United States Department of Agriculture 

Office of Inspector General 
What Were OIG’s

Objectives

We reviewed a statistical 

sample of FSA payments as 

part of our audit of the 

Department of Agriculture’s 

Consolidated Financial 

Statements. Our objective was 

to determine if fiscal year 

2012 FSA program payments 

were properly recorded in the 

accounting system and 

adequately supported.

What OIG Reviewed

To review FSA’s fiscal year 

2012 payments, we 

statistically selected a sample 

of 80 FSA payments totaling 

$3.7 million, obtained 

supporting information, and 

recalculated the payments. 

We sampled payments related 

to seven FSA programs, 

including the SURE program. 

What OIG Recommends

We recommend that FSA 

officials strengthen controls by 

emphasizing the importance of 

second-party reviews, and 

develop and implement a 

checklist to verify the integrity 

of SURE workbook inputs.

The Office of Inspector General assessed 

whether FSA properly recorded and 

supported payments made during fiscal 

year 2012 through its various farm 

assistance programs.

What OIG Found

The Office of Inspector General determined that the Farm Service 

Agency (FSA) did not properly record and adequately support all 

fiscal year 2012 FSA program payments. We identified errors related 

to 12 of the 80 FSA program payments in our statistical sample of 

farm assistance program payments FSA made in fiscal year 2012. 

These errors occurred primarily because FSA’s internal controls over 

the Supplemental Revenue Assistance Payments (SURE) program’s 

manual payment calculation process did not prevent the data errors 

from occurring. Personnel at county offices made errors when 

inputting the data into the manual workbook used to calculate the 

payments, and second-party reviewers did not identify these errors. 

FSA has agreed that these 12 errors resulted in improper payments of 

$80,480, and has initiated or completed appropriate corrective actions 

for all errors. However, based on the results of these 80 sampled 

payments, we estimated that a total of about $17 million of FSA’s 

program payments were improper. Our review identified that FSA’s 

rate of improper payments was 2.3 percent, an increase from the 1.4 

percent rate we identified in an audit of payments FSA made in fiscal 

year 2011. FSA generally agreed with our recommendation and 

management decision was reached.

Fiscal Year 2012 Farm Service Agency 

Farm Assistance Program Payments

Audit Report 03401-0002-11

United States Department of Agriculture

Office of Inspector General

Washington, D.C. 20250

DATE: July 2, 2013

AUDIT

NUMBER: 03401-0002-11 

TO: Juan M. Garcia

Administrator 

Farm Service Agency 

ATTN: Philip Sharp

Director

Operations Review and Analysis Staff

FROM: Gil H. Harden

Assistant Inspector General for Audit

SUBJECT: Fiscal Year 2012 Farm Service Agency Farm Assistance Program Payments

This report presents the results of the subject audit. Your written response to the draft report, 

dated June 10, 2013, is included in its entirety at the end of the report. Excerpts from your 

response and the Office of Inspector General’s position are incorporated in the relevant sections 

of the report. Based on your response, we were able to accept management decision on the 

recommendation in the report, and no further response to us is necessary.

In accordance with Departmental Regulation 1720-1, final action is required to be taken 

within 1 year of management decision to prevent being listed in the Department’s annual Agency 

Financial Report. Please follow your internal agency procedures in forwarding final action 

correspondence to the Office of the Chief Financial Officer.

We appreciate the courtesies and cooperation extended to us by members of your staff during our 

audit fieldwork and subsequent discussions. This report contains publically available 

information and will be posted in its entirety to our website (http://www.usda.gov/oig) in the 

near future.

Table of Contents

Background and Objectives...................................................................1

Section 1: Fiscal Year 2012 Improper Payments................................2

Finding 1: FSA Made Improper Farm Assistance Program 

Payments ..................................................................................................2

Recommendation 1.........................................................................3

Scope and Methodology..........................................................................5

Exhibit A: Summary of Monetary Results...........................................7

Exhibit B: Statistical Plan.......................................................................8

Agency’s Response ................................................................................11

Background and Objectives

AUDIT REPORT 03401-0002-11 1

Background

Within the U.S. Department of Agriculture (USDA), the Farm Service Agency’s (FSA) 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 for natural 

disaster losses resulting from drought, flood, fire, freeze, tornadoes, pest infestation, and other 

calamities. The agency distributes program-related payments through more than 2,345 State and 

county offices. In fiscal year 2012, FSA made about $759 million in payments through its 

programs. Approximately 75 percent of payments ($570 million) were made through the 

Supplemental Revenue Assistance Payments (SURE) program. FSA also made payments 

through ten other programs, including the Tree Assistance Program.1 

The SURE program provides agricultural disaster assistance to producers who suffer qualifying 

crop production losses, crop quality losses, or both, due to disaster(s), adverse weather, or other 

environmental conditions. Congress established this permanent crop disaster program in the 

Food, Conservation, and Energy Act of 2008 (2008 Farm Bill) for producers who suffered such 

losses between the beginning of the 2008 crop year and September 30, 2011. Its inclusion in the 

2008 Farm Bill represented a change from the ad hoc crop disaster programs that had served as 

Congress’ primary instrument to disburse crop disaster assistance. 

FSA has developed a workbook to guide the complex process of calculating SURE payments.2

The manual calculation process includes the use of a series of Excel worksheets and crop data 

from various sources, including FSA and the Risk Management Agency (RMA). To complete 

the process, county office personnel must complete a significant amount of data entry. For 

instance, the SURE workbook used for 2010 program payments contained approximately 35 data 

fields, and each producer can have multiple crops. Further, completing each crop line requires 

approximately 23 entries. County personnel need to obtain acreage information from RMA, 

compare it with FSA information, and reconcile it, if needed. For instance, to ensure that the 

producer is eligible for the SURE program, personnel may need to check three data systems. 

These checks are also manual, as the workbook does not have the capability to check or 

reference other systems. The SURE Information Report may contain numerous pages and record 

types, along with differences in how FSA and RMA report the acreage information. 

Objectives

The objective of our review was to determine if fiscal year 2012 FSA program payments were 

properly recorded in the accounting system and adequately supported.

 

1 The Tree Assistance Program provides financial assistance to qualifying orchardists and nursery tree growers to 

replant or rehabilitate eligible trees, bushes, and vines damaged by natural disasters occurring between January 1, 

2008 and September 30, 2011. The 2008 Farm Bill authorized this program, which is funded through the 

Agricultural Disaster Relief Trust Fund.

2

1-SURE Handbook (October 26, 2012). 
Section 1: Fiscal Year 2012 Improper Payments

2 AUDIT REPORT 03401-0002-11

Finding 1: FSA Made Improper Farm Assistance Program Payments

We identified errors related to 12 of the 80 FSA program payments in our statistical sample. 

These errors occurred primarily because FSA’s internal controls over the SURE program’s 

manual payment calculation process did not prevent the data errors from occurring. Personnel at 

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

the SURE program payments, and second-party reviewers did not identify these errors. FSA has 

agreed that these 12 errors resulted in improper payments of $80,480, and has initiated or 

completed appropriate corrective actions for all errors. However, based on the results of these 80 

sampled payments, we estimated that a total of about $17 million of FSA’s program payments 

were improper.3 

In response to previous audits, FSA has taken steps intended to reduce SURE program payment 

errors and enhance the manual process that employees use to calculate payments.

4

 For instance, 

FSA has implemented the SURE Data Query Tool, a web-based software that employees can use

to export acreage and unit data into the SURE workbook. Use of this optional tool eliminates 

part of the manual entry process. Additionally, FSA now provides a table of price and yield data 

to the personnel who calculate the payments. Also, in response to our audit findings for fiscal 

year 2011, FSA reminded employees of the importance of second-party reviews and the need to 

identify deficiencies during such reviews.5

Although FSA has taken these steps, our review identified that FSA’s rate of improper payments 

was 2.3 percent, an increase from the previous year’s 1.4 percent rate.

6 Of the 12 errors we 

found in our statistical sample of 80 payments (including 56 SURE payments), 11 represented 

SURE program payments, for a total of $77,980 in improper payments.7

 The primary cause for 

errors was county office data input errors in the SURE workbook. Errors included, for example, 

the use of an incorrect RMA price during the calculation process, or incorrect production-tocount amounts. 8

 In addition to the 11 improper payments, we identified other exceptions to 

SURE program payments. These exceptions caused differences in SURE calculated payment 

 

3 We are 95 percent confident that the improper payments did not exceed $38 million. See exhibit B for additional 

information about our statistical plan, including sampling and universe information.

4

Previous audits include report 03024-0001-11, Fiscal Year 2010 Farm Service Agency Farm Assistance Program 

Payments (June 2011); and report 03401-0001-11, Fiscal Year 2011 Farm Service Agency Farm Assistance 

Program Payments (May 2012).

5

SURE Notice 25 to State and county offices (April 12, 2012). 

6

In our audits of fiscal year 2010 and 2011 payments, we recalculated statistically-selected FSA program payments 

and estimated improper payment rates of 2 percent and 1.4 percent, respectively. For fiscal year 2010 payments, we 

identified 18 improper payments totaling $61,714 and projected improper payments totaling $49 million. For fiscal 

year 2011 payments, we identified 14 improper payments, totaling $54,408, and projected improper payments 

totaling $28.1 million. 

7 The other error was a Tree Assistance Program payment. For the improper payment, we found the county office 

did not use the required actual receipts to calculate the payment. FSA agreed that this error resulted in an improper 

payment of $2,500.

8

Specifically, we found errors related to the National Average Market Price amounts, the crop share entered on the 

form, the production-to-count, the RMA indemnity, producer premium, guaranteed basis, adjusted yield, status code 

and crop acres, and RMA data for the guaranteed basis and producer premium.
amounts. However, these exceptions did not affect the producer’s actual payment because the 

producer’s payment calculation already exceeded payment limitations.

AUDIT REPORT 03401-0002-11 3

9

 For instance, we 

determined that a county office failed to enter certain codes into the workbook, and incorrectly 

entered information when using a tool related to yields. We also found a discrepancy in the 

RMA data unit personnel used in calculations.10 Additionally, we determined that a county 

office did not use data from the correct report when multiplying a certain yield.11

Although FSA personnel documented second-party reviews of the payments with their initials 

and the date that they completed, the reviews did not identify these errors. Specifically, 

reviewers did not adequately verify that information on the SURE Information Report was 

accurately input into the SURE workbook. Additionally, reviewers did not reconcile all FSA 

information against the RMA data that might have eliminated errors in the producer’s crop share 

and crop status code. 

The rise in the improper payment rate since fiscal year 2011 indicates that FSA should take 

additional action to further strengthen controls to reverse this trend in error rates. 

As of September 30, 2011, the Department’s authority to operate the SURE program 

expired. The deadline for 2011 SURE program payment signup is June 2013, and FSA expects 

SURE program payment activity to decline thereafter. However, FSA will be making SURE 

payments to farmers in fiscal year 2013, and needs to ensure the accuracy of the payments. 

Recommendation 1

We recommend that FSA officials strengthen controls by emphasizing the importance of secondparty reviews and developing and implementing a checklist to verify the integrity of SURE 

workbook inputs.

Agency Response

The authority for SURE ended with those crop losses that were due to a natural disaster that 

occurred through September 30, 2011. As a result, very little SURE activity remains and sign up 

for 2011 SURE ends on June 7, 2013. FSA Handbook 1-SURE, paragraph 21, provides 

instructions for using a FSA-770 SURE checklist as an optional management tool State offices 

can use to help address deficiencies identified by an audit or review; however, it is not a

requirement. Due to the fact that SURE is in its final stages, FSA has determined not to require a 

checklist at this time.

FSA during the May 23, 2013, Deputy Administrator for Farm Programs video teleconference 

call with State offices, alerted States of the importance of second-party reviews and highlighted 

 

9

FSA limits SURE and other farm assistance program payments, collectively. A producer cannot receive, directly 

or indirectly, more than $100,000 per person or legal entity for fiscal years 2009 and 2010. 

10 When calculating the RMA indemnity, county personnel failed to enter the RMA unit number, according to the 

Handbook 1-SURE, Paragraph 614F.

11 County personnel used the acres shown in the “A” acreage record report, instead of using the acres shown in the 

“Y” subsequent year yield record when multiplying by the yield in the “Y” record.
the four areas of concern identified in the audit: share, acres, National Average Market Price, 

and data discrepancies between RMA and FSA. In addition, FSA reiterated the importance of 

second-party reviews in both FSA Notice SURE-33 (issued May 22, 2013), addressing the end of 

signup, and Handbook 1-SURE, amendment 27, subparagraph 665H (issued May 24, 2013).

OIG Position

We accept management decision on this recommendation.

4 AUDIT REPORT 03401-0002-11
Scope and Methodology

AUDIT REPORT 03401-0002-11 5

We obtained the universe of payments from FSA and statistically selected 80 payments made 

from October 1, 2011, through September 30, 2012.12 FSA provided four data extracts that

included program payments for all of fiscal year 2012, totaling $759 million. FSA made the 

payments through 11 programs.

13

Details on each data extract are as follows:

· The first extract included payments of about $483 million, made from October 1, 2011, 

through March 31, 2012, from which we statistically selected 50 payments. 

· The second extract included payments of about $196 million, made from April 1, 2012, 

through June 30, 2012, from which we statistically selected 21 payments. 

· The third extract included payments of about $61 million, made from July 1, 2012, 

through August 31, 2012, from which we statistically selected 7 payments. 

· The fourth extract included payments of about $19 million, made in September 2012, 

from which we statistically selected 2 payments. 

We relied on the data extracts provided by FSA, and we validated the completeness of that data. 

We obtained supporting documentation from FSA offices nationwide, such as applications, 

workbooks, invoices, receipts, and 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 this audit in accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain sufficient, appropriate 

evidence to provide a reasonable basis for our findings and conclusions based on our audit 

objectives. We believe that the evidence obtained provides a reasonable basis for our findings 

and conclusions based on our audit objectives. 

 

12 Complete sample design information can be found in exhibit B: Statistical Plan.

13 The 11 programs included in the universe were Crop Disaster Program; Emergency Assistance for Livestock, 

Honey Bees, and Farm-Raised Fish; Emergency Conservation Program; Emergency Forest Restoration Program;

Dairy Indemnity Payment Program; Livestock Compensation Program; Livestock Forage Disaster Program; 

Livestock Indemnity Program; Reimbursement Transportation Cost Payment Program for Geographically 

Disadvantaged Farmers and Ranchers; SURE; and Tree Assistance Program. 
Abbreviations

6 AUDIT REPORT 03401-0002-11

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

OIG .............................Office of Inspector General

OMB ...........................Office of Management and Budget

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

SURE ..........................Supplemental Revenue Assistance Payments Program
Exhibit A: Summary of Monetary Results

AUDIT REPORT 03401-0002-11 7

Finding Recommendation Description Amount Category

1

We recommend 

that FSA officials 

strengthen controls 

by emphasizing 

the importance of 

second-party 

reviews and 

developing and 

implementing a 

checklist to verify 

the integrity of 

SURE workbook 

inputs.

FSA Made Improper 

Farm Assistance 

Program Payments 

in Fiscal Year 2012

$17.4 million Questioned 

Costs/Loans, No 

Recovery

The table above summarizes the monetary results by finding and includes a description, dollar 

amount, and the category of errors found. The table illustrates Finding 1 has $17.4 million of 

monetary results based on statistical projections of improper payments.
Exhibit B: Statistical Plan

8 AUDIT REPORT 03401-0002-11

Objective

This sample was designed to determine if fiscal year 2012 FSA program payments were properly 

recorded in the accounting system and adequately supported. We performed this work to 

provide coverage for our Department of Agriculture’s Consolidated Financial Statement audit by 

determining whether the financial statements were materially affected by the net impact of 

improper payments made by FSA, through its various farm assistance programs. 14 A second 

objective was to estimate the corresponding “gross total of both over and under payments (i.e., 

not the net of over and under payments)” consistent with the Office of Management and Budget 

(OMB) Circular A-123, Appendix C, Part I.A.9. Exhibit B focuses primarily on the second 

objective. 

Audit Universe

Our universe consisted of $759 million of FSA payments made during fiscal year 2012. To 

complete this work prior to OMB’s deadline for annual financial statement audits, we reviewed 

these records as they became available over the following four periods:

· 6 months ended March 31, 2012.

· 3 months ended June 30, 2012.

· 2 months ended August 31, 2012.

· 1 month ended September 30, 2012. 

Sample Design 

Consistent with Financial Audit Manual §480.21,15 since the prior year’s improper payment rate 

was not high, the Office of Inspector General (OIG) employed monetary-unit sampling, a form 

of probability proportional to size sampling.16 Each record’s selection probability was 

proportional to the corresponding amount paid, relative to that extract’s total payments. 

Based on the previous year’s 1.36 percent gross improper payment rate, OIG selected 

80 payments. To achieve consistent coverage over the dollars paid throughout the fiscal year, 

the number of payments selected from each of the four extracts was roughly proportional to the 

total dollars paid in each extract, approximately one payment per $9.5 million, the average length 

of the sampling intervals. This yielded four samples of 50, 21, 7 and 2 by selecting one payment 

 

14 Audit Report 50401-0003-11, Department of Agriculture’s Consolidated Financial Statements for Fiscal Years 

2012 and 2011 (November 2012).

15 Government Accountability Office and the President’s Council on Integrity & Efficiency, Financial Audit 

Manual, July 2008.

16 More specifically, from a random start in each extract, OIG systematically selected the monetary unit that 

succeeded the previously selected unit by an amount equal to that extract’s sampling interval. OIG reviewed all 

payments summarized in the records associated with the monetary units selected.
from each interval, with each extract’s interval varying only slightly from the $9.5 million 

average as follows:

· $9.66 million (= $483 million ÷ 50 payments) for 6 months ended March 31, 2012.

· $9.33 million (= $196 million ÷ 21 payments) for 3 months ended June 30, 2012. 

· $8.71 million (= $61 million ÷ 7 payments) for 2 months ended August 31, 2012.

· $9.50 million (= $19 million ÷ 2 payments) for September 2012.

Results

Based on the sample results, we project about $17.4 million or 2.29 percent of FSA’s 

approximately $759 million farm program assistance payments during fiscal year 2012 were 

improper. We also project a 95-percent chance these improper payments did not exceed $38

million, or 5 percent of the total paid.

AUDIT REPORT 03401-0002-11 9

Measure

Point 

Estimate 

(Projection)

Upper 

Bound of 

95-Percent 

Confidence 

Interval

(One-tail)*

Raw Data (Improper Payments Observed in Sample)

6 months ended 

March 31, 2012

3 months ended

June 30, 2012

2 months ended 

August 31, 2012

September 

2012

Fraction 

of 

universe 

(or 

sample)

2.29 percent

5.00

percent (1.17 percent) (4.93 percent) (0.77 percent) (0 percent)

Value of 

improper 

payments

$17.4

million

$38 

million $23,354 $54,127 $2,999 $0 

*By definition, total gross improper payments cannot be less than the $80,480 observed in the sample items.

The table above summarizes the results of our statistical sampling of fiscal year 2012 FSA program 

payments for the four sampled periods by value of improper payments (dollar amount) and fraction 

of the universe (percentage). The table also illustrates the point estimate and upper bound of our 

statistical projection, using a 95-percent confidence level.
10 AUDIT REPORT 03401-0002-11
Agency’s Response

AUDIT REPORT 03401-0002-11 11

USDA’S

FARM SERVICE AGENCY'S

RESPONSE TO AUDIT REPORT

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 

20250-0541 

USDA 


~ 

DATE: June 10,2013 

TO: Assistant Inspector General for Audit 

Office of Inspector General 

FROM: Philip Sharp, Director lsI 

Operations Review and Analysis Staff 

SUBJECT: Resposonding to Official Draft Report, Fiscal Year 2012 Farm 

Service Agency (FSA) Farm Assistance Program Payments 

- Audit 03401-0002-11 

The Deputy Administrator for Farm Programs (DAFP) has provided the information 

below which responds to the subject's audit recommendation. 

Recommendation 1 

We recommend that FSA officials strengthen controls by emphasizing the importance of 

second-party reviews and developing and implementing a checklist to verify the integrity 

of Supplemental Review Assistance Payment Program (SURE) workbook inputs. 

Agency Response: 

The authority for SURE ended with those crop losses that were due to a natural disaster 

that occurred through September 30,2011. As a result, very little SURE activity remains 

and sign up for 2011 SURE ends on June 7, 2013. FSA Handbook I-SURE, paragraph 

21, provides instructions for using a FSA-770 SURE checklist as an optional 

management tool State Offices can use to help address deficiencies identified by an audit 

or review; however, it is not a requirement. Due to the fact that SURE is in its final 

stages, FSA has determined not to require a checklist at this time. To do so this late in 

the 2011 signup period would create significant county office workload for which FSA 

does not have the resources. 

In response to FSA emphasizing the importance of second party reviews, FSA during the 

May 23, 2013, DAFP video teleconference call with State Offices, alerted States of the 

importance of second party reviews and highlighted the four areas of concern identified 

in the audit; share, acres, National Average Market Price, and data discrepancies between 

the Risk Management Agency and FSA. Notes of the call will be provided under 

separate cover. In addition, FSA reiterated the importance of second party reviews in 

both FSA Notice SURE-33 addressing the end of signup and Handbook I-SURE, 

amendment 27, subparagraph 665H. Both the notice and amendment will also be 

provided under separate cover in support of FSA's action. 
To learn more about OIG, visit our website at 

www.usda.gov/oig/index.htm

How To Report Suspected Wrongdoing in USDA Programs 

Fraud, Waste and Abuse 

e-mail: USDA.HOTLINE@oig.usda.gov 

phone: 800-424-9121 

fax: 202-690-2474 

Bribes or Gratuities 

202-720-7257 (24 hours a day) 

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