Audit Report 03024-1-11

June 2011

U.S. Department of Agriculture

Office of Inspector General

Fiscal Year 2010

Farm Service Agency

Farm Assistance Program Payments
United States Department of Agriculture

Office of Inspector General

Washington, D.C. 20250

DATE: June 21, 2011

AUDIT

NUMBER: 03024-1-11

TO: Bruce Nelson

Administrator

Farm Service Agency 

ATTN: Philip Sharp

Acting Director

Operations Review and Analysis Staff

FROM: Gil H. Harden /s/

Assistant Inspector General for Audit

SUBJECT: Fiscal Year 2010 Farm Service Agency Farm Assistance Program Payments 

Summary

This report presents the results of our review of payments made by the Farm Service 

Agency (FSA) during fiscal year 2010 through its various farm assistance programs. The work 

was performed to support our audit of the Department of Agriculture’s consolidated financial 

statements for fiscal years 2010 and 2009 (Audit Report 50401-70-FM, issued November 15, 

2010). That report notes that the Office of Inspector General (OIG) identified improper 

payments

1

that would be reported separately to FSA.

Background 

FSA’s mission is to equitably serve all farmers, ranchers, and agricultural partners through the 

delivery of effective, efficient agricultural programs for all Americans. FSA provides assistance

 

1 An improper payment is any payment that should not have been made or that was made in an incorrect amount 

under statutory, contractual, administrative, or other legally applicable requirements. (“Improper Payments 

Information Act of 2002,” Public Law 107-300, dated November 26, 2002).
Bruce Nelson Page 2

for natural disaster losses, resulting from drought, flood, fire, freeze, tornadoes, pest infestation, 

and other calamities. These programs include the Supplemental Revenue Assistance 

Payments (SURE) program, Livestock Forage Disaster Program (LFP), Emergency Conservation 

Program (ECP), Livestock Indemnity Program (LIP), and Dairy Economic Loss Assistance 

Program (DELAP).

The SURE program authorizes the Secretary of Agriculture to provide agricultural disaster 

assistance to producers who suffered qualifying crop production losses, crop quality losses, or 

both, due to disaster(s), adverse weather, or other environmental conditions, beginning with the 

2008 crop year and ending with losses incurred on or before September 30, 2011. The inclusion 

of a permanent crop disaster program in the Food, Conservation, and Energy Act of 2008 (2008 

Farm Bill) represented a change from the ad hoc crop disaster programs that, up until the 2008 

Farm Bill, had served as Congress’ primary instrument to disburse crop disaster assistance.

The American Recovery and Reinvestment Act of 2009 (ARRA) added and amended provisions 

of the 2008 Farm Bill related to the SURE program for the 2008 crop year. ARRA increased the 

assistance for producers who suffered 2008 crop losses, as well as provided an additional 

opportunity to participate in the SURE program through “buy-in” provisions.

The 2008 Farm Bill authorized the LFP to provide compensation to eligible livestock producers 

that have suffered grazing losses for covered livestock on land that is native or improved 

pastureland with permanent vegetative cover or is planted specifically for grazing. LFP also 

provides compensation to eligible livestock producers that have suffered grazing losses on 

rangeland managed by a Federal agency if the eligible livestock producer is prohibited by the 

Federal agency from grazing the normal permitted livestock on the managed rangeland due to a 

qualifying fire.

ECP provides emergency funding and technical assistance for farmers and ranchers to 

rehabilitate farmland damaged by natural disasters and for carrying out emergency water 

conservation measures in periods of severe drought.

Objectives

The objective of our review was to determine if fiscal year 2010 FSA program payments were 

properly recorded in the accounting system and adequately supported.
Bruce Nelson Page 3

Scope and Methodology

We obtained the universe of payments from FSA and selected two statistical samples. The two 

data extracts provided by FSA included program payments for all of fiscal year 2010 and 

represented five programs,

2

totaling $2.4 billion. The first extract included payments of about 

$1.7 billion, made from October 1, 2009, through June 30, 2010, from which we statistically 

selected 100 payments. The second extract included payments of about $681 million, made from 

July 1, 2010, through September 30, 2010, from which we statistically selected 30 payments. 

We obtained supporting documentation, such as applications, workbooks, invoices, receipts, and 

monthly production records for each sample and recalculated each payment. We discussed the 

samples with FSA officials as we worked to obtain concurrence on exceptions noted.

We conducted our audit in accordance with Government Auditing Standards, and believe the 

evidence obtained provides a reasonable basis for our conclusions.

Finding 1: Improper Payments Made for FSA Farm Assistance Program Payments

We sampled FSA program payments for fiscal year 2010 from a universe of $2.4 billion. We 

reviewed 130 payments,3

and identified errors in 18 of these payments. These errors occurred 

because FSA did not have effective internal controls over the manual SURE payment calculation 

process. OIG and FSA have agreed that these 18 errors resulted in improper payments of 

$61,714. FSA has initiated or completed appropriate corrective actions. Based on the results of 

these 130 sampled payments, we estimate the total dollars improperly paid were about 

$49 million. We are 95 percent confident that the improper payments did not exceed 

$102 million.

In our review, we found that 15 of the 184errors represented SURE payments. The first 

statistical sample included 51 SURE payments (of the 100 payments sampled) from a SURE 

payment universe of about $980 million. The second statistical sample included 29 SURE 

payments (of the 30 payments sampled) from a SURE payment universe of about $620 million. 

We calculated a total of $60,909 improper payments for the 15 errors. We found the county 

offices made errors when inputting the data into the manual workbook used to calculate the 

SURE payments. Specifically, these errors included calculating the Risk Management 

Agency (RMA) indemnity incorrectly; entering the incorrect Production to Count; not including

all correct yields; entering the incorrect Price and National Average Market Price amounts;

entering the incorrect Guarantee Basis; entering the incorrect Producer share; not including all 

units; and improperly merging multi-county workbooks.

 

2 The five programs were ECP, SURE, LIP, LFP, and DELAP.

3 These samples were selected with probabilities in proportion to their sizes.

4 The other three errors consisted of two LFP payments and one ECP payment. For the LFP improper payments, we 

found the county offices used an incorrect drought intensity rating and used incorrect acres and animal units when 

entering data for the payment. For the ECP improper payment, we found the county office used incorrect fence 

strand numbers when computing the payment.
Bruce Nelson Page 4

In addition to the improper payments mentioned above, we identified other exceptions to SURE 

payments made during our review. We determined one county office calculated the RMA 

indemnity incorrectly for all producers. The county office informed OIG that five producers 

received improper payments, totaling $54,489. We determined another county office did not 

include the quality factor, due to low test weights, for corn for many producers. The county 

office informed OIG that 17 producers received improper payments, totaling $122,901. We 

determined one county office entered the incorrect Production to Count for one producer on one 

unit. The county office informed OIG that the producer received an improper payment, totaling 

$9,934.

We found six instances where input errors changed the total amount for the SURE payment 

calculation; however, the input errors did not affect the actual payment to the producer, due to 

payment limitations. Therefore, these items were not included in our count of errors.

According to the FSA Handbook 1-SURE, Amendment 13, the SURE Interim Workbook process 

is a completely manual process that includes a series of Excel worksheets used to complete a 

manual calculation of the SURE payment. The handbook further states the SURE Interim 

Workbook does not have the capability to check or reference other FSA systems. FSA informed 

OIG that the automated software for the SURE program would not be in production until after 

fiscal year 2011.

We discussed these issues and recalculations with members of your staff on several occasions 

during the course of our review. During those meetings, FSA staff acknowledged that corrective 

actions were needed and that FSA planned to automate the SURE calculation program payment 

process. Because of actions taken by FSA addressing the specific improper payments discussed 

herein, no recommendation is made for those items.

We also discussed our findings with FSA officials during an exit conference. At that time, FSA 

officials shared that the plans to automate the SURE program payment process had been 

abandoned due to various factors such as budget constraints and the remaining lifespan of the 

SURE program. FSA officials also commented on the complexity of the SURE program and the 

elaborate actions that were needed by field personnel in the first year of executing SURE 

program payments.

Recommendation 1

We recommend that FSA officials develop and implement effective internal controls over the 

manual SURE payment calculation process to prevent the continuance of the errors identified in 

this report.
Bruce Nelson Page 5

Agency Response

Several additional tools and shortcuts were provided to county office employees to reduce data 

load errors when completing the workbook for the 2009 SURE program payment application. 

These additional tools included: a new application on the web, the Compliance Query Tool, 

which gathered a producer’s acreage report data and summarized [it] into a format that is useable 

by the workbook; incorporating the net indemnity calculation within the workbook; 

incorporating the Risk Management Agency Blended Yield calculation within the workbook; 

enhancing the workbook to highlight possible errors/questionable data; allowing for a single 

entry of prices to reduce data load and possible typos; adding a 10 percent crop loss as a shortcut 

to determine loss eligibility; and reducing data entry of quality factors to a single entry.

There are more enhancements planned for 2010 SURE payment process. These enhancements 

will include: a revision to the National Crop Table (NCT) to incorporate SURE specific data, 

such as county expected yields, subsequent crop expected yields, national average market prices, 

quality factors, and historical marketing percentages; enhancements to the compliance query tool 

to capture the SURE data on the NCT and improved sorting options; standardized highlighting of 

fatal errors and warnings in the workbook; and enhanced sorting of data within the workbook.

The enhancements are expected to be completed by November 30, 2011.

OIG Position

We concur with management decision.
Agency’s Response

USDA’S

FARM SERVICE AGENCY

RESPONSE TO AUDIT REPORT
USDA is an equal opportunity provider and employer.

United States

Department of

Agriculture

Farm and

Foreign

Agricultural

Services

Farm

Service

Agency

Operations Review 

and Analysis Staff

1400 Independence 

Ave, SW

Stop 0540

Washington, DC

20250-0540

DATE: June 9, 2011 

TO: Gil H. Harden 

 Assistant Inspector General 

 Office of Inspector General 

FROM: Philip Sharp, Acting Director 

 Operations Review and Analysis Staff 

SUBJECT: Response to Audit 03024-1-11, Fiscal Year 2010 Farm Service Agency Farm 

Assistance Program Payments 

The Farm Service Agency’s Deputy Administrator for Farm Programs has provided the following 

information to reach management decision on the subject audit. 

Recommendation 1 

Several additional tools and shortcuts were provided to county office employees to reduce data 

load errors when completing the workbook for the 2009 Supplemental Revenue Assistance 

Payments (SURE) program payment application. These additional tools included: a new 

application on the web, the Compliance Query Tool, which gathered a producer’s acreage report 

data and summarized into a format that is useable by the workbook; incorporating the net 

indemnity calculation within the workbook; incorporating the Risk Management Agency Blended 

Yield calculation within the workbook; enhancing the workbook to highlight possible 

errors/questionable data; allowing for a single entry of prices to reduce data load and possible 

typos; adding a 10 percent crop loss tool as a shortcut to determine loss eligibility; and reducing 

data entry of quality factors to a single entry. 

There are more enhancements planned for 2010 SURE payment process. These enhancements 

will include: a revision to the National Crop Table (NCT) to incorporate SURE specific data, such 

as county expected yields, subsequent crop expected yields, national average market prices, quality 

factors, and historical marketing percentages; enhancements to the compliance query tool to 

capture the SURE data on the NCT and improved sorting options; standardized highlighting of 

fatal errors and warnings in the workbook; and enhanced sorting of data within the workbook. 

The enhancements are expected to be completed by November 30, 2011.