United States Department of Agriculture

Office of Inspector General
United States Department of Agriculture

Office of Inspector General

Washington, D.C. 20250

DATE: May 14, 2012 

AUDIT

NUMBER: 03401-0001-11 

TO: Bruce E. Nelson 

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 2011 Farm Service Agency Farm Assistance Program Payments

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

dated April 25, 2012, 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 only 

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 Performance 

and Accountability Report. Please follow your internal agency procedures in forwarding final 

action correspondence to the Office of the Chief Financial Officer, Director, Planning and 

Accountability Division.

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

audit fieldwork and subsequent discussions. 

Table of Contents

Executive Summary .................................................................................................1

Background and Objectives....................................................................................3

Section 1: Fiscal Year 2011 Improper Payments.................................................5

Finding 1: FSA Made Improper Farm Assistance Program Payments............5

Recommendation 1 ........................................................................................6

Scope and Methodology...........................................................................................8

Abbreviations ...........................................................................................................9

Exhibit A: Summary of Monetary Results..........................................................10

Exhibit B: Statistical Plan .....................................................................................11

Agency’s Response .................................................................................................13

Fiscal Year 2011 Farm Service Agency Farm Assistance Program 

Payments

AUDIT REPORT 03401-0001-11 1

Executive Summary

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

Agency (FSA) during fiscal year 2011, 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 2011 and 2010.1 That report notes that the Office of Inspector 

General (OIG) identified improper payments2that would be reported separately to FSA. 

We sampled FSA program payments for fiscal year 2011 from a universe of $2.064 billion. We 

reviewed 122 payments, totaling $5.2 million,3and identified errors in 14 of these payments. 

These errors occurred primarily because FSA did not have effective internal controls over the 

manual Supplemental Revenue Assistance Payments (SURE) Program payment calculation 

process. Documentation for the SURE Program errors included a second-party reviewer initial 

and date, indicating that a second-party review had been completed; however, the second-party 

reviews conducted by FSA personnel did not detect the data input errors. OIG and FSA have 

agreed that these 14 errors resulted in improper payments of $54,408. Based on the results of 

these 122 sampled payments, we estimated the total dollars improperly paid were about 

$28 million. 

In fiscal year 2010,4 we performed similar work in recalculating FSA program payments selected 

statistically through FSA data extracts and we identified 18 improper payments, totaling 

$61,714. Last year, we recommended that FSA develop and implement effective internal 

controls over the manual SURE Program payment calculation process to prevent the continuance 

of the errors identified. During our fiscal year 2011 audit, we noted that FSA made 

enhancements to the SURE workbook to automatically compute the gross production total for 

the Risk Management Agency indemnity.

While we noted a reduction in the number and dollar amounts of improper payments during our 

fiscal year 2011 audit, controls should be further strengthened to prevent future occurrences of 

the types of errors noted in this report. 

 

1 Audit Report 50401-0001-11, Department of Agriculture’s Consolidated Financial Statements for 

Fiscal Years 2011 and 2010, November 2011.

2 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, November 26, 2002).

3 We statistically selected 100 records that summarized data on 122 payments. From each extract, records were 

selected with probabilities proportional to their sizes. 

4 Audit Report 03024-0001-11, Farm Service Agency, Farm Assistance Program Payments for Fiscal Year 2010, 

June 2011.
Recommendation Summary

FSA should implement more effective second-party reviews over the manual calculation of 

SURE Program payments. 

Agency Response

In its written response, dated April 25, 2012, FSA stated that it issued a notice to State and 

county offices stressing the importance of second party reviews and identifying tools available to 

help identify deficiencies during the review. FSA also discussed the audit and findings, along 

with the notice, at a meeting with all State offices. The written response is included in its 

entirety at the end of the report.

OIG Position 

Based on FSA’s written response, OIG accepts management decision on the recommendation. 

2 AUDIT REPORT 03401-0001-11
Background and Objectives

AUDIT REPORT 03401-0001-11 3

Background

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. These programs include the 

Supplemental Revenue Assistance Payments (SURE) program; Livestock Forage Disaster 

Program (LFP); Emergency Conservation Program (ECP); Livestock Indemnity Program (LIP); 

Crop Assistance Program (CAP); Emergency Assistance for Livestock, Honey Bees, and FarmRaised Fish (ELAP); and Trade Adjustment Assistance for Farmers (TAAF). 

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 LFP to provide compensation to eligible livestock producers that 

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.

CAP authorizes the Secretary of Agriculture to provide disaster aid to producers in specified 

counties whose rice, upland cotton, soybean, and sweet potato production was affected by 

excessive moisture and related conditions that occurred in 2009. Under Section 32 of the 

Agricultural Adjustment Act of August 24, 1935, FSA established per acre payment rates for 

these crops. Through CAP, FSA provides this emergency assistance to help re-establish the 

purchasing power of eligible producers who suffered a 5 percent or greater loss of an eligible 

crop on their crop acreage and were located in a primary county for which a Secretarial disaster 

designation was issued, based on excessive moisture and related conditions for the 2009 crop 

year.
Objectives

The objective of our review was to determine if fiscal year 2011 FSA program payments were 

properly recorded in the accounting system and adequately supported. 

4 AUDIT REPORT 03401-0001-11
Section 1: Fiscal Year 2011 Improper Payments

AUDIT REPORT 03401-0001-11 5

Finding 1: FSA Made Improper Farm Assistance Program Payments

We sampled FSA program payments for fiscal year 2011 from a universe of $2.064 billion. We 

reviewed 122 payments, totaling $5.2 million,5

and identified errors in 14 of these payments. 

These errors occurred primarily because FSA did not have effective internal controls over the 

manual SURE Program payment calculation process. Documentation for the SURE Program 

errors included a second-party reviewer initial and date, indicating that a second-party review 

had been completed; however, the second-party reviews conducted by FSA personnel did not 

detect the data input errors. The Office of Inspector General (OIG) and FSA have agreed that 

these 14 errors resulted in improper payments of $54,408. FSA has initiated or completed 

appropriate corrective actions for all errors. Based on the results of these 122 sampled payments, 

we estimated the total dollars improperly paid were about $28 million. We are 95 percent 

confident that the improper payments did not exceed $102 million.

In our review, we found that 10 of the 146errors represented SURE Program payments. Overall, 

our statistical sample included 62 SURE Program payments from a total SURE Program 

payment universe of about $1.186 billion. We calculated a total of $54,238 improper payments 

for the 10 SURE Program errors. We found the county offices made errors when inputting the 

data into the manual workbook used to calculate the SURE Program payments. Specifically, 

these errors included incorrectly omitting appropriate crop indemnity information; entering the 

incorrect Production to Count; entering the incorrect Direct and Counter-Cyclical Program direct 

payment amounts, as well as the National Average Market Price amounts; entering the incorrect 

acres; not including all units; entering the incorrect Stage Code; entering the incorrect inputted 

Quality Adjustment factors; and entering the incorrect County Office Committee Adjusted 

Production. 

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

SURE Program payments made during our review. We determined one county office failed to 

include all Risk Management Agency (RMA) indemnities in the SURE workbook for a multicounty producer. Also, the counter-cyclical yields for this same county were incorrectly added. 

Additionally, OIG determined that for this county office and a second one, the county offices 

entered an incorrect Production to Count for a wheat and corn unit. Together these errors caused 

a difference of $32,941. 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. 

 

5 We statistically selected 100 records that summarized data on 122 payments. From each extract, records were 

selected with probabilities proportional to their sizes. 

6 The other four errors consisted of three LFP payments and one CAP payment. For the LFP improper payments, 

we found the county offices used an incorrect carrying capacity rate when entering data for the payment. For the 

CAP improper payment, we found the county office used incorrect acres and share amount when computing the 

payment. OIG and FSA have agreed that these four errors resulted in improper payments totaling $170.
According to the FSA Handbook 1-SURE,

6 AUDIT REPORT 03401-0001-11

7

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 Program payment. The handbook further states the SURE “Interim 

Workbook” does not have the capability to check or reference other systems, such as the Service 

Center Information Management System, Farm Records, or Web Subsidiary. These other 

systems will need to be checked by the user to ensure that the producer is eligible for the 

SURE Program. OIG also identified an inconsistency in the 1-SURE Handbook regarding the 

instructions on which producer share to use in the SURE Program calculation. Specifically, we 

found there were inconsistencies in the 1-SURE Handbook between paragraphs 515-E/575-E and 

exhibit 4, page 2. In one reference, the handbook directed county offices to use the producer 

share from the form FSA-578 on the SURE Information Report (SIR). In the other reference, the 

handbook directed county offices to use the producer share from the RMA data information on 

the SIR. FSA and OIG had a meeting on this matter during our review and FSA officials agreed 

that the 1-SURE Handbook warranted an amendment to clarify to the county offices where the 

producer share should be obtained from the SIR. FSA informed OIG that the amendment would 

not be retroactive. On October 13, 2011, FSA provided proposed language to amend the 

1-SURE Handbook and clarify the inconsistent language in the handbook regarding where a 

producer’s share should be extracted from in order to calculate a payment. OIG agreed that the 

proposed language for the amendment was sufficient in addressing our concerns.

In fiscal year 2010,8 we performed similar work in recalculating FSA program payments selected 

statistically through FSA data extracts, and we identified 18 improper payments totaling 

$61,714. Last year, we recommended that FSA develop and implement effective internal 

controls over the manual SURE Program payment calculation process to prevent the continuance 

of the errors identified. During our fiscal year 2011 audit, we noted that FSA made 

enhancements to the SURE workbook to automatically compute the gross production total for 

the RMA indemnity.

While we noted a reduction in the number and dollar amounts of improper payments during our 

fiscal year 2011 audit, controls should be further strengthened to prevent future occurrences of 

the types of errors noted in this report. 

Recommendation 1 

We recommend that FSA officials implement more effective second party reviews over the 

manual calculation of SURE Program payments. 

Agency Response

To address the recommendation, FSA issued a notice to State and county offices stressing the 

importance of second party reviews and identifying tools available to help identify deficiencies 

 

7

1-SURE Handbook, “Amendment 19,” January 13, 2012.

8 Audit Report 03024-0001-11, Farm Service Agency, Farm Assistance Program Payments for Fiscal Year 2010, 

June 2011.
during the review. FSA also discussed the audit and findings, along with the notice, at a meeting 

with all State offices.

OIG Position

We accept FSA’s management decision on this recommendation. 

AUDIT REPORT 03401-0001-11 7
Scope and Methodology 

8 AUDIT REPORT 03401-0001-11

We obtained the universe of payments from FSA and statistically selected 100 records that 

summarized 122 payments made from October 1, 2010, through September 30, 2011. The four 

data extracts provided by FSA included program payments for all of fiscal year 2011 and 

represented seven programs,9

totaling $2.064 billion. Details on each data extract are as follows:

· The first extract included payments of about $1.269 billion, made from October 1, 2010, 

through March 31, 2011, from which we statistically selected 50 records that summarized 

66 payments. 

· The second extract included payments of about $403 million, made from April 1, 2011, 

through June 30, 2011, from which we statistically selected 25 records that summarized 

27 payments. 

· The third extract included payments of about $302 million, made from July 1, 2011, 

through August 31, 2011, from which we statistically selected 17 records that 

summarized 21 payments. 

· The fourth extract included payments of about $90 million, made in September 2011, 

from which we statistically selected 8 records that summarized 8 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 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. 

 

9 The seven programs were ECP, SURE, LFP, LIP, CAP, ELAP, and TAAF.
Abbreviations

AUDIT REPORT 03401-0001-11 9

ARRA ......................... American Recovery and Reinvestment Act of 2009 

CAP.............................Crop Assistance Program

ECP ............................. Emergency Conservation Program 

ELAP...........................Emergency Assistance for Livestock, Honey Bees, and Farm-Raised Fish

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

LFP.............................. Livestock Forage Disaster Program 

LIP............................... Livestock Indemnity Program 

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

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

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

SIR .............................. SURE Information Report 

SURE ..........................Supplemental Revenue Assistance Payments Program

TAAF ..........................Trade Adjustment Assistance for Farmers
Exhibit A: Summary of Monetary Results

10 AUDIT REPORT 03401-0001-11

Finding Recommendation Description Amount Category

1 1

FSA made Improper

Farm Assistance 

Program Payments 

in Fiscal Year 2011

$28.1 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 $28.1 million of 

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

AUDIT REPORT 03401-0001-11 11

Objective

This sample was designed to determine if fiscal year 2011 Farm Service Agency (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. 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 $2.064 billion of FSA payments made during fiscal year 2011. 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:

1. Six months ended March 31, 2011 

2. Three months ended June 30, 2011 

3. Two months ended August 31, 2011 

4. One month ended September 30, 2011 

Sample Design

Consistent with Financial Audit Manual §480.21,10 since the prior year’s improper payment rate 

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

known as probability proportional to size sampling.11 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 2.03 percent gross improper payment rate, OIG selected 100 

records that summarized data on 122 payments. To spread the audit work evenly over time, the 

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

span of the extract (averaging 81⁄3 records per month), resulting in four separate samples of 50, 

25, 17, and 8 records. However, because FSA’s payment rates varied significantly over the four 

periods, the number of records selected per total dollars paid also differed significantly across the 

four samples. Each extract’s “sampling fraction” is the reciprocal of its fixed-length sampling 

interval and these sampling intervals varied across the extracts as follows:

 

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

Manual, July 2008.

11 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.
Exhibit B: Statistical Plan (continued)

12 AUDIT REPORT 03401-0001-11

· $25.38 million (= $1.269 billion ÷ 50 records) for 6 months ended March 31, 2011.

· $16.12 million (= $403 million ÷ 25 records) for 3 months ended June 30, 2011.

· $17.76 million (= $302 million ÷ 17 records) for 2 months ended August 31, 2011.

· $11.25 million (= $90 million ÷ 8 records) for September 2011. 

Results

Based on the sample results, we project about $28.1 million or 1.36 percent of FSA’s 

$2.064 billion farm program assistance payments during fiscal year 2011 were improper. We 

also project a 95 percent chance these improper payments did not exceed $101.8 million, or 

4.93 percent of the total paid. 

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, 2011

3 months 

ended June 

30, 2011

2 months 

ended August 

31, 2011

September 

2011

Fraction of 

universe 

(or sample)

1.36 percent 4.93 percent (0.20 percent) (3.02 percent) (0.06 percent) (0 percent)

Value of 

improper 

payments

$28.1 

million

$101.8 

million $5,430 $48,618 $360 $0 

*By definition, total gross improper payments cannot be less than the $54,408 observed in the sample.

items.

The table above summarizes the results of our statistical sampling of fiscal year 2011 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.
Agency’s Response

AUDIT REPORT 03401-0001-11 13

FARM SERVICE AGENCY

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

20250-0540

DATE: April 25, 2012 

TO: Director, Farm, Trade, Research and Environment Division 

 Office of Inspector General 

FROM: Philip Sharp, Director 

 Operations Review and Analysis Staff 

SUBJECT: Responding to Official Draft Report, Fiscal Year 2011 Farm Service 

Agency Farm (FSA) Assistance Program Payments – Audit 03401-0001-11 

FSA’s Deputy Administrator for Programs has provided the following information to reach 

management decision for the subject’s audit recommendation. 

Recommendation 1

We recommend that FSA officials implement more effective second party reviews over 

the manual calculation of Supplemental Revenue Assistance Payments (SURE) program 

payments. 

Agency Response: 

The OIG summary indentified errors in 14 of the 122 payments reviewed. OIG 

determined that these errors occurred primarily because FSA did not have effective 

internal controls over the manual SURE Program payment calculation process. OIG also 

found that documentation for the SURE Program errors included a second-party reviewer 

initial and date indicating that a second-party review had been completed; however the 

second-party reviews conducted by FSA personnel did not detect the data input errors. 

Corrective action was taken to address the above deficiencies. FSA Notice SURE-25 was 

issued to State and County offices on April 12, 2012. The notice identified the data input 

errors found during the audit for the SURE program and also stressed the importance of 

diligence for second party reviews. It also reiterated the management tools available in 

FSA Handbook 1-SURE to help identify deficiencies during a review. 

On April 12, 2012, the audit and findings, along with Notice SURE-25, were discussed 

during the biweekly DAFP conference call with all State Offices. SURE State Office 

Program Specialists were responsible for relaying the information to the County Offices. 
Informational copies of this report have been distributed to: 

Administrator, Farm Service Agency (2) 

Attn: Director, Operations Review and Analysis Staff

Government Accountability Office (1) 

Office of Management and Budget (1) 

Office of the Chief Financial Officer (1) 

Director, Planning and Accountability Division 
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 

In Washington, DC 202-690-1622 

Outside DC 800-424-9121 

TDD (Call Collect) 202-690-1202 

Bribes or Gratuities 

202-720-7257 (Monday-Friday, 9:00a.m.- 3 p.m. ED 

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