FARM PROGRAMS

Direct Payments 

Should Be 

Reconsidered

Report to Congressional Requesters

July 2012

GAO-12-640

United States Government Accountability Office

GAO
United States Government Accountability Office

Highlights of GAO-12-640, a report to 

congressional requesters 

July 2012 

FARM PROGRAMS

Direct Payments Should Be Reconsidered

Why GAO Did This Study

Through one facet of the farm safety 

net, USDA provides farmers and other

producers with fixed annual payments, 

called direct payments, based on their 

farms’ historical crop production. Direct 

payments do not vary with crop prices 

or crop yields. In March 2011, GAO 

reported on observations and options

regarding direct payments and 

suggested to Congress that they be 

eliminated or reduced. GAO was asked 

(1) to provide information regarding the 

geographic distribution and ownership 

characteristics of payment recipients, 

as well as the dollar amount of direct 

payments made for farms with acreage 

that qualified, and the amount and 

types of crops grown on such acreage

for years 2003 to 2011, and (2) to 

examine whether direct payments are 

aligned with principles significant to 

integrity, effectiveness, and efficiency 

in farm bill programs. To conduct this 

work, GAO analyzed USDA data and

interviewed agency officials. 

What GAO Recommends

Congress should consider eliminating or 

reducing direct payments. GAO also

recommends that USDA take four

actions to improve its oversight of direct 

payments including developing a 

systematic process to report on land 

that may no longer be usable for 

agriculture, and considering ways to 

increase the number of cases selected 

for end-of-year reviews and completing

these reviews in a timely manner. 

USDA generally agreed with two of 

GAO’s recommendations and disagreed 

with two others, stating that it believes 

its current processes or practices are 

adequate. GAO continues to believe 

that it is important for USDA to take the 

recommended actions.

What GAO Found

From 2003 through 2011, the U.S. Department of Agriculture (USDA) made more 

than $46 billion in direct payments to farmers and other producers. These 

producers planted varying percentages of acres that qualified for payments 

based on their historical planting yields and designated payment rates (qualifying 

acres). Cumulatively, USDA paid $10.6 billion—almost one-fourth of total direct 

payments made from 2003 through 2011—to producers who did not, in a given 

year, grow the crop associated with their qualifying acres, which they are allowed 

to do. About 2,300 farms (0.15 percent of farms receiving direct payments) 

reported all their land as “fallow,” and producers did not plant any crops on this

land for each year for the last 5 years, from 2007 through 2011; in 2011, these

producers received almost $3 million in direct payments. 

Direct payments generally do not align with the principles significant to integrity, 

effectiveness, and efficiency in farm bill programs that GAO identified in an April 

2012 report. These payments align with the principle of being “distinctive,” in that 

they do not overlap or duplicate other farm programs. However, direct payments 

do not align with five other principles. Specifically, they do not align with the 

following principles: 

• Relevance: When the precursors to direct payments were first authorized in 

1996 legislation, they were expected to be transitional, but subsequent 

legislation passed in 2002 and 2008 has continued these payments as direct 

payments. However, in April 2012, draft legislation for reauthorizing

agricultural programs through 2017 proposed eliminating direct payments. 

• Targeting: Direct payments do not appropriately distribute benefits consistent 

with contemporary assessments of need. For example, they are 

concentrated among the largest recipients based on farm size and income; in 

2011, the top 25 percent of payment recipients received 73 percent of direct 

payments. 

• Affordability: Direct payments may no longer be affordable given the United 

States’ current deficit and debt levels. 

• Effectiveness: Direct payments may have unintended consequences. Direct 

payments may have less potential than other farm programs to distort prices 

and production, but economic distortions can result from these payments. 

For example, GAO identified cases where direct payments support recipients 

who USDA officials said own farmland that is not economically viable in the 

absence of these payments. 

• Oversight: Oversight of direct payments is weak. With regard to oversight, 

USDA has not systematically reported on land that may no longer be eligible 

for direct payments because it has been converted to nonfarm uses, as 

required for annual reporting to Congress. In addition, GAO identified 

weaknesses in USDA’s end-of-year compliance review process. For 

example, USDA conducts relatively few reviews and generally does not 

complete these reviews within expected time frames. 

Continuing to provide payments that generally do not align with principles 

significant to integrity, effectiveness, and efficiency in farm bill programs raises 

questions about the purpose and need for direct payments. 

View GAO-12-640. For more information, 

contact Lisa Shames at (202) 512-3841 or

shamesl@gao.gov. 
Page i GAO-12-640 Farm Programs

Letter 1 

Background 5

Varied Producers, Who Are Geographically Concentrated, Received 

More Than $46 Billion in Direct Payments from 2003 through 

2011 8

Direct Payments Do Not Align with Certain Principles 15

Conclusions 29

Matter for Congressional Consideration 30

Recommendations for Executive Action 31

Agency Comments and Our Evaluation 31

Appendix I Objectives, Scope, and Methodology 36

Appendix II Principles Significant to the Integrity, Effectiveness, and 

Efficiency of Farm Bill Programs 40

Appendix III Ownership Characteristics of Land for Which Direct 

Payments Were Made 41

Appendix IV Analysis of Direct Payment Crops Grown Compared with 

Base Acreage Allocations 43

Appendix V Analysis of Extent to Which Producers Did Not Grow Any of 

the Crop Associated with Their Base Acres in a Given Year 44

Appendix VI Analysis, by State, of the Number of Farms Fallow from 2007 

through 2011 and the Value of Direct Payments Made to Producers for 

These Farms in 2011 45

Contents
Page ii GAO-12-640 Farm Programs

Appendix VII Comments from the U.S. Department of Agriculture 47

Appendix VIII GAO Contact and Staff Acknowledgments 49

Related GAO Products 50

Tables

Table 1: Status of FSA’s End-of-Year Reviews for 2008 and 2009, as 

of September 2011 25

Table 2: Amounts by Which FSA Reduced Direct Payments for 

Selected Reasons in 2010 and 2011 28

Table 3: Changes in Ownership of Land for Which Direct Payments 

Were Made, All Covered Crops 41

Table 4: Ownership Characteristics, All Covered Crops, Corn, 

Cotton, Oats, Rice, Soybeans, and Wheat, 2011 42

Table 5: Planted Acres of Base Acre Crop as a Percentage of Base 

Acres, from 2003 through 2011 43

Table 6: Cumulative Value of Direct Payments Made for Which the 

Crop Associated with the Base Acres Was Not Grown in a 

Given Year from 2003 through 2011 44

Table 7: Number of Farms Where Producers Planted No Crop of 

Any Type from 2007 through 2011 and Value of Direct 

Payments Received by These Producers in 2011, by State 45

Figures

Figure 1: How Direct Payments Are Calculated 6

Figure 2: Direct Payments by County, 2011 10

Figure 3: Distribution of “Fallow” Farms—Those That Did Not 

Grow Any Crop of Any Type—Each Year from 2007 

through 2011 for Which Direct Payments Were Made 14
Page iii GAO-12-640 Farm Programs

Abbreviations

ACRE Average Crop Revenue Election

CCC Commodity Credit Corporation

FSA Farm Service Agency

GDP gross domestic product

OIG Office of Inspector General

USDA U.S. Department of Agriculture 

2008 Farm Bill The Food, Conservation, and Energy Act of 2008

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Page 1 GAO-12-640 Farm Programs

United States Government Accountability Office 

Washington, DC 20548

July 3, 2012

Congressional Requesters:

From 2006 through 2010, the U.S. Department of Agriculture (USDA) 

spent about $13 billion annually on federal programs to support farm 

income, assist farmers after disasters, and conserve natural resources. 

Through one facet of this farm safety net, USDA provides farmers and 

other producers with fixed annual payments—called direct payments—

based on their farms’ historical crop production. USDA makes these 

payments regardless of whether these producers grow crops, as long as 

they and their farms meet certain eligibility criteria. Amounting to nearly 

$5 billion annually since 2002, direct payments do not vary with crop 

prices, crop yields, or producers’ incomes.1

Increased national budget deficits, record levels of farm income and 

prices for major crops, and sensitivity within the agricultural industry and 

among the public to potentially unnecessary budget outlays have 

heightened concerns about the viability of and need for direct payments. 

In March 2012, the President’s fiscal year 2013 budget called for the 

elimination of direct payments, noting that more than 50 percent of direct 

payments go to farmers with more than $100,000 in income and 

questioning whether taxpayers should continue to “foot the bill.”

Unlike other major farm 

programs, which compensate farmers for declines in price or for lost 

crops, direct payments go to farmers regardless of risk factors. Direct 

payments were most recently authorized in the Food, Conservation, and 

Energy Act of 2008 (2008 Farm Bill), and without future action, will expire 

in September 2012. USDA’s Farm Service Agency (FSA) is responsible 

for administering direct payments and for ensuring that recipients of such 

payments meet eligibility criteria, and that payment limitations and other 

applicable provisions are applied.

2

 

1

Under the 2008 Farm Bill, a person or entity whose 3-year average farm income exceeds 

$750,000 and/or 3-year average non-farm income exceeds $500,000 is ineligible for direct 

payments.

For 

2011, USDA reported that net farm income was a record $98.1 billion. For 

2012, USDA estimates that net farm income will decline to $91.7 billion—

2

Office of Management and Budget, Fiscal Year 2013 Budget: Cutting Waste, Reducing 

the Deficit, and Asking All To Pay Their Fair Share (Washington, D.C.: Feb. 13, 2012).

 
 

Page 2 GAO-12-640 Farm Programs

still the second highest level on record. Moreover, according to USDA, 

the top 5 earnings years for the past 3 decades have occurred since 

2004, attesting to the recent profitability of farming. Furthermore, farmland 

values, another measure of farm prosperity, increased by 85 percent from 

2003 through 2011. Since August 2011, the trade associations of five 

major crops for which the bulk of direct payments are made—corn, 

cotton, wheat, rice, and soybeans—have stated that direct payments may 

need to be eliminated in favor of other elements of the governmentsubsidized farm safety net. In addition, in our March 2011 report on 

overlap and duplication in federal programs, we made several 

observations regarding direct payments, and we noted that GAO and 

others have proposed options to reduce or eliminate direct payments.3

In April 2012, we identified certain principles as applicable to Congress’s 

deliberations for the 2012 farm bill and significant to the integrity, 

effectiveness, and efficiency of farm bill programs, such as direct 

payments.4

We have further reported that strengthened oversight of direct payments 

and other farm program payments can save taxpayer dollars. For 

example, we reported in July 2007 that USDA made $1.1 billion in 

potentially improper farm program payments, including direct payments, 

Specifically, the principles we identified were (1) relevance of 

program purpose, (2) distinctiveness, (3) targeting benefits, (4) 

affordability, (5) effectiveness, and (6) oversight. See appendix II for the 

list of principles and associated key questions.

 

3

GAO, Opportunities to Reduce Potential Duplication in Government Programs, Save Tax 

Dollars, and Enhance Revenue, GAO-11-318SP (Washington, D.C.: Mar. 1, 2011). In 

February 2012, we reported that no legislative action was taken on this recommendation. 

See GAO, Follow-up on 2011 Report: Status of Actions Taken to Reduce Duplication, 

Overlap, and Fragmentation, Save Tax Dollars, and Enhance Revenue, GAO-12-453SP 

(Washington, D.C., Feb. 28, 2012). See also GAO, 2012 Annual Report: Opportunities to 

Reduce Duplication, Overlap and Fragmentation, Achieve Savings, and Enhance 

Revenue, GAO-12-342SP (Washington, D.C.: Feb. 28, 2012). Others who proposed such 

options included the National Commission on Fiscal Responsibility and Reform, the Debt 

Reduction Taskforce, the Administration, Members of Congress, and some farming 

groups.

4

GAO, Farm Bill: Issues to Consider for Reauthorization, GAO-12-338SP (Washington, 

D.C.: Apr. 24, 2012). USDA’s Office of Inspector General issued a companion report using 

these principles. See U.S. Department of Agriculture, Office of Inspector General, Farm 

Bill: Issues to Consider for Reauthorization, 50099-0001-10 (Washington D.C.: 

April 2012). 
 

Page 3 GAO-12-640 Farm Programs

to more than 170,000 deceased individuals.5 According to USDA officials, 

since 2007, they have begun taking additional steps to verify that 

payment recipients are alive, and if the payment is determined 

inappropriate, recover it. We also reported, in April 2004, that USDA was 

not effectively overseeing its farm program payments, including direct 

payments. In particular, we reported that FSA did not review a valid 

sample of producers’ farm operating plans to ensure compliance with 

eligibility requirements and thus did not ensure that only eligible recipients 

received payments. Moreover, we found that FSA’s reviews of these 

plans were often completed late.6

Because the expected reauthorization of the farm bill this year provides 

an opportunity to reexamine direct payments, you asked us to review 

them. In this context, this report (1) provides information on the 

geographic distribution and ownership characteristics of payment 

recipients, the dollar amounts of direct payments made for farms with 

acreage that qualifies for such payments, and the amount and types of 

crops grown on such acreage from 2003 through 2011 and (2) examines 

whether direct payments are aligned with principles significant to integrity, 

effectiveness, and efficiency in farm bill programs.

USDA has since implemented some 

management controls in response to our recommendations.

To conduct this work, we analyzed USDA data, interviewed agency 

officials, and reviewed and updated our past work. Specifically, to provide 

information about the ownership characteristics and geographic distribution 

of payment recipients and determine the dollar amount of direct payments 

made for farms with qualifying acreage, we obtained USDA data indicating 

the number, amount, and recipient for direct payments made from program 

years 2003 through 2011—that is, from the program’s first full year of 

operation through the most recent year for which complete program data 

are available.7

 

5

GAO, Federal Farm Programs: USDA Needs to Strengthen Controls to Prevent Improper 

Payments to Estates and Deceased Individuals, 

We also obtained and analyzed data detailing the acreage 

GAO-07-818 (Washington, D.C.: 

July 9, 2007).

6

GAO, Farm Program Payments: USDA Needs to Strengthen Regulations and Oversight 

to Better Ensure Recipients Do Not Circumvent Payment Limitations, GAO-04-407 

(Washington, D.C.: Apr. 30, 2004).

7

A program year is the year for which the program runs and benefits may be received. For 

direct payments, the program year corresponds with the federal fiscal year. 
 

Page 4 GAO-12-640 Farm Programs

of qualifying farms and the planting history for each farm for which direct 

payments were made and other records pertaining to the share of 

payments received by various individuals and entities. In particular, we 

obtained data from USDA’s compliance share file that indicates how a 

producer—whether an individual or an entity—is involved and whether they 

own a particular farm field or area of land for which direct payments were 

made. Producers report they either (1) own and operate the farm (“owneroperators”), (2) operate but do not own the farm (“tenants”), or (3) are an 

owner of the farm (“other owners”). To assess the reliability of USDA’s 

data, we (1) performed electronic testing of required data elements, (2) 

reviewed existing information about the data and the system that produced 

them, and (3) interviewed agency officials knowledgeable about the data. 

We found these data to be sufficiently reliable for the purposes of this 

report.8 To examine whether direct payments are aligned with principles 

significant to integrity, effectiveness, and efficiency in farm bill programs, 

we reviewed our previous work in the area—in particular our March 2011 

report on overlap and duplication of federal programs, which discussed 

observations regarding direct payments.9 We also reviewed our April 2012 

report, which reviewed our recent work on farm bill programs and identified 

the principles and associated key questions.10

 

8

However, for years before 2008, USDA was unable to provide reliable address files for 

recipients, which we needed to determine the geographic distribution of direct payments. 

Therefore, we were unable to analyze the geographic distribution of direct payments 

before 2008.

These principles may not 

represent all potential principles that could be considered. We collected 

additional data where possible to determine how circumstances regarding 

direct payments may have changed more recently and evaluated direct 

payments according to the principles identified in our earlier work. We 

spoke with officials in FSA headquarters, state, and county offices who are 

responsible for ensuring that direct payment recipients meet requirements 

for such payments. We also visited five selected FSA county offices located 

in Arizona and Louisiana. We selected these county offices because FSA 

data showed a relatively high number of end-of-year reviews of farming 

operations in these counties. In addition, some of these counties had 

experienced high levels of residential growth in recent years. During our 

visits, we reviewed case files, including those of farming operations that 

had undergone or were undergoing end-of-year reviews, and observed 

9

GAO-11-318SP. 

10GAO-12-338SP. 
 

Page 5 GAO-12-640 Farm Programs

some of these farms. Appendix I describes our objectives, scope, and 

methodology in more detail.

We conducted this performance audit from August 2011 to June 2012 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.

Federal law mandates support for farmers through various programs, 

including direct payments. USDA, through its Commodity Credit 

Corporation (CCC),11 calculates direct payments using a formula that 

factors in “base acres,” a measure of a farm’s crop production history 

based on the number of acres planted on the farm during certain past 

years. The term base acres refers to a farm’s average planted acreage of 

specific crops during those years; the term does not refer to specific 

physical acres on that farm. The direct payment formula uses a fixed 

percentage of the average number of acres planted on the farm from 

1998 through 2001 and multiplies that number by the farm’s historical 

crop yield and a statutorily fixed payment rate.12

 

11The CCC is a federally owned and operated corporation within USDA created to 

stabilize and support agricultural prices and farm income by making loans and payments 

to producers, purchasing commodities, and engaging in various other operations. The 

CCC handles all money transactions for agricultural price and income support and related 

programs. FSA distributes direct payments for the CCC.

The percentage and 

payment rates for each crop are specified in legislation, commonly 

referred to as farm bills, passed by Congress roughly every 5 years. For 

2009 through 2011, this percentage was set at 83 percent; for 2012, it 

was set at 85 percent. Figure 1 illustrates the process for calculating a 

producer’s direct payment.

12In 2002, producers were given the option of updating their base acre allocations based 

on the farm’s production from 1998 through 2001. Producers who opted not to update at 

that time maintained base acre allocations based on the farm’s production from earlier 

years. 

Background
 

Page 6 GAO-12-640 Farm Programs

Figure 1: How Direct Payments Are Calculated

Through this system, a producer’s direct payments are based on the 

historical production of a particular crop. Moreover, producers have 

almost complete flexibility in deciding which crops to plant, and they 

receive payments as long as they meet eligibility criteria, even if they 

decide to plant different crops or not plant crops at all. In years in which 

they do not plant, however, the farm bill requires that the relevant land be 

maintained in accordance with sound agricultural practices. For example, 

producers must take steps to minimize the growth of weeds on the land. 

Producers also are required to report planting information each year on 

forms called acreage reports.13

 

13Such reporting is outlined in FSA guidance and program documents and required by the 

2008 farm bill. See FSA, Direct and Counter-Cyclical Payment Handbook,1-DCP

(Washington, D.C.: Aug. 14, 2008), and FSA, Direct and Counter-Cyclical Payment and 

Average Revenue Crop Election Contract, CCC-509 (Washington, D.C. Apr. 16, 2009). In 

addition, the acreage report that FSA uses to collect such production information is more 

specifically known as FSA’s Form-578 “Report of Acreage.” 

The United States has classified direct 

payments as meeting World Trade Organization rules for nontrade 

distorting payments; direct payments are not tied to specific production or 

prices, and they are generally deemed not to distort international 

agricultural markets.
 

Page 7 GAO-12-640 Farm Programs

After learning of instances where farm payments were made to 

individuals not involved in farming, Congress enacted the Agricultural 

Reconciliation Act of 1987, commonly referred to as the Farm Program 

Payments Integrity Act. The act, among other measures, sets eligibility 

criteria to ensure that only individuals and entities “actively engaged in 

farming” receive certain farm program payments.14 Specifically, according 

to the 2008 Farm Bill, direct payments, Average Crop Revenue Election 

(ACRE), and counter-cyclical payment recipients are required to be 

actively engaged in farming.15

FSA reviews these plans to determine, among other things, the number of 

recipients who qualify for payments and whether they are actively engaged 

in farming. To be considered actively engaged in farming, an individual 

recipient must make significant contributions to the farming operation in two 

areas: (1) capital, land, or equipment and (2) personal labor or active 

personal management. An entity, such as a corporation, limited 

partnership, or trust is generally considered actively engaged in farming if 

the entity separately makes a significant contribution of capital, land, or 

equipment, and its members collectively make a significant contribution of 

personal labor or active personal management to a farming operation. In 

2010, FSA issued a rule stating that members of a legal entity are excepted 

from the requirement to make contributions of active personal labor or 

active person management if (1) at least 50 percent of the interest is held 

by members that are providing active personal labor or active personal 

management and (2) total payments, including direct payments, countercyclical payments, and ACRE payments are less than or equal to one 

FSA is responsible for ensuring that direct 

payment recipients meet program eligibility criteria. FSA carries out this 

responsibility through its headquarters office, 50 state offices, and 

approximately 2,200 county offices. Producers file with their local FSA 

county office a farm operating plan in which they document the number of 

recipients qualifying for payments, the name of each payment recipient, 

and each recipient’s role in the farming operation and share of profits and 

losses. Producers must update this plan when a change in their operation 

occurs, such as a change in the farm’s ownership.

 

14We previously reported on USDA’s enforcement of “actively engaged” provisions. See 

GAO-04-407. 

15ACRE is a revenue-support program, under which payments are made based on a 

producer’s production of certain crops and a crop price index. Counter-cyclical payments 

are price supports paid when the actual price of covered crops falls below a legislatively 

determined target price.
 

Page 8 GAO-12-640 Farm Programs

“payment limitation”—a statutorily set limit on the value of the payment 

made to the producer(s). FSA’s regulations define active personal 

management to include such tasks as arranging financing for the operation, 

supervising the planting and harvesting of crops, and marketing crops. For 

both individuals and entities, their contributions to the farming operation 

must also be commensurate with their share of the farming operation’s 

profits or losses.

To help oversee direct payments, FSA monitors farm operations’ land 

usage through producers’ acreage reports, and at the end of the year it 

conducts a detailed review of a sample of farm operating plans. 

Specifically, FSA field offices compare selected plans against supporting 

documentation to help monitor whether farming operations were 

conducted in accordance with their plans. These end-of-year reviews 

include an assessment of whether payment recipients met program 

requirements. FSA selects its sample of farming operations for these 

reviews on the basis of, among other criteria, the restructuring or 

formation of a farming operation in the past year and the number of 

farming operations in which an individual or legal entity is involved. 

According to FSA officials, the selection process emphasizes farm 

operations involving six or more producers.

From 2003 through 2011, USDA made more than $46 billion in direct 

payments, which was concentrated among certain counties, among 

recipients located within 100 miles of farms qualifying for payments, and 

among certain types of producers. We also found that producers of 

different qualifying crops planted varying percentages of their base acres 

in those crops. Cumulatively, almost one-fourth of the total value of direct 

payments made during this period went to producers who did not, in a 

given year, grow any of the crop associated with their base acres—as 

they are allowed to do.

Varied Producers, 

Who Are 

Geographically 

Concentrated, 

Received More Than 

$46 Billion in Direct 

Payments from 2003 

through 2011
 

Page 9 GAO-12-640 Farm Programs

According to our analysis of USDA data, more than $46 billion in direct 

payments were made from 2003 through 2011,16

 

16We included all the direct payment crops in our analysis: barley, canola, corn, cotton 

(upland), crambe, flax, mustard, oats, peanuts, rapeseed, rice, safflower, sesame, 

sorghum, soybeans, sunflower, and wheat.

with counties in the 

Midwest and Mississippi River Basin accounting for a large share of the 

value of payments made and smaller amounts distributed among other 

counties throughout the United States. In addition, our analysis showed 

that total payments varied widely by county: in 2011, about 9 percent of 

counties received less than $250,000 in payments countywide, and about 

8 percent of counties received at least $5 million countywide. Figure 2 

shows the distribution of direct payments in 2011, the most recent year 

for which data are available.

Payments Were 

Concentrated among 

Certain Counties, 

Recipients Located within 

100 Miles of the Farm, and 

Certain Types of Producers
 

Page 10 GAO-12-640 Farm Programs

Figure 2: Direct Payments by County, 2011

Note: Data for Alaska and Hawaii indicate that all of the counties in these states fall in the lowest 

range. Therefore, we excluded these states from the map. However, the 278 counties listed for this 

dollar range include those in Alaska and Hawaii. 
 

Page 11 GAO-12-640 Farm Programs

With regard to the geographic distribution of payment recipients, 

according to our analysis of USDA data, from 2008 through 2011,17

With regard to the ownership characteristics of farms, direct payments 

may be made to producers with varying degrees of involvement in the 

farming operation, including individuals or entities that either (1) own and 

operate the farm (owner-operators), (2) operate but do not own the farm 

(tenants), or (3) are an owner of the farm (other owners).

about 

97 percent of the value of payments, or about $18.8 billion, went to 

recipients located within 100 miles of the farm on which their direct 

payments were based. In addition, for that period, about 1.4 percent of 

the value, or about $269 million, went to recipients located 300 miles or 

more from the farm. Furthermore, our analysis shows that cumulatively 

from 2008 through 2011, 0.56 percent of direct payments, or $109 million, 

was made to recipients located 800 or more miles from the farm. For the 

complete results of our analysis on ownership characteristics of land for 

which direct payments were made, see appendix III.

18

 

17USDA was unable to provide reliable address files for recipients for years before 2008. 

We obtained available data for the centroid point—the geometric center—of the county in 

which the farm resides and calculated the distance from it to the centroid point of the 

payment recipient’s zip code. 

According to 

our analysis of USDA data from 2003 through 2011, 86 to 88 percent of 

acreage for direct-payment eligible crops was operated by producers who 

were listed as owner-operators or tenants, while 12 to 14 percent of 

acreage was operated by producers who were listed as other owners—

but not necessarily operators. In addition, we found that from 2003 

through 2011, the share of acreage operated by owner-operators 

decreased and the share operated by tenants increased, while the share 

operated by other owners was relatively consistent. Specifically, from 

2003 to 2011, the percentage of acreage, including acreage qualifying for 

direct payments, which was operated by owner-operators decreased from 

77 million acres in 2003 (30 percent of all eligible acreage) to 67 million 

acres (26 percent) in 2011. Acreage operated by tenants increased from 

145 million acres in 2003 (56 percent of eligible acreage) to 159 million 

acres (62 percent) in 2011. Meanwhile, the acreage operated by other 

owners decreased slightly, from 35 million acres in 2003 (14 percent of 

eligible acreage) to 30 million acres (12 percent) in 2011.

18Producers report how they are involved in and whether they own a particular farm field 

or area of land in what is known as the compliance share file. FSA officials noted that 

producers may operate on more than one farm, in different capacities.
 

Page 12 GAO-12-640 Farm Programs

In addition, our analysis identified variation in the ownership 

characteristics of farms receiving direct payments, depending on crops 

grown. For example, owner-operators operated 12 percent of acreage, 

including base acreage, for cotton in 2011 and 44 percent of acreage for 

oats that year. Also in 2011, tenants operated 78 percent of the acreage 

for rice and 58 percent of wheat acreage. Other owners operated 5 

percent of the acreage for oats, and 10 percent of corn acreage that year. 

For crop-specific analyses for corn, cotton, rice, soybeans, and wheat, 

see appendix III.

Since direct payments allow producers almost complete flexibility in which 

crops to plant, we analyzed USDA data to determine the type and 

quantity of crops that producers who received direct payments chose to 

grow. According to our analysis, from 2003 through 2011, producers 

planted from 2 to 126 percent of their base acres with the crop associated 

with their base acres. For example, over the period, producers with cotton 

base acres planted 59 percent of their base acres with cotton, whereas 

producers with soybean base acres planted soybeans on all of their base 

acres for soybeans, as well as on additional acres on their farms; in other 

words, they planted an area equivalent to 126 percent of their base acres 

with soybeans.19 Specifically, our analysis showed that from 2003 through 

2011, producers with cotton base acres cumulatively planted 100 million 

acres of their 169 million base acres with cotton, whereas producers with 

soybean base acres cumulatively planted 593 million acres, including 472 

million base acres, with soybeans.20

 

19USDA data do not differentiate between the program’s qualifying acreage, or “base 

acres,” and a farm’s other acreage, and producers report one aggregated number of acres 

for each crop planted. In addition, the term base acres refers to a farm’s average planted 

acreage of specific crops during certain past years; the term does not refer to specific 

physical acres on that farm. To determine the relative percentage of base acres planted in 

the base acre crop, we compared the acres of a farm planted in a particular crop with its 

base acres of that crop. Because a producer may plant 100 percent of the farm’s base 

acres in any crop, plus additional acres on the farm in excess of the base acre amount, 

more than 100 percent of base acres may be planted with a certain crop.

For the complete results of our 

20According to FSA officials, variation in planting decisions is to be expected for a number 

of reasons. For example, the practice of crop rotation between corn and soybeans is 

common. In addition, these officials said that producers in recent years are planting more 

corn and soybeans compared with wheat, whereas wheat was a relatively dominant crop 

when base acres were first established. In addition, according to FSA officials, the 

variation in planting may be attributable to other factors, such as the relative prices of 

various crops and local soil conditions.

Producers Planted Varying 

Percentages of Base Acres
 

Page 13 GAO-12-640 Farm Programs

analysis of the type and quantity of crops that producers who received 

direct payments chose to grow, averaged for years 2003 through 2011, of 

all crops and by crop type, see appendix IV.

In addition, we analyzed USDA data to determine the extent to which 

producers did not grow any of the crop for which their base acres were 

allocated—something they are allowed to do. Cumulatively, USDA paid 

$10.6 billion—almost one-fourth of total direct payments from 2003 

through 2011—to producers who did not, in a given year, plant any of the 

crop for which they had base acres. Specifically, during this period, 

producers cumulatively did not plant more than 633 million acres with the 

crops associated with their base acres in a given year. This amounted to 

an average of 70 million acres each year, or 26 percent of the 268 million 

base acres on average that are annually eligible for direct payments. For 

the complete results of our analysis on the extent to which producers did 

not grow any of a crop for which they had base acreage in a given year, 

by crop, see appendix V.

Also according to our analysis of USDA data, about 2,300 farms, or about 

0.15 percent of the 1.6 million farms receiving direct payments in 2011, 

reported all their land as “fallow,” that is, producers did not plant any 

crops of any type on this land, for each year of the last 5 years (i.e., 2007 

through 2011), as allowed under the farm bill. These producers received 

a total of about $2.9 million in direct payments in 2011. Our analysis of 

USDA data showed that these approximately 2,300 farms, comprising in 

total about 132,000 acres, were distributed among 402 counties in 

40 states. In addition, according to our analysis, one county in Louisiana 

had the most farms (190) with all their acreage reported fallow from 2007 

through 2011; producers on these farms received a total of about 

$203,000 in direct payments in 2011 for this land. For the results of our 

analysis, by state, of the number of fallow farms from 2007 through 2011 

and the value of direct payments made for such farms in each state, see 

appendix VI. Figure 3 shows the geographic distribution of the farms that 

our analysis indicated had all their acreage as fallow each year from 2007 

through 2011.

More Than $10 Billion in 

Payments Was Made for 

Base Acres That Did Not 

Grow the Base Acre Crop 

in a Given Year

About 2,300 Farms for 

Which Direct Payments 

Were Made Did Not Plant 

Any Crop of Any Type 

Each Year From 2007 

through 2011
 

Page 14 GAO-12-640 Farm Programs

Figure 3: Distribution of “Fallow” Farms—Those That Did Not Grow Any Crop of Any Type—Each Year from 2007 through 

2011 for Which Direct Payments Were Made

Notes: Data for Alaska and Hawaii indicate that none of the counties in these states had producers 

who received direct payments and reported all their acreage as fallow; we therefore excluded these 

states from the map. 

In addition, according to our analysis of USDA data, 622 farms reported 

all of their farm’s acreage as fallow for each of the previous 10 years, 

from 2002 through 2011. Those farms were distributed among 

178 counties in 28 states.
 

Page 15 GAO-12-640 Farm Programs

Direct payments generally do not align with the principles significant to 

integrity, effectiveness, and efficiency in farm bill programs, identified in 

our April 2012 report, which could be used to guide implementation of the 

2012 Farm Bill.21 These payments align with the principle of being 

“distinctive,” in that they do not overlap or duplicate other farm programs. 

However, they do not align with the five other principles. Specifically, 

(1) direct payments may no longer be relevant, (2) they do not 

appropriately target benefits, (3) they may no longer be affordable, 

(4) they may have unintended consequences, and (5) oversight of direct 

payments is weak.

Direct payments were expected to be transitional when first authorized 

and may no longer be relevant. According to the conference report 

accompanying the 1996 Farm Bill,22

In addition, direct payments may no longer be needed to comply with 

certain aspects of international trade agreements. Proponents of direct 

payments say that such payments help the United States meet certain 

commitments under international trade agreements, which set ceilings on 

government payments classified as trade distorting. Unlike other farm 

program payments, direct payments do not depend on current market 

prices or production, so the World Trade Organization generally considers 

them to be nontrade-distorting, and the United States does not count 

production flexibility contract 

payments—the precursors to direct payments, which were similar in 

design—were established to help farmers make a transition to basing 

their planting decisions on market signals rather than on government 

programs. Accordingly, production flexibility contract payments were 

scheduled to decrease over time and expire in 2002. Subsequent farm 

bills, however, including those passed in 2002 and 2008, have continued 

these payments as “direct payments.” In a press statement released in 

February 2012, the Chairwoman of the U.S. Senate Committee on 

Agriculture, Nutrition and Forestry, referred to direct payments as “an 

indefensible program of the past.” In April 2012, this committee’s website 

posted draft legislation on the reauthorization of agricultural programs 

through 2017 that proposed eliminating direct payments.

 

21GAO-12-338SP. 

22Federal Agricultural Improvement and Reform Act of 1996, Pub. L. No. 104-127, 110 

Stat. 888.

Direct Payments Do 

Not Align with Certain 

Principles

Direct Payments May No 

Longer Be Relevant
 

Page 16 GAO-12-640 Farm Programs

them against these payment ceilings. In recent years of high crop prices, 

the United States has not been in danger of meeting or exceeding its 

limits for trade-distorting payments. For example, in 2009—the most 

recent year for which the United States notified the World Trade 

Organization of its use of subsidies—the United States used about 

$4.3 billion of its $19.1 billion authorized allocation of trade-distorting 

subsidies.

Direct payments do not appropriately target benefits (i.e., distribute 

benefits consistently with contemporary assessments of need) in three 

key ways. First, farmers receive direct payments even in years of record 

farm income. Production flexibility contract payments, the precursors to 

direct payments, were established after a period in the early 1990s of 

relatively low farm income. In August 2011, however, USDA reported that 

all three measures of farm-sector earnings—net farm income, net cash 

income, and the value of the farm sector’s production of goods and 

services from farming versus its outlays to nonfarm sectors (i.e., “net 

value added”) were forecast to rise more than 20 percent in 2011 over 

recent historical highs or near-highs. Second, according to USDA, the 

average income for farm households is higher than that of the average for 

U.S. households. For example, in 2010, average farm household income 

was 25 percent higher than that of the average U.S. household. 

Moreover, in 2008, we reported that individuals who receive farm program 

payments, including direct payments, were more than twice as likely as 

other tax filers to have higher incomes.23

 

23GAO, Federal Farm Programs: USDA Needs to Strengthen Controls to Prevent 

Payments to Individuals Who Exceed Income Eligibility Limits, 

Third, direct payments are 

concentrated among the largest recipients—based on farm size and 

income—because the payments are tied to land and paid on a per-acre 

basis. According to our review of FSA direct payment data, in 2011, the 

top 10 percent of payment recipients received 51 percent of direct 

payments, and the top 25 percent of payment recipients received 

73 percent of direct payments. In addition, according to USDA, larger 

farms, including those receiving direct payments, have higher operating 

profit margins. Specifically, in 2010, farms with $1 million or more in sales 

had a 24 percent operating profit margin, on average, whereas farms of 

any size had an 8.8 percent operating profit margin, on average.

GAO-09-67 (Washington, 

D.C.: Oct. 24, 2008). We defined “higher incomes” in this report as adjusted gross 

incomes of $500,000 or more per year. 

Direct Payments Do Not 

Appropriately Target 

Benefits
 

Page 17 GAO-12-640 Farm Programs

Furthermore, according to USDA data, larger farms, including those 

receiving larger direct payments, are generally financially better able to 

cover their debt than smaller-sized farms. For example, according to 

USDA’s Agricultural Resource Management Survey data for 2010, farms 

with sales of $1 million dollars or more were more highly leveraged (i.e., 

they had higher debt-to-asset ratios), but they had higher debt-coverage 

ratios (i.e., they had more financial capacity to cover interest and principal 

payments on debt) than “all farms” or farms in smaller economic size 

classes. Yet, as discussed, it is these larger farms that are receiving the 

preponderance of direct payments.

When direct payments were first authorized in 2002, the nation’s annual 

deficit equaled 1.5 percent of gross domestic product (GDP), and debt 

was 59 percent of GDP, according to the Office of Management and 

Budget. In 2011, the deficit was projected to be 10.9 percent, and debt 

was projected to be 103 percent of GDP, respectively. In July 2003, we 

testified before the House Committee on Ways and Means about the 

need to improve the economy, efficiency, and effectiveness of 

government programs, policies, and activities and to undertake a 

fundamental reassessment of what government does and how it does it.24

 

24GAO, Federal Budget: Opportunities for Oversight and Improved Use of Taxpayer 

Funds, 

We stated that this undertaking would require looking at current federal 

programs in terms of their goals and results and determining whether 

(1) other approaches might succeed in achieving the goal, (2) taxpayers 

are getting a good “return on investment” from the program, and (3) the 

program’s priority is higher or lower today given the nation’s evolving 

challenges and fiscal constraints. In light of the nation’s difficult fiscal 

situation and pressure to reduce government spending, the President’s 

fiscal year 2013 budget proposes eliminating direct payments. In addition, 

USDA’s Acting Undersecretary for Farm and Foreign Agricultural 

Services testified before the Senate Committee on Agriculture, Nutrition, 

and Forestry in March 2012 that eliminating direct payments could save 

$31.1 billion, over 10 years, while maintaining other farm programs that 

target assistance when and where it is most needed. In addition, in April 

2012, the Congressional Budget Office estimated that repealing direct 

payments would save about $24.8 billion from fiscal year 2014 through 

fiscal year 2018.

GAO-03-1030T (Washington, D.C.: July 17, 2003).

Direct Payments May No 

Longer Be Affordable
 

Page 18 GAO-12-640 Farm Programs

Studies by USDA have found that direct payments result in higher prices 

to buy or rent land because in some cases the payments go directly to 

landowners—raising land values—and in other cases the payments go to 

tenants, prompting landlords to increase cash rental rates. For example, 

in June 2009, USDA’s Economic Research Service reported that the 

primary economic effects of direct payments are increases in producers’ 

incomes and land values.25 In this way, direct payments may compound 

challenges for beginning farmers. We reported in September 2007 that 

beginning farmers face multiple challenges, including a need for funds to 

purchase farmland.26

During the course of our work, we identified cases where direct payments 

support recipients who FSA officials said own farmland that would not be 

economically viable in the absence of these payments. For example, in 1 

county, 190 farms were fallow—they did not grow any crop of any type—

for 5 consecutive years, and producers claimed payments for these 

farms. According to FSA county officials, these recipients are unable to 

profitably farm their land or lease it to other producers because the land is 

of poor quality and lacks access to irrigation. Another FSA county official 

from another state said that the producers associated with the 32 farms in 

that county that were fallow for 5 consecutive years were generally 

unable to obtain financing for their farming operations and could not 

profitably farm their land. Nevertheless, these landowners remain eligible 

for direct payments under a provision of the 2008 Farm Bill known as the 

“landowner exemption.”

In this regard, an increase in the price of land as a 

result of direct payments—or other farm program subsidies—may 

potentially raise the amount of debt beginning farmers need to incur to 

buy their own farm or additional farmland.

27

 

25USDA Economic Research Service, Farm and Commodity Policy: Program Provisions: 

Direct Payments (Washington, D.C.: June 15, 2009).

Under this exemption, landowners can remain 

eligible for direct payments as long as the landowners’ interest in their 

acreage depends directly on the output of that acreage. In practice, 

therefore, landowners can remain eligible if they (1) operate the land 

26GAO, Beginning Farmers: Additional Steps Needed to Demonstrate the Effectiveness of 

USDA Assistance, GAO-07-1130 (Washington, D.C.: Sept. 18, 2007).

27Under the “landowner exemption,” landowners are not required to contribute both 

(1) capital, equipment, or land and (2) personal labor or active personal management, as 

are other producers. However, landowners must make contributions that are at risk, and 

commensurate with their share of profits or losses in the farming operation. 

Direct Payments May Have 

Unintended Consequences
 

Page 19 GAO-12-640 Farm Programs

themselves, (2) lease the land for a rent that depends on the production 

of a crop, or (3) do not lease or operate the land and therefore receive no 

production-related revenue from it. In practice, however, it appears the 

landowner exemption allows landowners to receive payments for land 

that is no longer economically viable for farming. Direct payments may 

have less potential than other farm programs to distort prices and 

production, but economic distortions can nonetheless result from these 

payments. Furthermore, a trade-off exists between being less market 

distorting—as direct payments are considered to be—and targeting 

benefits to adjust to need.

During the course of our work, we identified several concerns with regard 

to FSA’s oversight of direct payments: FSA has not developed a 

systematic process to report on acreage that may no longer be usable for 

agriculture and therefore ineligible for direct payments; FSA conducts 

relatively few end-of-year reviews and generally does not complete these 

reviews within expected time frames; and FSA has not kept data on 

enforcement.

FSA has not systematically reported or corroborated the extent to which 

land may no longer be eligible for direct payments because it has been 

converted to nonfarm uses. The 2008 Farm Bill instructed the Secretary 

of Agriculture to establish procedures to identify such land and each year, 

to “ensure, to the maximum extent practicable, that payments are 

received only by producers,” submit to Congress a report describing the 

results of USDA’s actions to identify and reduce base acres for land that 

has been subdivided and developed for nonfarm use. The 2008 Farm Bill 

uses base acres to determine direct payments, Average Crop Revenue 

Election (ACRE) payments, and counter-cyclical payments. FSA issued 

its first report in response to this mandate in September 2011, covering 

2009 and 2010.28

 

28Farm Service Agency, A Report to Congress on Base Acre Reduction When Base Acres 

Are Converted to a Non-Agricultural Use (Washington, D.C.: September 2011). 

According to this report, about 190,000 acres—about 

129,000 in 2009 and 61,000 in 2010—were converted to nonfarm use 

during this period. However, the report noted that these estimates were 

likely low, stating that USDA’s periodic Natural Resources Inventory 

Oversight of Direct 

Payments Is Weak

FSA Has Not Systematically 

Reported or Corroborated 

Acreage No Longer Usable for 

Agriculture
 

Page 20 GAO-12-640 Farm Programs

estimated that an average of 440,000 cropland acres were converted to 

nonfarm uses annually from 1982 through 2007.29

FSA’s report had several methodological limitations that we identified. For 

example, FSA relied exclusively on surveying the 50 FSA state offices for 

information on such conversions. It did not use or corroborate the state 

offices’ results with other possible sources of information, including 

geospatial information on land use gathered by USDA’s National 

Agriculture Imagery Program, which provides geospatial imagery data to 

support FSA compliance activities. FSA also did not provide its state 

offices with guidance for collecting information on such conversions. As a 

result, these offices, and their associated county offices, used a variety of 

methods to collect this information. For example, FSA officials in one 

county office said they identified base acreage reductions by consulting 

records of County Committee meetings.30 In another case, FSA county 

office officials said they used Base Acreage Yield Adjustment reports to 

identify base acreage that was already permanently reduced, and Out of 

Balance Tracts reports to identify other base acreage that may signal the 

need for a base acreage reduction.31

FSA headquarters officials said that, because in the past they were not 

required to report land converted from agriculture to residential or other 

As a result of these varying methods 

and consequently unsystematic process, FSA may have 

underrepresented the extent to which land may no longer be eligible for 

direct payments because it has been converted to nonfarm uses in its 

required report to Congress.

 

29The National Resources Inventory is a statistical survey of land use and natural 

resource conditions and trends on nonfederal lands in the United States conducted by 

USDA’s Natural Resource Conservation Service. Conversion rates of land from 

agricultural to nonfarm or commercial use may vary according to prevailing economic 

conditions. Specifically, when the profitability of land in agricultural use is high relative to 

other potential uses, conversion rates from agricultural to nonfarm or commercial use 

would likely be low. If, however, business conditions improve and demand for residential 

housing increases, then conversion rates could increase.

30FSA County Committees consist of farmers and ranchers elected by other producers to 

help deliver FSA programs in their local farming communities. 

31FSA officials can query a database to identify a farm’s acreage and base acreage and 

compare it with reports on yield for that farm. In some cases, Out of Balance Tracts 

reports may indicate that base acreage is greater than the yield, in which case the FSA 

official can determine whether further information is needed to confirm that the farm’s 

reported base acreage is accurate.
 

Page 21 GAO-12-640 Farm Programs

nonfarm use, they had not systematically tried to track such land. They 

also stated that because producers, including direct payment recipients, 

are required to report planting information each year and certify the 

accuracy of this information, FSA has been able to identify land subject to 

base acre reductions manually through such reports.32

All of the FSA county officials we spoke with said that geospatial imagery 

was very helpful in identifying land that may no longer be usable for 

agriculture, and some noted this was particularly so as budget constraints 

have precluded more frequent on-site farm inspections. For example, 

some of these officials spoke of instances where they knew from 

geospatial imagery that land had been converted from agricultural use, 

and the producer had not informed FSA. Nevertheless, officials said, the 

National Agriculture Imagery Program did not provide such imagery 

regularly and they received updated imagery only every few years, 

limiting their ability to identify land that may no longer be usable for 

agriculture—and therefore ineligible for direct payments. An imagery 

program official stated that the program had received inconsistent funding 

since its establishment in 2002. As a result, this official said, in 2008 the 

office began collecting imagery data in 3-year cycles rather than annually, 

as would meet program needs. The official stated that three USDA 

agencies and the Department of the Interior are funding the 

approximately $40-million-per-year effort. The official added that the 

These officials 

stated that FSA relied on such manual records to report on land that was 

converted to nonfarm uses in its September 2011 mandated report, and it 

has begun compiling data for the next report, covering 2011, using the 

same methodology. However, these officials noted that in October 2011 

FSA updated its data collection systems to compile the mandated report 

covering 2012 base acre reductions through a computerized tracking 

system. This system includes a reporting code to identify whether the 

base acre reduction was made because land was converted to nonfarm 

uses, including residential or commercial uses.

 

32In addition, as part of FSA’s National Compliance Program, USDA’s National 

Agricultural Statistics Service selects a statistical sample of 2,000 producers each year—

including some of the approximately 1.6 million producers who receive direct payments—

and FSA staff perform spot checks to verify that reported planting information is accurate. 

We note that based on this information, approximately 0.13 percent of producers receiving 

direct payments could potentially be selected to have their reported planting information 

verified each year through this process. FSA state and county offices may elect to spot 

check any producer if there is reason to question the producer’s compliance with any 

program provision.
 

Page 22 GAO-12-640 Farm Programs

imagery program’s own requirements and FSA’s needs continue to call 

for collecting and reporting data annually, but funding constraints 

preclude the program from doing so.

FSA’s detailed end-of-year reviews, in which FSA officials assess 

whether direct payment recipients met program requirements, such as 

being actively engaged in farming, have key weaknesses. Specifically, 

FSA conducts relatively few end-of-year reviews, and generally does not 

complete these reviews within expected time frames.

FSA guidance states that the purpose of end-of-year reviews is to 

maintain the integrity of payment limitation and payment eligibility 

provisions by verifying that farming operations were carried out as 

producers reported on their farm operating plans. One such provision for 

direct payments is that all payment recipients be actively engaged in 

farming, which, according to the 2008 Farm Bill, generally includes 

making a “significant contribution” that is at risk and commensurate with 

the recipient’s share of profits and losses from the farming operation. 

Recipients of payments under ACRE and counter-cyclical payment

programs also are required to be “actively engaged” in farming. According 

to FSA officials, to verify the extent to which producers’ contributions 

meet these, as well as other, eligibility requirements, FSA selects a 

judgmental sample of farming operations for review on the basis of, 

among other criteria, (1) whether the operation has undergone an 

organizational change in the past year by, for example, adding another 

entity or partner to the operation and (2) whether the operation receives 

payments above a certain threshold. FSA officials said that their selection 

process for end-of-year reviews is designed to direct limited resources 

toward categories of recipients among whom officials most expect to find 

wrongdoing such as fraud or other deliberate misrepresentation of a 

farming operation.33

 

33Misrepresentation could include exaggerating the number of participants in a farming 

operation, or the stake of any participant in the operation, to increase the amount of the 

payment received. Fraud may be falsifying documentation to circumvent provisions 

defining payment eligibility and payment limitations. According to FSA officials, the 

distinction between fraud and other misrepresentation is one of degree, where fraud is 

more serious.

These officials explained that the recipient categories 

emphasized for review include joint operations, particularly those 

comprising three or more entities, because such operations offer more 

potential and incentive for partners to exaggerate their contributions.

FSA’s End-of-Year Reviews 

Have Key Weaknesses 
 

Page 23 GAO-12-640 Farm Programs

Producers in farming operations selected for end-of-year review must 

provide documentation to verify that the information they report on their 

farm operating plan, including their contributions of land, capital, 

equipment, labor, and management, is accurate. By reviewing such 

documentation, FSA officials can determine whether the contributions, in 

terms of risk and share of profits and losses, made by each participant in 

a farming operation match the contributions reported for that participant 

on the farm operating plan. FSA officials said that end-of-year reviews are 

a key means of identifying potentially improper payments. In addition, 

some FSA county officials said end-of-year reviews were useful in 

identifying irregularities and fraud and cited cases in their experience 

where producers returned direct payments determined to have been 

erroneously disbursed. Nonetheless, we identified two key weaknesses in 

FSA’s end-of-year review process.

First, FSA selects relatively few cases for annual end-of-year review. Our 

analysis of FSA data showed that in 2008 and 2009, FSA selected for 

review 0.04 percent of farming operations receiving direct payments. By 

comparison, for fiscal year 2010, the Internal Revenue Service selected 

at least 0.7 percent of taxpayers, from every income level—an average of 

1.1 percent of all taxpayers—for examination. According to FSA 

headquarters officials, they would like to select additional cases for 

review, but the selection rate is relatively small because the reviews are 

resource intensive.34 Increasing budget constraints and USDA’s 

announced plans to close some of FSA’s 2,200 county offices and reduce 

field staffing may further limit the number of cases for review the agency 

can select in the future. These officials said that, because of resource 

constraints, they select the sample according to categories of recipients 

where they most expect to find wrongdoing, and waive categories of 

recipients, such as landowners and spouses among whom they least 

expect to find misrepresentation. However, we found that when FSA 

waives reviews for some of the cases selected, the agency does not 

replace them with reviews of other cases, as we recommended in April 

2004.35

 

34FSA guidance allows state and county FSA officials to add cases for end-of-year 

reviews; however, FSA officials did not provide data regarding how often this has occurred 

in recent years. 

At the time, we reported that FSA was not reviewing a valid 

sample of farm operating plans to reasonably assess the overall level of 

35GAO-04-407. 
 

Page 24 GAO-12-640 Farm Programs

compliance because its selection methodology did not replace waived 

cases, resulting in a smaller sample size that might have affected the 

validity of the sample results.36

Second, FSA often completes end-of-year reviews late with respect to its 

own expected time frames. According to an FSA official in charge of 

selecting cases and monitoring the end-of-year review process, FSA 

headquarters generally selects cases for review within the first 6 months 

of the following year and generally expects county office staff to perform 

their assigned reviews within a year of receiving the cases selected.

In response to our recommendation, FSA 

reduced the number of compliance reviews it waived each year but did 

not act to replace reviews that were waived with new cases. FSA 

continues to select a small sample of cases for review: in 2008 and 2009, 

respectively, 23 and 154, or just under 6 and 13 percent, of selected 

cases were waived, further decreasing the number of farming operations 

reviewed.

37 As 

of September 2011, however, 271 of 380 pending reviews for 2008 

(71 percent) were more than 6 months past the expected 18-month 

completion time frame, which includes the selection, assignment, and 

conducting of these reviews. In May 2012, FSA reported that as of 

February 2012, nearly 24 percent of pending reviews for 2008 were still 

incomplete. Table 1 summarizes the status of end-of-year reviews for 

2008 and 2009, as of September 2011 and February 2012.38

 

36For example, for 2001, FSA developed a judgmental sample of 1,573 farm operating 

plans from the 247,831 entities (0.6 percent) that received federal farm payments. The 

sample selection included 966 farming operations that were waived for various reasons, 

leaving 523 farming operations to be reviewed (0.2 percent). See GAO-04-407. 

37This schedule is informal and may vary. FSA’s handbook on producer compliance states 

that FSA state directors will determine the official completion dates for end-of-year reviews 

but does not specify or suggest a particular time frame. In addition, FSA headquarters 

may not meet its target date of selecting end-of-year reviews within 6 months of the new 

calendar year. For example, FSA headquarters did not send 2010 cases selected for endof-year reviews to states until December 2011, more than 5 months after the expected 

selection date according to nominal FSA time frames. 

38The most recent years for which complete data were available were 2008 and 2009; 

FSA first provided these data as of September 2011, and, in May 2012, provided updated 

data as of February 2012. We are reporting the data as of September 2011 in addition to 

the most recent data to more fully illustrate the status of these reviews at a date 3 months 

past the expected time frame for completion. FSA provided data indicating that in 2006 

and 2007, an average of 0.04 percent of cases were selected for review. FSA did not 

provide the number of cases waived or completion time frames for those years.
 

Page 25 GAO-12-640 Farm Programs

Table 1: Status of FSA’s End-of-Year Reviews for 2008 and 2009, as of September 

2011

2008 2009 Total

Farming operations for which direct payments 

were made 

1,815,520 1,654,200 3,469,720 

Farming operations selected for review 403 1,208 1,434 

Farming operations selected for review and 

waived 

23 154 177 

Reviews of farming operations completed 109 212 321 

Percentage of farming operations receiving 

payments, selected for review

0.02% 0.06% 0.04% 

Percentage of reviews completed as of 

September 2011 

28.7% 20.1% 22.4% 

Percentage of reviews completed as of 

February 2012

76.6% 55.0% 60.7%

Source: GAO analysis of USDA data.

In addition, in February 2012 FSA reported that county offices in three 

states—California, Louisiana, and Mississippi—had not completed some 

of their 2006 or 2007 end-of-year reviews.39

Federal internal control standards call for agencies to obtain, maintain, 

and use relevant, reliable, and timely information for program oversight 

and decision making, as well as for measuring progress toward meeting 

FSA officials said they do not 

regularly collect data on the number of end-of-year reviews completed 

and pending. FSA officials also said that taking corrective action against 

payment recipients becomes more difficult as reviews are delayed. For 

example, with the passage of time, it is more difficult for FSA to collect 

evidence of potential misrepresentation or fraud, as well as for producers 

to provide the requested documentation. Furthermore, according to FSA 

officials, completed end-of-year reviews are needed for USDA’s Office of 

Inspector General (OIG) to investigate cases of potential fraud or other 

illegal activity.

 

39In May 2012, FSA provided updated information, reporting that California had completed 

its 2006 and all but two of its 2007 end-of-year reviews; Louisiana had completed all but 

one of its 2006 and all of its 2007 end-of-year reviews; and Mississippi had completed all 

its 2006 and all but two of its 2007end-of-year reviews. FSA officials said the five pending 

reviews for these states were due to pending appeal at the state or county level. FSA did 

not provide updated data regarding completion of 2008 or 2009 end-of-year reviews.
 

Page 26 GAO-12-640 Farm Programs

agency performance goals.40 In addition, the Office of Management and 

Budget directs agency managers to take timely and effective action to 

correct internal control deficiencies.41 Furthermore, FSA’s handbook on 

determining eligibility for farm program payments states that “[d]etecting 

schemes, fraudulent representations, and other equally serious actions of 

persons and legal entities to circumvent payment eligibility and payment 

limitation provisions is essential for producer compliance.”42

USDA does not have data to demonstrate that it is using available 

enforcement mechanisms against payment recipients found to have 

misrepresented their farming operation so as to increase their direct 

payments improperly, and the agency generally has not centrally tracked 

data on such cases of misrepresentation. Specifically, when asked, FSA 

officials were unable to provide the number of direct payment cases FSA 

has referred to OIG for further investigation and potential prosecution by 

U.S. Attorneys’ Offices, but according to FSA officials, the number of such 

cases has been small. For example, regarding potential fraud, FSA 

officials cited only one case that was currently under active litigation. FSA 

state offices are required to report any known or suspected violations of 

criminal statutes to OIG for investigation, but according to OIG officials, 

their investigators will pursue cases of potential fraud only if they 

The issues 

we identified in FSA’s end-of-year compliance review process leave the 

agency with a less effective management oversight tool. For example, in 

light of these problems, FSA is less able to identify potential fraud, waste, 

and abuse; avert potentially improper payments; and enforce farm bill 

provisions and related implementing regulations.

 

40GAO, Standards for Internal Control in the Federal Government, GAO/AIMD-00-21.3.1 

(Washington, D.C.: November 1999).

41Office of Management and Budget, Management’s Responsibility for Internal Control, 

OMB Circular No. A-123 (Washington, D.C.: Dec. 21, 2004).

42Farm Service Agency, Payment Eligibility, Payment Limitation, and Average Adjusted 

Gross Income, 4-PL, Amendment 10, Sec. 4 Para. 42.

USDA Has Not Kept Data on 

Enforcement
 

Page 27 GAO-12-640 Farm Programs

anticipate a “good outcome,” that is, a successful prosecution.43 The 

potential amount of funds to be recovered is another consideration. 

According to FSA officials, the number of cases accepted for investigation 

varies by region. For example, according to these officials, in regions with 

significant drug crime, such as southern Texas, U.S. Attorneys give 

priority to drug cases and accept virtually no farm program cases. This 

situation notwithstanding, OIG and FSA officials said that FSA offices in 

Texas refer very few compliance and payment limitation cases to OIG. 

According to OIG officials, depending on the circumstances, FSA may be 

able to take administrative action against a producer in an attempt to 

recover inappropriately disbursed funds even if the producer is not 

prosecuted by state or federal authorities for violations of law, by following 

its own procedures or consulting with the Office of General Counsel. 

However, both OIG and FSA officials said that, in cases of alleged fraud, 

the payment recipient may not be subject to additional enforcement 

mechanisms unless prosecuted and convicted. FSA regulations provide 

that any producer found to have committed fraud may be debarred from 

receiving further payments for up to 5 years.44

FSA headquarters officials stated that most payment recipients are 

honest and comply with direct payment eligibility requirements, and that 

the level of enforcement is appropriate. However, the officials could not 

These regulations also 

provide that any producer found to have engaged in misrepresentation 

may be debarred from receiving further payments for up to 2 years. 

However, if FSA does not maintain comprehensive data on payment 

recipients that may have misrepresented their farming operation, 

including by name of producers, it is unclear how it can consistently 

pursue and recover improper payments.

 

43For example, in a September 2005 report, we found that few suspicious crop insurance 

claims payments resulted in a conviction for fraud. We reported that, while the number of 

USDA OIG referrals to the Department of Justice on suspicious claims payments had 

increased, the Department of Justice declined more cases than it had accepted since 

2000. According to Department of Justice officials, the factors considered when accepting 

a case include sufficiency of the evidence, complexity of the case, whether the fraudulent 

activity is part of a pattern or scheme, and workload and resources that would be needed 

to investigate and prosecute the case. With regard to crop insurance, these officials told 

us that fraud cases are highly complex and involve a significant number of documents that 

must be reviewed and presented in court and that the dollar value of such cases 

frequently is not as large as in other cases, such as drug trafficking or some white-collar 

crime. See GAO, Crop Insurance: Actions Needed to Reduce Program’s Vulnerability to 

Fraud, Waste, and Abuse, GAO-05-528 (Washington, D.C.: Sept. 30, 2005).

44See 7 C.F.R. 1400.5.
 

Page 28 GAO-12-640 Farm Programs

provide data on compliance. Some FSA county officials expressed 

concerns about discouraging producers from farming, should the 

producer be debarred from receiving further payments. They also said 

that they can and do recover improper payments from producers without 

pursuing potential prosecution. However, FSA’s reluctance to pursue 

these cases and enforcement mechanisms could encourage some 

producers to engage in and profit from submitting false information with 

little fear of being caught or punished.

Moreover, FSA officials acknowledged that the agency lacks 

comprehensive data on its enforcement actions. Specifically, FSA officials 

said that the agency does not keep a centralized, national database or list 

of direct payment recipients found to be at fault for misrepresentation, 

including recipients convicted of fraud, debarred from future payments, 

referred to OIG for investigation, or found by county or state FSA offices 

to have received improper payments by misrepresenting their farming 

operation—including in cases in which these payments were later 

recouped. FSA does, however, maintain data at the national level on 

payments it reduced because it determined a certain producer was 

ineligible before making the payment. According to these data, in 2011 

FSA reduced payments to certain direct payment recipients by almost 

$20 million for not being actively engaged in farming; by more than 

$89 million for exceeding payment limitations; by over $37 million for 

exceeding income limitations; and by $3,393 for fraud. Table 2 

summarizes the amount of these reduced payments for 2010 and 2011.

Table 2: Amounts by Which FSA Reduced Direct Payments for Selected Reasons in 

2010 and 2011

Dollars in millions

Reason for reduction 2010 2011

Producer not actively engaged in farming $23.5 $19.9

Producer’s payment would exceed payment limitations 80.8 89.2

Producer’s income exceed income limitations 30.95 37.39

Fraud 0.05 0.0a

Total for these reasons $135.3 $146.5

Source: GAO analysis of USDA data.

Note: These numbers include direct payments and counter-cyclical payments; as a point of reference, 

counter-cyclical payments averaged $1.45 billion annually from 2006 through 2010. 

a

In 2011, FSA reported reducing payments by $3,393 because of fraud. 
 

Page 29 GAO-12-640 Farm Programs

Under the Improper Payments Information Act of 2002, as amended, 

federal agencies are required to estimate the level of improper payments 

in their programs.45 In November 2011 USDA reported that its error rate 

for making direct and counter-cyclical payments was 0.05 percent, which

was below its 2010 error rate of 0.96 percent and below its target of 0.40 

percent.46 However, because USDA does not keep comprehensive data 

on its enforcement actions or the amount of money it recovers after 

improper disbursements are made, the level of improper payments 

reported by FSA for the direct payments program may be understated.

Direct payments allow producers flexibility in the type and amount of 

crops to plant by making payments based on historical production trends, 

rather than current production. However, the fiscal health of our nation, 

recent and expected high national budget deficits, and pressures to 

reduce federal spending mean that every federal dollar should be 

scrutinized to ensure it is spent efficiently and for the most worthwhile 

purposes. Maintaining a safety net for farmers is worthwhile, but during 

times of record-high crop prices and farm incomes, providing payments 

that do not align with principles significant to integrity, effectiveness, and 

efficiency in farm bill programs raises questions about the continued need 

for direct payments. In a March 2011 report, we and others proposed 

options to reduce or eliminate direct payments.

FSA monitors land usage and conducts a detailed review of a sample of 

farm operating plans at the end of the year to help oversee direct 

payments and other farm programs, including ACRE and counter-cyclical 

payments, which require payment recipients to be actively engaged in 

farming. There have been proposals to eliminate direct payments, but as 

long as they remain in effect, it is worth noting several weaknesses 

concerning FSA’s oversight of these programs that our work identified.

First, because FSA does not have a systematic process to identify land 

that may no longer be usable for agriculture and therefore eligible for 

direct payments—or ACRE or counter-cyclical payments—FSA’s reports 

to Congress may underreport the extent to which land may no longer be 

eligible for these payments. Second, because FSA does not regularly 

 

45Pub. L. No. 107-300, 116 Stat. 2350 (2002), as amended by Pub. L. No. 111-204, 124 

Stat. 2224 (2010). 

46USDA, 2011 Performance and Accountability Report (Washington, D.C.: Nov. 15, 2011).

Conclusions
 

Page 30 GAO-12-640 Farm Programs

update the geospatial imagery FSA county offices use to corroborate that 

direct payments are made only for lands usable for agriculture, FSA could 

potentially be making payments to individuals and entities that should not 

be receiving them. Third, because FSA’s process for selecting and 

performing end-of-year reviews has key weaknesses, FSA is less able to 

identify potential fraud, waste, and abuse; avert potentially improper 

payments; and enforce farm bill provisions and related implementing 

regulations. We acknowledge the budget constraints that, according to 

FSA officials, make the case for a judgmental sample and limit the 

number of end-of-year reviews FSA conducts. However, similarly to what 

we reported in April 2004—that FSA was not reviewing a valid sample of 

farm operating plans to reasonably assess the overall level of 

compliance—FSA continues to select a small sample of cases to review 

and does not complete reviews in a timely manner, exposing the agency 

and taxpayers to potential waste, fraud, and abuse of taxpayer dollars.

While FSA officials state that most producers are honest and comply with 

eligibility requirements, it is in the interest of all producers, as well as 

taxpayers, to maintain the integrity of direct payments and other farm 

program payments. FSA regulations provide enforcement mechanisms 

for producers found to have engaged in misrepresentation or to have 

committed fraud, but FSA does not maintain comprehensive data on 

payment recipients that have misrepresented their farming operation, 

including data by producer name. As a result, it is unclear how 

consistently FSA has pursued and recovered improper payments. In sum, 

as a result of FSA’s decision to not pursue a more comprehensive 

oversight process—including maintaining comprehensive data on 

misrepresentation and tracking the referral of cases for enforcement—the 

number and value of improper payments and program fraud may be 

underrepresented.

In light of the need to identify potential savings in the federal budget and 

questions about the continued need for direct payments, Congress should 

consider eliminating or reducing these payments.

Matter for 

Congressional 

Consideration
 

Page 31 GAO-12-640 Farm Programs

To help ensure that direct payments, while they remain in effect, and 

other farm programs, including ACRE and counter-cyclical payments, are 

made in a manner consistent with farm bill provisions and related 

implementing regulations, and to minimize the potential for improper 

payments, we recommend that the Secretary of Agriculture direct the 

Administrator of the Farm Service Agency to take the following four 

actions:

• Develop and implement a systematic process to report on land that 

may no longer be usable for agriculture, as required for annual 

reporting to Congress.

• Ensure the more timely and consistent regular collection and 

distribution of geospatial imagery needed to corroborate that 

payments are only made for lands usable for agriculture.

• Consider options within given budget constraints to improve FSA’s 

end-of-year reviews by selecting a larger sample of cases to review 

and ensuring that these reviews are completed in a timely manner.

• Maintain comprehensive data on misrepresentation and enforcement 

actions taken nationwide, as needed for management oversight and 

reporting purposes.

We provided a draft of this report to USDA for review and comment. In 

written comments, which are reproduced in appendix VII, USDA generally 

agreed with two of our recommendations and disagreed with two others. 

USDA also noted our Matter for Congressional Consideration to eliminate 

or reduce direct payments, stating that the President’s financial year 2013 

budget recommended eliminating direct payments while maintaining a 

strong safety net for farmers.

Regarding our first recommendation that USDA develop and implement a 

systematic process to report on land that may no longer be usable for 

agriculture, as required for annual reporting to Congress, USDA 

disagreed, stating that it considers its current process to be adequate. 

Among other points, USDA noted that it already selects a statistical 

sample of producers for spot checking to determine that all land reported 

as cropland remained in cropland status for the year the spot check was 

conducted. Nevertheless, as discussed in this report, only about 2,000

producers─and potentially 0.13 percent of the approximately 1.6 million 

producers receiving direct payments─could be selected for annual spot 

Recommendations for 

Executive Action

Agency Comments 

and Our Evaluation
 

Page 32 GAO-12-640 Farm Programs

checks. Further, in a September 2011 report in response to a 

congressional mandate USDA stated that its estimates of base acres 

converted to nonfarm uses in 2009 and 2010 were likely understated. We 

also note, as discussed in the report, that USDA’s current procedures to 

collect these data are subject to methodological limitations and 

inconsistencies in how its field offices collect these data. For example, 

USDA relied exclusively on surveying the 50 FSA state offices for 

information on such conversions, and did not use or corroborate the state 

offices’ results with other possible sources of information, such as 

geospatial imagery. USDA also did not provide its state offices with 

guidance for collecting information on such conversions. As a result, 

these offices, and their associated county offices, used a variety of 

methods to collect this information. Given this very small sample and the 

department’s likely underestimation of the extent of conversions to 

nonfarm uses, we maintain that development of an improved process is 

needed for identifying land that may no longer be usable for agriculture. 

For added clarity, we revised the report to make clear that USDA uses a 

statistical sample and that its field offices may spot-check other producers 

if there are concerns. In addition, USDA noted that the 2008 Farm Bill, 

among other sources requires producers to file acreage reports on all 

cropland on the farm. In response to USDA’s comment, we added 

clarifying language to the report to identify the sources that USDA cites as 

requiring such reporting.

Regarding the second recommendation that USDA ensure the more 

timely and consistent collection and distribution of geospatial imagery 

needed to corroborate that payments are only made for lands usable for 

agriculture, USDA stated that it agrees that geospatial imagery is a useful 

tool to identify land use changes. It also said, however, that its ability to 

update this imagery more frequently would require increased funding from 

Congress. As discussed in the report, USDA already leverages resources 

from other agencies, such as the Department of the Interior, to help cover 

the costs of collecting this imagery. Further opportunities may exist to do 

so. In addition, USDA could consider options to reallocate more funding 

to geospatial imagery within its existing budget resources.

Regarding the third recommendation that USDA consider options within 

given budget constraints to improve FSA’s end-of-year reviews by selecting 

a larger sample of cases to review and ensuring that these reviews are 

completed in a timely manner, USDA disagreed. USDA stated that it 

concurs that timely, high-quality end-of-year reviews are important; 

however, it also stated that its current practices already meet this standard. 

According to USDA, in the early 1990’s its Office of Inspector General 
 

Page 33 GAO-12-640 Farm Programs

determined that a judgmental sample completed in USDA headquarters 

was the most consistent and beneficial in terms of detecting problematic 

issues and potential compliance problems. In addition, USDA said that, in 

consideration of efficiency, FSA has made a targeted selection and 

devoted its limited resources to identifying farming operations considered 

most likely to have potential payment eligibility and payment limitation 

compliance issues. However, as discussed in our report, USDA selects 

very few cases for end-of-year reviews. For example, in 2008 and 2009, 

only 0.04 percent of operations receiving direct payments were selected. In 

addition, as noted in the report, these reviews were often not done in a 

timely fashion as measured by USDA’s own time frames. For example, as 

of September 2011, 271, or 71 percent, of 380 pending reviews for 2008 

were more than 6 months past USDA’s expected completion date. Given 

this very small sample and the lack of timeliness associated with many of 

these reviews, we continue to believe that USDA should consider options 

to increase the number and improve the timeliness of these reviews. To 

eliminate potential confusion about FSA’s use of a judgmental sample, we 

revised our third recommendation by removing the words “the quantity and 

quality” from an earlier draft to clarify our emphasis on improving the scope 

and timeliness of these reviews.

Regarding the fourth recommendation that USDA maintain 

comprehensive data on misrepresentation and enforcement actions taken 

nationwide as needed for management oversight and reporting purposes, 

USDA agreed and stated there is value in maintaining data on 

misrepresentation and enforcement actions. It stated that the 

development of such a capability has been planned for a number of years 

but that other projects, such as the implementation of the 2008 Farm Bill 

and the development and implementation of a robust process for verifying 

producer compliance with adjusted gross income limits have taken 

precedence. We understand that USDA has many competing priorities, 

but its decision to not pursue a more comprehensive oversight process—

including maintaining comprehensive data on misrepresentation and 

tracking the referral of cases for enforcement—means the number and 

value of improper payments and program fraud may be 

underrepresented. 
 

Page 34 GAO-12-640 Farm Programs

We are sending copies of this report to the Secretary of Agriculture, 

appropriate congressional committees, and other interested parties. The 

report also is available at no charge on the GAO website at 

http://www.gao.gov. 

If you or your staff members have any questions about this report, please 

contact me at (202) 512-3841 or shamesl@gao.gov. Contact points for 

our Offices of Congressional Relations and Public Affairs may be found 

on the last page of this report. GAO staff who made key contributions to 

this report are listed in appendix VIII.

Lisa Shames

Director

Natural Resources and Environment
 

Page 35 GAO-12-640 Farm Programs

List of Requesters

The Honorable Henry A. Waxman

Ranking Member

Committee on Energy and Commerce

United States House of Representatives

The Honorable Darrell E. Issa

Chairman

The Honorable Elijah Cummings

Ranking Member

Committee on Oversight 

and Government Reform

United States House of Representatives

The Honorable Jim Cooper

Ranking Member

Subcommittee on Oversight 

and Investigations

Committee on Armed Services

House of Representatives

The Honorable Earl Blumenauer

House of Representatives

The Honorable Ron Kind

House of Representatives

The Honorable Jeff Flake

House of Representatives
Appendix I: Objectives, Scope, and 

Methodology

Page 36 GAO-12-640 Farm Programs

The objectives of our review were to: (1) provide information regarding 

the geographic distribution and ownership characteristics of payment 

recipients, as well as the dollar amount of direct payments made for land 

with qualifying acreage and amount and types of crops grown on 

qualifying acreage from 2003 through 2011 and (2) examine whether 

direct payments are aligned with principles significant to integrity, 

effectiveness, and efficiency in farm bill programs.

To conduct this work, we analyzed U.S. Department of Agriculture 

(USDA) data, interviewed agency officials, reviewed applicable laws, 

regulations, and guidance, and reviewed and updated past GAO work. 

Specifically, to provide information about the geographic distribution and 

ownership characteristics of payment recipients and to determine the 

dollar amount of direct payments made for land with qualifying acreage, 

we obtained disaggregated data from USDA’s Farm Service Agency 

(FSA) indicating the number, amount, and payee for direct payments 

made from program years 2003 through 2011—that is, from the 

program’s first full year of operation through the most recent year for 

which complete program data are available.1

 

1

A program year is the year for which the program runs and benefits may be received. For 

direct payments, the program year corresponds with the federal fiscal year.

In particular, we reviewed 

the Food, Conservation, and Energy Act of 2008 (2008 Farm Bill) to 

determine which crops are eligible for direct payments and determined 

that we would include barley, canola, corn, cotton (upland), crambe, flax, 

mustard, oats, peanuts, rapeseed, rice, safflower, sesame, sorghum, 

soybeans, sunflower, and wheat in our analysis. Further, we reviewed 

and evaluated USDA documents for collecting data from direct payment 

recipients regarding land usage, in particular the Farm Operating Plan for 

Payment Eligibility Review for individuals and entities, to identify 

appropriate data elements for use in our analyses. In particular, we 

obtained data from USDA’s compliance share file that indicates how 

producers—whether individuals or entities—are involved and whether 

they own a particular farm field or area of land for which direct payments 

were made. Producers report they either (1) own and operate the farm 

(“owner-operators”), (2) operate but do not own the farm (“tenants”), or (3) 

are an owner of the farm (“other owners”). We also obtained 

disaggregated USDA data indicating the number of base acres and 

planting history for each farm for which direct payments were made. 

When analyzing direct payments spending, we assigned a payment 

Appendix I: Objectives, Scope, and 

Methodology 
Appendix I: Objectives, Scope, and 

Methodology

Page 37 GAO-12-640 Farm Programs

according to its program year; that is, the year in which the payment was 

associated with since it is possible for payments to be made after the end 

of the program year for which they are made.

USDA does not collect the zip codes of farms with which direct payment 

are associated. We therefore obtained data for the centroid point—the 

geometric center—of the county in which the farm resides and calculated 

the distance from it to the centroid point of the payment recipient’s zip 

code. In addition, USDA provided reliable address files for payees from 

2008 through 2011. USDA data do not differentiate between the 

program’s base acres and a farm’s other acres, and producers report one 

aggregated number of acres for each crop planted. To determine the 

relative percentage of base acres planted with the base acre crops, we 

compared the acreage of a farm planted in a particular crop with its base 

acres of that crop. Because a producer may plant 100 percent of the 

farm’s base acres in any crop, plus a portion of additional acres on the 

farm that exceeds the base acre amount, more than 100 percent of base 

acres may be planted in a certain crop. We assessed the reliability of 

USDA’s data by (1) performing electronic testing of required data 

elements, (2) reviewing existing information about the data and the 

system that produced them, and (3) interviewing agency officials 

knowledgeable about the data. We determined that the data were 

sufficiently reliable for the purposes of this report. We used geographic 

information system (“GIS”) software to map selected results of our 

quantitative analyses. We also interviewed FSA officials regarding the 

results of our data analysis; these officials indicated that they generally 

found these results to be credible.

To examine whether direct payments are aligned with principles 

significant to integrity, effectiveness, and efficiency in farm bill programs, 

we reviewed our past work, particularly more recent work that identifies 

relevant principles to consider for farm bill reauthorization. These 

principles are relevance, distinctiveness, targeting, affordability, 

effectiveness, and oversight.2

 

2

The resulting principles and associated key 

questions may not represent all potential principles that could be 

considered. We collected additional data where possible to determine 

how circumstances regarding direct payments may have changed more 

recently and evaluated direct payments according to the principles 

GAO-12-338SP. 
Appendix I: Objectives, Scope, and 

Methodology

Page 38 GAO-12-640 Farm Programs

identified for in our earlier work. We also reviewed our March 2011 report, 

which discussed observations regarding direct payments.3 In applying the 

identified principles to direct payments, we considered information on the 

program’s original purpose; its potential, if any, to duplicate payments 

under other programs; who benefits from the program; the nation’s deficit 

and debt challenges; the program’s potential, if any, to have unintended 

consequences; and program oversight measures taken by FSA.

However, based on our past work, we believe these principles to be 

significant to integrity, effectiveness, and efficiency in farm bill programs 

since 2003, when much of the 2002 Farm Bill was implemented. Further, 

USDA’s Office of Inspector General shares this point of view and issued a 

companion report to our report using the same principles and based on its 

own past work for this time frame.4

Regarding oversight, we interviewed FSA and Office of Inspector General 

officials and reviewed documentation FSA provided, including information 

related to investigations of potential fraud related to direct payments. We 

also visited several FSA county offices in each of two states—Arizona 

and Louisiana—to discuss oversight issues, review farm operating plan 

files, and observe the use of cropland in these counties associated with 

direct payments.5 In addition, we interviewed officials by phone in FSA 

county offices in two other states—California and Mississippi—to discuss 

oversight issues.6 In general, we judgmentally selected these offices 

because (1) the office has a relatively large number of end-of-year 

compliance reviews,7

 

3

 (2) the county has a relatively large number of 

farms with cropland associated with direct payments that has not been 

GAO-11-318SP. 

4

USDA Office of Inspector General, Farm Bill: Principles to Help Guide Its Design and 

Implementation, IG-50099-001-10 (Washington, D.C.: Apr. 20, 2012).

5

In Arizona, we visited FSA county offices in Maricopa, Pima, and Pinal counties. In 

Louisiana, we visited FSA county offices in Madison, Morehouse, and Richland parishes.

6

In California, we spoke by phone with FSA county office officials in Colusa and Fresno 

counties. In Mississippi, we spoke by phone with FSA county office officials in Bolivar and 

Coahoma counties.

7

To ensure compliance with payment limitation and eligibility provisions (as provided in 

statute and regulation), FSA conducts end-of-year compliance reviews of some farming 

operations each year to determine that they were carried out as represented in their farm 

operating plans. This includes an assessment of whether individuals associated with a 

farming operation meet criteria for being actively engaged in farming.
Appendix I: Objectives, Scope, and 

Methodology

Page 39 GAO-12-640 Farm Programs

planted with crops in recent years, and/or (3) the county is experiencing 

rapid urban development. The information gathered at these locations 

cannot be generalized to the experience of all FSA county offices.

We conducted this performance audit from August 2011 to June 2012 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.
Appendix II: Principles Significant to the 

Integrity, Effectiveness, and Efficiency of Farm 

Bill Programs 

Page 40 GAO-12-640 Farm Programs

In April 2012 we identified certain principles as applicable to Congress’s 

deliberations for the 2012 Farm Bill and significant to the integrity, 

effectiveness, and efficiency in farm bill programs, such as direct 

payments.1

1. Relevance: Does the program concern an issue of national interest? 

Is the program consistent with current statutes and international 

agreements? Have the domestic and international food and 

agriculture sectors changed significantly, or are they expected to 

change, in ways that affect the program’s purpose?

Specifically, we identified these principles to be relevance, 

distinctiveness, targeting, affordability, effectiveness, and oversight. Key 

questions associated with these principles are shown below. Our list of 

principles may not represent all potential principles that could be 

considered.

2. Distinctiveness: Is the program unique and free from overlap or 

duplication with other programs? Is it well coordinated with similar 

programs?

3. Targeting: Is the program’s distribution of benefits consistent with 

contemporary assessments of need?

4. Affordability: Is the program affordable, given the nation’s severe 

budgetary constraints? Is it using the most efficient, cost-effective 

approaches?

5. Effectiveness: Are program goals clear, with a direct connection to 

policies, resource allocations, and actions? Does the program 

demonstrate measurable progress toward its goals? Is it generally 

free of unintended consequences, including ecological, social or 

economic effects? Does the program allow for adjustments to 

changes in markets?

6. Oversight: Does the program have mechanisms, such as internal 

controls, to monitor compliance and help minimize fraud, waste, and 

abuse in areas where these are most likely to occur?

 

1

GAO-12-338SP. 

Appendix II: Principles Significant to the 

Integrity, Effectiveness, and Efficiency of 

Farm Bill Programs
Appendix III: Ownership Characteristics of 

Land for Which Direct Payments Were Made

Page 41 GAO-12-640 Farm Programs

Data from USDA’s compliance share file indicate how producers—

whether individuals or entities—are involved and whether they own a 

particular farm field or area of land for which direct payments were made. 

Producers report they either (1) own and operate the farm (“owneroperator”), (2) operate but do not own the farm (“tenants”), or (3) are an 

owner of the farm (“other owners”). Our analysis of USDA data found that 

ownership characteristics of land for which direct payments were made 

have changed from 2003 through 2011, as shown in table 3.

Table 3: Changes in Ownership of Land for Which Direct Payments Were Made, All Covered Crops

Year

Millions of 

acres, owneroperatorsMillions of 

acres, tenants

Millions of 

acres, other 

owners

Percentage, 

owner-operators

Percentage, 

tenants

Percentage, 

other owners

2003 76.76 144.65 35.16 29.92% 56.38% 13.70%

2004 73.87 146.83 33.46 29.07 57.77 13.16

2005 66.65 150.85 32.41 26.67 60.36 12.97

2006 57.85 154.53 30.64 23.81 63.59 12.61

2007 58.82 157.30 30.76 23.82 63.72 12.46

2008 60.64 161.74 31.02 23.93 63.83 12.24

2009 59.51 160.70 30.09 23.78 64.20 12.02

2010 66.39 153.48 29.32 26.64 61.59 11.77

2011 67.03 158.73 29.67 26.24% 62.14% 11.62%

Source: GAO analysis of USDA data.

Note: Numbers may not total 100 percent because of rounding. 

Appendix III: Ownership Characteristics of 

Land for Which Direct Payments Were Made
Appendix III: Ownership Characteristics of 

Land for Which Direct Payments Were Made 

Page 42 GAO-12-640 Farm Programs

Moreover, we found that the ownership characteristics regarding the 

operation of land for which direct payments were made varied according 

to which crops were grown. Table 4 shows these variations by crop, for all 

covered crops, corn, cotton, oats, rice, soybeans, and wheat in 2011.

Table 4: Ownership Characteristics, All Covered Crops, Corn, Cotton, Oats, Rice, Soybeans, and Wheat, 2011

Crop type

Millions of 

acres, owneroperatorsMillions of 

acres, tenants

Millions of 

acres, other 

owners

Percentage, 

owner-operators

Percentage, 

tenants

Percentage, 

other owners

All covered crops 67.03 158.73 29.67 26.24% 62.14% 11.62%

Corn 25.48 56.79 9.64 27.73 61.79 10.49

Cotton (upland) 1.74 10.82 1.87 12.05 74.97 12.98

Oats 0.76 0.87 0.09 44.06 50.70 5.24

Rice 0.28 2.31 0.36 9.54 78.19 12.27

Soybeans 19.65 47.29 8.31 26.11 62.84 11.04

Wheat 15.97 32.47 7.79 28.39% 57.75% 13.86%

Source: GAO analysis of USDA data.

Note: Percentages may not total to 100 because of rounding. 
Appendix IV: Analysis of Direct Payment Crops 

Grown Compared with Base Acreage 

Allocations

Page 43 GAO-12-640 Farm Programs

Our analysis of USDA data found variation in the extent to which 

producers grew the crop associated with their base acres. Table 5 depicts 

the results for each crop eligible for direct payments, as well as the totals 

for all eligible crops, from 2003 through 2011.

Table 5: Planted Acres of Base Acre Crop as a Percentage of Base Acres, from 2003 

through 2011

Crop name

Millions of actual 

planted acres of 

base acre crop

Millions of base 

acres

Planting as 

percentage of

base acres

Barley 27.61 79.39 34.78%

Canola 6.57 6.46 101.65

Corn 692.38 791.14 87.52

Cotton (upland) 100.42 169.00 59.42

Crambe 0.00 0.17 2.43

Flax 1.57 1.65 95.49

Mustard 0.10 0.27 35.13

Oats 15.74 29.19 53.91

Peanuts 6.89 13.67 50.38

Rapeseed 0.00 0.02 17.44

Rice 26.18 40.67 64.38

Safflower 0.61 0.95 63.73

Sesame 0.01 0.01 60.69

Sorghum 45.95 108.63 42.30

Soybeans 592.76 472.19 125.53

Sunflower 10.70 16.49 64.87

Wheat 488.14 685.18 71.24

 Total: 2,015.63 Total: 2,415.08 Average: 83.46%

Source: GAO analysis of USDA data.

Notes: (1) The millions of actual planted acres of base crop was more specifically 0.0042 million 

acres for crambe and 0.0058 for sesame; the planting as percentage of base acres was more 

specifically 2.4282 for crambe and 60.6945 for sesame. (2) Numbers may not add to totals because 

of rounding. 

Appendix IV: Analysis of Direct Payment 

Crops Grown Compared with Base Acreage 

Allocations 
Appendix V: Analysis of Extent to Which 

Producers Did Not Grow Any of the Crop 

Associated with Their Base Acres in a Given 

Year 

Page 44 GAO-12-640 Farm Programs

Our analysis of USDA data found that some producers chose to not grow 

any of the crop associated with their base acres in a given year—as they 

are allowed to do. Table 6 depicts our results of this analysis, by crop, 

and the corresponding value of direct payments made for each crop.

Table 6: Cumulative Value of Direct Payments Made for Which the Crop Associated with the Base Acres Was Not Grown in a 

Given Year from 2003 through 2011 

Crop name

Millions of base acres 

for which no base 

acre crop was planted 

in a given year 

(cumulative)

Millions of 

base acres (cumulative)

Percentage of base 

acres not planted with 

any of the base acreage 

crop in a given year

Millions paid for base 

acres not planted with 

any base acre crop 

(cumulative)

Barley 54.07 79.39 68.11% $457.13

Canola 3.75 6.46 58.02 23.82

Corn 138.91 791.14 17.56 2,659.77

Cotton (upland) 62.06 169.00 36.72 1,907.38

Crambe 0.17 0.17 98.88 1.22

Flax 1.16 1.65 70.20 4.99

Mustard 0.24 0.27 88.05 0.91

Oats 20.02 29.19 68.57 17.24

Peanuts 6.58 13.67 48.13 272.35

Rapeseed 0.01 0.02 89.67 0.09

Rice 10.64 40.67 26.17 885.49

Safflower 0.68 0.95 71.67 2.98

Sesame 0.01 0.01 77.69 0.01

Sorghum 70.04 108.63 64.47 1,098.26

Soybeans 73.71 472.19 15.61 732.21

Sunflower 10.97 16.49 66.50 73.37

Wheat 180.11 685.18 26.29 2,507.65

 Total: 633.11 Total: 2,415.08 Average: 26.22% Total: $10,644.88

Source: GAO analysis of USDA data.

Notes: (1) The producer could have planted another crop, as they are allowed to do. (2) The millions 

of acres for which no base acre crop was planted in a given year (cumulative) was more precisely 

0.169 for crambe and 0.007 for sesame; the millions of base acres (cumulative) for the period was 

more precisely 0.171 for crambe and 0.009 for sesame. (3) The dollar totals represent the amount 

paid for producers of a particular crop who did not plant any of the base acre crop in a given year, 

cumulative from 2003 through 2011. (4) Numbers may not add to the totals because of rounding. 

Appendix V: Analysis of Extent to Which Producers 

Did Not Grow Any of the Crop Associated with 

Their Base Acres in a Given Year 
Appendix VI: Analysis, by State, of the Number 

of Farms Fallow from 2007 through 2011 and 

the Value of Direct Payments Made to 

Producers for These Farms in 2011 

Page 45 GAO-12-640 Farm Programs

According to our analysis of USDA data, 2,327 farms, or about 

0.15 percent of the 1.6 million farms receiving direct payments in 2011, 

reported all their land as “fallow” from 2007 through 2011. That is, 

producers did not plant any crops of any type on this land in any year 

during this 5-year period, as they are allowed to do in accordance with 

planting flexibility rules. Table 7 presents the results of our analysis, by 

state, of the number of such fallow farms in each state, including the 

direct payments received by producers on these farms in 2011.

Table 7: Number of Farms Where Producers Planted No Crop of Any Type from 

2007 through 2011 and Value of Direct Payments Received by These Producers in 

2011, by State

State 

Number of farms that 

reported all their land fallow 

from 2007 through 2011

Direct payments made in 

2011 for such fallow farms 

(dollars)

Alabama 82 $44,105

Alaska 0 0 

Arizona 85 750,531

Arkansas 124 135,216

California 85 307,182

Colorado 14 11,216

Connecticut 1 280

Delaware 0 0 

Florida 60 25,716

Georgia 551 307,388

Hawaii 0 0 

Idaho 20 17,726

Illinois 6 1,675

Indiana 13 3,668

Iowa 0 0 

Kansas 8 4,957

Kentucky 1 144

Louisiana 322 346,514

Maine 0 0 

Maryland 4 832

Massachusetts 0 0 

Michigan 27 7,544

Minnesota 3 1,141

Mississippi 83 41,735

Appendix VI: Analysis, by State, of the Number of Farms 

Fallow from 2007 through 2011 and the Value of Direct 

Payments Made to Producers for These Farms in 2011
Appendix VI: Analysis, by State, of the Number 

of Farms Fallow from 2007 through 2011 and 

the Value of Direct Payments Made to 

Producers for These Farms in 2011 

Page 46 GAO-12-640 Farm Programs

State 

Number of farms that 

reported all their land fallow 

from 2007 through 2011

Direct payments made in 

2011 for such fallow farms 

(dollars)

Missouri 7 2,758

Montana 1 1,693

Nebraska 4 2,441

Nevada 0 0 

New Hampshire 0 0 

New Jersey 3 1,007

New Mexico 68 204,381

New York 18 6,198

North Carolina 169 34,389

North Dakota 8 3,052

Ohio 32 11,840

Oklahoma 22 12,909

Oregon 3 984

Pennsylvania 5 2,004

Rhode Island 0 0 

South Carolina 283 103,858

South Dakota 1 1,413

Tennessee 28 6,382

Texas 134 449,438

Utah 3 3,569

Vermont 1 334

Virginia 25 2,902

Washington 11 11,103

West Virginia 0 0 

Wisconsin 11 6242

Wyoming 1 261

Total 2,327 $2,876,728

Source: GAO analysis of USDA data.

Note: We are reporting payments made in the most recent year for which data are available, 2011, to 

producers of farms that we identified as being fallow for 5 consecutive years, from 2007 through 

2011. 
Appendix VII: Comments from the U.S. 

Department of Agriculture

Page 47 GAO-12-640 Farm Programs

Appendix VII: Comments from the U.S. 

Department of Agriculture
Appendix VII: Comments from the U.S. 

Department of Agriculture

Page 48 GAO-12-640 Farm Programs
Appendix VIII: GAO Contact and Staff 

Acknowledgments

Page 49 GAO-12-640 Farm Programs

Lisa Shames, (202) 512-3841 or shamesl@gao.gov

In addition to the individual named above, James R. Jones, Jr. (Assistant 

Director); Alisa Beyninson; Ellen W. Chu; Michael Kendix; and Michelle 

Munn made key contributions to this report. Important contributions were 

also made by Benjamin Bolitzer, Kevin Bray, Tom Cook, Melinda 

Cordero, Greg Dybalski, Barbara El Osta, Rebecca Makar, John Mingus, 

Susan Offutt, Anne Rhodes-Kline, Ardith A. Spence, Kiki 

Theodoropoulous, and Michelle K. Treistman.

Appendix VIII: GAO Contact and Staff 

Acknowledgments 

GAO Contact

Staff 

Acknowledgments
Related GAO Products

Page 50 GAO-12-640 Farm Programs

Farm Bill: Issues to Consider for Its Reauthorization, GAO-12-338SP. 

April 24, 2012.

Crop Insurance: Savings Would Result from Program Changes and 

Greater Use of Data Mining, GAO-12-256. Washington, D.C.: 

March 13, 2012.

Follow-up on 2011 Report: Status of Actions Taken to Reduce

Duplication, Overlap, and Fragmentation, Save Tax Dollars, and Enhance 

Revenue, GAO-12-453SP. Washington, D.C.: February 28, 2012.

Opportunities to Reduce Potential Duplication in Government Programs, 

Save Tax Dollars, and Enhance Revenue GAO-11-318SP. Washington, 

D.C.: March 1, 2011.

2012 Annual Report: Opportunities to Reduce Duplication, Overlap and 

Fragmentation, Achieve Savings, and Enhance Revenue, 

GAO-12-342SP. Washington, D.C.: February 28, 2012.

USDA Crop Disaster Programs: Lessons Learned Can Improve 

Implementation of New Crop Assistance Program, GAO-10-548. 

Washington, D.C.: June 4, 2010.

Crop Insurance: Opportunities Exist to Reduce the Costs of Administering 

the Program, GAO-09-445. Washington, D.C.: April 29, 2009.

Federal Farm Programs: USDA Needs to Strengthen Controls to Prevent 

Payments to Individuals Who Exceed Income Eligibility Limits, 

GAO-09-67. Washington, D.C.: October 24, 2008.

Agricultural Conservation: Farm Program Payments Are an Important 

Factor in Landowners’ Decisions to Convert Grassland to Cropland. 

GAO-07-1054. Washington, D.C.: September 18, 2007. 

Beginning Farmers: Additional Steps Needed to Demonstrate the 

Effectiveness of USDA Assistance, GAO-07-1130. Washington, D.C.: 

September 10, 2007.

USDA Needs to Strengthen Management Controls to Prevent Improper 

Payments to Estates and Deceased Individuals. GAO-07-1137T. 

Washington, D.C.: July 24, 2007.

Related GAO Products
Related GAO Products

Page 51 GAO-12-640 Farm Programs

Federal Farm Programs: USDA Needs to Strengthen Controls to Prevent 

Improper Payments to Estates and Deceased Individuals, GAO-07-818. 

Washington, D.C.: July 9, 2007.

Crop Insurance: Continuing Efforts Are Needed to Improve Program 

Integrity and Ensure Program Costs Are Reasonable, GAO-07-944T. 

Washington, D.C.: June 7, 2007.

Crop Insurance: Continuing Efforts Are Needed to Improve Program 

Integrity and Ensure Program Costs Are Reasonable, GAO-07-819T. 

Washington, D.C.: May 3, 2007.

Crop Insurance: More Needs to Be Done to Reduce Program’s 

Vulnerability to Fraud, Waste, and Abuse, GAO-06-878T. Washington, 

D.C.: June 15, 2006.

Crop Insurance: Actions Needed to Reduce Program’s Vulnerability to 

Fraud, Waste, and Abuse, GAO-05-528. Washington, D.C.: September 

30, 2005.

Farm Program Payments: USDA Should Correct Weaknesses in 

Regulations and Oversight to Better Ensure Recipients Do Not 

Circumvent Payment Limitations, GAO-04-861T. Washington, D.C.: June 

16, 2004.

Crop Insurance: USDA Needs to Improve Oversight of Insurance 

Companies and Develop a Policy to Address Any Future Insolvencies,. 

GAO-04-517. Washington, D.C.: June 1, 2004.

Farm Program Payments: USDA Needs to Strengthen Regulations and 

Oversight to Better Ensure Recipients Do Not Circumvent Payment 

Limitations, GAO-04-407. Washington, D.C.: April 30, 2004.

Federal Budget: Opportunities for Oversight and Improved Use of 

Taxpayer Funds, GAO-03-1030T. Washington, D.C.: July 17, 2003.

(361318)
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