guidance and/or 

Legislation 

50501-0012-12 11/10/2016 9/30/2019 

Office of the Chief Information 

Officer, FY 2016 Federal 

Information Security 

Modernization Act 

$0 $0 Pending Administrative 

Action

50501-0012-12(2) 11/09/2016 9/30/2019

Security Protocols and 

Connections for USDA’s 

Public-Facing Web sites 

$0 $0 Pending 

Rulemaking/Legislation 

50501-0015-FM 11/18/2009 9/17/2019 

Fiscal Year 2009 Federal 

Information Security 

Management Act 

$0 $0 Pending Administrative 

Action

88401-0001-12 08/02/2012 9/30/2019 

OCIO’s FY’s 2010 and 2011 

Funding Received for Security 

Enhancements 

$0 $0 Pending Administrative 

Action

OCIO Subtotal (10) N/A N/A N/A $0 $0 N/A 
 SECTION III | OTHER INFORMATION 

253 

Office of homeland security and Emergency Coordination (OHSEC) 

Audits Date Issued Revised 

Completion Date Audit Title 

Monetary Amount 

DC ($) FTBU ($) 

Reason Pending 

61701-0001-21 03/27/2017 10/01/2019 Agroterrorism Prevention, 

Detection, and Response 

$0 $0

Issuance of Policy 

Guidance and/or 

Legislation 

OHSEC Subtotal (1) N/A N/A N/A $0 $0 N/A 

Rural Development (RD) 

Audits Date Issued Revised 

Completion Date Audit Title 

Monetary Amount 

DC ($) FTBU ($) 

Reason Pending 

04601-0018-CH 09/27/2012 9/30/2018 

Rural Rental Housing Program 

Maintenance Costs and Inspection 

Procedures 

$0 $0

Issuance of Policy 

Guidance and/or 

Legislation 

04901-0001-13 09/24/2015 9/30/2018 

Review of Rural Rental Housing’s 

Tenant and Owner Data Using 

Data Analytics 

$27,719 $0

IT System 

Implementation 

and/or 

Enhancements 

RD Subtotal (2) N/A N/A N/A $27,719 $0 N/A 

Total Number 

Audits (53) N/A N/A Total $5,733,837 $118,528,436 N/A 
USDA AGENCY FINANCIAL REPORT | 2018 

254 

Reduce the Footprint 

The U.S. Department of Agriculture successfully implemented the OMB (Office of 

Management and Budget) policy “Reduce the Footprint” formally known as “Freeze the 

Footprint” as an initiative to maintain its office and warehouse square footage baselines at the 

FY 2012 levels, through 2015. Beginning in FY 2016, the policy shifted to an emphasis on 

disposal of excess real property held by the Federal Government, thus making the overall 

Federal real estate asset portfolio more efficient. CFO (Chief Financial Officer) Act entities are 

required to define annual targets to reduce their total square footage of domestic office and 

warehouse inventories in comparison to the revised FY 2015 “Reduce the Footprint” baseline, 

as compiled by the General Services Administration (GSA). 

EXHIBIT 47: Reduce the Footprint Baseline Comparison 

Square Footage (SF) (in millions) 

Fiscal Year 2015 Baseline 2017 Change (2015–2017) 

32.62 31.90 -2.22% 

EXHIBIT 48: Reporting of Operation and Maintenance Costs—Owned and Direct-Leased 

Facilities 

Operations and Maintenance (O&M) Costs ($ in millions) 

Fiscal Year 2015 Baseline 2017 Change (2015–2017) 

$580.20 $594.40 +$14.2 

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 2012, 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 2015 baseline, represented in the figures above. 

USDA continues to support footprint reductions by identifying opportunities for disposal, 

consolidation, and increased utilization of real property. The Department 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 
SECTION III | OTHER INFORMATION 

255 

USDA’s commitment to strategically managing and utilizing its space to achieve the highest 

return for the taxpayer. USDA also monitors compliance with this policy and requests agencies 

to submit waivers when this utilization rate cannot be met in new space acquisitions. USDA 

also provides periodic reports to senior management on agency compliance with this policy. 

USDA has also provided training to agencies to ensure an understanding of how utilization data 

is captured in the corporate property information system. 
USDA AGENCY FINANCIAL REPORT | 2018 

256 

Civil Monetary Penalties 

USDA maintains regulations regarding civil monetary policies at Title 7 of the Code of Federal Regulations § 3.91. The Department has 

reviewed and updated the penalties in accordance with the Civil Monetary Penalties Inflation Act of 2015. On December 5, 2017, the 

Department published the revised listing of penalties in the Federal Register (https://www.federalregister.gov/documents/2017/12/05/2017-

26194/inflation-catch-up-adjustment-of-civil-monetary-penalty-amounts). Each year, the Department must update its civil monetary penalties 

to account for annual inflation. On March 14, 2018, the Department published the revised penalties for 2018 in the Federal Register 

(https://www.federalregister.gov/documents/2018/03/14/2018-04832/civil-monetary-penalty-inflation-adjustment-for-2018). The table below 

briefly describes the penalty, under which authority it pertains, and the anticipated current penalty amount. 

EXHIBIT 49: Civil Monetary Penalties 

Penalty (Name of Penalty) Authority (Statute) Date of Current 

Adjustment 

Anticipated Current Penalty Level 

($ Amount) 

Improper recordkeeping first-time 

offense; pesticides 

Federal Insecticide, Fungicide, and 

Rodenticide Act, 7 U.S.C. 136i-1(d) 

03/14/2018 $923 

Improper recordkeeping subsequent 

offense; pesticides 

Federal Insecticide, Fungicide, and 

Rodenticide Act, 7 U.S.C. 136i-1(d) 

03/14/2018 $1,795 

Violation of the unfair conduct rule Perishable Agricultural Commodities Act, 

codified at 7 U.S.C. 499b(5) 

03/14/2018 $5,029 

Willful violation of the licensing 

requirements 

Perishable Agricultural Commodities Act, 

codified at 7 U.S.C. 499c(a) 

03/14/2018 $1,605 plus $401 per day for as long

as the violation continues

Unwillful violation of the licensing 

requirements 

Perishable Agricultural Commodities Act, 

codified at 7 U.S.C. 499c(a) 

03/14/2018 $401 for each non-willful offense 

Violative transaction Perishable Agricultural Commodities Act, 

codified at 7 U.S.C. 499h(e) 

03/14/2018 $3,209 

Violation Export Apple Act, 7 U.S.C. 586 03/14/2018 $147–$14,665 
 SECTION III | OTHER INFORMATION 

257 

Penalty (Name of Penalty) Authority (Statute) Date of Current 

Adjustment 

Anticipated Current Penalty Level 

($ Amount) 

Violation Export Grape and Plum Act, codified at 

7 U.S.C. 596 

03/14/2018 $281–$28,061 

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) 

03/14/2018 $2,806 

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) 

03/14/2018 $281 

Violation of a seed program Federal Seed Act, codified at 

7 U.S.C. 1596(b) 

03/14/2018 $96–$1,913 

Failure to collect any assessment or fee 

for violation 

Cotton Research and Promotion Act, 

codified at 7.U.S.C. 2112(b) 

03/14/2018 $2,806 

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) 

03/14/2018 $1,257–$12,570 

Failure to obey a cease and desist order Potato Research and Promotion Act, 

codified at 7 U.S.C. 2621(b)(3) 

03/14/2018 $1,257 

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) 

03/14/2018 $1,454–$14,544 

Failure to obey a cease and desist order Egg Research and Consumer Information 

Act, codified at 7 U.S.C. 2714(b)(3) 

03/14/2018 $1,454 

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)

03/14/2018 $11,346 
USDA AGENCY FINANCIAL REPORT | 2018 

258 

Penalty (Name of Penalty) Authority (Statute) Date of Current 

Adjustment 

Anticipated Current Penalty Level 

($ Amount) 

Failure to remit any assessment or fee, 

or for a violation of a program 

Wheat and Wheat Foods Research and 

Nutrition Education, codified at 

7 U.S.C. 3410(b) 

03/14/2018 $2,806 

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) 

03/14/2018 $1,320–$13,205 

Failure to obey a cease and desist order Floral Research and Consumer 

Information Act, codified at 

7 U.S.C. 4314(b)(3) 

03/14/2018 $1,320 

Violation of an order Dairy Promotion Program, codified at 

7 U.S.C. 4510(b) 

03/14/2018 $2,442 

Failure to pay, collect, or remit any 

assessment or fee, or for a violation of a 

program 

Honey Research, Promotion, and 

Consumer Information Act, codified at 

7 U.S.C. 4610(b)(1) 

03/14/2018 $752–$7,250 

Failure to obey a cease and desist order Honey Research, Promotion, and 

Consumer Information Act, codified at 

7 U.S.C. 4610(b)(3) 

03/14/2018 $752 

Violation of a program Pork Promotion, Research, and Consumer 

Information Act of 1985, codified at 

7 U.S.C. 4815(b)(1)(A)(i) 

03/14/2018 $2,269 

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) 

03/14/2018 $1,135 

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) 

03/14/2018 $1,135–$11,346 
 SECTION III | OTHER INFORMATION 

259 

Penalty (Name of Penalty) Authority (Statute) Date of Current 

Adjustment 

Anticipated Current Penalty Level 

($ Amount) 

Failure to obey a cease and desist order Watermelon Research and Promotion Act, 

codified at 7 U.S.C. 4910(b)(3) 

03/14/2018 $1,135 

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)

03/14/2018 $1,848–$18,477 

Failure to obey a cease and desist order Pecan Promotion and Research Act of 

1990, codified at 7 U.S.C. 6009(e) 

03/14/2018 $1,848 

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) 

03/14/2018 $898–$8,977 

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)

03/14/2018 $898 

Failure to pay, collect, or remit any 

assessment or fee, or for a violation of a 

program 

Lime Research, Promotion, and Consumer 

Information Act of 1990, codified at 

7 U.S.C. 6207(c)(1)

03/14/2018 $898–$8977 

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) 

03/14/2018 $898 

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) 

03/14/2018 $1,848 

Failure to obey a cease and desist order Soybean Promotion, Research, and 

Consumer Information Act, codified at 

7 U.S.C. 6307(e) 

03/14/2018 $9,239 
USDA AGENCY FINANCIAL REPORT | 2018 

260 

Penalty (Name of Penalty) Authority (Statute) Date of Current 

Adjustment 

Anticipated Current Penalty Level 

($ Amount) 

Failure to pay, collect, or remit any 

assessment or fee, or for an unwillful 

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) 

03/14/2018 $898–$8,977 

Failure to pay, collect, or remit any 

assessment or fee, or for a willful 

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) 

03/14/2018 $17,952–$179,522 

Failure to obey a cease and desist order Fluid Milk Promotion Act of 1990, codified 

at 7 U.S.C. 6411(e) 

03/14/2018 $9,239 

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) 

03/14/2018 $17,952 

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) 

03/14/2018 $847–$8,464 

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) 

03/14/2018 $8,464 

Violation of a program Sheep Promotion, Research, and 

Information Act of 1994, codified at 

7 U.S.C. 7107(c)(1)(A) 

03/14/2018 $1,650 

Failure to obey a cease and desist order Sheep Promotion, Research, and 

Information Act of 1994, codified at 

7 U.S.C. 7107(e) 

03/14/2018 $824 

Violation of an order or regulation Commodity Promotion, Research, and 

Information Act of 1996, codified at 

7 U.S.C. 7419(c)(1) 

03/14/2018 $1,558–$15,582 for each violation 
 SECTION III | OTHER INFORMATION 

261 

Penalty (Name of Penalty) Authority (Statute) Date of Current 

Adjustment 

Anticipated Current Penalty Level 

($ Amount) 

Failure to obey a cease and desist order Commodity Promotion, Research, and

Information Act of 1996, codified at 

7 U.S.C. 7419(e) 

03/14/2018 $1,558–$15,582 for each day the 

violation continues 

Violation of an order or regulation Canola and Rapeseed Research, 

Promotion, and Consumer Information 

Act, codified at 7 U.S.C. 7448(c)(1)(A)(i) 

03/14/2018 $1,558 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) 

03/14/2018 $7,791 for each day the violation 

continues 

Violation of an order or regulation National Kiwifruit Research, Promotion, 

and Consumer Information Act, codified 

at 7 U.S.C. 7468(c)(1)

03/14/2018 $780–$7,791 

Failure to obey a cease and desist order National Kiwifruit Research, Promotion, 

and Consumer Information Act, codified 

at 7 U.S.C. 7468(e) 

03/14/2018 $780 for each day the violation 

continues 

Violation of an order or regulation Popcorn Promotion, Research, and 

Consumer Information Act, codified at 

7 U.S.C. 7487(a) 

03/14/2018 $1,558 for each violation 

Certain violations Egg Products Inspection Act, codified at 

21 U.S.C. 1041(c)(1)(A) 

03/14/2018 $8,977 for each violation 

Violation of an order or regulation Hass Avocado Promotion, Research, and 

Information Act of 2000, codified at 

7 U.S.C. 7807(c)(1)(A)(i) 

03/14/2018 $1,417–$14,177 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) 

03/14/2018 $14,177 for each violation
USDA AGENCY FINANCIAL REPORT | 2018 

262 

Penalty (Name of Penalty) Authority (Statute) Date of Current 

Adjustment 

Anticipated Current Penalty Level 

($ Amount) 

Violation of certain provisions Livestock Mandatory Reporting Act of 

1999, codified at 7 U.S.C. 1636b(a)(1) 

03/14/2018 $14,665 for each violation 

Failure to obey a cease and desist order Livestock Mandatory Reporting Act of 

1999, codified at 7 U.S.C. 1636b(g)(3)

03/14/2018 $14,665 for each violation 

Failure to obey an order of the Secretary Dairy Product Mandatory Reporting 

Program, codified at 

7 U.S.C. 1637b(c)(4)(D)(iii) 

03/14/2018 $14,177 for each violation

Willful violation of the program by a 

retailer or person engaged in the 

business of supplying a covered 

commodity to a retailer 

Country of Origin Labeling Program, 

7 U.S.C. 1638b(b)(2) 

03/14/2018 $1,139 for each violation 

Violations of the program Dairy Research Program, codified at 

7 U.S.C. 4535 and 4510(b) 

03/14/2018 $2,442 for each violation

Violation of the imported seed 

provisions 

Federal Seed Act, codified at 

7 U.S.C. 1596(b) 

03/14/2018 $96–$1,913

Violation of the Animal Welfare Act Animal Welfare Act, codified at 

7 U.S.C. 2149(b) 

03/14/2018 $11,390, and knowing failure to obey 

a cease and desist order has a civil 

penalty of $1,708 

 Any person that causes harm to, or 

interferes with, an animal used for the 

purposes of official inspection by the 

Department 

Civil Penalties (Department of 

Agriculture), 7 U.S.C. 2279e(a) 

03/14/2018 $14,177 

Penalty for a violation of the Swine 

Health Protection Act 

Swine Health Protection Act, codified at 

7 U.S.C. 3805(a) 

03/14/2018 $28,061 
 SECTION III | OTHER INFORMATION 

263 

Penalty (Name of Penalty) Authority (Statute) Date of Current 

Adjustment 

Anticipated Current Penalty Level 

($ Amount) 

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) 03/14/2018 $70,881 in the case of any individual 

(except that the civil penalty may not 

exceed $1,417 in the case of an initial 

violation of the PPA by an individual 

moving regulated articles not for 

monetary gain); $354,402 in the case 

of any other person; $569,468 for 

violations adjudicated in a single 

proceeding if not a willful violation; 

$1,138,937 for violations adjudicated 

in a single proceeding if 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. 
USDA AGENCY FINANCIAL REPORT | 2018 

264 

Penalty (Name of Penalty) Authority (Statute) 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) 

03/14/2018 $68,027 in the case of any individual 

(except that the civil penalty may not 

exceed $1,360 in the case of an initial 

violation of the AHPA by an individual 

moving regulated articles not for 

monetary gain); $340,131 in the case 

of any other person for each 

violation; $569,468 for all violations 

adjudicated in a single proceeding if 

the violations do not include a willful 

violation; $1,138,937 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’s 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) 

03/14/2018 $340,131 in the case of an individual 

and $680,262 in the case of any other 

person. 
 SECTION III | OTHER INFORMATION 

265 

Penalty (Name of Penalty) Authority (Statute) Date of Current 

Adjustment 

Anticipated Current Penalty Level 

($ Amount) 

Violation of the act Horse Protection Act, codified at 15 

U.S.C. 1825(b)(1) 

03/14/2018 $5,612 

Failure to obey act disqualification Horse Protection Act, codified at 15 

U.S.C. 1825(c) 

03/14/2018 $10,969 

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 (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) 

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)(1) 

03/14/2018 $51,302 

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, as set forth at 

16 U.S.C. 1540(a) 

Endangered Species Act of 1973, as set 

forth at 16 U.S.C. 1540(a)(1) 

03/14/2018 $24,625 
USDA AGENCY FINANCIAL REPORT | 2018 

266 

Penalty (Name of Penalty) Authority (Statute) 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, as set 

forth at 16 U.S.C. 1540(a) 

Endangered Species Act of 1973, as set 

forth at 16 U.S.C. 1540(a)(1) 

03/14/2018 $1,296 

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 

28 Hour Law, 49 U.S.C. 80502(d) 03/14/2018 $165–$824 

Violating a provision of 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) 

03/14/2018 $113,894 

Trafficking in food coupons Food and Nutrition Act of 2008 (Act), 

codified at 7 U.S.C. 2021(b)(3)(B) 

03/14/2018 $41,042–$73,906 

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) 

03/14/2018 $36,953–$73,906 
 SECTION III | OTHER INFORMATION 

267 

Penalty (Name of Penalty) Authority (Statute) 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 

Child Nutrition Act of 1966, as amended 

by Sec. 204 of the Child Nutrition Act of 

1992, P.L. 1102-512., 

42 U.S.C. 1786(h)(8)(H)(i)

03/14/2018 $173,951,364 

Vendor convicted of trafficking in food 

instruments 

Child Nutrition Act of 1966, as amended 

by Sec. 203 (p)(1) of the William F. 

Goodling Child Nutrition Reauthorization 

Act of 1998, P.L. 105-336., 

42 U.S.C. 1786(o)(1)(A) and 

42 U.S.C. 1786(o)(4)(B) 

03/14/2018 $15,041–$60,161

Vendor convicted of selling firearms, 

ammunition, explosives, or controlled 

substances in exchange for food 

instruments 

Child Nutrition Act of 1966, as amended 

by Sec. 203 (p)(1) of the William F. 

Goodling Child Nutrition Reauthorization 

Act of 1998, P.L. 105-336., 

42 U.S.C. 1786(o)(1)(B) and 

42 U.S.C. 1786(o)(4)(B) 

03/14/2018 $15,041–$60,161 

Certain violations Egg Products Inspection Act, codified at 

21 U.S.C. 1041(c)(1)(A) 

03/14/2018 $8,977 for each violation 

Willful disregard of the prohibition 

against the export of unprocessed 

timber originating from Federal lands 

Forest Resources Conservation & 

Shortage Relief Act of 1990, as amended, 

16 U.S.C. 620d(c)(1)(A) 

03/14/2018 $923,831 
USDA AGENCY FINANCIAL REPORT | 2018 

268 

Penalty (Name of Penalty) Authority (Statute) Date of Current 

Adjustment 

Anticipated Current Penalty Level 

($ Amount) 

Violation in disregard of the Forest 

Resources Conservation and Shortage 

Relief Act or the regulations that 

implement such Act 

Forest Resources Conservation & 

Shortage Relief Act of 1990, as amended, 

16 U.S.C. 620d(c)(2)(A)(i) 

03/14/2018 $138,575 

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) 

03/14/2018 $92,383 

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) 

03/14/2018 $923,831 

Violation involving protections of caves Federal Cave Resources Protection Act of 

1988; P.L. 100-691; 102 Stat. 4546, 

16 U.S.C. 4307(a)(2) 

03/14/2018 $20,191 

Packer or swine contractor violation Packers and Stockyards Act, 1921, as 

amended, 7 U.S.C. 193(b) 

03/14/2018 $28,061 

Livestock market agency or dealer failure 

to register 

Packers and Stockyards Act of 1921, 

7 U.S.C. 203 

03/14/2018 $1,913 

Livestock market agency or dealer failure 

to register

Packers and Stockyards Act of 1921, 

7 U.S.C. 203 

03/14/2018 $96 each day the violation continues 

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) 

03/14/2018 $1,913 
 SECTION III | OTHER INFORMATION 

269 

Penalty (Name of Penalty) Authority (Statute) Date of Current 

Adjustment 

Anticipated Current Penalty Level 

($ Amount) 

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) 

03/14/2018 $96 each day the violation continues 

A stockyard owner, livestock market 

agency, and dealer violation

Packers and Stockyards Act of 1921, 

7 U.S.C. 213(b) 

03/14/2018 $28,061 

Stockyard owner, livestock market 

agency, and dealer compliance order 

Packers and Stockyards Act of 1921, 

7 U.S.C. 215(a) 

03/14/2018 $1,913 

Live poultry dealer violations Packers and Stockyards Act of 1921, 

7 U.S.C. 228b-2(b) 

03/14/2018 $81,633 

Refusal of inspection and weighing 

services violation 

7 U.S.C. 86(c) 03/14/2018 $274,235 

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) 

03/14/2018 Has a maximum of the greater of: the 

amount of the pecuniary gain 

obtained as a result of the false or 

inaccurate information or the 

noncompliance; or $11,984 

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) 

03/14/2018 $196,387 in the case of an individual 

and $1,963,870 in the case of an 

applicant other than an individual 
USDA AGENCY FINANCIAL REPORT | 2018 

270 

Penalty (Name of Penalty) Authority (Statute) Date of Current 

Adjustment 

Anticipated Current Penalty Level 

($ Amount) 

Equity skimming Section 543(a) of Title V of the Housing 

Act of 1949, codified at 

42 U.S.C. 1490s(a)(2) 

03/14/2018 $35,440 

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 543(b) of Title V of the Housing 

Act of 1949, codified at 

42 U.S.C. 1490s(b)(3)(A) 

03/14/2018 $70,881 

Failure to comply with certain provisions U.S. Warehouse Act, codified at 

7 U.S.C. 254

03/14/2018 $35,440 

Willful failure or refusal to furnish 

information, or willful furnishing of false 

information 

Section 156 of the Federal Agricultural 

Improvement and Reform Act of 1996, 

codified at 7 U.S.C. 7272(g)(5). 

03/14/2018 $15,582 for each violation 

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) 

03/14/2018 $15,582 for each violation 

Filing a false acreage report that exceeds 

tolerance 

Federal Agriculture Improvement and 

Reform Act of 1996, Section 156, codified 

at 7 U.S.C. 7272(g)(5) 

03/14/2018 $15,582 for each violation 
 SECTION III | OTHER INFORMATION 

271 

Penalty (Name of Penalty) Authority (Statute) Date of Current 

Adjustment 

Anticipated Current Penalty Level 

($ Amount) 

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) 

03/14/2018 $11,390 for each violation 

Knowingly violating any 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) 

03/14/2018 $14,031 

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) 

03/14/2018 $11,182 

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) 

03/14/2018 $11,182 

Violation of any of the slaughter horse 

transportation regulations in 

9 CFR part 88

Commercial Transportation of Equine for 

Slaughter Act, 7 U.S.C. 1901 note 

03/14/2018 $5,000 
USDA AGENCY FINANCIAL REPORT | 2018 

272 

Penalty (Name of Penalty) Authority (Statute) Date of Current 

Adjustment 

Anticipated Current Penalty Level 

($ Amount) 

Knowingly violating section 3(d) or 3(f) of 

the Lacey Act Amendments of 1981, or 

for violating any other provision 

provided that, in the exercise of due 

care, the violator should have known 

that the plant was taken, possessed, 

transported, or sold in violation of any 

underlying law, treaty, or regulation 

Lacey Act Amendments of 1981, 

16 U.S.C. 3373(a)(1) 

03/14/2018 $25,928 for each violation (but if the 

plant has a market value of less than 

$350, and involves only the 

transportation, acquisition, or receipt 

of a plant taken or possessed in 

violation of any law, treaty, or 

regulation of the United States, any 

Indian Tribal law, any foreign law, or 

any law or regulation of any State, the 

penalty shall not exceed the 

maximum provided for violation of 

said law, treaty, or regulation, or 

$25,928, whichever is less) 

Violating section 3(f) of the Lacey Act 

Amendments of 1981

Lacey Act Amendments of 1981, 

16 U.S.C. 3373(a)(2) 

03/14/2018 $648
SECTION III | OTHER INFORMATION 

273 

Grant Oversight and New Efficiency (GONE) Act 

EXHIBIT 50: Aging and Balances for Grants and Cooperative Agreements Subject to 

GONE Act Reporting 

CATEGORY 2–3 YEARS >3–5 YEARS >5 YEARS

Number of Grants/Cooperative 

Agreements with Zero Dollar 

Balances 

4 21 41

Number of Grants/Cooperative 

Agreements with Undisbursed 

Balances 

677 411 106

Total Amount of 

Undisbursed Balances $ 4,339,705.64 $ 7,764,474.03 $ 3,273,133.88 

CHALLENGES 

The U.S. Department of Agriculture (USDA) faces several challenges leading to delayed grant 

agreement award closeout. In some instances, agencies have not received closeout 

documentation in a timely manner, which may be a result of ongoing disputes with grant 

recipients about allowable expenditures and/or as a result of legal situations. Several 

agreements are either in litigation or have the potential for litigation. Pursuant to 2 Code of 

Federal Regulations (CFR) 200.333 Retention of Records (Title 2 CFR Part 200 “Uniform 

Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards”) 

and Department Regulation (DR) Litigation Retention Policy (DR3090-001), the agreement 

must be maintained in both hard copy and electronically in its native format while the litigation 

hold or potential for litigation is in force. The closeout process will occur, and any remaining 

balances will be de-obligated or dispersed as directed after litigation action is resolved. 

There are cases in which awardees must submit a return of funds; USDA is awaiting receipt of 

these funds. In these cases, the projects will be officially marked as “closed” once funds have been 

received. USDA has certain awards with State Agencies in Puerto Rico that have not been able to 

perform reconciliation in their systems due to Hurricane Rita and Irma activity. The closeout 

process for awards in Puerto Rico has been challenging, and many have not been completed. 

In limited situations, an incorrect period of performance (POP) in award systems has allowed 

awards to remain open after the POP has past. As a result of invalid POPs, the grantee must 

submit invoices to the agency for review. If the invoices are found to have discrepancies, USDA 

must reach out to the grantee for the additional information, delaying the closeout process.
USDA AGENCY FINANCIAL REPORT | 2018 

274 

With imposed hiring freezes, agencies are facing staff shortages in the Grants and Agreements 

Service Branches (GASB). Staff priorities have been placed on processing new agreements, 

which limits the amount of time available for agreement closeout. 

CORRECTIVE ACTIONS 

USDA remains committed to working to address the requirements of Title 2 CFR Part 200, as 

well as the Grant Oversight and New Efficiency (GONE) Act, to ensure grants and cooperative 

agreements are closed out within the time identified in the regulatory guidance. Agencies are 

working on corrective action plans, which include revising the grant closeout process and fully 

documenting the procedures and notifications that will be required for all grant agreements. 

Agencies continue to work with grantees who drawdown funds after a period of performance. 

There is ongoing work to appropriately collect funds and close out grants or cooperative 

agreements as soon as possible.

Although USDA may have a grant community staff shortage, extra time is being devoted to 

agreement closeout in fiscal year (FY) 2018. Additionally, the teams are working to bring other 

contractor support to assist with closing expired agreements. Closing out expired agreements is 

an agency priority. 
ABBREVIATIONS—ACRONYMS

275 

Abbreviations—Acronyms 

A

AAR—Acquisition Approval Request 

ACRSI—Acreage Crop Reporting 

Streamlining Initiative 

ACRWS—Automated Cash Reconciliation 

Worksheet System 

ADA—Anti-deficiency Act 

AFR—Agency Financial Report 

AGA—Association of Government 

Accountants 

AgNIC—Agriculture Network Information 

Collaborative 

AGPMR—Agriculture Property Management 

Regulation 

AIP—Approved Insurance Providers 

AMS—Agricultural Marketing Service 

AO—Approving Officials 

APC—Agency Program Coordinators 

APEC—Access, Participation, Eligibility, and 

Certification 

APHIS—Animal and Plant Health Inspection 

Service 

APR—Annual Performance Report 

AQI—Agricultural Quarantine Inspection 

AR—Administrative Review 

ARC/PLC—Agriculture Risk Coverage and 

Price Loss Coverage 

ARC-CO—Agriculture Risk Coverage-County 

ARS—Agricultural Research Service 

ART— Administrative Review and Training

AU—Audit

B

BAR—Budget and Accrual Reconciliation 

BARC—Beltsville Agricultural Research 

Center 

BCAP-Biomass Crop Assistance Program 

BPR—Business Process Reengineering 

Broker—Treasury Broker

C

CACFP—Child and Adult Care Food Program 

CAE—Center for Agribusiness Excellence 

CAIVRS—Credit Alert Interactive Voice 

Response System 

CBO—Certificates of Beneficial Ownership 

CCC BF—CCC Budget Formulation 

CCC—Commodity Credit Corporation 

CCSC—Charge Card Service Center 

CDC—Centers for Disease and Control 

Prevention 

CDM—Continuous Diagnostics and 

Mitigation 

CEP—Community Eligibility Provision 

CFDA—Catalog of Federal Domestic 

Assistance 

CFO—Chief Financial Officer 
USDA AGENCY FINANCIAL REPORT | 2018 

276 

CFR—Code of Federal Regulations 

CN—Child Nutrition 

CoC—Cushion of Credit 

COF—County Operated Facility 

CORE—Core Accounting System 

COTS—Commercial Off the Shelf 

CPAIS—Corporate Property Automated 

Information System 

CPI—Consumer Price Index 

CRP—Conservation Reserve Program 

CSS—Country Strategy Statements 

CTA—Conservation Technical Assistance 

CUECs—complementary end-user controls 

CY—Current Year

D

DAIMS—DATA Act Information Model 

Schema 

DA-OCP—The Departmental Administration 

Office of Contracting and Procurement 

DATA—Digital Accountability and 

Transparency Act of 2014 

DC—Disallowed Costs 

DCR— Data Change Request

DHS—U.S. Department of Homeland 

Security 

DM&R—Deferred Maintenance & Repairs 

DM—Departmental Manual 

DNP—Do Not Pay 

DR—Departmental Regulation

E

E&T—Employment and Training 

EEO—Equal Employment Opportunity 

eFMS—Electronic Funds Management 

System 

ELC—Entity Level Control 

EPA—Environmental Protection Agency 

EPLS—Excluded Parties List System 

EQIP—Environmental Quality Incentives 

Program 

ERM—Enterprise Risk Management 

ERP—Enterprise Resource Planning 

ERS—Economic Research Service 

F 

FABS—Financial Assistance Broker 

Submission 

FAPIIS—Federal Awardee Performance and 

Integrity Information System 

FAS—Foreign Agricultural Service 

FAV—Fruits and Vegetables 

FBWT—Fund Balance with Treasury 

FCC—Federal Communications Commission 

FCIC—Federal Crop Insurance Corporation 

FDA—Food and Drug Administration

FDCH—Family Day Care Homes 

FDPIR—Food Distribution Program on Indian 

Reservations 

FEB—Federal Executive Board 

FECA—Federal Employee Compensation Act 

FFAS—Farm and Foreign Agricultural 

Services 
ABBREVIATIONS—ACRONYMS

277 

FFATA—Federal Funding Accountability and 

Transparency Act 

FFB—Federal Financing Bank 

FFMIA—Federal Financial Management 

Improvement Act 

FFMS—Federal Financial Management 

System 

FFN—Frost Freeze 

FISMA—Federal Information Security 

Management Act 

FMFIA—Federal Managers’ Financial 

Integrity Act 

FMMI—Financial Management 

Modernization Initiative 

FMS—Financial Management Services 

FMT—Financial Management Training 

FNCS—Food, Nutrition and Consumer 

Services 

FNS—Food and Nutrition Service 

FPAC—Farm Production and Conservation 

FPD— Fiscal Policy Division 

FPDS—Federal Procurement Data System 

FRPP—Federal Real Property Profile 

FSA—Farm Service Agency 

FSDW—Financial Statement Data 

Warehouse 

FSFL—Farm and Sugar Storage Facilities 

FS—Forest Service 

FSH—Forest Service Handbook 

FSIS—Food Safety and Inspection Service 

FSM—Forest Service Manual 

FSRIP— Farm Security and Rural Investment 

Act Programs 

FSRS—Federal Funding Accountability and 

Transparency Act sub award Reporting 

System 

FTBU—Funds To Be Put to Better Use 

FY—Fiscal Year 

G

GAAP—Generally Accepted Accounting 

Principles 

GAO—Government Accountability Office 

GIPSA—Grain Inspection, Packers and 

Stockyards Administration 

GIS—Geographic information system 

GL—General Ledger 

GONE—Grant Oversight and New Efficiency 

Act 

GPRA—Government Performance and 

Results Act of 1993 

GRC—Governance Risk and Compliance 

GSA—General Services Administration 

H

HR—Human Resources 

HSPD—Homeland Security Presidential 

Directive 

HVAs—High Value Assets
USDA AGENCY FINANCIAL REPORT | 2018 

278 

I

IAA— Interagency Agreement 

The IAA— Federal Civil Penalties Inflation 

Adjustment Act of 1990 

IAS—Integrated Acquisition System 

IDs—identification numbers 

IPAC—Intra-Governmental 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

IT—Information Technology

L 

L&WCF—Land and Water Conservation Fund 

LAPCs—Local Agency Program Coordinators 

LDP—Loan Deficiency Payment 

LEAs—local educational agencies 

LEIE—List of Excluded Individuals/Entities 

LFP—Livestock Forage Disaster Program

M 

MCC—Merchant Category Codes 

MD&A—Management’s Discussion and 

Analysis 

MDD—Management Decision Date 

ME—Management Evaluation 

MFH—Multi-Family Housing 

MGT—Modernizing Government Technology 

MIDAS—Modernize and Innovate the 

Delivery of Agricultural Systems 

MITS—Management Information Tracking 

System 

MRP—Marketing and Regulatory Programs

N 

NAL—National Agricultural Library 

NAP—Noninsured Crop Disaster Assistance 

Program 

NASS—National Agricultural Statistics 

Service 

NCSS—National Cooperative Soil Survey 

NERAOC—National Extension and Research 

Administrative Officers Conference 

NFC—National Finance Center 

NFS—National Forest System 

NIFA—National Institute of Food and 

Agriculture 

NRCS—Natural Resources Conservation 

Service 

NRE—Natural Resources and Environment 

NRHP—National Register of Historic Places 

NSLP—National School Lunch Program

O 

OAO—Office of Advocacy and Outreach 

OCFO—Office of the Chief Financial Officer 

OCIO—Office of the Chief Information 

Officer 
ABBREVIATIONS—ACRONYMS

279 

OCP—Office of Contracting and 

Procurement 

OGC— Office of the General Counsel 

OHSEC—Office of Homeland Security and 

Emergency Coordination 

OIG—Office of Inspector General 

OMB—Office of Management and Budget 

OPPE—Office of Partnerships and Public 

Engagement 

OSEC—Office of the Secretary 

P 

PAR—Performance and Accountability 

Report 

PHA—Priority Heritage Assets 

PHIS—Public Health Information System 

PIV—Personal Identity Verification 

PL—Public Law 

PMC—Plant Materials Centers 

POA&M—Plans of Actions and Milestones 

POC—Point of Contact 

PP&E—Property, Plant, and Equipment 

PTIGs—Process Technology Improvement 

Grants 

PUPS—Prisoner Update Processing System 

of the Social Security Administration

Q 

QC—Quality Control 

R 

R&D—Research & Development 

RBS—Rural Business and Cooperative Service 

RC&D—Resource Conservation and 

Development 

RC&D—Resource Conservation and 

Development 

RCO—Regional Compliance Office 

RD—Rural Development 

REE—Research, Education, and Economics 

RHIF—Rural Housing Insurance Fund 

RHS—Rural Housing Service 

RITA—Reconciliation of Intra-Governmental 

Payment and Collection Transactions for 

Agriculture

RMA—Risk Management Agency 

RME—Risk Management Education 

RUS—Rural Utilities Service 

RVA—Risk and Vulnerability Assessment 

RY— Reinsurance year

S 

S&E—Salaries and Expenses 

SAM—System for Award Management 

SAP— Systems, Applications, and Products 

SAS— Statement on Auditing Standards 

SBP—School Breakfast Program 

SBR—Statement of Budgetary Resources 

SFA—School Food Authority 

SFFAS—Statement of Federal Financial 

Accounting Standards 

SFSP—Summer Food Service Program 
USDA AGENCY FINANCIAL REPORT | 2018 

280 

SF—Square Footage 

SNAP—Supplemental Nutrition Assistance 

Program 

SOD— segregation of duty 

SOP—Standard Operating Procedure 

SORN—System of records notice 

SPAs—Strategic Program Areas 

SPPS—Special Payroll Processing System

SPS—Secure Payment System 

SSD—Soil Science Division 

STO—State Office

T 

T&A—Time and Attendance 

TAP—Tree Assistance Program 

TARGET—Technology Accessible Resources 

Give Employment Today 

TB—Technical Bulletin

TBT—Technical Barriers to Trade 

TDD—Telecommunication Device for the 

Deaf 

TFAA—Trade and Agricultural Affairs 

TMC—Travel Management Center 

TOP—Treasury Offset Program 

TPMC—Tucson Plant Materials Center 

Treasury— U.S. Department of the Treasury 

TSP—Thrift Savings Plan

U 

U.S.C.—United States Code 

UDO—Undelivered Orders 

ULO—Unliquidated Obligations 

USAID—U.S. Agency for International 

Development 

USDA—U.S. Department of Agriculture 

USSGL—U.S. Standard General Ledger

V 

VA— Veterans Administration 

W

WCF—Working Capital Fund 

WEP—Water and Environmental Program 

WIC—Special Supplemental Program for 

Women, Infants, and Children 

WIP—Work in Progress