Additional copies of this Performance and Accountability Report 

can be downloaded at http://www.usda.gov/ocfo/pm/par2002.htm. 

To request paper copies of this report or other reports 

referenced herein, send an email with your 

specific request to pm@cfo.usda.gov. 

If you have comments or questions, please 

submit via email to pm@cfo.usda.gov. 

The U.S. Department of Agriculture (USDA) prohibits discrimination in all its programs and 

activities on the basis of race, color, National origin, gender, religion, age, disability, political 

beliefs, sexual orientation, and marital or family status. (Not all prohibited bases apply to all 

programs.) Persons with disabilities who require alternative means for communication of 

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Center at (202) 720-2600 (voice and TDD). USDA is an equal employment opportunity employer. 
CONTENTS 

Message From The Secretary..........................................................................................1 

Message From The Chief Financial Officer ....................................................................2 

I. Management Discussion and Analysis.................................................................... 3

An Overview of USDA ..................................................................................................3 

Performance Goals and Results ......................................................................................9 

Financial Statement Highlights.....................................................................................11 

Systems, Controls, and Legal Compliance....................................................................13 

Future Demands, Risks, Uncertainties, Events, Conditions, and Trends........................16 

USDA’s Implementation of President’s Management Agenda ......................................17 

II. Performance Section .............................................................................................. 19

Annual Performance Goals and Results ........................................................................19 

Data Assessment of Performance Measures..................................................................68 

Inspector General Act Amendments of 1988 Management’s Report on Final Action 

(Audit Follow-up) ........................................................................................................88 

Federal Managers’ Financial Integrity Act Report on Management Controls ................95 

III. Consolidated Financial Statements ................................................................... 101

Notes to the Financial Statements...............................................................................107 

Required Supplementary Stewardship Information .....................................................144 

Required Supplementary Information .........................................................................154 

IV. Report of the Office of the Inspector General and Management’s Response 164

Appendix A – Exhibits.............................................................................................. 205

Appendix B – Acronyms .......................................................................................... 207

Appendix C – OIG Major USDA Management Challenges..................................... 210
This page left blank intentionally. 
USDA Performance and Accountability Report for FY 2002

1

MESSAGE FROM THE SECRETARY 

The United States Department of Agriculture (USDA) is pleased to 

present the Performance and Accountability Report for FY 2002. This 

report provides information on our performance and our operating and 

financial results. 

We achieved success on a host of issues: implementing the Farm 

Security and Rural Investment Act of 2002; providing assistance to 

farmers and ranchers impacted by severe weather conditions; making 

significant progress on agricultural trade issues; fighting a near recordlevel of forest fires; supporting renewable fuels such as ethanol and 

biodiesel; advocating strong conservation programs; providing grants 

and loans to spur economic growth and create jobs in rural communities; 

investing in technology and infrastructure projects such as new water 

systems, hospitals, schools, housing projects and processing facilities; 

and continuing to be vigilant in protecting the food and agriculture sector against intentional and 

unintentional threats. 

USDA managers have reviewed the quality of performance data included in the Annual Performance 

Goals and Results section. Except for data limitations explicitly discussed in that section and based upon 

reviews by our management team, I hereby provide reasonable assurance that the data are valid and 

reliable. Furthermore, managers have discussed data limitations and plans for improvement in data 

quality. 

This report includes information that satisfies the reporting requirements for the Federal Managers’ 

Financial Integrity Act (FMFIA) to ensure that federal programs are operated efficiently, effectively, and in 

compliance with relevant laws. Therefore, except for those areas for improvement identified in this 

document, USDA is providing reasonable assurance that our systems of internal control comply with the 

objectives of FMFIA Section 2. Section 4 of the FMFIA requires financial systems to conform to certain 

standards, principles, and other specifications to ensure timely, relevant, and consistent financial 

information. Based on the work performed during FY 2002 and prior years, the Department’s integrated 

financial management system is substantially compliant with the objectives of Section 4 of FMFIA with the 

exception of those financial system nonconformances identified in this report. 

Ann M. Veneman 

Secretary of Agriculture 
USDA Performance and Accountability Report for FY 2002 

2

MESSAGE FROM THE CHIEF FINANCIAL OFFICER 

People are the only source of a sustainable competitive advantage. 

My gratitude and congratulations go to the individual excellence and 

collective success of all United States Department of Agriculture (USDA) 

associates and our business partners for achieving numerous valuable 

results in financial management accountability in Fiscal Year (FY) 2002. 

Value was created by accomplishing break-through results, such as: 

• Receiving the first-ever, clean audit opinion for the Department since the 

passage of the Chief Financial Officer Act in 1990; 

• Assembling, focusing and integrating an effective team of talented 

leaders to create effective change and sustain improvement in financial 

management, led by Secretary Veneman, the Subcabinet, the Office of 

the Chief Financial Officer, agency administrators and their related 

finance, accounting and budget staffs; 

• Implementing improved accounting processes and completing the 

installation of a standard general accounting system; 

• Transforming the Forest Service financial management activity into a 

vastly improved function; 

• Correcting real and personal property accounting deficiencies; 

• Improving capabilities in the management of working capital funds, 

analyzing program costs and administering lending programs; 

• Instituting an organizational structure that creates a unified corporate 

controller function with related process and system accountabilities; and 

• Reducing the number of material deficiencies by almost 50 percent—a 

noteworthy achievement that reflects an improving environment of 

internal control. We began the year with 32 material deficiencies and 

closed it with 19. Our FY 2003 goal is to reduce the remaining 

deficiencies by half. We plan to eliminate the rest in FY 2004. 

USDA is committed to providing the best management of the resources 

under its stewardship. Through teamwork and the dedicated efforts of 

many USDA employees, we will continue to improve financial management accountability at USDA and report the results that are expected of a 

world-class organization. 

Edward R. (Ted) McPherson 

Chief Financial Officer
USDA Performance and Accountability Report for FY 2002 

3

I. MANAGEMENT DISCUSSION AND ANALYSIS 

AN OVERVIEW OF USDA 

Mission Statement: We provide leadership on food, agriculture, natural resources, 

and related issues based on sound public policy, the best available science, and 

efficient management. 

Founded by President Abraham Lincoln in 1862 when more than half of the nation’s population lived and 

worked on farms, the United States Department of Agriculture’s (USDA’s) role has evolved as the United 

States (U.S.) economy has changed. USDA enhances the quality of life for the American people by: 

• Enhancing economic opportunities for farmers and ranchers; 

• Ensuring a safe, affordable, nutritious, and accessible food supply; 

• Caring for public lands and helping people care for private lands; 

• Supporting sound sustainable development of rural communities; 

• Providing economic opportunities and improving the quality of life for farm and rural residents; 

• Expanding global markets for agricultural and forest products and services; and 

• Working to improve Americans’ nutrition and reduce hunger. 

As noted by Secretary Veneman in “Food and Agriculture: Taking Stock for a New Century,” published 

in September 2001, America’s food and fiber producers now operate in a global, technologically 

advanced, rapidly diversifying, highly competitive business environment that is relentlessly driven by 

increasingly sophisticated consumers. USDA’s challenge today is two-fold: to confront and manage the 

change immediately before us while, at the same time, modernizing our farm and food system infrastructure to ensure continued growth and development for the 21st century. USDA’s progress toward 

meeting this challenge is described in this Performance and Accountability Report for FY 2002.

USDA is revising its strategic plan for FY 2002–2007. This report provides information on our core 

performance measures as set forth in our revised FY 2002 Annual Performance Plan. Accordingly, for the 

purpose of this report, we have revised the placement of the core measures to align approximately with 

the structure of the draft plan. When finalized, the structure of our new Strategic Plan and the measures 

used to assess our performance may differ from what is depicted here. 

USDA’s two fundamental goals are service to customers (Goal 1) and efficient management (Goal 2). 

Goal 1 contains seven key outcomes, reflecting results for programs that cover farmers, ranchers, rural 

communities and all of us who consume food. This goal includes implementation of the Farm Security 

and Rural Investment Act of 2002 and Homeland Security. Goal 2 addresses the President’s Management 

Agenda (PMA) and seeks to improve USDA’s capabilities in the areas of human capital and competitive 

sourcing, financial management, electronic information, and budget and performance integration. 

Some highlights of USDA’s 2002 performance: 

• Agricultural exports continued on an upward trend, rising by an estimated $0.6 billion to $53.3 

billion. 

• Grain quality measurements increased dramatically, from a target of 40 to an actual of 60. 

• Travelers non-compliant with agricultural restrictions decreased from 4.0 to 3.3 percent. 
USDA Performance and Accountability Report for FY 2002 

4

• The Centers for Disease Control and Prevention tied a decline in human Salmonella infections to 

USDA-regulated products. 

• The U.S. provided more than 50 percent of total international food aid. 

• USDA contributed expertise to the Partnership to End Hunger in Africa. 

• We completed the implementation of an integrated standard general ledger accounting system in all 

USDA agencies on October 1, 2002. 

• We established clear and sustainable processes to fully reconcile our fund balance with Treasury. 

• We completed new direct and guaranteed loan models to improve resource management. 

Organization 

 Secretary 

Ann M. Veneman

Deputy Secretary 

James R. Moseley

General Counsel 

Nancy S. Bryson

Under Secretary 

for 

Farm and Foreign 

Agricultural Services 

J.B. Penn

Under Secretary 

for 

Rural Development 

Thomas C. Dorr

Inspector General 

Phyllis K. Fong

Director of 

Communications 

Kevin Herglotz

Executive Operations*

Under Secretary 

for 

Food, Nutrition, and 

Consumer Services 

Eric M. Bost

Under Secretary 

for 

Food Safety 

Elsa Murano

Under Secretary 

for 

Research, Education, 

and Economics 

Joseph Jen

Under Secretary 

for 

Marketing and 

Regulatory Programs 

William Hawks

Under Secretary 

for 

Natural Resources 

and Environment 

Mark Rey

Chief Financial 

Officer 

Edward R. McPherson

Chief Information 

Officer 

Scott Charbo

Assistant Secretary 

for 

Congressional Relations

Mary Waters

Assistant Secretary 

for 

Administration 

Lou Gallegos

* Includes the Office of the Executive Secretariat, Office of Budget and Program Analysis, 

 Office of the Chief Economist and the National Appeals Division.

Mission Areas 

Natural Resources and Environment Mission Area 

The Natural Resources and Environment (NRE) mission area has two agencies: the Forest Service (FS) 

and the Natural Resources and Conservation Service (NRCS). The agencies work to ensure the health of 

the land through sustainable management. The FS manages the 192 million acres of National Forests and 

Grasslands for the American people, and NRCS assists farmers, ranchers, and others to manage private 

lands for environmental and economic sustainability. Both NRE agencies work in partnership with tribal, 

State, and local governments; communities and groups; and Federal agencies to protect the Nation’s soils, 

watersheds, and ecosystems to meet current and future needs. 
USDA Performance and Accountability Report for FY 2002 

5

Farm and Foreign Agricultural Services Mission Area 

The Farm and Foreign Agricultural Services (FFAS) mission area has three agencies: the Farm Service 

Agency (FSA), the Foreign Agricultural Service (FAS), and the Risk Management Agency (RMA). The 

FFAS mission area is devoted to improving the livelihood of American farmers and ranchers through 

its numerous programs and activities. FFAS programs strengthen American agricultural markets by 

stabilizing farm incomes, conserving our natural resources, providing credit and risk management 

products and services, and developing and expanding our international markets. Working together, 

these programs contribute to making the American agricultural sector more productive and sustainable 

for the future. 

The Commodity Credit Corporation (CCC) is a Government-owned organization created to stabilize, 

support, and protect farm income and prices; to help maintain balanced and adequate supplies of agricultural commodities, including food products, feeds, and fibers; and to help in an orderly distribution of 

these commodities. They deliver commodity, credit, conservation, disaster, and emergency assistance 

programs that help improve and strengthen the agricultural economy. 

Rural Development Mission Area

The Rural Development (RD) mission area provides economic opportunities to improve the quality of life 

in rural America. RD addresses rural America’s need for basic utility services, single and multi-family 

housing, as well as health and other community facilities. This mission area also provides support to rural 

areas that need to develop new job opportunities, helping businesses and cooperatives to remain viable in 

a changing economy. 

Food Nutrition and Consumer Services Mission Area

The Food Nutrition and Consumer Services (FNCS) mission area operates through two agencies: the 

Food Nutrition Service (FNS) and the Center for Nutrition Policy and Promotion (CNPP). FNS administers the Federal nutrition assistance programs, including the Food Stamp Program, the Child Nutrition 

Programs, and the Women, Infants and Children Program—programs which provide access to nutritious 

food and support for better dietary habits to one in six Americans each year. CNPP links scientific 

research to the nutrition needs of consumers through science-based dietary guidance. 

Food Safety Mission Area

The Food Safety and Inspection Service (FSIS) ensures the safety, wholesomeness, and correct labeling and 

packaging of meat, poultry, and egg products. FSIS sets public health performance standards for food safety 

and inspects and regulates these products in interstate and foreign commerce, including imported products. 

FSIS has significant responsibilities coordinating efforts among various Federal agencies, including the 

Department of Health and Human Services and the Environmental Protection Agency. 

Research, Education, and Economics Mission Area

The Research, Education, and Economics (REE) mission area is dedicated to creating a safe, sustainable, 

competitive U.S. food and fiber system and strong, healthy communities, families, and youth through 

integrated research, analysis, and education. Composed of the Agricultural Research Service (ARS); the 

Cooperative State Research, Education, and Extension Service (CSREES); the Economic Research 

Service (ERS); and the National Agricultural Statistics Service (NASS), REE generates and provides 

access to agricultural information, ensuring an abundance of high-quality safe food and other agricultural 
USDA Performance and Accountability Report for FY 2002 

6

products to meet the nutritional needs of the American consumer, to sustain a viable economy, and to 

maintain a high-quality environment and natural resource base. 

Marketing and Regulatory Programs Mission Area 

Three agencies operate under the Marketing and Regulatory Programs (MRP) mission area: the 

Agricultural Marketing Service (AMS), the Animal and Plant Health Inspection Service (APHIS), and 

the Grain Inspection, Packers, and Stockyards Administration (GIPSA). MRP facilitates the domestic 

and international marketing of U.S. agricultural products and helps protect the agricultural sector from 

plant and animal health related threats while improving competitiveness and the economy for the 

overall benefit of both consumers and American agriculture. MRP also protects our borders from 

agricultural pests and diseases; its agencies actively participate in setting national and international 

standards, via Federal-State cooperation and international organizations. It also helps ensure humane 

care and treatment of animals. 

Departmental Offices 

Department-level offices provide centralized leadership, coordination, and support for USDA’s policy and 

administrative functions. They help agencies deliver services to all USDA customers and stakeholders. 
USDA Performance and Accountability Report for FY 2002 

7

Resources 

USDA’s operations are funded primarily by congressional appropriations. Total FY 2002 program 

obligations were $102,825 million, a decrease of $261 million compared to FY 2001. Staff year resources 

were 112,333, an increase of 4,123 compared to FY 2001. The following table identifies the key 

outcomes for our programs. The pie charts illustrate total resources and staff years for FY 2002. 

FY 2002 USDA Resources Dedicated to Program Outcomes 

 

USDA Resources 

Dedicated to Program Outcomes FY 2002 Actual 

 Program Obligation ($ Mil) 102,825 

Key Outcome 1.1: 

Expand Market 

Opportunities for U.S. 

Key Outcome 1.7: Agriculture

Implement the Farm 

Security and Rural 

Investment Act

Key Outcome 1.6: 

Provide Sensible 

Management of our 

Natural Resources

Key Outcome 1.5: 

Improve the Nation’s 

Nutrition and Health 

through Food 

Assistance and Nutrition 

Education and 

Promotion

Key Outcome 1.4: 

Protect the Nation's 

Agriculture and Food 

Supply

Key Outcome 1.2: 

Provide Risk 

Management and 

Credit/Financing Tools

Key Outcome 1.3: Meet 

Responsibilities for 

Homeland Security 

Effectively

23% 

4% 

24% 

1% 

1% 

37% 

10% 
USDA Performance and Accountability Report for FY 2002 

8

FY 2002 USDA Resources Dedicated to Program Outcomes 

USDA Resources 

Dedicated to Program Outcomes FY 2002 Actual 

 Staff Years 112,333 

Key Outcome 1.6: 

Provide Sensible 

Management of our 

Natural Resources

Key Outcome 1.2: 

Provide Risk 

Management and 

Credit/Financing Tools

Key Outcome 1.1: 

Expand Market 

Opportunities for U.S. 

Agriculture

Key Outcome 1.3: Meet 

Responsibilities for 

Homeland Security 

Effectively

Key Outcome 1.4: 

Protect the Nation's 

Agriculture and Food 

Supply

Key Outcome 1.5: 

Improve the Nation’s 

Nutrition and Health 

through Food 

Assistance and Nutrition 

Education and 

Promotion

Key Outcome 1.7: 

Implement the Farm 

Security and Rural 

Investment Act

11% 9% 

10% 

8% 

12% 

3% 

47% 
USDA Performance and Accountability Report for FY 2002 

9

PERFORMANCE GOALS AND RESULTS 

USDA has made progress in accomplishing the goals and challenges described in its revised FY 2002 

annual performance plan. In summary, of the Department’s 33 core performance goals, 23 were met or 

exceeded, five were reported as preliminary (incomplete data) or deferred (unable to report progress until 

date specified), leaving five unmet. Analyses of these results are provided in the Performance Section of this 

report. Information supporting these performance goals is of sufficient quality and reliability except where 

otherwise noted in this document. Only federal employees were involved in the preparation of the 

performance information contained in this section. 

Performance Scorecard for FY 2002 

Key Outcomes* Annual Performance Goals Result 

1.1 • Increase U.S. agricultural trade Met 

• Increase U.S. food aid exports under Public Law (P.L.) 480, Title I and 

Food for Progress in supporting world food security 

Unmet 

• Promote research, training and technical assistance activities that 

support sustainable food supplies worldwide 

Met 

Expand Market 

Opportunities for U.S. 

Agriculture 

• Increase the efficiency of U.S. grain marketing Met 

1.2 • Producers have economically sound risk management tools available, 

and they use them to meet their needs 

Met 

• Improve the standard of living in rural communities Unmet 

• Maintain the percentage of small farms in relation to total U.S. farms at 

the 1999 level 

Met 

Provide Risk Management and Credit/Financing Tools to Support 

Production Agriculture, 

and Improve Quality of 

Life in Rural Areas 

• Increase the amount of farm operating and ownership loans made or 

guaranteed to beginning and socially disadvantaged farmers 

Met 

1.4 • Reduce the number and severity of pest and disease outbreaks in the 

U.S. 

Deffered 

• Maintain a coordinated food safety risk analysis system to ensure the 

safety of U.S. meat, poultry, and egg products from farm to table 

Met 

Continue to Use the Best 

Available Science, 

Information and Technology to Protect the 

Nation’s Agriculture and 

Food Supply • People reached with food safety information through media stories, 

circulation reports, incoming website visits, and incoming hotline calls 

Met 

1.5 • Expand program access and benefit delivery for USDA nutrition 

assistance programs 

Met 

• Promote better diet quality among children and caregivers eligible for 

Federal nutrition assistance programs 

Exceeded 

• Improve access to fruits and vegetables Met 

• Individuals using the Healthy Eating Index to assess and improve their 

diet 

Exceeded 

Improve the Nation’s 

Nutrition and Health 

through Food 

Assistance and 

Nutrition Education and 

Promotion 

• Copies of the 2000 Dietary Guidelines disseminated to help individuals 

improve their diet 

Met 

1.6 • Maintain the productivity and health of the Nation’s non-Federal 

cropland and grazing lands 

Met 

• Treat wildlands with high fire risks on National Forests and Grasslands 

to reduce the risk of loss of life, property, and natural resources from 

catastrophic wildfire 

Unmet 

• Protect water and air quality against the risk of impairment as a result of 

agricultural production 

Met 

Provide Sensible Management of Our Natural 

Resources 

• Restore or improve rangeland and forestland watersheds in the National 

Forests and Grasslands 

Unmet 

*Key Outcomes 1.3, 1.7 and 2.4 are new for 2002; performance measures have been developed and will be reported in FY 2003. 
USDA Performance and Accountability Report for FY 2002 

10

Performance Scorecard for FY 2002 

Key Outcomes* Annual Performance Goals Result 

2.1 Improve Human Capital 

Management 

• Major USDA programs reviewed each year Met 

• Reduction in the average number of days it takes to resolve USDA civil 

rights complaints 

Exceeded 

• USDA employee satisfaction rate above U.S. Government worker 

satisfaction 

Deferred 

• Reduction in cost and/or increased productivity of commercial activities Met 

• Use of performance-based service contracts of total eligible service 

contracts 

Exceeded 

2.2 • Achieve an unqualified opinion on the USDA’s Consolidated Financial 

Statements for FY 2002 

Met 

• Implement the Foundation Financial Information System USDA-wide Met 

• Improve program design and delivery Met 

Improve Financial 

Management 

• Maintain benefit accuracy in the food stamp and the school meals 

programs 

Deferred 

2.3 • Movement toward a fully integrated eGovernment environment Met 

• Simplify and reduce number of financial assistance program forms and 

application kits 

Met 

• Improve electronic processes for financial assistance program 

announcements and application kits 

Deferred 

Expand Electronic 

Government 

• Develop, implement, and maintain a secure and confident IT 

environment while protecting privacy 

Unmet 

*Key Outcomes 1.3, 1.7 and 2.4 are new for 2002; performance measures have been developed and will be reported in FY 2003. 

Actions on Unmet Goals 

USDA is working to improve performance in those areas where our goals were unmet. A further 

discussion of our actions on unmet goals is provided in the Performance Section of this report. A brief 

summary of our ongoing and future actions follows: 

• Implementing the Farm Security and Rural Investment Act to increase access to credit programs for 

minority and socially disadvantaged farmers and ranchers; 

• Expanding rural and minority homeownership; 

• Assessing vulnerability to terrorist threats; 

• Providing the general public with food safety and bio-security information and education; 

• Continuously advancing the science of nutrition; 

• Improving fire suppression decision-making training; 

• Implementing a department-wide accountability system for Human Resource programs; 

• Enhancing internal control, data integrity, management information, and decision-making as reflected 

by an unqualified audit opinion; 

• Educating, advocating, and communicating through eGovernment marketing materials; and 

• Ensuring that the planning/evaluation and budget staff works with program managers to develop and 

implement budgets linked with program performance. 
USDA Performance and Accountability Report for FY 2002 

11

FINANCIAL STATEMENT HIGHLIGHTS 

Budgetary Resources and Outlays 

Appropriations, combined with other budgetary resources made available and adjustments, totaled $129.9 

billion in FY 2002, while total outlays were $70.8 billion. 

Assets and Liabilities 

USDA’s total assets and liabilities as of September 30, 2002 were $123.4 billion and $112.7 billion, 

respectively. Loans receivable of $75.5 billion, or 61 percent of total assets remained the single largest 

asset. Consequently, Intragovernmental Debt of $75.9 billion, or 67 percent of total liabilities, 

representing borrowings used to make loans, remained the single largest liability. 

Net Cost of Operations 

USDA’s net cost of operations for FY 2002 was $72.9 billion. The net cost of operations for Food 

Stamps, Income Support, and Child Nutrition of $21.8 billion, $10.5 billion, and $10.1 billion, 

respectively, are the single largest program costs. 

Net Cost of Operations by Mission Area 

37.6

0.7 0.4 1.6

2.4 3.3 6.6

20.3

0

5

10

15

20

25

30

35

40

FNCS FFAS NRE RD REE MRP FSIS DO

(in billions) 
USDA Performance and Accountability Report for FY 2002 

12

Debt Management 

USDA is the Federal government’s single largest provider of direct credit. USDA’s credit portfolio has been 

about $100 billion over the past three fiscal years. This represents approximately 32 percent of the non-tax 

debt owed to the Federal government. USDA’s average delinquency rate remains stable at approximately 

seven percent but varies by program purpose and type of loan. Our current $7.0 billion delinquent 

receivables represents a decrease of about 20 percent from the $8.8 billion in delinquencies reported for 

fiscal year 1996, in which the Debt Collection Improvement Act (DCIA) was passed. Of this $7.0 billion, 

only $1.4 billion is eligible for collection using Debt Collection Improvement Act tools. The use of these 

tools is precluded from the remaining delinquent debt due to statutory or administrative requirements, such 

as bankruptcy, litigation, or debt owed by foreign/sovereign entities (approximately $3.7 billion of 

delinquent debt is foreign debt). Through concentrated management attention in the past year, USDA’s 

referral rate to the Treasury Cross-Servicing program increased substantially from 14% in FY 2001 to 96% 

in FY 2002. 

Limitations of the Financial Statements 

The financial statements have been prepared to report the financial position and results of operations of 

the entity, pursuant to the requirements of 31 U.S.C. 3515(b). 

While the statements have been prepared from the books and records of the entity in accordance with the 

formats prescribed by Office and Management and Budget (OMB), the statements are in addition to the 

financial reports used to monitor and control budgetary resources which are prepared from the same 

books and records. 

The statements should be read with the realization that they are for a component of the U.S. Government, 

a sovereign entity. One implication of this is that liabilities cannot be liquidated without legislation that 

provides resources to do so. 
USDA Performance and Accountability Report for FY 2002 

13

SYSTEMS, CONTROLS, AND LEGAL COMPLIANCE 

For the first time in more than 10 years, USDA can provide reasonable assurance that the Department is 

in compliance with the objectives of both Section 2 and Section 4 of the Federal Managers’ Financial 

Integrity Act (FMFIA) except for the material weaknesses described in this report. A major achievement 

this year is the removal of the Central Accounting System as a material financial system nonconformance 

for the Department. As of September 30, 2002, all but two USDA agencies were converted from the 

Central Accounting System to the Foundation Financial Information System (FFIS). For the remaining 

two agencies, the effective date of conversion was the next day, October 1, 2002. 

USDA’s management controls program ensures compliance with the requirements of the FMFIA and the 

OMB Circulars A–123, “Management Accountability and Control,” and A–127 “Financial Management 

Systems,” except for the weaknesses described in exhibit 67 of this report. 

Within USDA, Subcabinet Officials, Agency and Staff Office Heads are responsible for ensuring that their 

programs are operating efficiently, effectively, and in compliance with relevant laws; and that financial 

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

is to eliminate material deficiencies by the end of FY 2004. In conjunction with the Office of Inspector 

General, USDA’s management is working aggressively to determine the root causes of our material 

deficiencies and moving quickly to remedy them. 
USDA Performance and Accountability Report for FY 2002

14

Four USDA agencies did not meet key milestones for seven material deficiencies, six material weaknesses, and one nonconfor revising estimated completion dates are provided in the summary below, where applicable. Summary of Material Deficiencies 

Integrity Act Material Deficiencies 

Responsible 

Agency Material Deficiency Description Corrective Actions Remaining To Be Taken Reason for Change in Es

Completion Date 

DA USDA agencies lack appropriate 

internal controls over the Purchase Card Management System. 

Issue revised guidance and develop oversight queries. Complete deployment on upgraded software and provide training. 

FNS Deficiencies in management of 

Recipient Claims. 

Evaluate and monitor procedures and systems to establish and report claims. Implement better subsystems and link databases. 

Over- and under- issuance of program benefits. 

Implement revised guidance and forms to improve States’ quality and control data coding and analysis. Implement monitoring. 

Program changes brought abouthorization have created a need prior plans. Congress has estabbaseline for sanctioning States. 

Some organizations have received excessive Federal funding. 

Publish revised regulations. Conduct evaluations, reassess, revise, and implement training on final regulations. 

Publication of the initial interim rnot occur in FY 2002. 

Need better determination of household eligibility for school food programs. 

Develop and implement legislative provisions requiring State agencies to collect and report on data verification. 

Improper procurement of goods and services occurred in some programs. 

Revise procurement guidance and evaluate its effectiveness against improper procurement of goods and services. 

Administrative cost reimbursements made to partner agencies operating Food Assistance Programs 

Develop, implement, and evaluate the effectiveness of guidance on WIC cost allocations and ADP approval processes to ensure that cost reimbursements made to States are appropriate. 

FS Inadequate financial systems Ensure transactions are entered into FFIS promptly. 

Develop reconciliation procedures for FFIS interfaces with subsidiary systems. 

Lands Special Use Permits are not being administered to a standard consistent with law, regulations, or policy. 

Solicit, analyze, and publish comments on proposed revisions to categorical exclusions on Special Uses. Issue guidance and provide training. Publish and implement final rule for recovery of costs. 

Publication of the cost recovery is pending completion of the ecoanalysis required by OMB. 

Ineffective internal controls of performance data. 

Implement new performance measures as a tool to assess and report on agency performance. 

Linkages to outcome measures further developed during the FY strategic planning process. For budget formulation process, the to present an integrated budget with improved output/outcome m
USDA Performance and Accountability Report for FY 2002

15

Integrity Act Material Deficiencies 

Responsible 

Agency Material Deficiency Description Corrective Actions Remaining To Be Taken Reason for Change in Es

Completion Date 

FS 

(cont’d) 

Ineffective administrative controls of the analysis and preparation of environmental documents and implementation of mitigation measures applicable to timber sales. 

Revise manual and handbooks. Implement corrective actions. Provide training and tools for effective analysis. 

FSA Reimbursement Claims Not Made 

for Excess Ocean Freight Payments. 

With USAID, revise procedures for submitting semi-annual 

apportionment requests to OMB. 

Agreements have not been reacoutstanding billing issues betweFSA, the Agency for InternationDevelopment, and the DepartmeTransportation—Maritime Admin

Foreign credit subsidiary and credit reform systems are not fully automated and integrated. 

Implement new system to interface with the general ledger. Other IT resource priorities pree

completion of Phase I and Phassystem. 

OCFO Financial statement preparation is 

not timely or reliable. * 

Design and implement data extraction and cross-walking functionality. Select and implement better reporting. 

OCIO Information Security Weaknesses. Improve controls in risk assessment and mitigation, logical 

and physical access, disaster recovery and contingency planning, intrusion detection and response, certification and accreditation, and security awareness. 

National Information Technology Center has weaknesses in access controls, identifying vulnerabilities on systems, controlling access to its network from the Internet, and compliance with existing Federal security guidelines. 

Identify NITC common resources requiring Public Internet access and migrate them to Demilitarized Zone (DMZ), and encrypt all sensitive data transported in and out of the DMZ through securing services. Implement improved access management and improve encryption use. 

Control Weaknesses in Security of Website Content 

Finalize guidance defining sensitive data to be excluded from USDA websites and ensure that agencies have reviewed their sites and expunged sensitive data. 

RD The Multi-Family Housing (MFH) 

Program lacks adequate oversight and internal controls. 

Publish final rule for the MFH Loan Programs. Publication of the final rule has 

delayed. 

Direct Loan Servicing and Reporting system not in compliance with OMB policy. 

Complete incremental implementation of the Rural Utilities Loan Servicing System to replace legacy loan systems. 

* On January 15, 2003, USDA obtained a clean audit report on the FY 2002 Financial Statements. 

The FMFIA Report on Management Controls is presented in full in Part II of this report. 
USDA Performance and Accountability Report for FY 2002

16

FUTURE DEMANDS, RISKS, UNCERTAINTIES, EVENTS, 

CONDITIONS, AND TRENDS 

USDA is influenced by many of the same forces that shape the American economy—globalization of 

markets and culture, technical advances in information, biology, and other technologies, and fundamental 

changes in our family structure and workforce. Our farmers and food companies operate in highly competitive markets and must respond to constantly changing demand for high quality food with a huge 

variety of characteristics including convenience, taste, and nutrition. 

Along with these long-term trends, the events of September 11th have made Homeland Security an 

immediate priority for USDA. We are working to ensure that our programs protect agriculture from 

intentional and unintentional acts that might affect our food supply or natural resources. 

External factors that will challenge USDA’s ability to achieve our desired outcomes include the following: 

• Weather and other growing conditions at home and abroad. 

• Domestic and international macroeconomic factors including consumer purchasing power, the 

strength of the U.S. dollar and competing currencies, and political changes in other countries can have 

major impacts on domestic and global markets in any year. 

• The uncertainty of research, which makes it a challenge to define goals more specific than fuller 

knowledge and understanding of the phenomena under study. 

• Availability of funds for financial assistance provided by Congress and the local and national 

economies. Bad weather, sharp fluctuations in farm prices, interest rates, and unemployment also 

impact the ability of farmers, other rural residents, communities, and businesses to qualify for credit 

and manage their debts. 

• The impact of future economic conditions, and actions by a variety of Federal, state and local 

governments, that will influence the sustainability of rural infrastructure. 

• Increased movement of people and goods, which provides the opportunity for crop and animal pests 

and diseases to move quickly across spatial and national boundaries. 

• Hazardous substances, which may pose a threat to human health and to the environment. Collaboration between the public and private sectors plays a large role in food safety, food security, and 

emergency preparedness. 

• Efforts to reduce hunger and improve dietary habits, which depend on coordination between USDA 

and its Federal, State and local partners, and effective compliance by partners with program 

standards and rules. 

• eGovernment goals and initiatives, which we pursue in the context of a wide range of competing 

priorities. 
USDA Performance and Accountability Report for FY 2002

17

USDA’S IMPLEMENTATION OF PRESIDENT’S MANAGEMENT 

AGENDA 

USDA has taken steps that will lead to improvements in all five agenda items: 

• Human Capital, 

• Competitive Sourcing, 

• Financial Performance, 

• eGovernment, and 

• Budget and Performance Integration. 

The following summarizes our latest quarterly report. 

Human Capital 

USDA has made this initiative a priority, and we have made significant progress in aligning our Human 

Capital team to develop a sound strategy. USDA continues to initiate a number of human capital 

initiatives outside of its Human Capital Plan development effort. New initiatives, such as a Senior 

Executive Service Candidate Development Program, a Mentoring Program, and a Career Intern Program, 

strengthen USDA’s management ability. 

Competitive Sourcing 

USDA has accomplished much to improve our program: 

• Updated Competitive Sourcing Plan. 

• Directly converted and competed positions. 

• Established competitive sourcing office in OCFO staffed by an experienced A–76 practitioner. 

• Established competitive sourcing program staffs in several agencies. 

• Formed a Department-wide A–76 working group. 

Financial Performance 

USDA has made significant progress in this area. 

• USDA obtained a clean audit opinion for 2002. 

• All agencies use the Foundation Financial Information System (FFIS) to provide accurate and timely 

financial information. USDA is now focused on data integrity and feeder system improvement. 

• USDA continues efforts to reduce the error rate in the Food Stamp program. 

Electronic Government 

USDA continues to move forward in the eGovernment arena. 

• USDA has provided a project plan for Enterprise Architecture, is improving business cases, and is 

working on several eGovernment initiatives. 

• Office of the Chief Information Officer is actively involved in strengthening business cases and 

project management for systems. 

Budget and Performance Integration 

USDA plans significant progress in this area in FY 2003. 

• Have developed a revised strategic plan with improved performance measures. 

• Will pilot new means of improving budget and performance integration for at least 40 percent of 

USDA’s budget. 
USDA Performance and Accountability Report for FY 2002

18

• Will work with OMB and other Federal agencies to complete common performance measure 

evaluations. 

• Will begin evaluations of additional USDA programs
USDA Performance and Accountability Report for FY 2002

19

II. PERFORMANCE SECTION 

ANNUAL PERFORMANCE GOALS AND RESULTS 

Performance management at USDA is comprised of three principal elements: 1) a strategic plan that 

depicts the long-term goals and strategies for the Department; 2) an annual performance plan that lays out 

year-to-year strategies and targets for making progress toward achieving the Department’s long-term 

goals; and 3) a performance and accountability report that relays to Congress and the American people 

how well the Department did in reaching the goals established in the previous fiscal year. 

In addition to comparing actual performance with the performance goals for FY 2002, an analysis of 

results, strategies, and revised timelines are provided, as appropriate. Actual performance data is 

presented for fiscal years 1999, 2000, 2001, and 2002 to show performance trends. 

To determine whether or not a performance goal was met, agencies considered the applicable performance indicator(s). If agencies concluded that they had successfully met the intent of the performance goal, 

this report categorizes the goal as “met.” In some instances goals are considered to be “met” although 

some component indicator was not achieved. 

Most of the Department’s programs and activities are represented in specific performance goals and targets. 

However, USDA’s Research, Education, and Economics (REE) Mission Area conducts and supports a 

broad range of research, educational, and statistical activities that contribute to the achievement of our 

overall goals. The creation of scientific knowledge at the frontiers of biological, physical, and social science 

and the application of that knowledge to agriculture, consumers, and rural America are core processes for 

USDA. Accordingly, selected accomplishments in research are found throughout this section. 
USDA Performance and Accountability Report for FY 2002

20

STRATEGIC GOAL 1: Effectively Carry Out USDA Program Responsibilities 

with Decisions Based on the Best Available Science 

and Efficient Program Delivery Systems 

Key Outcome 1.1: Expand Market Opportunities for U.S. Agriculture 

Exhibit 1: Resources Dedicated to Expanding Marketing Opportunities 

 

USDA Resources Dedicated to Key Outcome 1.1 FY 2002 Actual 

Program Obligation ($ Mil) 4,000.4 

 Staff Years 10,353 

 

9% Key Outcome 1.1: Expand 

Market Opportunities for 

U.S. Agriculture 

Staff Years

Rest of Goal 1

91% 

Key Outcome 1.1: Expand 

Market Opportunities for 

U.S. Agriculture 

Program Obligation

Rest of Goal 1

96% 

4% 
USDA Performance and Accountability Report for FY 2002

21

Performance Measure: Improving International Marketing Opportunities

Expanding markets for agricultural products is critical to the long-term health and prosperity of our food 

and agricultural sector. U.S. farmers have a wealth of natural resources, cutting edge technologies, and a 

supporting infrastructure that can benefit from expanding global markets and developing new uses for 

agriculture in industrial and pharmaceutical markets. Expanding sales is key as our farmers and ranchers 

continue to increase capacity while facing a mature U.S. market. 

To expand international opportunities, USDA worked with the Office of the U.S. Trade Representative to 

pursue new trade agreements and to enforce provisions of existing agreements. We also worked with the 

U.S. Agency for International Development (USAID) to alleviate hunger and malnutrition. 

Analysis of Results. Despite a year 

of challenges on the trade front, the 

upward trend in U.S. agricultural 

exports continued in FY 2002. We 

expect exports to reach $53.3 billion 

this year, an increase of $600 million. 

This increase is particularly noteworthy given the number of trade 

disputes that resulted in major trading 

partners temporarily blocking the 

entry of U.S. products into their countries in FY 2002. Keeping markets 

open for U.S. food and other agricultural products remains a major USDA 

priority. We continued to ensure that 

trade agreements aimed at creating 

and expanding opportunities for U.S. 

exporters were fully implemented.

We achieved success in our overseas advocacy for market access for U.S. products not covered by the 

World Trade Organization (WTO) notification process. Preliminary estimates indicate USDA exceeded its 

FY 2002 target of $2.7 billion by 41 percent ($1.1 billion). USDA exceeded its FY 2002 target of 

$250 million for on-site sales at international trade shows with sales equaling $332 million. USDA missed 

its target for trade opportunities preserved through the WTO notification process in FY 2002 but results 

paralleled those of FY 2001. USDA also missed its target of $3.9 billion for General Sales Manager (GSM) 

export credit guarantee registrations, but we exceeded FY 2001’s $3.2 billion by six percent ($190 million). 

Exhibit 2: Increasing U.S. Marketing Opportunities 

Fiscal Year 2002 

Annual Performance Goals and Indicators 

Target Actual Result 

Increase U.S. agricultural trade: Met 

• Estimated trade opportunities preserved annually by assuring implementation of 

existing trade agreements by signatory countries through the World Trade 

Organization (WTO) notification process ($ Mil) 

2,200 1,327 

• Gross trade value of markets created, expanded, or retained annually due to 

market access activities other than WTO notifications ($ Mil) 

2,700 3,818 

• Annual Sales reported by U.S. exporters from on-site sales at international trade 

shows ($ Mil) 

250 332 

• U.S. agricultural exports supported by USDA export credit guarantee programs 

($ Bill) 3.9 3.4 

Exhibit 3: Upward Trade Trends 

FY Actual 

Trends 

1999 2000 2001 2002 

Estimated trade opportunities preserved annually by assuring implementation of existing trade agreements by signatory countries through 

WTO notification process ($ Mil) 

1,995 837 1,329 1,327

Gross trade value of markets created, 

expanded, or retained annually due to 

market access activities other than 

WTO notifications and/or standards 

($ Mil) 

2,527 4,349 2,684 3,818

Annual sales reported by U.S. exporters from on-site sales at international trade shows ($ Mil) 315 367 360 332 

U.S. agricultural exports supported by 

USDA export credit guarantee programs ($ Bill) 

3.0 3.1 3.2 3.4 
USDA Performance and Accountability Report for FY 2002

22

Program Evaluation. The following evaluations, reviews, and/or audits took place during FY 2002:

The USDA Office of Inspector General (OIG) reviewed the export credit guarantee programs as part of 

the annual Commodity Credit Corporation (CCC) financial audit and identified no major issues. The 

Foreign Agricultural Service's Compliance Review Staff (CRS) reviews approximately five percent of 

CCC's Export Credit Guarantee Program activity each year. During FY 2002, CRS performed 224 GSM 

and Supplier Credit reviews covering over $170 million in sales activity. 

On a quarterly basis, USDA assesses the use of the export credit guarantee programs by country and 

commodity and estimates the use in relation to our Government Performance and Results Act (GPRA) 

goals and in comparison to total U.S. exports of agricultural products to that market. USDA began a 

program review of the Supplier Credit Guarantee Program in October 2001 in response to industry 

requests to increase guarantee coverage under the program. USDA is currently developing an analysis of 

the risk portfolio that CCC incurs in the export credit guarantee programs to review the history of the 

programs and examine program volume, fees collected, claims paid, recoveries made, claims rescheduled, 

claims forgiven and program management costs to determine program sustainability. The primary aim of 

the portfolio analysis is to assist in making risk decisions for programming to address market 

opportunities that exceed country risk or bank risk guidelines. 

Performance Measure: Reducing Hunger and Malnutrition Around the World

The U. S., along with the 185 other nations participating in the Food and Agricultural Organization 

(FAO) World Food Summit of 1996, pledged to reduce world hunger and malnutrition through a multinational approach. Each nation will prepare an action plan and dedicate resources in pursuit of the longterm goal of reducing hunger and malnutrition by 420 million people by the year 2015. The FAO has 

determined that, on average, the annual reduction in the world’s population suffering from hunger should 

be about 20 million people in order to reach the 2015 goal. 

Analysis of Results. The U.S. is the world leader in 

international food aid, providing more than 50 percent of 

total worldwide assistance. During the past year, the 

Administration has carried out a comprehensive management 

review of all U.S. foreign food assistance activities to 

rationalize and reform their administration and to strengthen 

their effectiveness. As a result of the review, the Administration intends to reduce the number of programs through which 

assistance is provided and to redefine roles to eliminate 

program overlap. Accordingly, donations by USDA that rely 

on the purchase of surplus commodities by CCC will be 

phased out in 2003 while funding in donations through 

Public Law (P.L.) 480, Title II (administered by USAID) will 

be increased. This explains the decrease in food aid 

shipments under P.L. 480, Title I and Food for Progress and 

the fact that USDA failed to meet its projected target of $224 

million by approximately $36 million. 

Exhibit 4: Food Aid Exports 

Fiscal Year 2002 

Annual Performance Goals and Indicators 

Target Actual Result 

Increase U.S. food aid exports under Public Law 480, Title I and Food for Progress in 

supporting world food security ($ Mil) 

224 188 Unmet 

Exhibit 5: Decline in Food Aid Exports

247

188

307

727

0

200

400

600

800

1999 2000 2001 2002

Year

$ MIllions
USDA Performance and Accountability Report for FY 2002

23

Description of Actions and Schedules. The internationally sponsored long-term goal of reducing 

hunger and malnutrition by 420 million people by 2015 is not on track, despite encouraging improvements and USDA’s success in achieving a high level of its funded performance targets. In June of 

2002, the FAO hosted a midterm review of progress made toward achieving the 2015 goal. USDA will 

continue to mitigate this trend, primarily via trade capacity building and projects to enhance food 

security in at-risk countries. 

Program Evaluation. The following evaluations, reviews, and/or audits took place during FY 2002: 

• USDA received the results of an evaluation of USDA program activities to promote global food 

security in the summer of FY 2002. 

• The General Accounting Office (GAO) and USDA OIG regularly audit food-aid agreements and 

evaluate our overall performance. 

Performance Measure: Supporting Sustainable Food Supplies Worldwide

USDA’s research, training, and technical assistance activities related to building trade and economic 

capacity via sound science and technology—especially agricultural biotechnology—expanded the goals 

outlined in our U.S. Action Plan on Food Security. We advised on domestic and export policy to meet 

America’s existing international obligations yet retained ample latitude in pursuing ambitious goals in 

ongoing and future negotiations. We also sought to achieve consistent and mutually reinforcing domestic 

farm and international trade policies. 

Analysis of Results. USDA staff 

contributed expertise to the Partnership 

to End Hunger in Africa, a coalition of 

African and American leaders committed to improving food security and 

economic development in Sub-Saharan 

Africa. We also engaged in similar trade 

and economic capacity-building activities worldwide and expect to continue investing in an average of 

1,000 projects each year. While it appears we missed our target for food aid shipments and concessional 

sales, this target was based on proposed 2002 funding of $56 million. Actual funding in this area required 

USDA to adjust these targets. Therefore, based on the actual funding of $44.5 million, USDA met its 

performance obligations in this area. 

Program Evaluation. The following evaluations, reviews, and/or audits took place during FY 2002:

• An evaluation of USDA program activities to promote global food security is available. 

• The GAO and USDA OIG regularly audit food-aid agreements and evaluate our overall process. 

Exhibit 6: Promoting Assistance on Sustainable Food Supplies 

Fiscal Year 2002 

Annual Performance Goals and Indicators 

Target Actual Result 

Promote research, training and technical assistance activities that support sustainable food 

supplies worldwide: Met 

• Projects underway 1,000 795 

• Amount invested ($ Mil) 56.0 44.5 

Exhibit 7: Investments on Food Supply Research 

FY Actual 

Trend 

1999 2000 2001 2002 

Projects underway 789 967 1,005 795 

Amount invested ($ Mil) 39.9 53.8 56.0 44.5 
USDA Performance and Accountability Report for FY 2002

24

Performance Measure: Improving Domestic Agricultural Marketing Opportunities

Today, approximately 150,000 farmers in the U.S. produce most of the nation’s food and fiber and are 

among the world’s most competitive, meeting domestic needs and supplying large quantities to foreign markets. These farmers are the foundation of the Nation’s food security and underpin the agricultural economy. 

USDA facilitates the efficient marketing of U.S. agricultural products through marketing standards and by 

carrying out a variety of information, technical assistance, grading, certification, inspection, and laboratory services. The Department continues to deliver timely market information, even though the number of 

markets dramatically increased under newly instituted mandatory livestock price reporting. We plan to 

implement more sophisticated grain quality measurement methods. USDA also plans to improve wholesale and other direct marketing facilities to encourage farm markets and other endeavors that connect 

consumers directly with the men and women who produce their food, keeping a larger percentage of 

America’s food dollar on the farm. 

Analysis of Results. New or improved grain quality measurements 

increased dramatically, from a target 

of 40 to an actual of 60. Most of the 

increase resulted from the accelerated implementation of new digital 

reference images for measuring grain 

quality. 

Targets for the Number of 

Investigations Conducted and the 

Violations corrected within one year 

of their Start Date were not met 

because of the following factors. In 

2002, emphasis was placed on no 

investigative projects, such as the 

establishment of a hog contract 

library. Secondly, a greater number of packer trusts and bond claims were filed, which required 

reallocation of investigative resources. Finally, there was a 17 percent increase in the number of 

investigations referred to headquarters with a request for formal administrative action. The number of 

cases docketed by the Office of the Hearing Clerk increased 57 percent. Investigations requesting such 

formal administrative action are more complex and take longer than an average case to resolve. 

Therefore, fewer investigations were conducted and more of them could not be completed within oneyear.

Exhibit 8: Improved Grain Marketing and Financial Trade Practice Protection 

Fiscal Year 2002 

Annual Performance Goals and Indicators 

Target Actual Result 

Increase the efficiency of U.S. grain marketing: Met 

• Critical grain quality measurement methods evaluated for improvement (%) 100 100 

• New or improved grain quality measurement methods implemented 40 60 

• Investigations 1,800 1,435

• Violations corrected/issues resolved within 1 year of investigation’s starting date 

(%) 96 91

• Monetary recovery to livestock producers and poultry growers resulting from 

enforcement of the Packers and Stockyards Act ($ Mil) 

19 37.1 

Exhibit 9: Success in Monitoring Grain Quality and Providing 

Financial and Trade Practice Protection 

FY Actual 

Trends 

1999 2000 2001 2002 

Critical grain quality measurement methods evaluated for improvement (%) 94 107 97 100 

Number of new or improved grain 

quality measurement methods 

implemented 

49 18 39 60 

Investigations 1,218 1,898 1,619 1,435 

Violations corrected/issues resolved 

within 1 year of investigation’s starting 

date (%) 

98 96 97 91 

Monetary recovery to livestock producers and poultry growers resulting 

from enforcement of the Packers and 

Stockyards Act ($ Mil) 

12.6 7.1 20.4 37.1 
USDA Performance and Accountability Report for FY 2002

25

The monetary recovery target to producers, resulting from investigations and regulatory oversight of the 

livestock, meat, and poultry industries, was significantly exceeded. The large increase over FY 2001 was 

primarily the result of recoveries from investigations of several large firms that had failed to pay for 

livestock, and due to intensified USDA efforts to correct a greater number of financial insolvencies of 

subject firms. 

Program Evaluation. No program evaluations were conducted related to this performance goal in 

FY 2002.

Selected Examples of Accomplishments in Research, Extension, and Statistics that Contribute to 

Achieving Key Outcome 1.1 

USDA released over 500 national crop and livestock reports covering 120 crop and 45 livestock items 

critical to maintaining an orderly association between the consumption, supply, marketing, and input sectors 

of agriculture. Customer demands for readily accessible and timely information on the Internet—USDA’s 

primary data dissemination channel—continued to grow in 2002. USDA updated and populated additional 

data sets in its online database, which contains published crop, livestock, and price information. The online 

database allows customers to create customized tabulations at the National, State, and county level. 

Overall, USDA was able to keep its customers and stakeholders up-to-date on important marketing and 

statistical information by releasing its Market News and National Agricultural Statistics Service reports in 

a timely manner. In meeting its deadlines, USDA kept information flowing, which makes agriculture 

markets more efficient. It also improved the efficiency of food marketing by funding research and 

technical assistance projects. Such projects assist localities to develop new or upgraded wholesale, 

collection, and farmers market facilities, and improve food distribution and marketing methods. 

USDA provided the following new agricultural statistics to customers: 

• Annual Crop Production included detailed fruit counts by month. For the first time, the number of 

wheat heads, corn ears, soybean pods, and cotton bolls are being published for months when fruit are 

present as well as season final counts. This provided users additional data to evaluate the current 

month's forecast and to relate the current forecast to the current crop conditions, final end of season 

counts, and historic yields. Additional plant population data were also provided for corn. USDA 

published information on maple syrup, the number of taps and yield per tap, and a breakout on the 

percent of sales by bulk and wholesale.

• Nursery and Floriculture Chemical Usage reported detailed information on chemical applications to 

nursery and floriculture crops, including information on common pest management practices. 

• U.S. Dairy Herd Structure reported on the composition of the U.S. dairy herd by size of operation and 

location. 

• Catfish Production and Trout Production was combined into one release. 

USDA released satellite image maps depicting crop areas in eight states. These images, referred to as the 

cropland data layer, can be used in geographic information systems (GIS) applications. The crop maps 

include Arkansas, Illinois, Indiana, Iowa, Mississippi, North Dakota, and portions of Missouri and 

Nebraska. When the satellite image maps are used in a GIS application and are combined with other data 

such as soil, transportation networks or weather contours, the image maps are an important tool for 

watershed analysis, soil utilization evaluations, and crop rotation analysis. 

USDA announced the availability of published chemical use statistics through a new website developed 

by North Carolina State University’s Center for Integrated Pest Management. Data users can now: 
USDA Performance and Accountability Report for FY 2002

26

1) search agricultural chemical usage data based on crop, year, region, or active ingredient; 2) extract 

chemical use statistics from previously published data; and 3) create U.S. maps or descriptive charts 

based on these data. Data are available for crop years 1990–2001. 

USDA developed economic analyses of the factors shaping major international markets through 

published reports on China, Brazil, Argentina, Russia, and Ukraine. The reports evaluated the driving 

forces—including agricultural policy reform, infrastructure and resource constraints, technology 

adoption—and provided guidance on the likely future impact on U.S. exports and imports of grains, 

oilseeds, livestock products, and horticulture. 

Using novel bioconversion approaches, USDA scientists have improved the production of fermentable 

sugars from corn fiber, an abundant corn wet-milling coproduct. These sugars are potential feedstocks for 

fermentation to produce ethanol and such value added bioproducts as xylitol. Portions of this effort will be 

conducted in conjunction with collaborators at Cornell University and the Slovak Academy of Sciences. A 

new bacterial strain that can improve conversion of biomass sugars to ethanol was developed and patented. 

The development of this organism will lead to more efficient and lower cost ethanol production. 

 

USDA transferred sorting technology enabling the U.S. tree nut industry to consistently meet foreign 

import standards for quality and aflatoxin presence. These systems were marketed to the U.S. pistachio 

industry during the summer of 2002. If implemented industry wide, the systems will increase U.S. open 

shell pistachio production by approximately eight percent and have a payback period of about three 

months for the required capital investment. 

USDA scientists and their university or private sector partners, released scores of more nutritious, more 

productive, healthier, disease-, toxin- and pest-free cultivars of grains, oilseeds, forages, vegetables, fruits, 

and ornamentals. These new cultivars will provide a safe and secure supply of food, feed, fiber, ornamentals, and industrial products to U.S. consumers. 

USDA researchers developed and introduced value added fruit and vegetable germplasm with enhanced 

phytonutrient content. These value added cultivars will contribute to improved human health and nutritional 

status. Candidate releases include carotenoid-enriched tomato and carrot breeding lines and calciumenriched broccoli germplasm. 

With USDA funding, Virginia State scientists promote organic certification for small-scale farmers. In the 

past two years, the number of new Virginia certified organic farms has grown by more than 30 percent to 

120 farms encompassing 6,483 acres. One new crop may be vegetable soybeans. Virginia State researchers have developed 17 new breeding lines. Seventy percent of the U.S. vegetable soybeans are now 

imported. If the vegetable soybean crop continues to grow, at the current rate, it may replace tobacco as 

Virginia’s small farmers’ best crop. 

With USDA funding, Nebraska and Florida meat scientists provided the scientific foundation for new 

products developed from traditionally undervalued beef chuck and rounds. They identified higher value 

potential in numerous muscles traditionally used for roasts and ground beef. The best-known new cut is 

the flat iron steak. These new cuts sell for $2.99 to $5.99 per pound compared with roasts and ground beef 

that typically sell for $1.19 to $1.99 per pound. 

With USDA funding, an Ohio State food scientist found that removing chlorophyll during soybean oil 

processing prevents the oil’s undesirable “grassy” flavor. Major soybean oil processors adopted the 

practice of producing stable, high-quality soybean oil. Also, with USDA funding, Arkansas researchers 

developed a soy, whey, cellulose, and wheat gluten coating for eggshells that minimizes egg microbial 
USDA Performance and Accountability Report for FY 2002

27

contamination. As an added benefit, the coating strengthens shells, which reduces egg breakage that 

currently costs U.S. producers $37 million annually. 
USDA Performance and Accountability Report for FY 2002

28

Key Outcome 1.2: Provide Risk Management and Credit/Financing Tools to Support 

Production Agriculture, and Improve Quality of Life in Rural Areas 

Exhibit 10: Resources Dedicated to Providing Risk Management and 

Credit/Financing Tools 

 

USDA Resources Dedicated to Key Outcome 1.2 FY 2002 

Actual 

 Program Obligation ($ Mil) 24,303.6 

 Staff Years 11,719 

 

10% 

Key Outcome 1.2: Provide 

Risk Management and 

Credit/Financing Tools 

Staff Years

Rest of Goal 1

90% 

Key Outcome 1.2: Provide 

Risk Management and 

Credit/Financing Tools 

Program Obligation

Rest of Goal 1

24% 

76% 
USDA Performance and Accountability Report for FY 2002

29

Performance Measure: Improving the Safety Net for Farmers and Ranchers

In FY 2002, America's farmers used a variety of USDA’s financial risk management tools, including 

crop insurance, direct USDA payments, marketing assistance loans, farm storage loans, market diversification, contracting inputs and outputs. They established prices, and futures and options markets to 

bridge agricultural market highs and lows. USDA aggressively pursued research and education to help 

producers better manage their risks, and we explored options to further expand growing markets for 

their biobased products. 

Analysis of Results. Crop insurance 

met its performance goal. Additionally, 157 crop insurance plans 

were available compared to the target 

of 149; over $2.9 billion in crop 

insurance premiums was booked 

compared to the target of approximately $2.8 billion; insurance in 

force exceeded $37.3 billion 

compared to the target of $34.9 

billion. In addition, USDA continued 

efforts to increase the risk management education activity and participation in revenue insurance plans in 

underserved States. 

Farm sector gross cash income is projected to be $229.2 billion in 2002, a decrease from the $238.5 

billion in 2001, but well above the 1992-2001 average of $215.3 billion. Total cash receipts from the sale 

of farm products are projected to be $196.5 billion, so 86 percent of gross cash farm income was from the 

market. The remaining 14 percent of gross cash income was from direct government payments and other 

farm-related income. 

As indicated above, government assistance in the form of direct payments and marketing loans continued 

to be an important factor in stabilizing farm income in FY 2002. During FY 2002, more than 1.2 million 

farmers received production flexibility contract payments totaling almost $4 billion. USDA also issued 

more than 2.2 million Loan Deficiency Payments (LDPs) totaling about $5.4 billion for crop year 2001. 

Slightly more than 67 percent of the eligible production of major commodities including barley, corn, 

oats, grain sorghum, wheat and soybeans received a LDP. In addition to direct payments, USDA provided 

short term financing through the marketing assistance loan program. In crop year 2001, USDA issued 

171,000 marketing assistance loans totaling over $7 billion. 

Program Evaluation. The following evaluations, reviews, and/or audits took place during FY 2002: 

Through the County Operations Review program and program compliance activities, FSA evaluated various 

components of its farm programs. In addition, OIG completed four audits on select FSA programs. 

Exhibit 11: Increasing Use of Risk Management Tools 

Fiscal Year 2002 

Annual Performance Goals and Indicators 

Target Actual Result 

Producers have economically sound risk management tools available, and they use them 

to meet their needs: Met 

• Participation rate for acres covered by all insurance plans (%–crop year* data) 77.7 80.0 

• Participation rate for acres covered by revenue insurance plans (%–crop year*

data) 42.4 43.7 

* For most crops, crop year is defined as the period within which the insured crop is grown and it is designated by the calendar year in which 

the insured crop is harvested.

Exhibit 12: Increase in Producers Using Risk Management Tools 

FY Actual 

Trends 

1999 2000 2001 2002 

Participation rate for acres covered by 

all insurance plans (%)1

72.5 76.5 78.0 80.0 

Participation rate for acres covered by 

revenue insurance plans (%) 

27.0 31.7 42.2 43.7 

1 Participation rates are calculated from the Risk Management Agency Budget 

Baseline (October 2001). Changes from previous performance reports reflect more 

complete reporting of Federal Crop Insurance Corporation data and updates to 

National Agriculture Statistics Service acreage estimates.
USDA Performance and Accountability Report for FY 2002

30

Performance Measure: Improving the Standard of Living in Rural Communities

More than one-fifth of rural America had persistently high poverty rates in each of the last four decades. 

Greater investment in public services, jobs, and housing is essential to improve the rural standard of living. 

To help ensure that all rural communities have equal opportunities to prosper, USDA provided substantial 

financial and technical help tailored to each community’s unique challenges. Our housing programs made 

affordable credit available to lower income, rural residents. Our Empowerment Zone and Enterprise 

Communities (EZ/EC) initiative targeted America’s neediest rural communities. EZ/EC channeled Federal 

seed money to areas where citizens worked to develop and implement strong community improvement and 

economic development strategies. Our Water and Electric Programs provided basic infrastructure to many 

underserved communities. Lack of basic infrastructure is a barrier to economic development. Our increased 

outreach to communities experiencing persistent-poverty conditions ensured they had equal access to 

USDA rural development resources. 

Analysis of Results. The target for 

homes financed through the Single 

Family Housing program was not met 

because fewer guaranteed single 

family housing loans were obligated 

than anticipated. The target for jobs 

created or saved was not met because 

fewer loan funds were obligated than 

anticipated. Some 750 rural water 

systems were developed or expanded 

to provide safe drinking water compared to the target of 600. Sixty-nine 

borrowers serving persistent-poverty 

counties received financial assistance 

to establish or improve the local 

electric service compared to the target of 89. Seventy borrowers serving counties experiencing outmigration received financial assistance to establish or improve local electrical service compared to the 

target of 90. The targets in the Annual Performance Plan were based on the funding initially requested 

and were not adjusted when the appropriation was received. The adjusted targets, although not met, are 

included in this report. The persistent poverty and out-migration numeric targets for the Electric Program 

were not met because the amount of the average loan was much higher than projected; therefore, fewer 

loans were made. Although fewer counties were served by the electric program, the amount of money 

provided was significantly more than projected because of the larger average loan size. The target for 

EZ/EC was exceeded. 

Exhibit 13: Standard of Living in Rural Communities 

Fiscal Year 2002 

Annual Performance Goals and Indicators 

Target Actual Result 

Improve the standard of living in rural communities: Unmet 

• Communities located in persistent-poverty counties receiving financial 

assistance to establish or improve a system for drinking water or waste 

disposal 

230 255 

• Jobs created or saved through USDA financing of businesses in rural areas 96,264 76,301 

• Rural households receiving USDA financial assistance to purchase a home 55,800 42,069 

• Ratio of non-Empowerment Zone and Enterprise Communities (EZ/EC) 

grants to EZ/EC grants invested in EZ/EC communities 

7:1 or 

greater 

16.65/1 

Exhibit 14: Rural Standard of Living Continued to Improve 

FY Actual 

Trend 

1999 2000 2001 2002 

Communities located in persistent-poverty counties receiving 

financial assistance to establish 

or improve a system for drinking 

water or waste disposal 

247 219 236 255 

Jobs created or saved through 

USDA financing of businesses in 

rural areas 

79,839 73,502 105,222 76,301 

Rural households receiving 

USDA financial assistance to 

purchase a home 

55,941 45,420 44,073 42,069 

Ratio of non-EZ/EC grants to 

EZ/EC grants invested in EZ/EC 

communities 

8.4:1 10.7:1 17.77:1 16.65:1 
USDA Performance and Accountability Report for FY 2002

31

Description of Actions and Schedule. For most unmet targets, loan funds were not fully expended. In FY 

2003, we plan to use all allocated loan funds. The guarantee fee for Single Family Housing Guaranteed 

loans has been lowered, which will have a substantial impact on fund utilization. For other Rural 

Development programs, a return to normal loan levels is anticipated or targets have been adjusted to 

compensate for fluctuations. 

Program Evaluation. It was concluded from Program Assessment Rating Tool (PART) reviews conducted 

in Summer 2002 that better long-term and annual measures are needed to evaluate program performance. 

Performance Measure: Sustaining Family Farms

Beginning farmers, socially disadvantaged farmers, limited-resource farmers, and/or farmers who have 

suffered financial setbacks from natural disasters or adverse market or production conditions cannot obtain 

needed credit from conventional sources at reasonable rates and terms. USDA’s farm loan programs make 

credit available to these farmers. Individual, rural-residence farms are small but collectively control 29 

percent of America’s farmland and have considerable impact on the contributions to the national design of 

conservation and environmental programs. Most rural-residence farmers lose money on farming and have to 

subsidize these activities with nonfarm earnings or retirement income. Their off-farm income, aided by 

favorable tax policies, permits them to continue farming. 

Analysis of Results. USDA funded technical assistance to almost 450 small and limited-resource 

farmers in 14 counties. We also helped farmers obtain private bank and/or government loans to 

finance their struggling farm operations or to reevaluate their farm operations to decide whether to 

continue farming. 

USDA accomplished its goal of providing additional financial assistance to beginning and socially-disadvantaged farmers in FY 2002 by making or guaranteeing 12,175 farm loans totaling $1.144 billion, 

surpassing our target of $1.12 billion. Loans were used to acquire, enlarge, or improve a farm (farm ownership loans) or provide short- to intermediate-term production or chattel financing (farm operating loans). 

USDA took additional actions during FY 2002 to strengthen programs aimed at minority and sociallydisadvantaged farmers. One such action was establishing an Office of Minority and Socially-Disadvantaged 

Farmers Assistance within FSA. This office works with minority and socially-disadvantaged farmers who 

have questions or concerns regarding loan applications filed in local USDA offices, and enhanced our 

efforts to ensure fair and equitable treatment for all farmers. 

USDA’s direct farm loans, which are made to farmers and ranchers who are temporarily unable to obtain 

commercial credit, carry a high level of risk. During FY 2002, the loss rate on direct loans was 7.3 

percent. The increased loss rate can be attributed to the continued economic difficulties facing the farm 

sector. 

Exhibit 15: Success in Sustaining Family Farms 

Fiscal Year 2002 

Annual Performance Goals and Indicators 

Target Actual Result 

Maintain the percentage of small farms in relation to total U.S. farms at the 1999 level (%) 93 93 Met 

Increase the amount of farm operating and ownership loans made or guaranteed to 

beginning and socially disadvantaged farmers ($ Mil) 

1,120 1,144 Met 
USDA Performance and Accountability Report for FY 2002

32

Program Evaluation. FSA, through its National 

Internal Review program and the County 

Operations Review program, evaluates the farm 

loan programs each year. 

Selected Examples of Accomplishments in 

Research, Extension, and Statistics that 

Contribute to Achieving Key Outcome 1.2 

Northern Tennessee Farmers Association 

received funding for the construction of a 

greenhouse used to produce tobacco seedlings 

and to experiment with alternative crops. 

Association members reduced their production 

costs by almost 60 percent, or an average of 

$187.50 per acre. Similar efforts are underway 

in middle and western Tennessee. 

USDA helped North Carolina farmers evaluate 

alternative production practices to ensure 

continued farm productivity and enterprise 

profits. This support improved how selected 

fields, seed varieties, and harvesting 

techniques; controlled pests, and adapted 

equipment improved the financial return on 

investment of 3,446 producers on 388,290 acres 

by an estimated $452 million. 

USDA published U.S. Agricultural Growth and 

Productivity: An Economywide Perspective and 

co-sponsored the Agricultural Productivity: 

Data, Methods, and Measures Workshop. 

Workshop papers explored new methodologies 

for measuring agricultural productivity, 

highlighted advances in linking productivity growth to research and development expenditures, and 

examined the impact of accounting for adverse environmental impacts on productivity growth. This 

USDA work is being used both nationally and internationally. 

In preparation for conducting the December 2002 Census of Agriculture, USDA mailed the 2002 Farm 

Identification Survey to 1.2 million potential farms and ranch properties across the country to help 

determine their agricultural status. This survey will lead to substantial savings because only qualifying 

farms will receive the full census package. 

USDA-sponsored research reviewed the rural dimensions of welfare reform and found that many rural 

areas have not shared in the success of welfare reform. Employment in rural areas is often concentrated in 

low-wage industries; unemployment and underemployment rates are higher; residents have less formal 

education; distances to work sites are greater; and work support services such as child care and public 

transportation are less available. As a result, efforts to move low-income adults into the workforce, off of 

welfare and out of poverty, have been less successful in many rural areas. 

Exhibit 16: Maintained Small Farms in Relation to all 

Farms at 1999 Levels (%)

93 93 93 93

0

20

40

60

80

100

1999 2000 2001 2002

Fiscal Year

Percent (%)

Exhibit 17: Loans to Beginning and Socially 

Disadvantaged Farmers and Ranchers ($ Mil) 

627.3 684.2

984.9 993.3 996

1144

0

200

400

600

800

1000

1200

1997 1998 1999 2000 2001 2002

Fiscal Years 

$ Million
USDA Performance and Accountability Report for FY 2002

33

Key Outcome 1.3: Effectively Meet Responsibilities for Homeland Security

Exhibit 18: Resources Dedicated to Homeland Security Responsibilities 

 

USDA Resources Dedicated to Key Outcome 1.3 FY 2002 

Actual 

 Program Obligation ($ Mil) 1,389.7 

 Staff Years 8,998 

 

8% 

Key Outcome 1.3: Meet 

Responsibilities for 

Homeland Security 

Staff Years

Rest of Goal 1

92% 

Key Outcome 1.3: Meet 

Responsibilities for 

Homeland Security 

Program Obligation

Rest of Goal 1

1% 

99% 
USDA Performance and Accountability Report for FY 2002

34

No performance measures specific to this Key Outcome were contained in USDA’s FY 2002 Annual 

Performance Plan. The Key Outcome, Effectively Meet Responsibilities for Homeland Security, was first 

introduced in USDA’s Revised Strategic Plan for FY 2002–2007. Relevant measures will be reported in 

next year’s Performance and Accountability Report. 

 

USDA programs implemented prior to the events of September 11, 2001, are tied to performance measures found throughout this document. The terrorist attacks had a significant impact on the operations in a 

number of USDA mission areas. The resulting effect placed additional demands and challenges on both 

funding and human resources to implement various program and security enhancements to ensure the 

safety of our Nation and its citizens. 

USDA has unique, critical responsibilities to help provide for the security of the U.S. and its citizens: 

• Ensuring the safety of the U.S. food supply and the security of the U.S. agricultural production 

system. 

• Protecting the Nation’s natural resource base and environment. 

• Participating in Government-wide efforts to plan for, and respond to, releases or threatened releases 

of hazardous substances. 

• Ensuring the availability of an adequate supply of affordable food and fiber to meet the needs of our 

citizens. 

• Developing guidance on security countermeasures to protect against threats to farms and ranches. 

Selected Examples of Accomplishments in Research, Extension, and Statistics that Contribute to 

Achieving Key Outcome 1.3 

USDA, in collaboration with the Department of Defense, has developed rapid on-site tests that detect and 

identify important animal, plant and foodborne pathogens. Development of these new rapid detection 

technologies enhanced the ability of animal health officials in regulatory capacities (Animal and Plant 

Health Inspection Service [APHIS] and State Departments of Agriculture) to determine if a disease agent 

is present, where it is located and when it is eradicated, if possible. This will reassure our trading partners 

of our ability to detect and control disease agents. 

With USDA funding, the Extension Disaster Education Network (EDEN), a multi-state coalition of 

extension services across the country that responds to a wide range of disasters, is playing a pivotal role in 

responding terrorist threats and the homeland security efforts. EDEN, with its more than 30 Land-Grant 

University members, helps plan and coordinate local, state, and federal responses to disasters—natural or 

human-made. It also works closely with the U.S. Office of Homeland Security. 
USDA Performance and Accountability Report for FY 2002

35

Key Outcome 1.4: Continue to Use the Best Available Science, Information and 

Technology to Protect the Nation’s Agriculture and Food Supply 

Exhibit 19: Resources Dedicated to Protect the Nation’s Agriculture and 

Food Supply 

 

USDA Resources Dedicated to Key Outcome 1.4 FY 2002 

Actual 

 Program Obligation ($ Mil) 1,315.8 

 Staff Years 13,607 

 

12% 

Key Outcome 1.4: Protect 

the Nation’s Food Supply 

Staff Years 

Rest of Goal 1

88% 

Key Outcome 1.4: Protect 

the Nation’s Food Supply 

Program Obligation 

Rest of Goal 1

1% 

99% 
USDA Performance and Accountability Report for FY 2002

36

Performance Measure: Reducing the Number and Severity of Pest and Disease Outbreaks

Safeguarding America’s animal and plant resources from invasive pests and diseases is essential to enhancing the agricultural trade that underlies much of America’s prosperity and to housing, feeding, and 

clothing our Nation. To keep crop and animal pests and diseases out of the U.S. and to manage those 

inside our borders, USDA sponsored prevention activities that reduced the number of pest and disease 

outbreaks and coordinated effective pest and animal disease emergency response systems that reduced the 

severity of pest and disease outbreaks. We partnered with Federal and State agencies, industries, and 

professional organizations to develop and maintain effective emergency response systems to detect, 

respond to, and eliminate outbreaks of invasive pests and diseases. We also partnered with other nations 

and Federal agencies in research and operations that proactively prevent such outbreaks. 

Analysis of Results. This goal has 

been deferred because 1) results for 

the compliance of international air 

travelers cannot be verified or 

validated until approximately six 

months after the end of the previous 

fiscal year (March) because of time 

required to aggregate and validate the 

data, and 2) results for the Number of 

States and Territories meeting 

standards for state and Animal Health 

Emergency Management will not be verified or validated by APHIS until FY 2003 or 2004. 

USDA improved travelers’ compliance with agricultural restrictions by: 1) adding inspection and 

outreach activities at many Ports-of-Entry nationwide; 2) gathering better risk assessment data for nonU.S. agricultural products; 3) adding new inspection tools, such as improved X-ray technology that more 

accurately detects agricultural products in passenger baggage; 4) increasing dog detection teams at many 

Ports-of-Entry; and 5) expanding our cooperation with other Federal inspection service agencies, such as 

U.S. Customs Service and Immigration and Naturalization Service. We helped States and territories verify 

the data collected on meeting standards for state animal health emergency management systems and 

collected success stories and best practices from high-performing states to assist low-performing states. 

Program Evaluation. The following evaluations, reviews, and/or audits took place during FY 2002: 

• International air traveler compliance: We completed a comprehensive external review of the Plant 

Protection and Quarantine program’s Agricultural Safeguarding System, including Agricultural 

Quarantine Inspection data and the Work Accomplishment Data System. Results showed good yearto-year uniformity for most pathways. 

Exhibit 20: Number and Severity of Pests and Diseases 

Fiscal Year 2002 

Annual Performance Goals and Indicators 

Target Actual Result 

Reduce the number and severity of pest and disease outbreaks in the U.S.: Deferred 

• International air travelers not complying with restrictions to prevent the 

entry of pests and diseases (%)1

3.3 3.3

• States and territories meeting standards for state animal health 

emergency management systems (# cumulative) 

5 52 

1

 Actual compliance rates may vary as much as 0.5% due to the margin of error associated with statistical sampling. 2

 Preliminary Data - Results for this measure will not be verified or validated until FY 2003 or 2004 since Animal and Plant Health Inspection 

Service has just received the funding necessary to hire emergency veterinary managers in the field to work with the states to verify and 

validate the national self-assessment results. While the assessment tool is to be completed jointly by State and Federal veterinary officials, 

objective oversight and review is needed and will be done in late 2003 or early 2004. At that time, a comprehensive review will be completed.

Exhibit 21: Reducing Pest and Disease Outbreaks 

FY Actual 

Trend 

1999 2000 2001 2002 

International air travelers not 

complying with restrictions to prevent 

the entry of pests and diseases (%) 

4.2 4.8 4.0 3.3* 

States and territories meeting 

standards for state animal health 

emergency management systems 

(# cumulative) 

0 0 1 5*

* Preliminary data 
USDA Performance and Accountability Report for FY 2002

37

• Animal Health Emergency Management System: An external panel of experts completed a 

comprehensive review of the Veterinary Service’s Agricultural Safeguarding System. The panel 

suggested that a process be developed to review a States’ emergency preparedness capacity. USDA, 

in conjunction with state and industry officials, developed a State self-assessment tool. There are 

plans to hire USDA personnel to verify and validate State self-assessment data. These personnel will 

be trained to conduct reviews and provide objective analysis of the self-assessment process. 

Performance Measure: Reducing the Incidence of Foodborne Illnesses Related to Meat, Poultry, 

and Egg Products in the U.S.

An estimated 76 million persons contract foodborne illnesses each year in the U.S. In April 2002, the 

Centers for Disease Control and Prevention (CDC) released data showing a 21 percent decrease in major 

bacterial foodborne illnesses during the last six years, indicating significant progress towards meeting the 

national health objectives to reduce the incidence of foodborne diseases. The decline in the rate of 

Salmonella infections in humans coincided with a decline in the prevalence of Salmonella isolated from 

USDA-regulated products to levels well below baseline levels before Hazard Analysis and Critical 

Control Point (HACCP) implementation. Although the incidence of infection for several foodborne 

diseases has declined, the overall incidence of foodborne diseases remains high, indicating that increased 

knowledge, efforts, and communication are needed. USDA worked toward reducing foodborne hazards 

by focusing on new research and better scientific methods to: 1) reduce or eliminate food hazards, 2) 

determine the root causes of food safety problems, and 3) quickly detect and eliminate these problems. 

Our regulations, voluntary efforts, compliance inspection, and enforcement activities helped manage 

foodborne risks by influencing those who produce, process, transport, and prepare food. We also communicated data on food safety hazards and risks. The prompt distribution and use of this information 

helps prevent future risks. We used our more than 7,600 inspectors and veterinarians in meat, poultry, and 

egg products plants every day, and at Ports-of-Entry to prevent, detect and respond to food safety 

emergencies. 

Analysis of Results. Overall, the food safety analysis system met its goals. In April 2002, a scientific 

symposium on E. coli O157: H7 was held. In the area of food safety we met our goals. In October 2002, 

we announced new meat safety directives to control pathogens in ground beef processing plants. Under 

these new directives, inspectors will determine whether plants have specifically addressed Salmonella and 

E. coli O157: H7 in their HACCP plans and have effective control measures for these pathogens. Ground 

Exhibit 22: Ensuring the Safety of Meat, Poultry, and Egg Products 

Fiscal Year 2002 

Annual Performance Goals and Indicators 

Target Actual Result 

Maintain a coordinated food safety risk analysis system to ensure the safety of U.S. meat, 

poultry, and egg products from farm to table: Met 

• Risk assessments used to inform risk management decision making and policy (# 

cumulative) 4 4 

• Reduction in the prevalence of Salmonella on raw meat and poultry products as 

illustrated by: 

- Prevalence of Salmonella on broiler chickens (%) 9.0 11.6 

- Prevalence of Salmonella on market hogs (%) 5.5 4.3 

- Prevalence of Salmonella on ground beef (%) 3.0 2.8 

• Reduction in the prevalence of Listeria monocytogenes in ready-to-eat meat and poultry 

products: 

- Samples testing positive for Listeria monocytogenes (%) 1.40 1.02 

People reached with food safety information through media stories, circulation reports, incoming 

web site visits, and incoming hotline calls (Mil) 

89 90 Met 
USDA Performance and Accountability Report for FY 2002

38

beef plants that do not employ 

effective strategies, or that do not 

require their suppliers to do so as part 

of their HACCP systems, will be 

targeted for increased USDA 

verification testing. USDA currently 

tests for Salmonella and E. coli O157: 

H7 in grinding plants to verify that the 

plants’ food safety systems are 

controlling microbial hazards. Under 

the HACCP rule, if a plant does not 

have an adequate HACCP plan or an 

adequate sanitation program, the 

USDA can withhold marks of 

inspection or suspend inspection at a 

plant, which effectively shuts down 

the plant. To further guide policy 

making, several risk assessments have 

been conducted or are underway to 

evaluate the risk associated with 

certain microbiological pathogens. 

During 2002, we completed a 

comparative risk assessment of intact 

and non-intact (blade tenderized) 

steaks that yielded greater insight into 

the effects of various cooking 

methods and temperatures. We completed a risk assessment regarding nitrosamines in bacon to evaluate 

the risk to public health from nitrosamines in bacon based on consumption analyses data and compared 

these risk estimates to those of other allowed resides in meat and poultry products. We also conducted a 

quantitative risk assessment for Bovine Spongiform Encephalopathy (BSE) in collaboration with 

scientists from the Harvard School of Public Health and Tuskagee University School of Veterinary 

Medicine. The external peer review has been completed and the assessment is being revised in response 

to comments received. This revised assessment will be used to evaluate various risk scenarios to further 

reduce the potential risk of BSE and to ensure that potentially infectious materials do not enter the U.S. 

food supply. We are continuing our efforts to issue a final rule on Listeria monocytogenes in ready-to-eat 

products. Our efforts include an analysis of Listeria contamination of ready-to-eat products, the 

development of a Listeria risk assessment to take into account post-lethality contamination during 

processing and in-plant mitigation strategies. 

While the data on prevalence of pathogens shows a continuation of downward trends, the presence of 

certain pathogens, like E. coli O157:H7 on raw products and Listeria monocytogenes on ready-to-eat 

products, can result in serious foodborne illness. When foodborne illness outbreaks occur, FSIS works 

with the Centers for Disease Control and Protection (CDC) to match molecular subtyping of pathogens 

isolated from patients with pathogens from products. As public health agencies are able to link specific 

products to specific human illnesses and to link sporadic cases to a common source, it is possible to 

identify outbreaks that might previously have been missed. In 2002, efforts of this type, combined with 

food safety assessments in plants with positive results for pathogens, enabled FSIS to secure the evidence 

necessary to take regulatory action that resulted in two of the largest recalls ever. Based on information 

obtained through the food safety assessments and the pattern of these recalls, FSIS has implemented 

Exhibit 23: Declining Instances of Salmonella and Listeria

FY Actual 

Trends 

1999 2000 2001 2002 

• Risk Assessments used to 

inform risk management 

decision-making and policy (# 

cumulative). 

2 2 2 4 

• Reduction in the prevalence 

of Salmonella on raw meat 

and poultry products as 

illustrated by: 

 

- Prevalence of Salmonella 

on broiler chickens (%) 

11.3 8.7 11.9 11.6* 

- Prevalence of Salmonella 

on market hogs (%) 

6.6 7.6 4.5 4.3* 

- Prevalence of Salmonella 

on ground beef (%) 

4.4 3.6 2.6 2.8* 

• Reduction in the prevalence 

of Listeria monocytogenes in 

ready-to-eat meat and poultry 

products 

 

- Samples testing positive 

for Listeria monocytogenes

(%) 

1.91 1.45 1.26 1.02 

People reached with food safety information through media stories, circulation reports, web site visits, and USDA 

Meat & Poultry Hotline calls (Mil) 

83 85 150 90 

*Data from October 1, 2001 through approximately September 15, 2002. USDA 

considers them final and reliable for FY 2002. 
USDA Performance and Accountability Report for FY 2002

39

major policy changes associated with the regulation of products found to have E. coli O157:H7 and 

Listeria monocytogenes.

We exceeded our targets in three of four indicators for reducing the prevalence of Salmonella and Listeria 

monocytogenes. This accomplishment not only exceeds FY 2002 targets but also exceeds two of the 

targets for 2005. However, prevalence fluctuates widely, and the prevalence of Salmonella on broiler 

chickens continues to be a concern. We are looking into the causes of fluctuation in rates. One rationale is 

that testing is conducted randomly and, depending upon the entity tested in any given year, results can 

vary. Given the history of the plants in question, we are considering increasing activities to include not 

only random sampling but also sampling when there is an indication that problems exist. For this reason, 

we have scheduled a risk assessment for Salmonella on broiler chickens. 

We met our target for the numbers of people reached with food safety information. Of the millions of 

people potentially receiving food safety information, we estimate that 20 percent or 90 million were 

actually reached. We exceed our cumulative target of 51 for the number of stakeholder activities held. 

The actual number of stakeholder events conducted rose to 61. 

Program Evaluation. The following evaluations, reviews, and/or audits took place during FY 2002: 

• In December 2001, the Agency completed an evaluation titled “Changes in Consumer Knowledge, 

Behavior, and Confidence since the 1996 HACCP final rule.” The study provided an understanding of 

consumer knowledge, confidence and behavior of food safety. 

• In March of 2002, the Agency concluded “Evaluation Interim Report: Recall System 

Recommendations.” This report clarified the goals, policies and procedures of the recall system. 

• The General Accounting Office (GAO) issued an audit report regarding the HACCP-Based 

Inspection Models Project (HIMP) in December 2001. The Agency has completed some activity to 

address the issues raised and plans to complete all corrective actions recommended during FY 2003. 

Selected Examples of Accomplishments in Research, Extension, and Statistics that Contribute to 

Achieving Key Outcome 1.4. 

Within the last five years, U.S. farmers have adopted the first generation of genetically engineered crop 

varieties at rates not usually seen for a new technology. USDA research has investigated the magnitude 

and distribution of benefits and risks associated with genetically engineered seed providing enhanced pest 

protection. The research addressed the farm-level effects of adopting the seed on costs, yields, profits, and 

pesticide use, the factors affecting observed and projected patterns and rates of adoption, and how measurable benefits and costs of adoption are distributed among farmers, input suppliers, and consumers. This 

information helps policymakers carry out their roles as co-regulators of these new technologies, and 

informs the broader public of their benefits and costs. 

USDA scientists have developed a same-day, on-site portable molecular assay for the Pierce’s disease 

bacterium, which threatens the five billion dollar California grape industry. Field tests demonstrate that 

infected grape stock can be diagnosed within 1–2 hours. Conventional identification of the pathogen takes 

ten days to two weeks because the organism is difficult to isolate. 

USDA scientists have developed new vaccines against Foot and Mouth disease, respiratory disease in 

cattle, and swine influenza. These vaccines will help producers combat diseases where it exists and 

increase preparedness for foreign diseases should they occur in this country. 

USDA scientists discovered several new human attractants and five new attractant inhibitors to mosquitoes. Both attractants and repellents have value in the control of insect borne diseases. Attractant inhibitors may lead to new classes of economically competitive, efficacious repellents for use on animals or 
USDA Performance and Accountability Report for FY 2002

40

humans. Attractants can be used to increase the efficiency and specificity of traps used for disease 

surveillance, as for the West Nile virus. 

USDA scientists designed and evaluated treatment processes for the microbial decontamination of pork 

and beef trim. The treatment processes were shown to reduce and control fecal bacteria on beef and pork 

and in the resultant ground product without a large negative effect on meat quality. 

USDA scientists developed risk assessment models for Listeria, Salmonella, and Campylobacter in 

poultry products. These predictive and simulation models assist industry and regulatory agencies in 

making critical food safety decisions that affect public health. 
USDA Performance and Accountability Report for FY 2002

41

Key Outcome 1.5: Improve the Nation’s Nutrition and Health through Food 

Assistance and Nutrition Education and Promotion 

Exhibit 24: Resources Dedicated to Improving the Nation’s Nutrition and Health 

 

USDA Resources Dedicated to Key Outcome 1.5 FY 2002 

Actual 

 Program Obligation ($ Mil) 37,777.2 

 Staff Years 2,910 

 

3% Key Outcome 1.5: 

Improve the Nation’s 

Nutrition and Health 

through Food Assistance 

and Nutrition Education 

and Promotion 

Staff Years

Rest of Goal 1

97% 

Key Outcome 1.5: 

Improve the Nation’s 

Nutrition and Health 

through Food 

Assistance and 

Nutrition Education and Promotion 

Program Obligation

Rest of Goal 1

37% 

63% 
USDA Performance and Accountability Report for FY 2002

42

Performance Measure: Reducing Hunger and Improving Nutrition in the U.S. Through the Nutrition 

Assistance Programs

USDA policy has sought to ensure that all Americans have access to a healthy and nutritious food supply, 

regardless of income. A well-nourished population is healthier, more productive, and better able to learn. 

No child or family in need should be left behind for want of food. 

USDA’s nutrition assistance programs constitute the majority of the Federal government’s effort to 

reduce hunger and improve nutrition in the U.S. By working with the States to maintain program access 

for those who are eligible and to ensure effective benefit delivery for participants, USDA seeks to ensure 

access to food for those with little income and few resources. The programs were generally successful in 

achieving this outcome in FY 2002. 

Note: The number of people reached with food safety information is reported in the discussion of Key 

Outcome 1.4: Continue to Use the Best Available Science, Information and Technology to Protect the 

Nation’s Agriculture and Food Supply, (see pp. 32-36). 

Analysis of Results. USDA met the 

FY 2002 nutrition assistance program 

participation goals. As program 

participation is voluntary, we based 

our participation performance 

projections on assumptions about 

economics and other factors such as 

State and local outreach efforts 

expected to affect the behavior of 

eligible populations. 

The Special Supplemental Nutrition 

Program for Women, Infants, and 

Children (WIC); Child and Adult 

Care Food Program; and National School Lunch and School Breakfast programs performed substantially 

as expected. 

The Summer Food Service Program (SFSP) did not perform as expected; participation fell significantly 

below the FY 2001 level. USDA targeted growth in this program as a major priority in FY 2002. The 

Department continued significant outreach and information efforts, and expanded waivers that simplify 

program operations for schools and for sponsors of programs in low-participation States. Despite these 

efforts, the anticipated growth did not occur. However, because provided access for children to nutritious 

Exhibit 25: Nutrition Assistance Results 

Fiscal Year 2002 

Annual Performance Goals and Indicators 

Target Actual Result 

Expand program access and benefit delivery for USDA nutrition assistance programs 

(Millions): 

 Met 

• Food Stamp Program participation (people) 19.8 19.1 

• Special Supplemental Nutrition Program for Women, Infants, and Children (people) 7.5 7.5 

• National School Lunch Program (people) 28.0 27.9 

• School Breakfast Program (people) 8.1 8.1 

• Child and Adult Care Food Program (meals) 1,754 1,740 

• Summer Food Service Program (people) 2.1 1.9 

Exhibit 26: Nutrition Assistance Programs Reached Those in Need 

FY Actual Trends 

(In Millions) 1999 2000 2001 2002 

Food Stamp Program participation 18.2 17.2 17.3 19.1 

Special Supplemental Nutrition 

Program for Women, Infants, and 

Children (people) 

7.31 7.20 7.30 7.5 

National School Lunch Program 

(people) 

26.9 27.2 27.4 27.9 

School Breakfast Program 

(people) 

7.4 7.6 7.8 8.1 

Child and Adult Care Food 

Program (meals) 

1,638 1,671 1,678 1,740 

Summer Food Service Program 

(people) 

2.17 2.09 2.11 1.9 
USDA Performance and Accountability Report for FY 2002

43

food during the summer when school is not in session remains an important USDA objective, the 

Department plans to continue to work with program stakeholders on outreach and expansion efforts. 

The Food Stamp Program average monthly participation did not reach the level projected. This reflects 

lower-than-anticipated participation at the beginning of the year and somewhat lower-than-expected 

unemployment rates through the course of the year (seasonally adjusted monthly unemployment rates 

averaged 5.7 percent instead of the predicted 5.8 percent). Participation nonetheless increased substantially—about ten percent—between FY 2001 and 2002, and the program served nearly two million more 

participants by fiscal year end. 

Projection of Food Stamp Program participation is based in large part on macro-economic factors, rather 

than specific policy or administrative actions. USDA remains committed to ensuring that all eligible 

people have access to nutrition benefits afforded by the Food Stamp program. USDA is pursuing a range 

of efforts in the current fiscal year to reach out to targeted groups of non-participants that are hardest to 

reach and possibly most in need, including immigrants, the elderly, and working families. The 

Department is also testing potential policy and program changes to improve access to the program, and 

developing and using new tools, such as web-based eligibility “pre-screening,” and a toll-free information 

number, to make more people aware of their potential eligibility. 

As part of the Farm Security and Rural Investment Act of 2002 (2002 FSRIA), USDA restored funding in 

FY 2002 to serve additional seniors, women, infants, and children in the Commodity Supplemental Food 

Program for Vermont and Montana, and increased by $2.5 million funding for Community Food Security 

Grants helping low-income households gain access to fresher, more nutritious food supplies and assisting 

communities in responding to their own nutritional issues. 

Program Evaluation. The following analyses and evaluations related to this outcome were completed in 

FY 2002: 

• Household Food Security in the U.S., 2000 

• Family Child Care Home Participation in the Child Adult Care Food Program (CACFP)—Effects of 

Reimbursement Tiering: A Report to Congress on the Family Child Care Homes Legislative Changes 

Study 

• Summer Feeding Design Study: Final Report 

• The Food Stamp Program and Food Insufficiency 

• Second Food Security Measurement and Research Conference, Volume II: Papers 

• The Well-Being of the Poor: Demographics of Low-Income Households 

• Explaining Recent Trends in Food Stamp Program Caseloads: Final Report 

• The Effects of the Macro economy and Welfare Reform on Food Stamp Caseloads 

• Pre-1997 Trends in Welfare and Food Assistance in a National Sample of Families 

• Imposing a Time Limit on Food Stamp Receipt: Implementation of the Provisions and Effects on 

Food Stamp Participation 

• Household Food Security in the U.S., 1995–1997: Technical Issues and Statistical Report 

• Characteristics of Food Stamp Households, FY 2001 

• Reaching Those In Need: Food Stamp Participation Rates in the States in 1999 
USDA Performance and Accountability Report for FY 2002

44

Performance Measure: Improving Diets in U.S. Through the Nutrition Assistance Program

To improve diet quality among those eligible for Federal nutrition assistance programs and their 

caregivers, USDA advanced an integrated approach to nutrition education through and across these 

programs in FY 2002, and improved access to fruits and vegetables. 

Analysis of Results. USDA was 

generally successful in implementing 

its nutrition education strategies to 

promote healthy eating behaviors 

among those eligible for Federal 

nutrition assistance programs and 

their caregivers. Disseminating 

significantly more materials than 

originally anticipated, we also met 

our goal to improve participants’ 

access to fruits and vegetables in 

schools and in the Food Distribution 

Program on Indian Reservations. 

(Note: USDA tracks the implementation of nutrition promotion and 

education efforts during the year; 

mechanisms to evaluate the annual impact on the diets of those targeted by these efforts generally are 

not available.) 

Highlights include: 

• Delivered over 13 million nutrition education materials and interventions for all major nutrition 

assistance programs in all 50 States. 

• Completed four train-the-trainer programs on techniques that foster behavioral change and that 

improve the effective use of USDA nutrition education materials. 

• Trained 40 WIC State agencies on updated WIC Nutrition Services Standards to provide information 

and support their efforts to enhance the provision of nutrition services. 

• Provided technical assistance in the form of grants to nine States to implement the Loving Support 

breastfeeding campaign, in support of their efforts to promote breastfeeding through WIC as the 

preferred infant feeding practice. (FY 2002 data on breastfeeding initiation will be available in FY 

2004.) 

• Worked with 20 State and regional dairy councils to promote healthy eating environments in schools 

by reinforcing the use of Changing the Scene resource kit. 

Exhibit 27: Improving Diet Quality Through Assistance 

Fiscal Year 2002 

Annual Performance Goals and Indicators 

Target Actual Result 

Promote better diet quality among children and caregivers eligible for Federal nutrition 

assistance programs: Exceeded 

• USDA nutrition education materials and education interventions disseminated 

(# Mil) 4.8 13.2 

• Women, Infants, and Children (WIC) mothers initiating breastfeeding (%) 45 Available 

FY 04 

Improve access to fruits and vegetables: Met 

• Fruits and vegetables provided to schools ($ Mil) 171 199 

• Sites on Indian reservations receiving fresh fruits and vegetables 83 86 

Exhibit 28: Better Diet Quality and Access to Fresh 

Fruit/Vegetables Grew Among Target Segments 

FY Actual 

Trend 

1999 2000 2001 2002 

USDA nutrition education 

materials and education interventions disseminated (#Mil) 

N/A 1.6 2.7 13.2 

WIC mothers initiating 

breastfeeding (%) 

N/A 45 N/A Available 

FY 04 

Fruits and vegetables provided to 

schools ($ Mil) 

155 221 245 199 

Sites on Indian reservations 

receiving fresh fruits and 

vegetables 

58 59 83 86 
USDA Performance and Accountability Report for FY 2002

45

• Completed as planned Team Nutrition demonstration project activity in four states. Due to their 

success, the projects were extended through February 2003. They are intended to develop and deliver 

national training on this comprehensive approach to school-based nutrition promotion. 

• Conducted over 3,500 School Meals Initiative monitoring reviews, more than the 2,900 targeted. This 

level of effort indicates a continued high degree of commitment by States to provide oversight in this 

area. Variance between the target and actual review activity reflects flexibility in scheduling reviews 

during a multi-year cycle, as well as additional efforts by States to conduct follow-up reviews to ensure 

corrective action is undertaken. 

• Purchased $199 million in fruit and vegetable commodities to support school programs, exceeding the 

FY 2002 target. It should be noted that $41 million of this amount represents bonus commodity 

purchases made during FY 2002. 

• Distributed fresh fruits and vegetables to 86 sites on Indian Reservations exceeding the target of 83 

sites. The increase reflects an expansion of sites administered by Indian Tribal Organizations participating in the Food Distribution Program on Indian Reservations (FDPIR). These organizations 

received the fresh produce program under an agreement between USDA and the Department of 

Defense. The President’s FY 2003 Budget requests an additional $3 million for FDPIR equipment 

purchases. Much of this money would likely support efforts to expand fresh produce in the program. 

• As part of the 2002 FSRIA, provided new funding for programs that allow seniors and low-income 

women, infants, and children to purchase fresh food at farmers’ markets. 

Program Evaluation. The following evaluations, reviews, and/or audits took place during FY 2002: 

• Nutrition Education in Food Nutrition Service (FNS): A Coordinated Approach for Promoting 

Healthy Behaviors 

• Effects of Food Assistance and Nutrition Programs on Nutrition and Health: Volume 1, Research 

Design 

• The Economic Benefits of Breastfeeding: A Review and Analysis 

• Reimbursement Tiering in the CACFP: Summary Report to Congress on the Family Child Care 

Homes Legislative Changes Study 

• Meals Offered by Tier 2 CACFP Family Child Care Providers—Effects of Lower Meal 

Reimbursements: A Report to Congress on the Family Child Care Homes Legislative Changes Study 

Performance Measure: Ensuring Better Diet Quality

USDA applied education, promotion, research, and assistance program resources to improve diet quality. 

In addition to our Dietary Guidelines for Americans (2000), we issued the Healthy Eating Index, which 

enables the general public to assess their diet and receive tailored recommendations for improvement via 

the Internet. 

Analysis of Results. The target for FY 2002 for the Healthy Eating Index was exceeded. Over 231,926 

visitor sessions were held, with individuals accessing the Healthy Eating Index at www.cnpp.usda.gov to 

ascertain whether they had a “good diet,” a “diet that needs improvement,” or a “poor” diet. Users of this 

index also received recommendations to help them improve their diets. Users spent, on average, 25 

minutes per session. 

Exhibit 29: Improving Diet Quality 

Fiscal Year 2002 

Annual Performance Goals and Indicators 

Target Actual Result 

Individuals using the Healthy Eating Index to assess and improve their diet 120,000 231,926 Exceeded 

Copies of the 2000 Dietary Guidelines disseminated to help individuals improve their diet 550,000 536,461 Met 
USDA Performance and Accountability Report for FY 2002

46

The target for FY 2002 for the Dietary Guidelines was an estimate, and actual distribution was within 2.5 

percent of the estimate. The target was lower than that for the previous year, since the 2000 Dietary

Guidelines materials, newly released in FY 2001, were disseminated extensively in their first year of 

release. However, there is continued widespread interest in the 2000 Dietary Guidelines, which provide 

scientifically-based guidance on nutrition and health related behaviors. 

Program Evaluation. The following evaluations, reviews, and/or audits took place during FY 2002: 

• Interactive Healthy Eating Index. Constituents using the index provided comments via the Internet. 

• Dietary Guidelines for Americans (2000). No program evaluations were conducted. 

Selected Examples of Accomplishments in Research, Extension, and Statistics that Contribute to 

Achieving Key Outcome 1.5. 

USDA researchers have taken a new approach to developing econometric projections of food demand and 

expenditures to 2020 to explore how projected changes in the profile of the U.S. population will affect the 

markets for food categories and agricultural commodities. Empirical results from these projected changes 

have been integrated with qualitative and quantitative information on structural change in the food sector 

to explain how consumer markets are driving change in the food industry and creating new marketing 

relationships and opportunities for agricultural producers. 

USDA researchers developed a tool to document directly the extent of food insecurity and hunger caused by 

income limitations and refined and extended the measurement of food security by developing a children’s 

food security measure and a 30-day food security scale. New measures of food security were introduced 

based on food expenditures and participation in emergency food pantries and emergency kitchens. 

USDA scientists have examined the biological activity of phytonutrients that may be protective against 

the development of certain chronic diseases. Oolong tea was found to increase energy expenditure, 

relative to water, and was effective in increasing preferential oxidation of fat. Compounds in blueberries 

and cranberries may have beneficial actions against the development of vascular disease and may 

contribute to the reduction of age-related deficits in neurological impairment. 

Expanded Food and Nutrition Education Program (EFNEP), a USDA-funded Extension program, targets 

two primary audiences: low-income youth and low-income families with young children. EFNEP reached 

447,027 youth and 164,154 adults last year. Moreover, 600,930 family members were indirectly reached 

through the adult participants. As a result, out of 106,062 adult graduates, 83 percent improved in one or 

more food resource management practices. 

Exhibit 30: People Using the Eating Index and Dietary Guidelines (thousands)

Use of the Interactive 

Healthy Eating Index

100

200

232

50

100

150

200

250

300

2000 2001 2002

Use of the Dietary Guidelines 

Bulletin and Brochure

536

2,213

141

500

1,000

1,500

2,000

2,500

2000 2001 2002
USDA Performance and Accountability Report for FY 2002

47

With USDA funding, Iowa State researchers found that a single daily dose of plant sterols, the plant 

version of cholesterol, added to lean ground meat lowers blood cholesterol. Plant sterol-supplemented 

lean ground meat reduced Low Density Lipoprotein (LDL), or so-called bad cholesterol, by 15 percent 

when eaten once a day.
USDA Performance and Accountability Report for FY 2002

48

Key Outcome 1.6: Provide Sensible Management of Our Natural Resources 

Exhibit 31: Resources Dedicated to Managing Our Natural Resources 

 

USDA Resources Dedicated to Key Outcome 1.6 FY 2002 

Actual 

 Program Obligation ($ Mil) 10,641.5 

 Staff Years 52,144 

 

47% 

Key Outcome 1.6: Provide 

Sensible Management of 

Our Natural Resources 

Staff Years

Rest of Goal 1

53% 

Key Outcome 1.6: Provide 

Sensible Management of 

Our Natural Resources 

Program Obligation

Rest of Goal 1

10% 

90% 
USDA Performance and Accountability Report for FY 2002

49

Performance Measure: Maintaining Resource Health and Productive Capacity

Healthy cropland, grazing land, and forestland are essential to the Nation's agricultural economy. Maintaining and improving the quality of the Nation’s soils and plant communities increases farm productivity, 

minimizes nutrient and pesticide use, protects water and air quality, and helps store greenhouse gases. 

USDA helps agricultural and forestland managers develop natural resources for long-term sustainability. 

Assistance to producers for working lands includes providing technical assistance; sharing the cost of 

applying conservation practices; conducting natural resource inventories and research; and developing and 

transferring up-to-date technology. USDA also provides rental payments to retire sensitive land from crop 

production and protect it under permanent vegetation. 

USDA and the U.S. Department of the Interior (DOI) jointly released the report, Managing the Impact of 

Wildfires on Communities and the Environment. This report presented the National Fire Plan (NFP) strategy 

to reduce catastrophic wildfire risks, protect rural communities, and increase firefighting readiness. To 

implement NFP, the USDA and DOI worked with the States to develop a ten-year Comprehensive Strategy 

and a collaborative Implementation Plan framework for implementing the strategy. The NFP, Comprehensive Strategy, and the Implementation Plan will guide USDA’s future efforts to protect communities and 

manage wildland fire on and around the 192 million acres of National Forests and Grasslands. 

Analysis of Results. The indicator for 

working cropland and grazing land 

includes only land on which the 

producer finished applying a conservation system that considered all of the 

site’s resource concerns: soil, water, 

air, plants, and animals. USDA also 

provided assistance on an additional 

nine million acres of working cropland 

and grazing land where resource 

concerns were treated at a less 

Exhibit 32: Maintaining Productivity and Health of the Land 

Fiscal Year 2002 

Annual Performance Goals and Indicators 

Target Actual Result 

Maintain the productivity and health of the Nation’s non-Federal cropland and grazing 

lands: 

 Met 

• Acres of working cropland and grazing land protected against degradation by 

application of improved conservation systems (Mil annually)1

17.0 17.02

 

• Acres of highly erodible and environmentally sensitive cropland and grazing 

land retired from production and protected against degradation under 

Conservation Reserve Program (CRP) contracts (Mil cumulative) 

34.2 33.9 

Treat wildlands with high fire risks on National Forests and Grasslands to reduce the 

risk of loss of life, property, and natural resources from catastrophic wildfire: 

 Unmet 

• Hazardous fuel treatments (acres) 1,750,496 718,290 

• Maximize firefighting production capability—Most Efficient Level (MEL) (%)5 100 95 

• Communities and volunteer fire departments assisted3 9,232 8,170 

1

 Acres are those on which the practices applied during the fiscal year resulted in complete application of a full conservation system. Cropland 

does not include acres enrolled in the Conservation Reserve Program 

2

 Includes 0.2 million acres of non-Federal forestland 

3

 The "Most Efficient Level" of wildland firefighting resources is a formula-driven calculation (using 10-year averages of fire occurrence and 

weather patterns) of the resources needed to be prepared for an average year of fires on a specific unit. MEL varies from unit to unit on the 

ground. It is usually reported as the percentage of funding received compared to the calculated level. 4

 These figures include State and Private activities and National Fire Plan activities 5

 For FY 2003, this measure will be changed to Fire Chains per hour. 

Exhibit 33: Improving the Land 

Fiscal Year Actual 

Trend 

1999 2000 2001 2002 

Acres of working cropland and 

grazing land protected against 

degradation by application of 

improved conservation systems (Mil 

annually) 

N/A 15.6 16.2 17 

Acres of highly erodible and environmentally sensitive cropland 

and grazing land retired from 

production and protected against 

degradation under CRP contracts 

(Mil cumulative) 

29.8 31.5 33.6 33.9 
USDA Performance and Accountability Report for FY 2002

50

comprehensive level. The conservation on these acres, although not comprehensive, provides 

significant environmental benefits. In FY 2002, USDA helped producers apply erosion reduction 

practices on 4.6 million acres of 

working cropland. 

In FY 2002, grazing land made up 

slightly more than 11.7 million acres of 

the 17 million acres of working land on 

which USDA provided assistance to 

the resource management level. 

Slightly more than one-third of these 

grazing land acres received both 

financial and technical assistance. 

Financial assistance was primarily 

through USDA's Environmental 

Quality Incentives Program (EQIP). Of 

the five million acres of working 

cropland where producers applied 

treatment to the full resource 

management system level, about 29 

percent received financial assistance 

under EQIP. 

Land retired from cropping and planted with protective covers represents the total acreage enrolled in 

Conservation Reserve Program (CRP), which is currently 33.9 million acres. The CRP helps farm owners 

and operators conserve and improve soil, water, air, and wildlife resources by converting highly erodible 

and other environmentally sensitive land to long-term resource conserving cover. 

Hazardous fuels treatments were 650 thousand acres less than FY 2002 targets for two related reasons: 

lack of available staff and drought conditions across much of the U.S. During severe fire seasons, staff 

and resources were reassigned to fire suppression. The reduced acreage in FY 2000 and FY 2002 reflect 

both drought conditions and severe fire seasons. 

Estimated most efficient level (MEL) was five percent less than originally projected. Not meeting MEL was 

a conscious decision based on the cost of achieving the target. The large increase in MEL in FY 2001 was 

because of the large increase in preparedness funding appropriated to USDA to implement the NFP. 

The number of communities and volunteer fire departments assisted was measurably less than projected 

due to a redirection of funds to wildland fire suppression. The large increase in the number of community and volunteer fire departments assisted in FY 2002 results from counting the outputs associated 

with NFP activities.

Description of Actions and Schedules. Drought and a severe fire season—factors external to USDA’s 

control—caused us to fall short of FY 2002 targets for hazardous fuel treatment. Not meeting the target 

slows the process of protecting communities and the environment and helping our National Forests return to 

historic levels of fire severity and frequency. In FY 2003, we will resume projects delayed because of the 

severe fire season and drought, based on available funding. We adjusted our FY 2002 target of funding 

100% of calculated MEL because the cost was too high. This resulted in hiring 530 fewer firefighters and 

maintaining 170 fewer fire engines than if we had full funding equaling the calculated MEL. No action can 

be taken to make up this shortfall since the MEL target reduction relates only to the FY 2002 funding needs 

Exhibit 34: Fluctuations in Wildland Fire Activities Due to 

Fire Season Severity (2000 and 2002 Experienced Severe 

Wildland Fire Seasons). 

Fiscal Year Actual 

Trend 

1999 2000 2001 2002 

Hazardous fuel 

treatments (acres) 

1,412,281 772,375 1,361,697 718,290 

Maximize firefighting 

production capability 

—MEL (%) 

69 74 97 95 

Communities and 

volunteer fire departments assisted1 

2,450 2,9902 3,062 8,1703

1

 A change in data tracking methodology occurred between 2000 and 2001. Data 

from 1999 and 2000 did not distinguish between communities and volunteer fire 

departments assisted, thus leading to underreporting. Beginning in 2001, these items 

are being tracked separately and added together to produce this performance 

measure. 

2

 An estimate based on eight of nine Regions reported from the Forest Service. 3

 This figure includes State and Private activities and National Fire Plan Activities. 
USDA Performance and Accountability Report for FY 2002

51

calculation and FY 2002 funding availability. Despite this, firefighting support by the USDA to 

communities or volunteer fire departments only fell short of planned programs by two communities.

Program Evaluation. The following evaluations, reviews, and/or audits took place during FY 2002: 

• USDA conducted program evaluations via its Natural Resources Conservation Service (NRCS) 

national oversight and evaluation staff. In FY 2002, we also conducted a major study to determine, at 

the sub-State level, the cost of implementing each of the key conservation practices in local field 

office technical guides. NRCS conducted more narrowly-focused studies of the agency’s technology 

structure and preparatory activities to implement the third-party Technical Service Provider provision 

of the 2002 Farm Security Rural Investment Act (2002 FSRIA). All of these studies provided data 

that is critical to ensuring efficient delivery of the expanded conservation programs authorized by the 

2002 FSRIA. 

• USDA evaluates components of its conservation programs each year through program compliance 

activities and the County Operations Review Program. 

• USDA reviews have provided both on-the-ground accountability and a tool to make course 

corrections for the NFP in the future. 

• USDA reviews included overall program function assessment (DOI collaboration) and annual 

financial accountability. 

• USDA evaluates annually the National Fire Management Analysis System (NFMAS) certification 

process for technical and financial programs of Regional fire management planning and operations to 

ensure consistent and credible organizational and budget information across regional boundaries. 

• USDA also collaborated with DOI and other partners to finish FY 2001 efforts to review and develop 

new joint performance measures; reviewed and initiated recommendations made by National 

Academy of Public Administration (NAPA) in the report “Managing Wildland Fire: Enhancing 

Capacity to Implement the Federal Interagency Policy”; and contracted with NAPA to review 

wildland fire suppression strategies and costs. 

Performance Measure: Protecting the Environment

Americans expect their environment to provide adequate supplies of clean water, clean air, and pleasant 

and healthy places to live. USDA plays a vital role in ensuring that these expectations are met. We 

manage the National Forests and Grasslands, work with private landowners and natural resource 

managers to ensure that their activities do not create hazards to human health or the environment, and 

work closely and cooperatively with other governmental and non-governmental entities to improve the 

environment in rural and urban communities. 

During FY 2002, USDA worked with producers, rural communities, and State and local agencies to plan 

and implement resource development and management that protect the environment yet meet the varied 

needs of the community. We worked to restore and improve watersheds on private land and on and near 

the National Forests and Grasslands to secure all of the benefits healthy watersheds provide—from 

contributions to clean air and water to opportunities for abundant wildlife habitat. We also worked to 

reduce the large potential liabilities for sites releasing or threatening to release hazardous substances to the 

environment on USDA managed lands. 
USDA Performance and Accountability Report for FY 2002

52

Analysis of Results. USDA joined 

with local partners to help develop 

5,214 comprehensive nutrient management plans (CNMPs) and to 

install 3,352, slightly exceeding the 

target. FY 2002 was the first year in 

which performance was reported in 

terms of the new CNMP guidance; 

performance in past years was 

reported for waste management 

systems, which were not as complex 

as the new CNMPs. 

USDA increased its technical 

assistance to producers to respond to 

the public’s concerns about the effect 

of fertilizer and animal wastes on 

water quality. 

Conservation buffers were applied 

under several USDA programs. The 

total for FY 2002 includes 114,400 

acres of buffers applied with Conservation Technical Assistance 

Exhibit 35: Protecting and Improving the Environment 

Fiscal Year 2002 

Annual Performance Goals and Indicators 

Target Actual Result 

Protect water and air quality against the risk of impairment as a result of agricultural 

production: 

 Met 

• Animal feeding operations with comprehensive nutrient management plans 

(CNMP) developed or applied 

7,854 8,566 

• Acres with conservation measures applied to reduce potential for off-site pollution 

by nutrients (Mil annually) 

4.6 5.5 

• Acres in conservation buffers (Mil)1 2.35 2.27 

• Reduced sheet and rill erosion on cropland and grazing land entered into 

Conservation Reserve Program (CRP) (Mil tons annually) 

179.9 179 

• Reduced wind erosion on cropland and grazing land entered into CRP (Mil tons 

annually) 

250.6 251 

• Carbon sequestered in soil and vegetation through long-term retirement of crop 

and grazing land (Mil metric tons annually) 

16.4 16.4 

Restore or improve rangeland and forestland watersheds in the National Forests and 

Grasslands: 

 Unmet 

• Soil and watershed improvements (acres) 21,256 36,417 

• Terrestrial habitat restored or enhanced (acres) 284,738 227,356 

• CERCLA2 cleanups completed 17 29 

• Abandoned mine sites reclaimed 20 42 

1

 Includes both Farm Service Agency cumulative and Natural Resources Conservation Service annual data 2

 Comprehensive Environmental Responses, Compensation, and Liability Act 

Exhibit 36: Soil Improvements 

FY Actual 

Trend 

1999 2000 2001 2002 

Animal feeding operations with CNMP 

developed or applied 

6,170 

facilities 

applied 

11,000 

waste 

systems 

10,520 

waste 

systems 

8,566 

CNMPs 

Acres with conservation 

measures applied to 

reduce potential for offsite pollution by nutrients 

(Mil annually) 

2.7 4.3 5.4 5.5 

Acres in conservation 

buffers (Mil) 

1.2 1.5 1.75 2.27 

Reduced sheet and rill 

erosion on cropland and 

grazing land entered into 

CRP (Mil tons annually) 

N/A 166.2 178.0 179.0 

Reduced wind erosion on 

cropland and grazing 

land entered into (Mil 

tons annually) 

N/A 240.6 249.8 251 

Carbon sequestered in 

soil and vegetation 

through long-term 

retirement of crop and 

grazing land (Mil metric 

tons annually) 

14.6 15.4 16.0 16.4 
USDA Performance and Accountability Report for FY 2002

53

only, 2.1 million acres of land retired 

and established in conservation buffers 

in CRP, and 60,000 acres established 

with other USDA cost-share and 

technical assistance. USDA’s conservation partners play a significant 

role in encouraging buffer application. 

USDA helped prevent 430 million 

tons of erosion on CRP lands, 

including 179 million tons of sheet 

and rill erosion and 251 million tons 

of wind erosion. We also sequestered 

16.4 million metric tons of carbon on 

CRP lands. 

On National Forests and Grasslands, changed work priorities, increased costs, and lowered work quality 

caused fluctuations in trends for soil and watershed improvements and terrestrial habitat restorations or 

enhancements over the past few years. 

The trend for habitat restoration increased during the past two years after falling by 28 percent in 2000. 

This was the first year USDA used the Budget Formulation and Execution System (BFES) to develop 

targets. 

USDA completed 29 comprehensive Environmental Response, Compensation, and Liability Act 

(CERCLA) cleanups in FY 2002. However, many of the 2,000 remaining environmental cleanups are 

larger, more complex, and more controversial than those completed to date, which will present new 

challenges to USDA's environmental cleanup program. Most sites subject to the Resource Conservation 

and Recovery Act, such as underground storage tanks (approximately 2,000), were addressed between 

1988 and 1998. 

Although individual site complexity can cause considerable variation in the number of abandoned mine 

sites reclaimed in one year, USDA consistently met its targets for reclaiming sites. 

Additional accomplishments in FY 2002 include: 

• Applied pest management practices on 5.2 million acres. 

• Enhanced urban environments by acquiring 58,083 acres (31 out of 31 states reporting as of 

December 2002) through the Legacy Project Acquisition and assisting local governments and 

communities to develop 569 group and area plans that address farmland protection and the effects of 

non-agricultural activities on ground water and surface water quality. 

• Protected or enhanced 2.925 million acres of wetlands and associated upland under multi-year 

contracts or easements. 

• Enhanced wildlife habitat by retiring 18.2 million acres from cropping and planting to vegetative 

cover best suited to wildlife. 

• Improved habitat for fish and wildlife by application of practices on 9.9 million acres of working 

cropland, grazing land, forest, and other land (annually). 

• Operated developed sites to standard, which served 95.07 million Persons At One Time (PAOT).

• Provided benefits to property and safety through flood damage reduction as a result of completing 79 

watershed protection structures. 

Exhibit 37: Environmental Improvements 

FY Actual 

Trend 

1999 2000 2001 2002 

Soil and watershed 

improvements on National 

Forests and Grasslands 

(acres) 

35,562 29,899 31,836 36,417 

Terrestrial habitat restored 

or enhanced on National 

Forests and Grasslands 

(acres) 

266,744 192,373 241,123 227,356 

CERCLA cleanups 

completed 

39 24 47 29 

Abandoned mine sites 

reclaimed 

15 N/A 154 42 
USDA Performance and Accountability Report for FY 2002

54

• Provided assistance to Resources Conservation and Development Councils to complete 4,145 projects 

that improved communities. 

• Assisted 11,780 communities through the Urban and Community Forestry Program. 

Description of Actions and Schedules. Using the new BFES process to estimate the output level, shifting 

priorities or emerging needs, and costs or quality of the outputs caused the actual acres of terrestrial 

habitat restored or enhanced to fall 57,382 below the target. In FY 2003 USDA expects to continue 

similar project work on National Forests for the highest priority needs based on available funding. Not 

meeting the target will delay the anticipated benefits derived from treating watersheds, habitat, or 

abandoned mine cleanup. 

Program Evaluation. The following evaluations, reviews, and/or audits took place during FY 2002: 

• USDA conducted internal reviews and evaluations through a national Oversight and Evaluation Staff. 

• In FY 2002 USDA conducted a study of National Resources Inventory, which is the major source of 

reliable trend data on conditions on non-Federal land. 

• Forest Service initiated a review of its Management Attainment Report (MAR) reporting 

requirements to evaluate MAR relevancy to current needs and the need to develop a Project Work 

Planning System. The initial system would create a planned program of work, possibly integrating 

reporting accomplishments with costs and linking the Forest Service (FS) Strategic Plan with 

performance reporting requirements. 

Selected Examples of Accomplishments in Research, Extension, and Statistics that Contribute to 

Achieving Key Outcome 1.6. 

Nutrient enrichment is one of the major sources of water quality impairment. Large confined animal 

operations (CAFOs) have drawn special attention as an agricultural source of nutrients. USDA researchers assessed the economic and water quality implications of nutrient management policies. USDA 

findings were instrumental in USDA and Environmental Protection Agency (EPA) interaction and EPA's 

development of rules implementing the new CAFO management requirements and new rules for 

assessing and managing watershed Total Maximum Daily Loads (TMDL). These insights have shaped a 

more efficient rule that will reduce water quality impairment at least cost to agricultural production and 

the economy as a whole. 

Herbicides and conventional management techniques cannot control Yellowstar thistle, a major Eurasian 

invasive weed of crops, rangeland, and natural areas. USDA scientists completed testing and applied for 

field release of a fungus (Puccinia jaceae). They determined that the fungus was specific and very 

damaging to Yellowstar thistle, obtained release approval from Californian regulators, and are awaiting 

final Federal release approval. This is the first time in the modern regulatory era in the United States that 

a plant pathogen has gone through the regulatory process. If the final regulatory hurdles are passed and 

the fungus is released, there is an excellent chance to reduce Yellowstar thistle populations that lower 

rangeland productivity and threaten valuable native plants. 

Leaving some crop residue on the field following harvest can reduce soil erosion from farm fields. Tools 

to quantify crop residue cover are needed to assess the effectiveness of this conservation tillage practice. 

USDA researchers using ground-based and aerial hyper spectral sensors measured the reflectance spectra 

of green vegetation, crop residues, and bare soil. A spectral reflectance index was developed using the 

reflectance data that can separate soil from residue, and measure the amount of soil covered by residue. 

The results provide a means of mapping conservation tillage practices and assessing erosion susceptibility 

over large areas which can be used to further reduce soil erosion and improved water quality. 

Forested lands adjacent to agricultural fields have been shown to reduce nitrogen concentration of water 

moving from the fields to adjacent streams and waterways. USDA has determined that forested zones 
USDA Performance and Accountability Report for FY 2002

55

bordering agricultural fields can be harvested for lumber, fuel wood, or pulpwood, and still function as 

filters for groundwater nitrate reduction. This indicates that these forested areas can be managed with 

long-term strategies to provide wood products or bio-fuels while maintaining water quality, and enabling 

producers to meet nutrient TMDL limitations. 

 

To reduce harmful phosphorus levels in surface water, Wisconsin researchers, with USDA funding, have 

altered the diets of dairy cows, cutting their phosphorus intake by one-third. As a result, the amount of 

phosphorus in manure was reduced by 50 percent. Moreover, runoff from fields fertilized with lowphosphorus manure contained just one-tenth as much phosphorus as runoff from fields fertilized with 

conventional manure. In addition, the new low-phosphorus diet allows producers to save $12 to $15 per 

cow per year. With 1.3 million cows in the state, Wisconsin will save $16 million each year.
USDA Performance and Accountability Report for FY 2002

56

Key Outcome 1.7: Effectively Implement the Farm Security and Rural Investment 

Act of 2002 

Exhibit 38: Resources Dedicated to Implementing the Farm Security and 

Rural Investment Act 

 

USDA Resources Dedicated to Key Outcome 1.7 FY 2002 

Actual 

 Program Obligation ($ Mil) 23,396.3 

 Staff Years 12,602 

 

11% 

Key Outcome 1.7: 

Implement the Farm 

Security and Rural 

Investment Act 

Staff Years

Rest of Goal 1

89% 

Key Outcome 1.7: 

Implement the Farm 

Security and Rural 

Investment Act 

Program Obligation

Rest of Goal 1

23% 

77% 
USDA Performance and Accountability Report for FY 2002

57

No performance measures specific to this Key Outcome were contained in USDA’s FY 2002 Annual 

Performance Plan. The Key Outcome, Effectively Implement the Farm Security and Rural Investment Act 

of 2002, was first introduced in USDA’s Revised Strategic Plan for FY 2002–2007. Relevant measures 

will be reported in next year’s Performance and Accountability Report. 

The Farm Security and Rural Investment Act of 2002 (2002 FSRIA) was passed in May 2002. The 2002 

FSRIA mandated many changes to existing programs and required the creation of new ones. For example, 

the new law allows producers to update historical acreage bases and yields; creates a new system of counter 

cyclical payments; establishes new loan rates for traditional program crops; creates new payment programs 

for dairy, wool, mohair, honey, and pulse crops; and requires significant changes to the peanut program. 

The 2002 FSRIA provides rebalanced loan rates and is consistent with our international trade obligations. 

The Act contains record-level support for environmental stewardship, a renewed commitment to renewable fuels programs, and additional investments to help expand international markets, rural community 

programs, and food stamp assistance for low-income Americans. 

For the first time, an Energy Title IX was included in the 2002 FSRIA. The Title has features that will 

increase economic opportunities for farmers, ranchers, and rural communities by providing new markets 

for agricultural commodities. 

Section 9002 established a new program requiring all Federal agencies to purchase biobased industrial 

products made from agricultural raw materials and a USDA labeling program for biobased products. 

Other provisions make loans and grants available for developing biorefineries and for renewable energy 

projects. The CCC will continue the bioenergy subsidy program for using agricultural feedstocks to make 

ethanol and biodiesel. The Agricultural Research Service will receive small increases in research directed 

to bioenergy. 

USDA took immediate steps to execute the 2002 FSRIA effectively and efficiently. We launched a new 

website (www.usda.gov/farmbill), cross-linked with major USDA agencies’ websites, that focused on 

providing farmers, ranchers, and other stakeholders with the latest information and announcements on the 

2002 FSRIA, and explaining its provisions and economic implications, as well as comparing it to the Act it 

succeeded. The Secretary established a Board of Directors (the Board), consisting of Subcabinet members 

and chaired by the Secretary and a working group to coordinate implementation of the 2002 FSRIA. The 

Board oversees the Farm Bill Implementation Working Group, which includes members from all USDA 

mission areas. Field and headquarters personnel are working together to develop policy and implement 

programs. The Working Group oversees implementations and makes regular progress reports on nearly 500 

actions undertaken to implement the 2002 FSRIA. USDA also makes regular program announcements to 

inform USDA constituents about our progress on implementing the 2002 FSRIA and providing faster, more 

efficient and accurate services to the farmers, ranchers, and other stakeholders. 

Selected Examples of Accomplishments in Research, Extension, and Statistics that Contribute to 

Achieving Key Outcome 1.7. 

USDA has refocused reporting of aggregate farm income to reflect a broader set of measures that present 

a truer picture of the well-being of farm households than any single income measure. Most farmers have 

multiple jobs and dual careers, with both farm and non-farm income and investments. USDA reporting 

now reflects a more complete picture of a household’s well-being; it examines levels of farm and nonfarm income, sources of wealth, and ability to support family consumption needs.
USDA Performance and Accountability Report for FY 2002

58

STRATEGIC GOAL 2: Enhance the Integrated Operation of USDA Through 

 Execution of the President’s Management Agenda

 

Key Outcome 2.1: Improve Human Capital Management 

Performance Measure: Ensuring Fair and Equitable Service to Customers and Upholding the Civil 

Rights of Employees

Constant surveillance and periodic major reviews instituted by USDA’s agencies have helped us ensure 

that our programs reach all who are eligible for them. USDA is making long-term improvements in 

processing civil rights cases. Applying increased resources and business process improvements has 

accelerated our case processing. We expect to reduce the time required to investigate an employment civil 

rights complaint case to within 180 days. Effective systems to process program and employment civil 

rights complaints will help us to carry out investigations in a fair and timely manner. 

Analysis of Results.

The data shows that major USDA 

programs have been given a civil 

rights review every five years. The 

data on civil rights case processing 

show that significant progress was 

made in FY 2002 in reducing 

processing times. USDA also 

reviewed all major program and 

administrative regulations for their 

impact on civil rights. 

A baseline was not established for minority participation in USDA programs in 2002. In this area, the 

outreach programs are being reevaluated in FY 2003 and the Outreach for Socially-Disadvantaged 

Farmers Program is being transferred to the Cooperative State Research, Education, and Extension 

Service. 

Program Cases–Average processing time for program complaints was reduced 38 percent in 2002.

Employment Cases–Average processing time for employment complaints was reduced 22 percent in 2002. 

Program Evaluations. The following evaluations, reviews, and/or audits took place during FY 2002: 

• USDA agencies review major programs and regulations for Civil Rights Impact and Minority 

Participation and report their findings annually. Since reviews are principally carried out by program 

operators in different locations at different times, the results are subject to the different conditions and 

interpretations; however, the reports are generally considered to be complete and accurate. 

Exhibit 39: Civil Rights of Employees 

Fiscal Year 2002 

Annual Performance Goals and Indicators 

Target Actual Result 

Major USDA programs reviewed each year (%) 20 20 Met 

Reduction in the average number of days it takes to resolve USDA civil rights complaints (%) 5 27 Exceeded 

Exhibit 40: Civil Rights Case Processing Improved. 

FY Actual 

Trend 

1999 2000 2001 2002 

Major USDA programs 

reviewed each year (%) 

N/A 20 20 20 

Reduction in the average 

number of days it takes to 

resolve USDA civil rights 

complaints (%) 

N/A N/A 1 27 
USDA Performance and Accountability Report for FY 2002

59

Performance Measure: Employee Engagement and Satisfaction

USDA’s human capital management goals focus on restructuring and competing for talent. Competition for 

the best talent is keen; employees want organizations that offer challenging work, opportunities for professional growth, inspiring leadership, quality work-life, and fair treatment. USDA’s workforce satisfaction 

exceeds the national average, positioning us to achieve our workforce restructuring goals. 

Analysis of Results. Data to assess or 

measure the accomplishment of the 

employee satisfaction rate is found in 

the Office of Personnel Management’s (OPM) Government-wide 

Survey on Human Capital (GWS). 

This survey has several dimensions 

and allows us to explore employee 

perceptions on many important issues, e.g. Strategic Alignment, Strategic Competencies, Leadership, 

Performance Culture, and Learning (Knowledge Management). The data will allow us to compare our 

results with private sector as well as government-wide norms. Personal Experience and Job Satisfaction 

were also areas of the survey. The survey was administered in March 2002. While the survey has closed, 

OPM has not yet released survey results to agencies. OPM will be using a sequenced or phased information release strategy. A high level, relatively brief report, which provides Government-wide findings on 

broad information, is scheduled for release in 2003. 

Program Evaluations. No program evaluations were conducted in FY 2002. 

Performance Measure: Ensuring USDA Acquires Recurring Commercial Services in the Most Cost 

Effective Way

In accordance with the President’s government-wide initiative to determine if the private sector can 

perform functions more effectively and efficiently than government employees, USDA submitted a plan 

to the OMB in FY 2002 for taking competitive bids on approximately 15 percent of the full-time 

equivalents listed in our Federal Activities Inventory Reform Act (FAIR) inventory of commercial 

functions. USDA has agreed with OMB to compete approximately 15 percent of our FY 2000 commercial 

inventory by September 2003. 

Exhibit 41: USDA Rates Above U.S. Government Worker Satisfaction 

Fiscal Year 2002 

Annual Performance Goals and Indicators 

Target Actual Result 

USDA employee work satisfaction rate above U.S. Government worker satisfaction (%) 5 TBD Deferred 

Exhibit 42: Employees Reported Above Average Job Satisfaction

FY Actual 

Trend 

1999 2000 2001 2002 

USDA employee work satisfaction rate 

above U.S. Government worker 

satisfaction (%) 

N/A 3 4 Available

12/31/02

Exhibit 43: Competitive Sourcing Activities 

Fiscal Year 2002 

Annual Performance Goals and Indicators 

Target Actual Result 

Reduction in cost and/or increased productivity of commercial activities: Met 

• Provide timely annual update of FAIR Act Inventory Yes Yes 

• Develop plan for incremental competitions/conversion of FAIR Act inventory Yes Yes 
USDA Performance and Accountability Report for FY 2002

60

Analysis of Results. All USDA agencies are working with OMB to obtain approval of our 2002 Inventory. 

USDA has a plan for conducting competitions for a portion of our FAIR Act inventory on an ongoing basis. 

Program Evaluations. No program evaluations were conducted in FY 2002. 

 

Performance Measure: Increasing the Use of Performance-Based Service Contracting

USDA promoted performance-based contracting focusing on identifying those contracts where making an 

investment in developing performance-based standards can yield big improvements in contractor performance. USDA has made strides in converting traditional service contracts to performance-based ones. In 

recent years, the value of USDA contracts eligible for service-based contracting has been over $700 million. 

The Department is also moving toward the Integrated Acquisition System. A pilot to test an Integrated 

Acquisition System on a web-based eProcurement solution was completed in FY 2002. 

Exhibit 44: USDA’s Eligible Service Contracts 

Fiscal Year 2002 

Annual Performance Goals and Indicators 

Target Actual Result 

Use of performance-based service contracts of total eligible service contracts (%) 20 40 Exceeded 

Analysis of Results. The contracting 

offices executing the contracts entered 

the data on Performance-Based 

Service Contracts (PBSC) into a 

procurement data management 

system. Based on that data, USDA 

used PBSC in 40 percent of the 

eligible contracts. USDA utilized 

FedBizOpps to advertise procurement opportunities. 

Program Evaluation. No program evaluations were conducted in FY 2002. 

Key Outcome 2.2: Improve Financial Management 

Performance Measure: Provide Timely and Reliable Financial Management Information

USDA works with its component agencies to ensure that our financial policies reflect sound business 

practices. Achieving a clean audit opinion on USDA’s Consolidated Financial Statements and agency 

specific financial statements will assure the users of our financial information as well as constituents that 

USDA’s internal control and financial systems are sound and generate consistent, reliable, and useful 

information. Implementation of the Foundation Financial Information System (FFIS) and its associated data 

warehouses, provided the integration and capabilities needed to improve the delivery of timely and 

meaningful financial management information, and will allow USDA to comply with legislation, including 

the CFO Act of 1990. 

Exhibit 45: Increased Use of Performance-Based Contracts 

FY Actual 

Trend 

1999 2000 2001 2002 

Use of performance-based service 

contracts as a percent of total eligible 

service contracts (%) 

1.9 4.6 13 40 
USDA Performance and Accountability Report for FY 2002

61

Analysis of Results. The Office of 

the Chief Financial Officer (OCFO) 

provided effective leadership and 

talent to USDA’s agencies and the 

National Finance Center (NFC) to 

capture break-through rather than 

incremental value from extensive 

changes in financial management 

accountability and accounting 

operations. We implemented 

effective operational accounting 

processes within NFC and problem 

agencies, while transferring 

knowledge through documentation and training. We also enhanced decision-making and cash 

management of USDA’s Working Capital Fund. 

The FS was transformed in FY 2002 to operate as an effective, sustainable, and accountable financial 

management organization. 

The OCFO guided USDA to full reconcilement of USDA’s Fund Balance with Treasury. 

Two major factors in USDA’s goal to obtain a clean audit opinion are our efforts on Property and Credit 

Reform. OCFO worked with USDA agencies to implement a process for accounting for real property and 

related depreciation expense, to conduct personal and real property inventories, and to reconcile all property records to the general ledger. All USDA agencies corrected real and personal property accounting 

and stewardship inadequacies and installed sustainable processes for the future. Also, OCFO worked with 

USDA agencies to maintain progress on Credit Reform and continue improvements. 

With an integrated budget and standard general ledger accounting system implemented in all USDA 

agencies, we add value to financial management information and improve corporate administrative 

computer systems. This emphasis will further advance managers’ ability to measure results and to make 

good decisions. 

Program Evaluation. The following evaluations, reviews, and/or audits took place during FY 2002: 

• The OIG has conducted various audits of USDA’s financial systems. 

• The OIG conducted annual audits of five stand-alone agency financial statements and the USDA 

Consolidated Financial Statements. 

Exhibit 46: Financial Management Information Timely and Reliable 

Fiscal Year 2002 

Annual Performance Goals and Indicators 

Target Actual Result 

Achieve an unqualified opinion on the USDA’s Consolidated Financial Statements 

for FY 2002 

Unqualified 

Opinion 

Unqualified 

Opinion 

Met 

Implement the Foundation Financial Information System USDA-wide: Met 

• Total USDA workforce served by the financial system (%) 98 98 

Note: The final two agencies in USDA were connected to FFIS on October 1, 2002. 

Exhibit 47: Financial Management Programs Showed 

Improvement 

FY Actual 

Trend 

1999 2000 2001 2002 

Achieve an unqualified 

opinion on the USDA’s 

Consolidated Financial 

Statements for FY 2002 

Disclaimer Disclaimer Disclaimer Unqualified 

Opinion 

Total USDA workforce 

served by the financial 

system (%) 

31 46 78 98 

Note: The final two agencies in USDA were connected to FFIS on 

October 1, 2002. 
USDA Performance and Accountability Report for FY 2002

62

Performance Measure: Improving Stewardship of the Food Assistance Programs

USDA is strongly committed to prevent abuse or waste of taxpayer dollars, and to ensure that nutrition 

programs serve those in need at the lowest possible costs. In FY 2002, USDA continued to improve 

stewardship, with further deployment of improvements to program delivery and management, as well 

as, continued progress in reducing program error. 

Analysis of Results. Because key 

results-oriented data is not yet 

available, a full assessment of 

USDA’s performance in improving 

food assistance program stewardship 

goals cannot yet be made. However, 

available data indicates the need for 

continued action to improve 

stewardship with increased delivery 

of food stamp benefits through 

electronic benefits transfer (EBT), 

implementation of commodity 

program improvements, and strong 

oversight in the CACFP. 

Highlights related to nutrition assistance program stewardship include: 

• Electronic Benefits Transfer: 89 percent of Food Stamp Program benefits were issued through EBT.

• Benefit Accuracy in the Food Stamp and School Meals Programs: While data for FY 2002 is not yet 

available, the Food Stamp Program achieved its highest-ever benefit accuracy rate in FY 2001 (91.3 

percent). FY 2002 data related to the counting and claiming of school meals will be available in 

November 2003. FY 2001 data indicates that the program substantially met its goal to continue strong 

performance in counting and claiming accuracy. The benefit accuracy goal was deferred; data will be 

provided on the dates indicated in exhibit 48. 

• Child Care Integrity: During FY 2002, USDA adjusted its review strategy to conduct more in-depth 

reviews for a two-year cycle. Thus, during FY 2002 and FY 2003, all States must be reviewed, but there 

is no per year target. Management evaluations appear to be proceeding appropriately on this adjusted 

schedule. Progress on management improvement training has been hampered by delays in publishing 

new regulations; an interim rule was published in June 2002. State agency training is now scheduled for 

the beginning of FY 2003, and State agency sponsor training will occur throughout the remainder of the 

year. 

• Food Distribution Reinvention Milestones: USDA met 90 percent of these milestones, rather than the 

100 percent originally targeted. USDA is still developing and/or pursuing actions related to two FY 

Exhibit 48: Better Stewardship of the Food Assistance Programs 

Fiscal Year 2002 

Annual Performance Goals and Indicators 

Target Actual Result 

Improve program design and delivery: Met 

• Food stamp benefits issued electronically (%) 89 89 

Maintain benefit accuracy in the food stamp and the school meals programs: Deferred 

• Food stamp benefit accuracy rate (%) 91.3 Available 

4/03 

• School Food Authorities in compliance with school meals counting and claiming 

rules (%) 

87 Available 

9/03 

Exhibit 49: Food Assistance Indicators Show Improved 

Program Delivery and Design 

FY Actual 

Trend 

1999 2000 2001 2002 

Food stamp benefits 

issued electronically (%)

70.3 76.3 82.8 89 

Food stamp benefit 

accuracy rate (%) 

90.1 91.1 91.3 Available 

4/03 

School Food Authorities in compliance with 

school meals counting 

and claiming rules (%) 

N/A 86.8 86.6 Available 

9/03 
USDA Performance and Accountability Report for FY 2002

63

2002 milestones: 1) processing commodities with limited demand into more usable forms; and 2) 

developing a single, web-based point of public contact on commodity issues for the Department. 

• Commodity Program Computer Connectivity: Two States, rather than the 15 States originally 

projected, initiated a USDA-sponsored system that facilitated computer connectivity to the school 

district level in FY 2002. Food Nutrition Service (FNS) decided to temporarily limit the newly 

developed system, called the Electronic Commodity Ordering System, to four States until it has been 

adequately tested. FNS plans to offer the system to all States during school year 2003. 

Program Evaluation. The following evaluations, reviews, and/or audits took place during FY 2002: 

• Among Staff and Participants in the WIC Program: Volume I 

• Final Report Reimbursement Tiering in the CACFP: Summary Report to Congress on the Family 

Child Care Homes Legislative 

• Family Child Care Homes and the CACFP–Participation After Reimbursement Tiering (An Interim 

Report of Family Child Care Homes Legislative Changes Study) 

• Plate Waste in School Nutrition Programs: Final Report to Congress 

• Methods to Prevent Fraud and Abuse Among Staff and participants in the WIC Program 

• Food Stamp Program: Use of Options and Waivers to Improve Program Administration and Promote 

Access 

• Financial Management: Coordinated Approach Needed to Address the Government’s Improper 

Payments problem 

• Food Stamp Program: Implementation of EBT. 

• Food Stamp Program: States’ Use of Options and Waivers to Improve Program Administration 

• Fruits and Vegetables: Enhanced Federal Efforts to Increase Consumption Could Yield Health 

Benefits for Americans 

• Analysis of CACFP Large Sponsoring Organizations 

Key Outcome 2.3: Expand Electronic Government 

Performance Measure: Improving Information Management Using eGovernment

In FY 2002, USDA began transforming and enhancing our programs, services, and information to deliver 

them electronically with the necessary security safeguards. USDA’s strategic and enabling eGovernment 

“smart choices,” together with our Government Paperwork Elimination Act (GPEA) and Freedom to EFile activities, serve as a foundation for more efficient delivery of the increased services called for in this 

legislation. At the same time, we began strengthening our information survivability and information 

security and awareness programs as part of our response to the Nation’s homeland security threats. 

Together these programs enable improved customer service, make employees more productive, and save 

taxpayer dollars. 

In concert with the President’s Management Council, USDA launched an internal eGovernment Program in 

October 2001. An interagency eGovernment Executive Council, led by the Deputy Secretary, manages the 

program. The Council developed a USDA eGovernment Strategic Plan (www.egov.usda.gov ) as part of an 

overall eGovernment Framework incorporating the vision, strategy, marketing, and tactical activities for our 

transition away from traditional paper-based processes and single-agency service delivery approaches. 

Together with agency tactical plans, these activities support collaborative Information Technology (IT) 

investments in FYs 2002, 2003, and 2004, and we expect them to reduce redundant investments serving 

single-agency requirements. As an example of USDA’s eGovernment progress, USDA fully met the 
USDA Performance and Accountability Report for FY 2002

64

requirements of the Freedom to E-file Act (P.L. 106–222) by establishing an Internet-based system that 

enables agricultural producers to access all USDA forms electronically. 

USDA established the Federal Financial Assistance Committee (FFAC) to oversee the implementation of 

the Federal Financial Assistance Management and Improvement Act (P.L. 106–107) and monitor 

eGovernment initiatives within USDA. 

 

Analysis of Results. In support of 

USDA’s activities for legislative 

mandates of the Freedom to E-file Act 

and GPEA, USDA established the 

Electronic Government (eGovernment) Program, hired the USDA 

eGovernment Executive to provide 

leadership and oversight for USDA’s 

eGovernment planning and implementation, and established an 

eGovernment governance structure 

that includes a senior-level executive 

council and working group. The 

eGovernment Program is responsible 

for leading implementation of the 

Government Paperwork Elimination 

Act, Freedom to E-File Act, the Paperwork Reduction Act, and the Expanding Electronic Government 

component of the President’s Management Agenda. 

The FFAC inventoried 640 USDA forms and application kits as the baseline for reduction efforts. 

Additionally, FY 2002 interagency efforts to establish a common set of data elements and eGovernment 

efforts to reduce the number of unique electronic systems supporting financial assistance will assist in 

the streamlining effort. USDA committed to using the interagency announcement site called FedBizOpps (http://www.FedBizOpps.gov) to co-locate USDA funding announcement summaries with all 

other Federal agencies. The FFAC began defining requirements for a single USDA website to find and 

exchange financial assistance information which will better serve our customers and staff. Work is 

under way to identify all USDA financial assistance web sites and then make them accessible through 

one web location by April 2003. 

USDA also successfully deployed the Common Computing Environment (CCE), which serves as the IT 

infrastructure foundation necessary to support the Service Center Agencies’ (SCA) use of modern 

Exhibit 50: Integrated eGovernment Environment 

Fiscal Year 2002 

Annual Performance Goals and Indicators 

Target Actual Result 

Movement toward a fully integrated e-Government environment: Met 

• Meet legislative mandates of the Freedom to E⋅File Act and GPEA Yes Yes 

• Reduce duplicative investments for enabling information technologies and 

related services 

Yes Yes 

Simplify and reduce number of financial assistance program forms and application kits Establish 

Baseline 

640 Met 

Improve electronic processes for financial assistance program announcements and 

application kits 

Establish 

Baseline 

Available 

4/03 

Deferred 

Exhibit 51: Improving eGovernment Process 

Fiscal Year Actual 

Trend 

1999 2000 2001 2002 

Meet legislative mandates of the 

Freedom to E⋅File Act and 

GPEA 

N/A N/A Yes Yes 

Reduce duplicative investments 

for enabling information 

technologies and related 

services 

N/A N/A Yes Yes 

Simplify and reduce number of 

financial assistance program 

forms and application kits 

N/A N/A N/A 640 

Improve electronic processes for 

financial assistance program announcements and application kits 

N/A N/A N/A Establish 

Baseline 
USDA Performance and Accountability Report for FY 2002

65

business processes and electronic government tools. We reached our goal of providing every SCA 

employee with a modern, secure workstation with updated software and access to the Internet. As 

planned, network servers were also installed in the Service Centers to enable sharing of applications 

and Geographic Information Systems (GIS), customer and other program data. 

Program Evaluation. The following evaluations, reviews, and/or audits took place during FY 2002: 

• We continuously reviewed our approach and adjusted accordingly. 

• OCIO provides regular eGovernment progress reports to the Secretary. 

• USDA provides OMB annual reports on GPEA and PRA implementation.

• USDA provides the Congress quarterly progress reports on CCE implementation.

• GAO and OMB assessed USDA progress in implementing the Freedom to E-File Act and GPEA. 

Performance Measure: Expanding Information and Cyber Security

The focus on homeland security in FY 2002, combined with expanded public access to more USDA 

online services, increased the importance of our information security program. In FY 2002, we made 

considerable progress in this area. 

Analysis of Results. In FY 2002, we 

completed our USDA Risk Management Methodology to guide 

agencies through risk analysis and risk 

mitigation. This methodology includes 

training, standard forms and procedures, and business case development. 

These guides have been distributed 

across the department and are being 

used by the agency as a regular part of 

their assessment and analysis 

programs. USDA completed the first 

phase of the security architecture 

strategy, which includes the blueprint for deployment of appropriate security products and a methodology 

for matching controls to specific technical environments and business processes. Full production and usage 

of the plan will be achieved during fiscal year 2003. USDA also initiated a base level Information 

Survivability Program. Initial steps included the establishment of a Departmental level planning Council to 

ensure awareness and understanding of the initiative. During fiscal year 2003, the program will design and 

deploy a standard methodology and tool that agencies will use to develop and test disaster recovery and 

business resumption plans. The methodology will create a common approach that will be standardized 

Exhibit 52: Securing the IT Environment 

Fiscal Year 2002 

Annual Performance Goals and Indicators 

Target Actual Result 

Develop, implement, and maintain a secure and confident IT environment while protecting 

privacy: Unmet 

• Implement a Risk Management Methodology (%)* 100 90 

• Develop and implement information and telecommunications security architecture 

(%)* 50 50 

• Develop and implement an Information Survivability Program (%)* 20 5 

• Develop and implement a Sensitive System Certification Program (%)* 20 5 

* % of Department-wide implementation completed. 

Exhibit 53: IT Security/Confidence Grew 

FY Actual 

Trend 

1999 2000 2001 2002 

Implement a Risk Management 

Methodology (%) 

N/A 10 25 90 

Develop and implement information and telecommunications 

security architecture (%) 

N/A N/A 10 50 

Develop and implement an Information Survivability Program (%) N/A N/A N/A 5 

Develop and implement a 

Sensitive System Certification 

Program (%) 

N/A N/A N/A 5 
USDA Performance and Accountability Report for FY 2002

66

across USDA. Limited progress was made toward the development and deployment of a sensitive system 

and certification program. Some progress was achieved in the identification of specific systems where 

certification was required, but not as a part of a regularly structured program implemented across the 

department. During fiscal year 2003, greater emphasis will be placed on implementation of a structured 

methodology and plan. 

Description of Actions and Schedules. During the coming year, the following actions, including timeframes, will be taken regarding the USDA Information Survivability program and the establishment of a 

sensitive system and certification program. 

The Information Survivability Program will have three phases: 

• First quarter of FY 2003: 1) development and delivery of a broad contingency planning and 

awareness program for a multiple level audiences of USDA employees (Executive, Technical and 

Worker), and 2) assessment, selection, and deployment of an enterprise software application to 

facilitate disaster planning and recovery across USDA will be completed. 

• Second quarter of FY 2003: 1) conduct a Pilot demonstration of the software tool and assess its 

adequacy to meet departmental needs using real agency based planning, and 2) develop and deploy 

policy guidance that establishes the program and its reporting requirements. 

• Third quarter of FY 2003: 1) evaluate recovery strategies and alternative backup and recovery 

solutions on a departmental basis, and 2) independently assess the planning efforts of USDA agencies 

in satisfying policy requirements and the actual development of executable plans. 

The Sensitive System and Certification Program will begin the second quarter of FY 2003 to: 1) begin the 

process of structuring a consistent methodology regarding certification of systems across USDA, and 2) 

establish, through policy, the need, and requirements for system certification. Coordinate efforts with the 

physical security staff regarding sensitive locations and facilities. This program was not funded or 

developed in FY 2002. 

Program Evaluation. The following evaluations, reviews, and/or audits took place during FY 2002: 

• The Office of the Chief Information Officer conducts an annual review of USDA’s information 

security status for the annual Government Information Security Reform Act submission to OMB. 

• GAO and OIG both conducted cyber-security related audits at USDA in FY 2002. 

• The Office of the Chief Information officer conducted a cyber-security review of the Ames, Iowa, 

research facility. 

Key Outcome 2.4: Establish Budget and Performance Integration 

No performance measures specific to this Key Outcome were contained in USDA’s FY 2002 Annual 

Performance Plan. The Key Outcome, Establish Budget and Performance Integration, was first introduced 

in USDA’s Revised Strategic Plan for FY 2002–2007. Relevant measures will be reported in next year’s 

Performance and Accountability Report. 

USDA made a number of strides forward in budget and performance integration during FY 2002. In 

January 2002, USDA prepared a draft Budget and Performance Integration plan. The draft highlighted 

steps toward integration, such as preparing a new strategic plan, and preparing a model budget justification using APHIS as a pilot agency. Following are highlights of some specific actions taken to improve 

integration during FY 2002. 

• In Spring 2002, a draft revised budget presentation for APHIS was developed to show how performance information could be presented in the context of resource requests. After discussion with OMB, 
USDA Performance and Accountability Report for FY 2002

67

this format was incorporated into the Department’s instructions to agencies for the development of 

FY 2004 budget proposals. 

• Budget materials used by policy makers during the FY 2004 budget process included performance 

information shown side-by-side with budget proposals to clearly identify the linkages between 

changes in funding levels and performance. 

• The Secretary and her Subcabinet developed a revised USDA strategic plan. The revised plan is more 

focused and results-oriented. 

• The Department collaborated with OMB to conduct timely Program Assessment Rating Tool 

evaluations on 11 programs during the last quarter of FY 2002 and to update three additional evaluations that were made during the spring. These evaluations helped inform the FY 2004 budget 

process. 

• The Department also worked with other Federal agencies and OMB to develop seven common 

performance measures for: wildland fire; disaster insurance; non-point pollution; wetlands; rural 

water projects; flood mitigation; and housing assistance. 
USDA Performance and Accountability Report for FY 2002

68

DATA ASSESSMENT OF PERFORMANCE MEASURES 

Strategic Goal 1: Effectively Carry Out USDA Program Responsibilities 

With Decisions Based on the Best Available Science and 

Efficient Program Delivery Systems 

Key Outcome 1.1: Expand Market Opportunities for U.S. Agriculture 

Improving International Marketing Opportunities 

Data on trade opportunities created and expanded are based on trade figures from trade retention reports. 

In some cases, statistics on actual values of shipments are obtained directly from U.S. exporters. Values 

of current trade were applied for tracking Tariff Rate Quotas (TRQs). It is understood that the measured 

performance data reflecting potential export markets are by nature “not guaranteed” and may be arguable 

among economists. Nevertheless, they are estimated as they occur using a systematic approach designed 

to avoid overstatement. 

These annual sales data reported have been collected for many years, and the collection processes and 

systems are highly reliable. However, the data that support these measures come directly from U.S. companies, which benefit from the specific activities. It is outside USDA’s authority and prohibitively costly 

to validate the actual exports reported. 

Export credit guarantee program data are based on actual CCC export credit guarantee program sales 

registrations. Actual data reported are final and complete. Program sales registrations predict actual exports 

that occur under the program with 95 percent accuracy. Actual export figures under the program become 

available during the month of February following the September 30 closing date of each fiscal year.

Reducing Hunger and Malnutrition Around the World 

Data are based on analyses completed by the Food and Agricultural Organization (FAO), of the United 

Nations. FAO analysts perform these analyses for all of the countries that committed to the goal at the 

1996 World Food Summit. The FAO analysis of current progress towards the long-term goal is conducted 

periodically, but not necessarily every year. 

Not only are the data captured in official program/financial databases; these data are also audited as part 

of the CCC Annual Financial Report audit. Data are final and based upon program agreements signed and 

amended as required by law prior to the end of each fiscal year. Final shipment data can vary slightly, but 

it is usually within a one percent error margin. Data presented, unless otherwise noted, only represent 

commodity values, and do not include the cost of shipment and administration. 

The research, training and technical assistance activities are tracked by an internal USDA accounting 

system and other internal program management databases. 

Supporting Sustainable Food Supplies Worldwide 

Research, training and technical assistance activities are tracked by an internal USDA accounting system 

and other internal program management databases. 

Improving Domestic Agricultural Marketing Opportunities 

The data contained in grain marketing is considered complete and reliable, and represents various 

analytical reference methods, official tests, and calibrations performed to support and ensure grain 

quality. Supporting data includes official notices, directives, bulletins, reports, Certificates of 

Conformance, Certificates of Performance, working instructions, and calibration review meeting minutes. 
USDA Performance and Accountability Report for FY 2002

69

Key Outcome 1.2: Provide Risk Management and Credit/Financing Tools to Support 

Production Agriculture, and Improve Quality of Life in Rural Areas 

Improving the Safety Net for Farmers and Ranchers 

The data used for these measures is from audited external and internal sources, and contains no known 

limitations. A more comprehensive description of the data can be found in the RMA and FSA annual 

program performance reports. 

Improving the Standard of Living in Rural Communities 

Data on the number of water and waste systems developed or expanded are obtained from the Program Loan 

and Accounting System. Data on the number of jobs resulting from the business programs has come from 

the Rural Community Facilities Tracking System (RCFTS) in the past, but will be from the RD Application 

Processing Tracking System (RDAPTS) in the future. Data from RDAPTS will be considered significantly 

more reliable. Data on the number of households receiving USDA financial assistance to purchase a home 

comes from the Obligations Report 205, which is derived from Finance Office obligation records and is 

considered reliable. Data on the success of EZ/EC communities in obtaining funding from non-EZ/EC 

sources is derived from the Office of Community Development’s benchmark management system. The 

EZ/EC program requires that a set of performance benchmarks be established and maintained for each 

EZ/EC community. All data is considered reliable for management purposes. 

Sustaining Family Farms 

The data assessing the number of small farms in the U.S. are based on USDA’s National Agricultural 

Statistics Service (NASS) annual report Farms and Land in Farms. This report is released in February of 

each year and includes data for the previous three years. The February 2003 report, which will include 

data for 2002, is expected to be released on February 22, 2003. 

Performance information on farm loan programs is collected from the Program Loan Accounting System 

and the Guaranteed Loan System. To help ensure data reliability and quality, internal controls are built 

into the systems. Additionally, FSA National Office management reviews systems reports to monitor 

program performance. Comprehensive internal control reviews are conducted in FSA State Offices each 

year to ensure loan making decisions are sound and that program implementation is in accordance with 

statutes and regulations. Data reported is also subject to OIG audit. There are no known data limitations.

Key Outcome 1.3: Effectively Meet Responsibilities for Homeland Security 

This new Key Outcome has no relevant performance measures from the FY 2002 Annual Performance Plan. 

Key Outcome 1.4: Continue to Use the Best Available Science, Information and 

Technology to Protect the Nation’s Agriculture and Food Supply 

Reducing the Number and Severity of Pest and Disease Outbreaks 

To reduce the number and severity of pest and disease outbreaks in international air passengers who 

comply with the agricultural quarantine inspections, USDA takes steps both to prevent outbreaks, and to 

respond effectively to those occurrences. Data used to calculate this compliance rate is collected through 

the Plant Protection and Quarantine’s (PPQ) Agriculture Quarantine Inspection (AQI) Monitoring System 

and its Work Accomplishment Data System (WADS). Data is collected at multiple Ports-of-Entry for the 

air passenger pathway by applying standard statistical sampling procedures. Although there is a small 

percentage of poor quality data (due to port personnel changes, equipment failure, and nonsupport by 

some local management), the quality and reliability of the monitoring data continues to be acceptable. 

PPQ national and regional managers are working with specific ports to improve data quality, support 

issues, and equipment problems. 

In August 2001, the National Animal Health Emergency Management Steering Committee (NAHEMS) 

sponsored a self-assessment of State Animal Health Emergency Management Systems. The State Veteri-
USDA Performance and Accountability Report for FY 2002

70

narian and the Federal Area Veterinarian in Charge for each state and territory (including Puerto Rico and 

the U.S. Virgin Islands) jointly completed the assessments. The assessment was designed to determine if 

each state met the Standards for State Animal Health Emergency Management Systems published in 

January 2000. Since the January 2000 assessment, the NAHEMS Steering Committee has done a biannual 

assessment of states. Moving to a biannual schedule allows states and the Committee more time for data 

verification and for providing help to states trying to meet the standards. The next assessment is scheduled for September 2003. 

Reducing the Incidence of Foodborne Illnesses Related to Meat, Poultry, and Egg Products in the U.S. 

Data included are from October 1, 2002, through approximately September 15, 2002, and are considered 

final and reliable. An automated system (MARCIS) provides information on microbiological, chemical, 

and pathological analyses of meat and poultry and their processed products. USDA uses the North 

American Precis Syndicate, Burrelles clipping service, and Media Distribution Services to monitor 

placement of consumer food safety articles, and print and broadcast media in North America and daily 

newspapers. For television tracking, USDA uses PCS Broadcast Services, which monitors public service 

announcements based on actual airtime and viewership of the announcement. 

Key Outcome 1.5: Improve the Nation’s Nutrition and Health through Food 

Assistance and Nutrition Education and Promotion 

Reducing Hunger and Improving Nutrition in the U.S. Through the Nutrition Assistance Program 

USDA uses projected annual participation levels as a proxy measure of performance in maintaining program 

access and benefit delivery for nutrition assistance programs. These projections reflect USDA’s best 

estimates of voluntary program participation, rather than targets per se. Performance data is drawn from 

reports from State cooperating agencies that are collected and consolidated by USDA and reviewed for 

consistency and completeness. Since this data is used to support disbursement of program payments to 

States, they reflect the most complete record available of program participation and related costs. Final data 

for this objective will be available 2nd Quarter, FY 2003; final figures are expected to fall within two percent 

(±) of preliminary figures. Data will be updated in the FY 2003 Annual Performance Report, and analysis 

will be included of any data that changes beyond the two percent range. 

Improving the Diets in U.S. Through the Nutrition Assistance Program 

USDA tracks the implementation of nutrition promotion and education efforts during the year; annual 

mechanisms are generally not available to evaluate the impact of the efforts on the diets of those targeted. 

Performance data involving the distribution of educational materials are collected from contractors, 

including the National Technical Information Services (NTIS), U.S. Department of Commerce, and the 

District of Columbia Archival Research Catalogue (DC-ARC), which distribute materials for USDA and 

from USDA-FNS administrative records when materials are distributed directly by the Agency. Contractors 

provide distribution reports to USDA, which can be verified through management reviews and other reporting mechanisms as resources permit. While this data tracks the overall number of materials disseminated as 

a result of the campaign, it does not permit determination of the number or proportion of participants 

reached by these events. 

Performance information for WIC mothers initiating breastfeeding is derived from a biennial analysis of 

WIC participant data, which include data on breastfeeding initiation. The data used represent a census of 

WIC participants, and thus are not subject to sampling error; in addition, non-response is very low, 

minimizing bias. Data for FY 2002 will be available in April 2004, and will be included in the FY 2004 

performance report. 

Data on fruit and vegetable deliveries to schools are derived from the Processed Commodities Inventory 

Management System (PCIMS), which track commodity purchases for nutrition assistance programs. 

PCIMS data is reconciled monthly and annually by program analysts to ensure accuracy. Data on the 

Food Distribution Program on Indian Reservations (FDPIR) sites receiving fresh fruits and vegetables is 
USDA Performance and Accountability Report for FY 2002

71

derived from Defense Department billing information, and verified through USDA administrative 

records. Since the data maintained in these systems support the inventory of fruits purchased along with 

the corresponding program costs associated with procuring fruit and vegetable commodities, they reflect 

the most complete record of performance available in these areas. FY 2002 data will be made available 

during the second quarter of FY 2003, and will be reported in the FY 2003 Annual Performance Report. 

USDA is not aware of any significant limitations on the validity or accuracy of this data. 

Ensuring Better Diet Quality 

Internal records were used to compile data on the number of visitors to USDA's Healthy Eating Index. 

The data, obtained from the site’s logs by using the software package WebTrends, consist of individuals 

who may have visited the site more than once during each reporting period. The data are highly reliable, 

providing accurate counts of the number of downloads, visitor sessions, most viewed pages, average daily 

use, as well as other information. Should this source no longer provide such information, Center for 

Nutrition Policy and Promotion (CNPP) will identify another source. 

Key Outcome 1.6: Provide Sensible Management of Our Natural Resources 

Maintaining Resource Health and Productive Capacity 

The performance data for the indicator on application of conservation on working land are collected 

through the USDA-NRCS Performance and Results Measurement System. NRCS field employees and 

local conservation district employees in 2,500 offices across the country enter the data. NRCS state 

conservationists certify the accuracy of the data provided by their employees. The data for acreage retired 

from production comes from the USDA-FSA National CRP Contract and Offer Data files. These files are 

evaluated to determine the environmental benefits of CRP, and upon contract approval, the data is 

updated to reflect land use, land treatment, and environmental benefits. To help ensure program integrity, 

service center employees conduct on-site spot checks and review producer files prior to annual payment 

issuance to ensure conservation practices are maintained in accordance with program requirements. 

Protecting the Environment 

Data for the indicators for soil and watershed improvements and terrestrial habitat on National Forests 

and Grasslands are obtained through the FS’s Management Attainment Report (MAR). To improve the 

quality of the data, the FS took several actions in FY 2001. A new reporting database was designed and 

implemented for the gathering of data in MAR. The new system is intended to minimize the risks of 

errors from manually consolidating data entry sheets; reduce the amount of time for data entry and 

tabulation; facilitate field review of accomplishment reports; and improve data analysis, control, and 

validation efforts. 

Agency heads attest to the accuracy and completeness of their reported data. The data is prepared by 

employees with education and/or training in relevant environmental fields and is examined holistically by 

the senior environmental professionals. 

The abandoned mine sites reclaimed data needs improved definitions to ensure that each unit is reporting 

the measure consistently. The data review and validation process in FY 2001 identified a discrepancy in 

how some units were reporting the abandoned mine sites reclaimed data. Several field units reported the 

elimination of physical hazards as mine reclamation activities. The measure will be formally redefined in 

FY 2002 to include both physical hazard removal and environmental clean-up activities. 

The data for comprehensive nutrient management plans, and nutrient management are collected through 

the USDA-NRCS Performance and Results Measurement System. NRCS field employees and local 

conservation district employees in 2,500 offices across the country enter the data. NRCS state conservationists certify the accuracy of the data provided by their employees. The data are considered adequate. 
USDA Performance and Accountability Report for FY 2002

72

Performance data for conservation buffers comes from the USDA-FSA National CRP Contract and Offer 

Data Files and from the NRCS Performance and Results Measurement System. Data for acres of land 

retired from cropping comes from the USDA-FSA National Conservation Reserve Program (CRP) 

Contract and Offer Data Files. Data for sheet and rill erosion, wind erosion, and carbon sequestered by 

CRP are estimated using a sample of data points from the National Resources Inventory applied to current 

CRP lands using CRP contract data. While this is a large sample that can be used to represent erosion 

reductions, it is an estimate. Future CRP general sign-ups will gather information that will permit the 

estimation of erosion reductions for each CRP contract, resulting in improved performance reporting. 

Data for the indicators for soil and watershed improvements and terrestrial habitat on National Forests 

and Grasslands are obtained through FS’s Management Attainment Report (MAR). To improve the 

quality of the data, the FS took several actions FY 2001. A new reporting database was designed and 

implemented for the gathering of data for MAR. The new system is intended to minimize the risks of 

errors from manually consolidating data entry sheets, reduce the amount of time for data entry and 

tabulation, facilitate field review of accomplishment reports, and improve data analysis, control and 

validation reports. 

Agency heads attest to the Comprehensive Environmental Response, Compensation, and Liability Act 

cleanups to the accuracy and completeness of their reported data. The data is prepared by employees with 

education and/or training in relevant environmental fields and is examined holistically by the senior 

environmental officials. 

The abandoned mine sites reclaimed data needs improved definitions to ensure that each unit is reporting 

the measure consistently. The data review and validation process in FY 2001 identified a discrepancy in 

how some units were reporting the abandoned mine sites reclaimed data. Several field units reported the 

elimination of physical hazards as mine reclamation activities. The measure will be formally redefined in 

FY 2002 to included both physical hazard removal and environmental clean-up activities. 

Key Outcome 1.7: Effectively Implement the Farm Security and Rural Investment Act 

of 2002 

This new Key Outcome has no relevant performance measures from the FY 2002 Annual Performance Plan. 
USDA Performance and Accountability Report for FY 2002

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Strategic Goal 2: Enhance the Integrated Operation of USDA through 

Execution of the President’s Management Agenda 

Key Outcome 2.1: Improve Human Capital Management 

Ensuring Fair and Equitable Service to Customers and Upholding the Civil Rights of Employees 

USDA agency reports are used to track civil rights reviews of major programs. Since the reviews are 

chiefly carried out by program operators in widely scattered locations during various periods of time, the 

results are subject to the different conditions and interpretations. However, the reports are generally 

considered to be complete and reliable. 

The average reduction in civil rights case processing time was 27 percent during FY 2002. The data on 

civil rights case processing times were generated by the civil rights case tracking systems. Processing 

times were recorded based on the dates of case filing and of Reports of Investigation. The data is complete, reliable, and accurate to the extent that pertinent information was properly recorded. Processing 

times for program and equal employment opportunity cases are indicated below. 

Program Cases–Average processing time for program complaints was reduced 38 percent in 2002.

Employment Cases–Average processing time for employment complaints was reduced 22 percent in 2002. 

Employee Engagement and Satisfaction 

The data on employee satisfaction will be derived from the Government-wide Survey on Human Capital 

to be published by the Office of Personnel Management in February 2003. 

Ensuring USDA Acquires Recurring Commercial Services in the Most Cost Effective Way 

The FAIR Act requires agencies to present to the OMB an annual inventory of commercial activities 

performed by Federal employees. USDA agencies presented their FAIR Act report to the Chief Financial 

Officer (CFO). The inventories were cleared for content, reasonableness, and adequacy of data. The 

reports were consolidated into a single submission and forwarded to OMB. Agencies were also required 

to provide plans for competition. 

Increasing the Use of Performance-Based Service Contracting 

The accomplishment data on performance-based service contracts (PBSC) is governed by the definitions 

and reporting criteria established government-wide for this Performance Goal in the Federal Procurement 

Data System. The percentage of accomplishment represents the ratio of dollars obligated on contracts 

reported to be using PBSC compared to the dollars obligated on all contracts awarded meeting the 

definition of PBSC. Data verification is not performed. These government-wide definitions were changed 

after the initial data reporting, and the definitions were changed again for FY 2002. While the accuracy of 

the data cannot be verified, the results are at least indicative of the extent to which PBSC is being utilized. 

Key Outcome 2.2: Improve Financial Management 

Provide Timely and Reliable Financial Management Information 

Financial statements are not audited until after the close of the fiscal year. OIG issues a written audit 

opinion on USDA’s Consolidated Financial Statements. The annual report for each fiscal year is issued at 

the conclusion of the financial statement audit that takes place the following fiscal year. The quality of the 

data is verified by using OIG’s audit report of the FY 2002 Consolidated Financial Statements issued in 

February 2003. 

The target for FY 2002 for implementation of the Foundation Financial Information System USDA-wide 

is 98 percent. Eight agencies were implemented on schedule, thus meeting the target for FY 2002. In 

addition to the eight agencies, the OCFO resolved major financial management issues related to cash 

reconciliation and the Fund Balance with Treasury. The source of the data to compile the number of 
USDA Performance and Accountability Report for FY 2002

74

employees and calculate the percentage of the total USDA workforce served by FFIS is a budget report 

entitled “Total FTE Employment: Max Schedule Q Detail,” run in December each year. This report 

provides the total number of FTEs in USDA and the number of FTEs by agency. 

Improving Stewardship of the Food Assistance Programs 

The proportion of FSP benefits issued through EBT as of the end of the fiscal year is calculated from the 

issuance data provided by States on the USDA-FNS Form 388, which is entered into the National 

Databank after being reviewed for completeness and consistency. The Department’s administrative 

structure and records provide the accountability necessary to verify completion of the work and thus 

ensures complete and reliable data in this area. 

Key Outcome 2.3: Expand Electronic Government 

Improving Information Management Using eGovernment 

Data for meeting these performance goals and indicators is based on observation, meetings with USDA 

agencies, inter-agency groups, moratorium waiver requests, and information submitted through USDA’s 

IT capital planning and investments control process and is believed to be reliable and accurate. Additional 

data is collected from the agencies for the Quarterly eGovernment Reports to the Secretary and the annual 

GPEA report submitted to OMB. 

Expanding Information and Cyber Security 

Data for meeting these performance goals and indicators is based on observation, meetings with USDA 

agencies, inter-agency groups, moratorium waiver requests, and information submitted through USDA’s 

IT capital planning and investments control process and is believed to be reliable and accurate. Additional data is collected from the agencies for the annual Government Information Security Reform Act 

report submitted to the OMB. The GAO and USDA OIG have also released data in this area in the past 

fiscal year. 

Key Outcome 2.4: Establish Budget and Performance Integration 

This new Key Outcome has no relevant performance measures from the FY 2002 Annual Performance Plan. 
USDA Performance and Accountability Report for FY 2002

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Status of Management Challenges and Program Risks 

To ensure strong performance, USDA must address its most significant management challenges and 

program risks. The U.S. General Accounting Office (GAO) report (dated October 2002) entitled 

Observations on the Department of Agriculture’s Efforts to Address its Major Management Challenges, 

and the USDA’s Office of Inspector General’s (OIG) November 2002 report entitled Major 

Management Challenges identified management challenges and program risks as areas of vulnerability. 

In the following table, USDA summarizes its strategies for addressing these concerns and ensures 

accountability for real progress in these vital areas. Appendix C provides the OIG report in its entirety. 

Exhibit 54: Management Challenge Accomplishments 

Major Management 

Challenges and 

Program Risks 

Accomplishments in FY 2002 

Farm Programs (OIG) Prior audits reported ineligible recipients resulting from comparable adjusted gross income caps 

in the disaster assistance programs, and recommended discontinuing some special crop 

programs that have been reintroduced in the current bill. 

To help ensure accurate and timely delivery of services to eligible producers, FSA will continue to monitor 

program delivery and program management through its various review processes, including the County 

Operations Review program, National Internal Reviews, and program compliance activities. 

Farm Service Delivery 

(GAO) 

USDA did not adopt a quantifiable measure for its efforts to transition to a fully integrated 

eGovernment environment and that USDA targets for its other two measures are to be determined. 

Efforts to develop appropriate quantifiable measures began in FY 2002. During 2003, USDA plans reviews 

aimed at improving service delivery to farmers. Improving office locations and business processes, such as 

farm loan servicing, will be examined. The Department will accelerate its efforts to use reengineered 

business processes based on GIS. Electronic filing is already available for most crop insurance customers 

and will be available for loan programs and other services in 2003. 

Conservation 

Programs (OIG) 

Compliance reviews will play a key role in ensuring program integrity, and past reviews indicate 

that the USDA agencies need to strengthen their monitoring and oversight activities. 

A Farm Service Farm Bill Implementation Team was organized in synchronization with a USDA-wide 

Team. The Team includes members from the USDA Budget Office, Office of General Counsel, and OMB. 

Strengthened oversight and monitoring of the Act implementation strategies will be detailed in rule-making 

and agency policy statements and program planning, as appropriate, during in FY 2003. 

 NRCS recognizes the need for strengthened monitoring and oversight and plans to focus the Oversight 

and Evaluation Staff activities on the Act‘s related reviews. Reviews are planned on Environmental 

Quality Incentives Programs, Wildlife Habitat Incentives Programs, Farmland Protection Programs, the 

Electronic Field Office Technical Guide, Nutrient and Pest Management Standard Implementation, 

Conservation Planning Certification, use of the State Technical Committees, and the Accountability 

System. 

Oversight by 

Insurance Companies 

and RMA (OIG) 

Current assessment of the oversight and monitoring procedures titled “Monitoring of RMA’s 

Implementation of Manual 14 Reviews/Quality Control (QC) Review System,” recommends that 

USDA identify and report the absence of a reliable QC review system. 

Crop Insurance has become a major USDA “farmer safety net.” The Manual 14, “guidelines, and 

expectations for delivery of the Federal Crop Insurance Program,” establishes the minimum training and 

quality control review procedures required by all insurance providers in the delivery of any policy insured 

or reinsured under the Federal Crop Insurance Act, as amended. The RMA conducts reviews of the 

insurance providers to determine their adherence to Manual 14 requirements. The results of these 

reviews are presented to RMA officials and insurance provider representatives in an effort to improve 

company operations and program integrity. Manual 14 is part of the Standard Reinsurance Agreement 

(SRA) with the insurance providers and has not been renegotiated since 1998. The SRA can only be 

renegotiated once between 2001 and 2005. The new SRA, when renegotiated, will contain new 

procedures and language to improve insurance providers quality control operations. The topic of conflictof-interest among policyholders, sales agents, claims adjusters, and insurance providers’ employees is 

one of the areas to be addressed. 

Implementation of 

ARPA (OIG) 

As a result of prevention efforts, RMA has prevented almost $15 million in improper payments during 

FY 2002. Many more cases are being investigated. Although implementation of the Agriculture Risk 

Protection Act of 2000 (ARPA) provisions and prevention activities have been major RMA Compliance 

priorities throughout the fiscal year, traditional investigation and criminal, civil and administrative 

processes have generated recoveries of approximately $29 million. In FY 2002, RMA Compliance 

reviewed more than 10,000 crop insurance policies representing more than $1 billion in liability. The 

referrals (to and from FSA) that support prevention/deterrence efforts alone now exceed 3,000 policies. 

This represents an increase of more than 500 percent since FY 2001. RMA expects that referrals will 

increase again during 2003. These partial first year results represent a dramatic increase in feedback 

systems, and we are extremely optimistic because of the positive results of ARPA implementation efforts. 
USDA Performance and Accountability Report for FY 2002

76

Exhibit 54: Management Challenge Accomplishments 

Major Management 

Challenges and 

Program Risks 

Accomplishments in FY 2002 

Bio-security & Biosafety 

(OIG) 

Controls and procedures are needed at USDA-funded laboratories (receiving USDA financial 

assistance). The OIG found minimal or no departmental guidance involving bio-security for these 

laboratories. The OIG audit found that the responsibility for security was fragmented among the 

laboratory units. There were no policies or procedures in place to identify the type and location of 

the pathogens. Security in general at the laboratories needed improvement, but laboratory 

managers also needed to restrict access.

• USDA 

Laboratory 

Facilities 

In the past, USDA has focused primarily on bio-safety, that is, ensuring that pathogens would not be 

released accidentally contaminating the environment. Now, USDA is focused on bio-security, that is, 

ensuring that our pathogens do not fall into the hands of individuals or groups that would use them 

against the United States. The most important laboratories in this regard are the biological safety level–3 

(BSL–3) laboratories that work with pathogens such as foot-and-mouth disease and avian influenza. 

 USDA developed security policies and procedures for BSL–3 laboratories (DM 9610–1, released August 

30, 2002). The manual establishes policy to protect pathogen holdings against limited external threats 

and against insider theft. It addresses physical security, cyber-security, personnel suitability, inventory 

control and incident response plans. Concurrently, USDA contracted with Sandia National Laboratories to 

conduct security assessments and to recommend security strategies for each BSL–3 laboratory. 

 USDA has allocated more than $10 million to meet the one-time cost of upgrading security at the BSL–3 

laboratories. A contract has been let for security upgrades with oversight by the Sandia Laboratories. 

Initial phases of security upgrades are underway. USDA agencies are implementing the policies and 

procedures concurrently with the installation of security upgrades. For example, USDA agencies have 

created both local and national inventories to identify the pathogens held at all USDA laboratories. In 

addition, all of the agents are categorized by bio-safety level. 

While all phases of security have not been addressed, primary actions were taken to increase the security 

forces at each BSL–3 laboratory and in some cases to arm guards. 

• USDA 

Funded 

Laboratory 

Facilities 

A parallel effort to enhance security is underway for all other laboratories and technical facilities of USDA. 

Mission critical facilities have had security needs assessments, and measures to enhance their security 

have begun. 

Inadequate Security 

Procedures over 

Aircraft (OIG) 

After September 11, OIG reviewed the security of Forest Service aircraft, including air tankers 

used for aerial dispersal of flame retardant chemicals and other fire suppression activities, 

because of their potential use as a weapon. 

A team of security experts was assembled to review security at 14 air tanker bases, conduct threat 

assessments, and analyze the countermeasures needed to mitigate the threat. In FY 2002, Security 

measures such as security lighting, fencing, electronic gates, and internal building security systems at 

seven air tanker bases were installed as planned. Thirty-eight air tanker bases do not meet the current 

standards, but funding estimates for needed improvements have been identified. Funding to implement 

security measures for the remaining air tanker bases has been requested for FY 2003. 

Food Supply (OIG) To ensure the safety of the American food supply, USDA agencies and particularly the two 

affected agencies, APHIS and FSIS, must increase coordination and communication among 

themselves.

 The Plant Protection & Quarantine permitting unit has undergone recent staff reorganization. New 

management and additional personnel are being dedicated to more intense scrutiny of permit requests. 

New guidelines for containment facilities are being developed, including a policy on enhanced coordination with containment facility personnel, inspectors, and risk-evaluation specialists. The new policy 

emphasizes better communication with field personnel and headquarters staff. APHIS has begun a series 

of port reviews, which focus on, among many other things, staffing issues. These reviews will suggest 

how port managers can better align staff at high volume times and through high-risk pathways. 

In September 2001, APHIS and FSIS revised their Memorandum of Understanding. The revisions 

primarily focused on communications between FSIS and APHIS regarding the inspection, handling, and 

disposition of imported meat and poultry products. Other changes included clarification and reinforcement 

of FSIS and APHIS’s respective authorities and communication channels for operations involving 

imported meat and poultry products. 
USDA Performance and Accountability Report for FY 2002

77

Exhibit 54: Management Challenge Accomplishments 

Major Management 

Challenges and 

Program Risks 

Accomplishments in FY 2002 

Need to Strengthen 

Department-wide 

Information Security 

(GAO) 

Information Resources 

Management (OIG) 

Reviews found several weaknesses in the security of information technology within the Department. 

Increased cyber-security remains a priority for the Department. USDA is not fully compliant with 

OMB Circular A–130 and Presidential Decision Directive. Networks and systems are vulnerable to 

internal and external intrusion. There are inadequate physical and logical access controls to ensure 

that only authorized users can access critical agency data. Nine of 11 USDA agencies had not 

assessed the risks of their systems nor initiated a plan to eliminate or mitigate those risks. There is 

inadequate oversight to ensure that contractors have the proper security clearances and 

background checks and that they are sufficiently trained in Federal Security Requirements. 

 The Department is actively engaged in identifying and addressing its information vulnerabilities, through a 

strengthened risk management program, development of Department-wide policies and procedures, 

training, improved day-to-day network management, monitoring and reporting, and increased tracking and 

monitoring of agency program and system level weakness. 

• Information 

Survivability 

In FY 2002, the Department began an information survivability program to ensure disaster recovery and 

business resumption plans for all critical USDA systems have been prepared and tested. Working with 

Departmental Administration, OCIO began developing a program to provide agency managers with a 

standard methodology and appropriate tools to develop and test integrated physical and information 

technology disaster recovery and business resumption plans. 

• Intrusion 

Detection 

Throughout FY 2002, the Department continued to strengthen our intrusion detection capabilities by 

deploying more monitors and sensors and training technical staff. USDA currently installed all Tier I 

and Tier II sensors. Tier II sensors are scheduled to be installed in FY 2003. Contract support has 

been engaged to assist USDA as we expand our intrusion detection capabilities. 

• Information 

Security 

Awareness/ 

Physical and 

Logical 

Access 

Controls 

OCIO recognizes the critical importance of conducting ongoing awareness and training activities to 

educate employees, contractors, and clients who affect USDA’s information security. Although some 

USDA agencies have fulfilled their requirement for annual security awareness requirements, there is no 

consistency across USDA in what training is provided. In FY 2002, USDA began developing a 

comprehensive awareness program that includes a Department-wide communication effort specifically 

designed to educate all employees about the security risks facing USDA. At the same time, OCIO is 

establishing standards and department-wide tools and techniques to ensure the safety of USDA’s 

computing environment. These standards apply to both physical and logical security controls that provide 

assurance that computing environments are secure and available. 

• Risk 

Management 

The USDA OCIO Cyber-Security Program is addressing the issue of risk management on three fronts: 1) 

to help USDA agencies meet their requirement to assess risks to the information systems they use and 

manage, standard risk assessment tools have been developed for each of the computer platforms in use 

throughout USDA; 2) to provide risk assessment training and counseling to agency security managers by 

OCIO Staff and contracted risk management specialists; and 3) to assist purchasing independent risk 

assessments from a highly qualified and experienced contractor through an OCIO-established Blanket 

Purchase Agreement. 

 OCIO is concurrently following a risk-based facility review program to fully assess USDA’s critical IT 

infrastructure. This strategy involves on-site reviews of major USDA information management facilities 

based on how critical their missions are to the organization. This approach allows OCIO staff to assess 

existing security controls, security management and administration, and computing environments; to 

identify security weaknesses; and to provide guidance and counseling. 

OCIO takes its responsibility for overall security of USDA’s information assets seriously. Where appropriate, 

OCIO is changing security policies and procedures, implementing mitigation actions when vulnerabilities are 

discovered, developing and implementing standard security tools and techniques, and managing USDA’s 

information security program from an enterprise perspective. 

Rural Rental Housing 

(OIG) 

• Portfolio 

Management 

• Guaranteed 

RRH Program 

• Rental 

Assistance 

Rural Housing Service (RHS) must maintain its current portfolio in good repair so that it will 

provide safe, decent, and affordable housing for rural Americans. 

The audit found that the pilot program had completed construction of only 222 units. RHS had 

reported apartment units that were obligated to be built, as being built. RHS restated the GPRA 

report to reflect the status of the units as proposed for construction rather than as built. RHS 

needs to continue monitoring the program’s growth and success and whether RHS has 

implemented sufficient controls to ensure accurate reporting of units built. 
USDA Performance and Accountability Report for FY 2002

78

Exhibit 54: Management Challenge Accomplishments 

Major Management 

Challenges and 

Program Risks 

Accomplishments in FY 2002 

• RRH Projects 

Leaving the 

Program 

• Unallowable 

and 

Excessive 

Expenses 

Charged to 

RRH Projects 

The cost to the Government will increase because funding for rental assistance, which was 

recommended by OIG, will need to increase. RHS needs to plan for these increased funding 

requirements. 

RHS needs to monitor the number of incentive payments and ensure that once made, project 

owners continue to participate in the program and meet the conditions of the incentive payment. 

Unallowable and excessive expenses charged to Rural Rental Housing projects must be 

disclosed. Continued monitoring of the Agency’s implementation of the new regulation is needed 

to ensure the desired results are achieved. 

 RHS has drafted a proposed rule to completely restructure its sections 515 and 514/516 loan and grant 

programs, to improve its ability to ensure properties are maintained, and to provide decent, safe and 

sanitary rental and farm labor housing. Performance and results reported under the section 538 

guaranteed rental program has been revised to be more accurate. 

Future year appropriation requests will reflect additional funding needed for the Rental Assistance 

program because of inflation. Section 515 preservation administration has been improved by the 

implementation of automated preservation incentive underwriting, thereby ensuring that incentive 

payments are fair. Additional tracking systems for loans entering the prepayment process have been 

implemented, which will substantially improve the Agency’s ability to determine the status of loans 

proposing prepayment and those that have been prepaid. 

During the FY 2003, Rural Development will take aggressive action to resolve the two management 

challenges. 

Rural BusinessCooperative Service 

(OIG) 

• Business and 

Industry Loanmaking and 

Servicing 

Procedures 

• Waivers of 

Internal 

Controls 

The audit found serious conditions with the Business & Industry loans including borrowers with 

insufficient collateral to secure their loans, businesses that defaulted within months after the loan 

was made, and loan proceeds used for unauthorized purposes. 

Future use of waiver authority needs to be monitored to ensure that these established controls 

are not circumvented. 

OIG is currently working with the National Office officials to identify actions to be taken. RBS has 

established internal instructions regarding the waiver of loan regulation processes. 

Food Safety Issues 

(GAO) 

The number of food-borne illnesses has heightened concerns about the effectiveness of the 

federal food safety system. GAO has found the current multi-agency federal food safety system 

needs to be replaced by the single food safety agency. 

 In the Federal government, food safety responsibilities are shared among several entities, most notably 

USDA, Health and Human Services and the Environmental Protection Agency. Concerns about the need 

for fundamental changes in food safety programs and about overcoming perceived fragmentation of food 

safety responsibilities are being addressed through cross-Departmental partnerships and program 

coordination activities. Recent statistics from the Centers for Disease Control and Prevention show a 21 

percent drop in the incidences of foodborne illness during the last six years. Although these figures 

represent the efforts of several Departments and Federal agencies, State and local governments, 

regulated industries, schools, and consumers, the USDA FSIS contribution to the reduction of foodborne 

illnesses cannot be ignored. The creation of a single food safety organization addressing all foods, as 

suggested by GAO, is beyond the legal scope of USDA or any Federal department. The FSIS is a 

Federally-mandated program. It can take no independent action to dismantle itself, absorb, or to merge 

itself with other agencies. Therefore, this management challenge has not been incorporated into the 

USDA or FSIS GPRA documents. 

• OIG Audits FSIS’ reinspection process and whether it has effective procedures and controls to provide FSIS 

with a means of ensuring that only wholesome, unadulterated and properly labeled food products 

enter U.S. commerce. There are concerns about the equivalency determinations FSIS makes of 

foreign inspection systems, focusing on equivalency determinations for HACCP and Salmonella. 

 During the last few years, FSIS has enhanced its process to identify and review high-risk firms. FSIS has 

proceeded with a number of enhancements and prioritized its efforts consistent with available resources. 

FSIS makes every effort to identify and halt all activity involving contamination of meat, poultry, and egg 

products. As of the issuance of this report, OIG has not released the official draft reports for Agency 

comment. 
USDA Performance and Accountability Report for FY 2002

79

Exhibit 54: Management Challenge Accomplishments 

Major Management 

Challenges and 

Program Risks 

Accomplishments in FY 2002 

Marketing & 

Regulatory (OIG) 

There is an OIG review underway focusing on APHIS’ policies and procedures. The OIG found 

APHIS could not account for 60 pounds of strychnine-treated bait and over 2,000 capsules 

containing sodium cyanide. Transfers of agents between locations were not documented, and it 

cannot be determined if the missing strychorine and cyanide have been accounted for, as well as 

13 other restricted-use compounds. An adequate control structure is needed to ensure that the 

pathogens and restricted materials are not made available to terrorists or others intent on 

harming U.S. citizens or agriculture. 

Upon further examination, it was determined that the APHIS WS program could account for all chemicals. 

However, an adequate chemical inventory and tracking system was needed. Wildlife Services (WS) has 

been piloting a new Chemical Inventory and Tracking System in five states for the past six months, and 

made this tracking system fully operational in October 2002 in all states. 

Food Assistance Must 

Reach Eligible People 

While Maintaining 

Program Integrity 

(GAO) 

Food Stamp Program 

(OIG) 

Child and Adult Care 

Food Program (OIG & 

GAO) 

National School Lunch 

and School Breakfast 

Program (OIG) 

Given the size and scope of USDA nutrition assistance programs, the Department faces a 

significant challenge in providing help to eligible people who need it while protecting the 

programs from those who would abuse them. GAO identifies three key challenges or risks under 

Federal nutrition assistance program management: the level of Food Stamp Program (FSP) 

payment accuracy; the persistence of retailer trafficking of FSP benefits; and the need to improve 

Child and Adult Care Food Program integrity. In addition, USDA’s Office of Inspector General 

identifies as major management challenges improving eligibility certification accuracy in the 

National School Lunch and School Breakfast Programs and achieving full implementation of 

electronic benefit transfer (EBT) in the FSP. Each of these issues is addressed below: 

1. Administration of the FSP at State Agencies: FSP Payment Accuracy: Payment accuracy for FY 

2001 (most current data available) reached its highest level ever. Although FY 2002 data is not yet 

available for inclusion in this report, corrective actions undertaken during FY 2002 are discussed in 

the Federal Managers’ Financial Integrity Act (FMFIA) Report on Management Controls section of 

this report. 

2. Trafficking of FSP Benefits: Corrective actions were taken during FY 2002. This issue has been 

removed from the FMFIA Report on Management Controls section of this report, but retailer integrity 

remains a focus for the Food and Nutrition Service. 

3. Child and Adult Care Food Program Integrity: Management evaluation work is proceeding as 

scheduled; updated management guidance and training of sponsors have been slowed by delays in 

publishing new CACFP management regulations. Corrective actions undertaken during FY 2002 are 

also discussed in the FMFIA Report for FY 2002 in the Management Controls section of this report. 

4. National School Lunch and Breakfast Program Eligibility: Although FY 2002 data is not yet available 

for inclusion in this report, corrective actions undertaken during FY 2002 are discussed in the FMFIA 

Report for FY 2002 in the Management Controls section of this report. 

5. FSP Electronic Benefits Transfer: In Fiscal Year 2002, USDA expanded delivery of food stamp 

benefits through electronic benefits transfer (EBT) to 89 percent of all households and successfully 

encouraged states falling behind the mandated target of October 2002 to move forward.

Forest Service (FS) 

Improving 

Performance 

Accountability (GAO) 

FS will transition to a new, outcome oriented budget and planning structure that will showing 

linkages between resources, program activities and results. 

The FS continued implementation of the Budget Formulation and Execution System (BFES) that 

incorporates a results-oriented budget structure and shows linkages between resources, program 

activities, and results. This approach will allow the FS to provide timely, credible data that 

demonstrates the impact of funding on actual on-the-ground work accomplished. The first full year of 

implementation of this effort will be completed with the execution of the FY 2003 budget. At that time, 

the results of this effort will be realized and evaluated. 

Forest Service 

Management and 

Program Delivery 

Issues: (OIG) 

• FS 

administration 

of grants to 

State and 

nonprofit 

organizations 

FS administration of grants to State and nonprofit organizations show significant weaknesses in 

all aspects of program management. These weaknesses increase the likelihood that program 

objectives will not be achieved and that Federal funds are not being spent for authorized 

purposes. 

Since FY 1997, the FS has made adjustments to the management of grants and agreements to nonprofit 

organization(s). Proper controls were implemented to ensure program integrity, program budget planning 

and accountability. Analysis and reviews occur regularly to protect resources and to ensure prudent use 

of all funds in achieving the agency mission within the scope of expectations, laws, regulations, and 

authority. Appropriate records and financial information are maintained and used for decision-making 

purposes. These actions will continue in FY 2003. 
USDA Performance and Accountability Report for FY 2002

80

Exhibit 54: Management Challenge Accomplishments 

Major Management 

Challenges and 

Program Risks 

Accomplishments in FY 2002 

• Environmental 

analyses 

required for 

timber sales 

There are serious weaknesses in the controls for the preparation and implementation of 

environmental analyses required for timber sales. 

The FS responded to an OIG Audit (#08801–10–AT) by conducting a follow-up review of an expanded 

sample (51) of timber sales in FS regions. The results of the FY 2000–2001 review timber sale planning, 

analysis, and documentation problems. OIG concurred with an Administrative Control Plan that was 

developed in FY 2001. Regional and Washington Office annual reviews of regional timber sales and the 

associated analyses, documentation, and implementation are scheduled and ongoing. The most recent 

Regional Review (Region 3, Southwestern Region) occurred in October 2002. 

• Polices for 

dealing with 

partnerships 

with private 

groups 

FS has not developed agency-wide policies for dealing with partnerships with private groups to 

meet its mission requirements. Direction is needed to ensure these relationships comply with 

existing laws. 

In FY 2001, the FS completed a comprehensive review of existing partnerships, authorities, and policies. 

Thirteen specific areas were identified where congressional intent could be clarified, expanded, or better 

aligned with other land management agencies. Work on the improvement of partnership policy, 

procedures, budget and financial accountability will continue in FY 2003. 

• Lacked 

meaningful 

goals and 

objectives 

with relevant 

performance 

measures. 

Strategic and Annual Plans have lacked meaningful goals and objectives with relevant 

performance measures. Past performance measurement data has been irrelevant and lacked 

accuracy. 

“In FY 2001, the FS revised its strategic plan to better focus on outcomes and results to be achieved over 

time and to better link strategic goals and objectives to long-term performance measures and 5-year 

milestones. The agency’s fiscal year 2002 performance plan begins to provide a bridge between the 

strategic plan and the on-the-ground activities funded through the annual budget process by linking 

annual performance goals and objectives.” (P. 29, GAO–01–761, August 23, 2001) 

The update of the USDA FS Strategic Plan will be completed by September 30, 2003. The Montreal 

Process Criteria and Indicators will provide the framework for the update and the findings of the National 

Assessment of resources will be more completely integrated with the updated goals and objectives. 

In June 2002, the Chief of the FS directed the development of a Performance Accountability System 

(PAS), a system that integrates annual budget plans with the accomplishment of strategic plan goals. 

Implementation of PAS will occur between now and Fiscal Year 2005.1 

• Forest 

Service 

National Fire 

Plan 

Authorized funds are vulnerable to waste and misuse. 

The 10-Year Implementation Plan signed by the Secretaries of Agriculture and Interior outlines common 

performance measures for the FS and Department of Interior agencies. These measures cover all parts of 

the National Fire Plan, including fire suppression, hazardous fuels treatment, fire rehabilitation, and 

community assistance, and will be incorporated in the FY 2003 update of the Strategic Plan and in budget 

and accomplishment reports. The Office of Management and Budget is evaluating government-wide 

wildland fire management programs using the performance measures in the 10-Year Implementation 

Plan, the results of which will be published in the President’s 2004 budget request.2

 

• Grant and 

Agreement 

Administration 

The FS has not effectively managed grants and agreements to ensure that funds appropriated by 

Congress were expended for their intended purposes and that grantees complied with applicable 

financial management standards. 

The Project Cost Accounting System (PCAS) module, part of FFIS implementation in FY 2000, was 

established for consistent and accurate accounting of grants and agreements. To respond to the 

inconsistency with which PCAS was implemented, a full-time position has been dedicated to plan, and 

then, to manage, a national solution to the inconsistent implementation of PCAS. National FS CFO 

Bulletins will be issued to clarify PCAS processes and procedures. An on-site strike team will provide 

expertise in correcting PCAS accounting problems when warranted. Schedule of specific actions TBD. 

 

1

 The U.S. General Accounting Office is currently conducting an extensive program and financial audit update of 

USDA Forest Service Management Challenges. Audit completion is expected sometime in the first quarter of 

calendar year 2003 and will likely result in a congressional hearing. 2 See “A Collaborative Approach for Reducing Wildland Fire Risks to Communities and Environment: 10-Year 

Comprehensive Strategy Implementation Plan” at www.fireplan.gov/10yrIPfinal.cfm and for additional information 

go to www.fireplan.gov/ 
USDA Performance and Accountability Report for FY 2002

81

Exhibit 54: Management Challenge Accomplishments 

Major Management 

Challenges and 

Program Risks 

Accomplishments in FY 2002 

Problems Persist in 

Processing 

Discrimination 

Complaints (GAO) 

Civil Rights 

Complaints (OIG) 

USDA agreed to establish timeframe goals for all stages of its process for addressing civil rights 

complaints, and to address staff turnover and morale problems in its Civil Rights (CR) Office. The 

Secretary of USDA will create the position of Assistant Secretary for Civil Rights in USDA as 

authorized under FSRIA. 

• In October 2000, USDA completed a report on civil rights functions and barriers to efficient and 

timely processing of civil rights complaints. During FY 2002, the recommendations of the report 

have been implemented as available resources have permitted. These efforts will continue in FY 

2003. These efforts include changes in business process, improved training, and improvements 

to the case tracking process. For FY 2004, a USDA performance measure targets a 25% 

reduction in civil rights case processing time below FY 2003 levels. 

• CR has developed Management Decisions and/or resolved all remaining recommendations with 

the exception of the following partially completed recommendations: 

• Document-by-document sweep of EEO complaint case files. CR conducted a post OIG Audit 

inspection of EEO complaint files and submitted a report of its findings dated 02/12/02 to 

OIG. CR anticipates a file-by-file sweep (document-by-document) in FY 2003); and 

• Provide OIG with final Standard Operating Procedure for Conducting Agency Civil Rights 

Evaluations. An interim SOP has been completed and signed by the Deputy Director for 

Programs on 11/02/01. The Program Compliance Division completed its first Agency Civil 

Rights Evaluation on 05/20/02 and is reviewing the draft report.

Lack of Financial 

Accountability at 

USDA 

(GAO) 

Financial Management 

(OIG) 

GAO and OIG have questioned the accuracy of USDA’s financial information to evaluate its 

financial performance and provide assurance that its consolidated financial statements are 

reliable and presented in conformity with generally accepted accounting principles. 

• USDA achieved a clean audit opinion on its financial statements. 

• The following steps were taken in FY 2002 to resolve these longstanding problems: 

• Provided effective leadership and talent from OCFO to USDA’s agencies and the National 

Finance Center (NFC) to capture break-through rather than incremental value from extensive 

changes in financial management accountability and accounting operations. 

• Implemented effective operational accounting processes within the branches of the NFC, 

problem agencies and OCFO while transferring knowledge through documentation and training. 

• Completed the successful implementation of a standard accounting system at USDA; renovating 

related corporate administrative systems during FY 2002 with focused, disciplined effective 

projects. 

• Maintained progress on resolving Credit Reform deficiencies and improvements. 

• Transformed the FS into operating as an effective, sustainable accountable, financial 

management function. 

• Corrected real and personal property accounting and stewardship inadequacies. 

• Enhanced decision-making and cash management of USDA’s Working Capital Fund. 

Human Capital 

Management (GAO) 

GAO has identified shortcomings at multiple agencies involving key elements of modern strategic 

human capital management, including strategic human capital planning and organizational alignment; leadership continuity and success planning; acquiring and developing staffing whose size, 

skills, and deployment meet agency needs; and creating results-oriented organizational cultures. 

 In FY 2002, USDA did the following to address human capital management: completed a Skills Gap 

Analysis; formed a Department-wide Human Capital Team; and developed the Human Capital Framework 

for the Human Capital Plan. The framework addresses goals, action strategies for the key elements of 

modern strategic human capital management, e.g., organizational alignment, leadership continuity and 

succession planning, talent (knowledge management), recruitment, and creating results-oriented 

organizational cultures. USDA aligned the Human Capital framework with the USDA strategic plan. 

 To further address our recruitment and skills needs, USDA instituted the Federal Career Intern Program. 

USDA developed a new Department-wide mentoring program to help develop its workforce. A five-year 

workforce-restructuring plan was developed addressing workforce needs, deployment, staffing, and a 

citizen-centered organizational structure. 

Employees of USDA participated in the Government-wide Survey on Human Capital. To date, OPM has 

not released results to the Departments and Agencies.
 USDA Performance and Accountability Report for FY 2002 

82

Fiscal Year 2002 Program Obligations incurred The following table depicts the component agencies and staff offices of the Department of Agriculture with total program laccount allocated to the USDA strategic Goal 1 key outcomes. The program levels have been rounded to the nearest millio

accounts support multiple key outcomes. An account’s funding was allocated to more than one key outcome when the amowas significant and could be identified. As a result, the table provides a general indication of the funding dedicated to each trative funding related to strategic Goal 2 supports all USDA Goal 1 key outcomes. For display purposes in this document, 

been reallocated equally among each Goal 1 key outcome. 

Exhibit 55: Funding by Key Outcome 

USDA FY 2002 Program Obligations 

USDA Goal 1 Key Outcomes ($ i

Agency Account 

FY 2002 

Program 

Obligations

($ in Millions) 1.1 1.2 1.3 1.4 1

OSEC Office of the Secretary 9.5 1.3 1.3 1.4 1.3  Homeland Security 60.4 8.5 8.5 9.1 8.5  Gifts and Bequests 0.7 0.1 0.1 0.1 0.1 OCFO OCFO 7.9 1.1 1.1 1.1 1.1  Working Capital Fund 314.8 45.0 45.0 45.0 45.0 OCIO OCIO 35.4 5.3 5.0 5.3 5.0  CCE 63.1 - 13.3 - - DA DA 51.3 7.2 7.2 7.7 7.2  HMMG 21.3 - 4.7 0.2 -  Buildings and Facilities 176.4 24.7 24.7 26.5 24.7 OC OC 9.1 1.3 1.3 1.4 1.4 OIG OIG 72.0 10.1 10.1 10.8 10.1 OGC OGC 33.7 4.7 4.7 5.1 4.7 OCE OCE 9.5 1.3 1.3 1.4 1.3 NAD NAD 12.7 1.8 1.8 1.9 1.8 OBPA OBPA 6.9 1.0 1.0 1.0 1.0 ERS ERS 70.2 14.0 8.4 3.5 2.1 NASS Ag. Estimates and Research 100.2 95.2 - - 5.0 
 USDA Performance and Accountability Report for FY 2002 

83

Exhibit 55: Funding by Key Outcome 

USDA FY 2002 Program Obligations 

USDA Goal 1 Key Outcomes ($ i

Agency Account 

FY 2002 

Program 

Obligations

($ in Millions) 1.1 1.2 1.3 1.4 1

NASS Census of Agriculture 25.8 - 25.8 - - Con’td Trust Funds 0.5 0.5 - - - ARS ARS Salaries and Expenses 1,026.3 405.4 - 39.0 350.0  Buildings and Facilities 55.5 20.9 - 20.4 7.0  ARS-No Year Funds 11.0 4.3 - 0.4 3.8  Miscellaneous Contributed Funds 20.3 8.0 - 0.8 6.9  National Agricultural Library Misc. Contributed Funds - - - - -  Collaborative Research w/ the New Independent States (AID) FY01-02 2.5 1.0 - 0.1 0.9 

Collaborative Research with the New Independent States (AID) FY02-03 - - - - - 

 Concessions, Fees, Volunteer Service 0.1 - - - - CSREES Integrated Activities 42.8 1.5 3.4 10.3 9.4  Research and Education Activities 610.8 73.3 73.3 24.4 30.5  Extension Activities 429.0 51.5 51.5 17.2 21.5  Outreach for Socially Disadvantaged Farmers - - --- Native American Endowment Fund 1.5 0.2 0.2 0.1 0.1 APHIS Salaries and Expenses 1,121.6 - - 1,121.6 -  Buildings and Facilities 10.6 5.3 - 5.3 -  Misc. Trust Funds 25.6 - - 25.6 - FSIS Salaries and Expenses 757.1 - - - 757.1  (FSIS No Year Funds) 5.4 - - 0.9 4.5  Trust Funds 4.9 - - - 4.9 GIPSA Salaries and Expenses 33.1 33.1 - - -  Inspection and Weighing 34.3 34.3 - - - AMS Marketing Services 111.7 111.7 - - -  Payments to States & Possessions 1.3 1.3 - - -  Perishable Ag. Commodities Act 0.1 0.1 - - - 
 USDA Performance and Accountability Report for FY 2002 

84

Exhibit 55: Funding by Key Outcome 

USDA FY 2002 Program Obligations 

USDA Goal 1 Key Outcomes ($ i

Agency Account 

FY 2002 

Program 

Obligations

($ in Millions) 1.1 1.2 1.3 1.4 1

AMS Section 32 Funds for Strengthening Markets 803.5 803.5 - - - Cont’d Trust Funds 113.3 113.3 - - - 

 Expenses, Refunds, Inspection & Grading of Farm Products 5.0 5.0 - - - RMA Administrative and Operating Expenses 73.7 - 73.7 - - 

 FCIC 3,845.5 - 3,845.5 - - FSA Salaries and Expenses 1,374.7 12.1 374.4 - -  Dairy Indemnity Program 0.1 - - - -  Emergency Conservation Program 32.4 - - - -  State Mediation Grants 3.5 - 2.8 - -  Agriculture Conservation Program 5.7 - - - -  Conservation Reserve Program - - - - -  Rural Clean Water Program - - - - -  Ag. Credit Insurance Program Account 1,747.9 - 1,747.9 - -  Ag. Credit Insurance Liquidating Account 18.7 - 18.7 - -  Ag. Credit Insurance Direct Loan Financing Account 1,376.0 - 1,376.0 - -  Ag. Credit Insurance Guaranteed Loan Financing Account 198.4 - 198.4 - -  Ag. Resource Conservation Demo Direct Loan Financing Account 1.5 - 1.5 - -  Farm Storage Loan Program Financing Account 65.0 - 65.0 - -  Apple Loans Direct Loan Financing Account 5.0 - 5.0 - -  CCC Export Loans Program Account 223.0 - 223.0 - -  Commodity Credit Corporation 25,718.0 514.4 - - -  P.L. 480 Direct Credit Financing Account 162.0 81.0 81.0 - -  P.L. 480 Liquidating Account 4.0 2.0 2.0 - -  Debt Reduction Financing Account 23.0 11.5 11.5 - -  P.L. 480 Title I Food for Progress, Financing Account 11.0 5.5 5.5 - -  Export Loans Program Account (fiscal year) 4.0 - 4.0 - - 
 USDA Performance and Accountability Report for FY 2002 

85

Exhibit 55: Funding by Key Outcome 

USDA FY 2002 Program Obligations 

USDA Goal 1 Key Outcomes ($ i

Agency Account 

FY 2002 

Program 

Obligations

($ in Millions) 1.1 1.2 1.3 1.4 1

FSA Export Guarantee Financing Account 259.0 - 259.0 - - Cont’d Guaranteed Loans Liquidating Account - - - - -  Emergency Boll Weevil Direct Loan Financing Account - - - - -  Emergency Boll Weevil Loan Program Account - - - - -  Farm Storage Facility Loans Program Account 1.0 - 0.8 - - NRCS Conservation Operations 921.3 - - - -  Watershed Surveys and Planning 11.3 - - - -  Watershed and Flood Prevention Operations 210.0 - - - - NRCS Resource Conservation and Development 49.0 - - - -  Rehabilitation of Aging Infrastructure 9.8 - - - -  Forestry Incentive Programs 10.1 - - - -  Farm Security and Rural Investment Programs 554.6 - - - - RD Administrative Expenses 611.6 - 611.6 - - 

Rural Community Advancement Program 1,288.6 - 1,288.6 - - 

RHS Rural Housing Assistance Grants 41.4 - 41.4 - -  Rental Assistance Program 704.6 - 704.6 - -  Farm Labor Program Account 36.8 - 36.8 - -  Mutual and Self-Help Housing Grants 28.8 - 28.8 - -  Rural Housing Voucher Program - - - - -  Rural Housing Insurance Fund Program Account 834.1 - 834.1 - -  Rural Housing Insurance Fund Liquidating Account 489.2 - 489.2 - -  Rural Housing Insurance Fund Direct Loan Financing Account 2,226.6 - 2,226.6 - -  Rural Housing Insurance Fund Guaranteed Loan Financing Account 154.5 - 154.5 - -  Rural Community Facility Direct Loans Financing Account 494.9 - 494.9 - - 

Rural Community Facility Guaranteed Loans Financing Account 6.3 - 6.3 - - 
 USDA Performance and Accountability Report for FY 2002 

86

Exhibit 55: Funding by Key Outcome 

USDA FY 2002 Program Obligations 

USDA Goal 1 Key Outcomes ($ i

Agency Account 

FY 2002 

Program 

Obligations

($ in Millions) 1.1 1.2 1.3 1.4 1

RBCS EZ/EC Grants 13.2 - 13.2 - - 

Rural EZ/EC Grants 8.2 - 8.2 - - Rural Cooperative Development Grants 0.3 - 0.3 - - National Sheep Industry Improvement Center 17.7 - 17.7 - - Rural Development Loan Fund Program Account - - - - - 

 Rural Development Loan Fund Direct Loan Financing Account 46.8 - 46.8 - -  Rural Economic Development Loans Program Account 3.9 - 3.9 - -  Rural Economic Development Loans Liquidating Account - - - - -  Rural Economic Development Direct Loan Financing Account 20.9 - 20.9 - -  Rural Economic Development Grants 2.6 - 2.6 - -  Rural Business & Industry Direct Loans Financing Account 6.8 - 6.8 - -  Rural Business & Industry Guaranteed Loans Financing Account 123.8 - 123.8 - - RUS Rural Electrification and Telecommunications Loans Program Account 76.1 - 76.1 - -  Rural Electrification and Telecommunications Loans Liquidating 

Account 

1,064.0 - 1,064.0 - - 

 Rural Electrification and Telecommunications Loans Direct Financing 

Account 

5,322.7 - 5,322.7 - - 

 Rural Electrification and Telecommunications Loans Guaranteed 

Financing Account 

- - - - - 

 Rural Telephone Bank Program Account 11.2 - 11.2 - -  Rural Telephone Bank Liquidating Account 22.5 - 22.5 - -  Rural Telephone Bank Direct Loan Financing Account 200.6 - 200.6 - -  Rural Development Insurance Fund Liquidating Account 265.4 - 265.4 - -  Rural Communication Development Fund Liquidating Account 2.8 - 2.8 - -  Rural Water & Waste Disposal Direct Loans Financing Account 1,456.5 - 1,456.5 - -  Rural Water & Waste Disposal Guaranteed Loans Financing Account 0.1 - 0.1 - -  Distance Learning and Telemedicine Program Account 30.8 - 30.8 - -  Distance Learning and Telemedicine Direct Loan Financing Account 99.0 - 99.0 - -  Local Television Loan Guarantee Program Account 2.0 - 2.0 - -  Local Television Loan Guarantee Financing Account - - - - - 
 USDA Performance and Accountability Report for FY 2002 

87

Exhibit 55: Funding by Key Outcome 

USDA FY 2002 Program Obligations 

USDA Goal 1 Key Outcomes ($ i

Agency Account 

FY 2002 

Program 

Obligations

($ in Millions) 1.1 1.2 1.3 1.4 1

RUS (Cont’d) 

High Energy Cost Grants - - - - - 

FAS Foreign Agricultural Services and General Sales Manager 197.1 197.1 - - -  P.L. 480 Title I Subsidy 239.0 239.0 - - -  P.L. 480 Title I Ocean Freight Differential Grants 28.0 28.0 - - -  P. L. 480 Title II 1,014.0 1,014.0 - - - FNS Food Program Administration 131.0 - - - - 1

Food Stamp Program 22,017.0 - - - - 22,0

 Child Nutrition Program 10,341.0 - - - - 10,3

 WIC 4,480.0 - - - - 4,4 Commodity Assistance 174.0 - - - - 1

 Food Donations 152.0 - - - - 1FS Capital Improvement and Maintenance 469.2 - - - -  Forest and Rangeland Research 277.9 - - - -  State, Private and International Forestry 282.2 - - - -  Wildland Fire Management 2,197.0 - - - -  National Forest System 1,389.9 - - - -  Range Betterment Fund 2.0 - - - -  Management of National Forest Lands for Subsistence Uses 5.9 - - - -  Land Acquisition Accounts 218.7 - - - -  Other Accounts 0.6 - - - -  Permanent Appropriations 220.2 - - - -  Trust Funds 44.7 - - - - 

Totals By Key Outcome 4,000.4 24,303.6 1,389.7 1,315.8 37,7

USDA Total 102,824.6 
 USDA Performance and Accountability Report for FY 2002

88 

INSPECTOR GENERAL ACT AMENDMENTS OF 1988 

MANAGEMENT’S REPORT ON FINAL ACTION (AUDIT 

FOLLOW-UP) 

Highlights 

During FY 2002, USDA agencies completed corrective actions on 107 audits. USDA began the year with 

246 audits that had reached management decision and added an additional 87 audits during the year. By 

the end of FY 2002, the total audit inventory was 226 (including 11 audits in appeal status). This represents an eight percent decrease in the audit inventory as compared to the previous fiscal year. Over the 

past four years, our audit inventory has declined by over ten percent. 

Introduction 

The Office of the Chief Financial Officer (OCFO) is responsible for audit follow-up at USDA. USDA 

continues to improve oversight and timeliness of resolved audits by: 

• Closely monitoring agencies’ activities to address audit findings and 

• Working with agencies and the Office of Inspector General (OIG) to identify and resolve issues that 

affect timely completion of corrective actions. 

The Inspector General Act Amendments of 1988 require reporting on audit reports that remain open more 

than one year past the date of management decision. The report must include: 

• Beginning and ending balances for the number of audit reports and dollar value of disallowed costs 

(DC) and funds to be put to better use (FTBU); 

• The number of new management decisions (MD) reached; 

• The disposition of audits with final action; and 

• For each audit report, the date issued, dollar value, and an explanation of why final action has not 

been taken. For audits that are in formal administrative appeal or legislative solution, reporting may 

be limited to the number of affected audits. 

Audit Follow-up Process 

Audit follow-up is a process used to ensure prompt and responsive action is taken once management 

decision has been reached on recommendations contained in final audit reports. USDA agencies are 

required to prepare combined time-phased implementation plans and interim progress reports for all 

audits that remain open one or more years beyond the management decision date. Time-phased implementation plans are submitted at the end of each semiannual period, and are updated to include new audits 

being reported for the first time. These plans contain corrective action milestones for each recommendation, and corresponding estimated completion dates. 

Agencies also provide interim progress reports on the status of corrective action milestones listed in the 

time-phased implementation plan. Interim reports are produced quarterly. These reports show incremental progress toward completion of planned actions, changes in planned actions, actual or revised 

completion dates, and explanations for any revised dates. Exhibit 56 provides definitions for the terms 

used in this section. 
 USDA Performance and Accountability Report for FY 2002

89 

Exhibit 56: Definitions 

Disallowed Cost A questioned cost that management sustains or agrees is not chargeable to the government. 

Final Action The completion of all actions that management has concluded are necessary in its management decision 

with respect to the findings and recommendations included in an audit report; and in the event that 

management concludes no action is necessary, final action occurs when a management decision is made. 

FTBU A recommendation by OIG that funds could be used more efficiently if management took actions to 

implement and complete the recommendation, including: 

• reductions in outlays; 

• deobligation of funds from programs or operations; 

• withdrawal of interest subsidy costs on loans or loan guarantees, insurance, or bonds; 

• costs not incurred by implementing recommended improvements related to the operations of the 

establishment, a contractor, or grantee; 

• avoidance of unnecessary expenditures noted in preaward reviews of contract or grant agreements; 

or 

• any other savings, which are specifically identified. 

Management Decision Management's evaluation of the audit findings and recommendations and the issuance of a final decision 

by management concerning its response to the findings and recommendations, including necessary 

actions and an estimated completion date. 

Questioned Cost A cost OIG questions for the following: 

• an alleged violation of a provision of a law, regulation, contract, grant, cooperative agreement, or 

other agreement or document governing the expenditure of funds; 

• a finding that, at the time of the audit, the cost is not supported by adequate documentation; or 

• a finding that the expenditure of funds for the intended purpose is unnecessary or unreasonable.

Resolved Audit Inventory 

Resolved audits are those audits where management decision has been reached on all recommendations 

in the audit report. 

At the beginning of the fiscal year, USDA agencies and OIG had reached management decision on all 

recommendations in 246 audits. During the fiscal year, management decision was reached on an additional 

87 audits. Management completed corrective actions on 107 audits. At the end of the fiscal year, the total 

resolved audit inventory is 226, which includes 11 audits in appeal status. This represents an eight percent 

decrease in the audit inventory as compared to the previous fiscal year. Exhibit 57 shows the decreasing 

trend in our audit inventory over the past four years. 

Exhibit 57: Decrease in Total Resolved Audit 

Inventory 

Exhibit 58: Decrease in Reportable Audits 

244

266

246

226

200

220

240

260

280

FY 99 FY 00 FY 01 FY 02

Number of Audits

148 147

164

159

145

150

155

160

165

FY 99 FY 00 FY 01 FY 02

Number of Audits

The number of reportable audits (audits with management decision but without final action one or more 

years past the management decision date) has decreased slightly, by one percent. However, there were an 
 USDA Performance and Accountability Report for FY 2002

90 

additional 17 audits scheduled for completion by September 30, 2002, but final action documentation was 

not received and evaluated in time to meet this year’s reporting deadline. These audits will be considered 

in the next reporting period. Exhibit 58 on the previous page shows that the number of reportable audits 

has decreased by over ten percent over the past four years. 

Beginning and Ending 

Inventory for Audits With 

Disallowed Costs and Funds 

to Be Put to Better Use 

Exhibits 59 and 60 show the disposition of monetary amounts for audits 

that achieved final action and the 

audit inventory balances for disallowed costs and funds to be put to 

better (FTBU) use amounts only. 

Of the 107 audits that achieved final 

action during the period, 49 audits 

contained disallowed costs. The 

number of disallowed costs audits 

remaining in the inventory at the end 

of the period is 111 with a monetary 

value of $126,636,309. 

Final action occurred on 22 audits that 

involved FTBU amounts. We project 

more efficient use for 95 percent of 

the amount identified, based on the 

corrective actions implemented. 

The number of FTBU audits remaining in the inventory at the end of 

FY2002 is 45 with a monetary value of $586,962,365. 

Adjustments to Disallowed Costs 

For audits with disallowed costs DC that achieved final 

action, the amount OIG and management agreed to collect 

totaled $13,468,226. However, adjustments totaling 

$11,932,657 (representing 89 percent of the total) were made 

for the following reasons: 1) changes in management 

decision, 2) legal decisions, 3) write-offs, 4) USDA 

agencies’ ability to provide sufficient documentation to 

substantiate disallowed costs, 5) agency discovery, and 6) 

appeals. 

Exhibit 61 shows the distribution of adjustments by reason and dollar amount. 

Reportable Audit Statistics by USDA Agency 

Reportable audits are separated into three groups: 

Exhibit 59: Inventory of Audits With Disallowed Costs 

Disallowed Costs # of Audits Dollar Amounts 

Beginning balance 1261 $110,383,334 

Plus: New MDs 34 $29,721,201 

Total audits pending 160 $140,104,535 

Adjustments ($11,932,657) 

Revised Subtotal 160 $128,171,878 

Less: Final Actions 49 

Disallowed costs recovered ($1,535,569)2

Audits Pending Final Action at the End 111 $126,636,309 

1

Balance adjusted to remove 10 audits with questioned costs but no recovery 

recommended. 

2

This amount does not include $138,301 of interest collected. 

Exhibit 60: Inventory of Audits With Funds to be Put to Better Use 

Funds to be Put to Better Use # of Audits Amount 

Beginning balance 53 $489,473,051 

Plus New MDs 14 $166,313,900 

Total Audits Pending 67 $655,786,951 

Less: Final Actions 22 

Funds to be put to better use: 

FTBU implemented ($65,419,364) 

FTBU not implemented ($3,405,222) 

Total FTBU amounts ($68,824,586) 

Audits Pending at the end of the Period 45 $586,962,365 

Exhibit 61: Distribution of Adjustments 

to Disallowed Cost 

Category Amount 

Change in Management Decision $3,871,431 

Legal Decision $3,517,686 

Write Off $2,899,893 

Agency Documents $1,466,700 

Agency Discovery $(4,101) 

Appeal $181,048 
 USDA Performance and Accountability Report for FY 2002

91 

• Audits that are without final action, but for which corrective action is continuing as planned and 

deemed to be on schedule; 

• Audits behind schedule which have missed their original estimated completion dates; and 

• Audits for which all administrative actions have been completed and the only action remaining is the 

collection of disallowed costs. Exhibit 62 shows the distribution of the 147 audits included in this 

report, by responsible USDA agency. 

Exhibit 62: Distribution of Audits by USDA Agency (In U.S. dollars) 

Audits On Schedule Audits Behind Schedule Audits Under Collection 

Agency No. DC FTBU No. DC FTBU No. DC FTBU 

APHIS 1 - - 2 - - 4 8,891,635 - 

DA 1 - - 2 193,973 249,866 - - - 

FNS - - - 13 612,318 72,397,246 6 6,364,710 - 

FS 5 - - 21 1,350,000 70,269,210 - - - 

FSA 1 921,386 - 7 516,526 208,043,386 31 14,682,745 335,002 

FSIS - - - 3 $0 - - - - 

NASS - - - 1 $0 - - - - 

NRCS 1 - 2,970,003 - $0 - 1 21,033,708 - 

OCFO - - - 5 101,027 - - - - 

OCIO - - - 2 - - - - - 

RBS - - - 4 150,000 100,000 - - - 

RD - - - 1 - - - - - 

RHS 1 1,034,459 11,896,622 16 141,680 38,237,777 - - - 

RMA - - - 9 69,217 23,818 6 1,696,503 13,264,866 

RUS - - - 2 - - 1 35,118 - 

Totals 10 1,955,845 14,866,625 88 3,134,741 389,321,303 49 52,704,419 13,599,868 

Reportable audits (excluding the 49 that are pending collections only) are individually listed in Exhibit 63 

and are categorized by the reason final action has not occurred. These audits are pending: 

• Issuance of policy/guidance, 

• Conclusion of investigation, negotiation, or administrative appeal, 

• Receipt and/or processing of final action documentation, 

• Systems development, implementation or enhancement, 

• Results of internal monitoring or program review, 

• Results of agency request for change in management decision, 

• Office of General Counsel (OGC) or OIG advice, 

• Conclusion of external action, and 

• Administrative action. 

Audits previously reported to Congress are identified in Exhibit 63 by the placement of an asterisk after 

the audit number. 
 USDA Performance and Accountability Report for FY 2002

92 

Exhibit 63: Audits One Year or More Past the Management Decision Date Audits Date Issued 

Estimated Completion Date 

Audit Title 

(U

(33) Pending issuance of policy/guidance 03601-15-KC 03/31/00 04/30/03 FSA Emergency Conservation Program 03601-36-TE* 06/08/00 02/28/03 FSA Farm Loan Program Guaranteed Loans 04099-1-HQ* 02/01/96 06/30/03 RHS Legislative Proposals to Strengthen the Rural Rental Housing Program 04600-5-KC* 9/30/93 06/30/03 RHS Rural Rental Housing Program, Servicing of HUD Section 8/515 Projects 04600-47-CH* 9/30/94 06/30/03 RHS Rural Rental Housing Program, Management Operations 04601-1-KC* 12/16/96 06/30/03 RHS Rural Rental Housing Program, Additional Servicing of Section 8/515 Projects 04801-4-CH* 02/12/99 07/31/03 RHS Evaluation of Rural Rental Housing Tenant Income Verification Process 05600-4-TE* 09/30/93 02/28/03 RMA FCIC Crop Year 1991 Claims 05601-5-TE* 03/15/99 12/31/03 RMA Prevented Plantings of 1996 Insured Crops 08002-2-SF* 11/28/00 09/30/02 FS Valuation of Lands Acquired in Congressionally Designated Areas 08003-2-SF* 08/05/98 09/30/02 FS Toiyabe/Humboldt National Forest Land Adjustment Program 08003-6-SF* 07/14/00 09/30/02 FS Zephyr Cove Land Adjustment 08099-146-SF* 05/05/94 10/30/02 FS Influence of Interest Groups on Timber Sales Management 08401-9-AT 02/25/00 12/30/02 FS FY 1999 Financial Statements 08601-1-AT* 03/29/96 06/30/03 FS Hazardous Waste at Active or Abandoned Mines 08601-5-SF* 09/30/93 09/30/03 FS Graduated Rate Fee System 08601-7-SF* 05/23/95 10/01/02 FS Controls Over Research Services Provided to External and Forest Service Clients 08801-6-SF* 01/19/00 09/30/02 FS Land Adjustment Program San Bernadine National Forest & South Zone 08801-13-AT* 03/31/00 10/01/02 FS National Fire Cache System 23099-1-FM* 3/30/00 10/31/02 OCIO Security Over Data Transmission in the Department Needs Improvement 27010-11-CH* 08/25/97 09/30/04 FNS National School Lunch Program Verification of Applications in Illinois 27099-13-SF* 03/23/01 10/15/02 FNS Appeal Process 27600-6-AT* 03/31/95 06/30/03 FNS Day Care Homes Nationwide 27601-3-CH* 03/22/96 06/30/03 FNS Food Stamp Program—Disqualified Recipient System 27601-7-SF 08/23/99 06/30/03 FNS Presidential Initiative: Operation Kiddie Care 33004-1-AT 03/07/00 03/31/03 APHIS Plant Protection and Quarantine Activities in Florida 33601-1-CH* 06/28/96 12/31/02 APHIS Licensing of Animal Exhibitors 34001-1-HQ* 12/17/96 12/31/02 RBS Minority Enterprise Financial Acquisition Corp., Cooperative Agreement, Kansas City, KS 34601-1-HY* 07/22/98 10/31/02 RBS Business and Industry Loan Program—Morgantown, West Virginia 50099-1-AT* 01/13/95 09/30/02 OCFO Use of Cooperative Agreements 50601-2-CH 03/30/01 03/31/03 RD Verification of the Government Performance and Results Act – Program Performance in Rural Development 50801-3-HQ* 09/29/97 10/31/03 FSA Minority Participation in FSA’s Farm Loan Program 50801-11-TE 09/29/00 09/30/02 OCFO Advances to Nonprofit Organizations for Grants/Cooperative Agreements (11) Pending conclusion of investigation, negotiation or administrative appeal03006-17-AT* 07/24/96 09/30/03 FSA Disaster Assistance Program Crop Year 1999, Kenansville, NC 03801-15-TE* 03/29/96 10/31/02 FSA Texas Agricultural Mediation Program 
 USDA Performance and Accountability Report for FY 2002

93 

Exhibit 63: Audits One Year or More Past the Management Decision Date Audits Date Issued 

Estimated Completion Date 

Audit Title 

(U

04010-5-CH* 12/20/95 12/31/03 RHS Rural Rental Housing Program, Croix Management—Taylor Falls, MN 04099-1-HY* 11/07/95 02/28/03 RHS Rural Rental Housing Program, Whistleblower Complaint, San Juan, PR 04601-7-SF* 08/03/00 09/30/02 RHS Rural Housing Service, Farm Labor Housing Program State of Florida 04801-6-HY* 03/17/99 12/31/02 RHS Rural Rental Housing Program, Lewiston Properties, Fayetteville, NY 04801-9-SF* 01/27/99 12/30/03 RHS Rural Rental Housing Program—DBSI Realty Corporation, Boise, ID 05099-2-KC* 07/14/98 07/31/03 RMA Quality Control for Crop Insurance Determinations 23801-1-HQ* 08/20/98 03/31/03 DA Review of Office of Operations Contract with B&G Maintenance, Inc. 27010-19-SF* 11/18/99 TBD FNS Summer Food Service Program—Smart Start Food Program 34004-5-HY* 02/18/00 12/31/02 RBS Audit of Procurement Operations, Virginia State Office, Richmond, Virginia (12) Pending receipt and/or processing of final action documentation 04004-1-AT 08/30/01 03/31/03 RHS Williamsburg Enterprise Community 05099-8-KC* 03/31/00 12/31/02 RMA Standard Reinsurance Agreement Reporting Requirements 08099-47-AT* 12/15/93 09/30/02 FS Management Report 08601-4-AT* 03/31/98 12/30/02 FS Wildlife and Fisheries Habitat 08801-3-AT 09/30/96 09/30/02 FS Real and Personal Property Issues 08801-3-SF* 06/16/00 12/30/02 FS Review of the Confidential Financial Disclosure System 09401-5-HQ 04/05/01 11/29/02 RUS FY 2000 Rural Telephone Bank Management Issues 24601-1-CH* 06/21/00 09/30/02 FSIS Food Safety and Inspection Service Laboratory Testing of Meat and Poultry Products 24601-1-FM 04/04/01 12/30/02 FSIS Review of FSIS Staffing and Budget Management 24601-4-AT* 06/21/00 09/30/02 FSIS District Enforcement Operations Compliance Activities 50020-14-CH 10/02/00 10/31/02 RBS Single Audit of Leech Lake Reservation, Special Revenue Fund 50099-3-TE 07/20/01 09/30/02 NRCS Grants/Agreements with the National Fish and Wildlife Foundation (17) Pending systems development, implementation, or enhancement 03099-32-KC* 12/22/99 09/30/03 FSA Controls Over Administrative Payment Operations 04099-72-FM* 09/28/90 10/31/02 RHS Collection Systems and Other Selected Areas 08099-37-AT* 08/24/92 12/30/02 FS FY 91 Financial Statements 08099-42-AT* 08/03/93 09/30/02 FS FY 92 Financial Statements 08099-49-AT* 06/10/94 09/30/02 FS FY 93 Financial Statements 08401-1-AT* 06/20/95 09/30/02 FS FY 94 Financial Statements 08401-4-AT 07/18/96 09/30/02 FS FY 1995 Financial Statements 08401-7-AT 07/13/98 12/30/02 FS FY 1997 Financial Statements 08401-8-AT 02/23/99 12/30/02 FS FY 1998 Financial Statements 09600-5-HQ* 04/06/92 09/30/03 RUS FY 1991 Management Letter 27099-4-KC* 01/31/00 03/31/04 FNS Food Stamp Program Participation by Disqualified Retailers 27099-18-HY 09/05/01 06/30/03 FNS Security Over Information Technology Resources 27601-8-CH* 01/21/97 03/31/04 FNS Food Stamp Program—Retailer Monitoring with Store Tracking and Redemption Subsystem 50099-11-FM* 03/25/98 07/31/04 OCFO Review of Controls in the Payroll/Personnel and T&A Systems 
 USDA Performance and Accountability Report for FY 2002

94 

Exhibit 63: Audits One Year or More Past the Management Decision Date Audits Date Issued 

Estimated Completion Date 

Audit Title 

(U

50601-3-CH 07/23/01 12/30/03 APHIS Assessment of APHIS & FSIS Inspection Activities to Prevent the Entry of Foot and Mouth Disease 50401-21-FM* 05/29/98 09/30/06 RHS Audit of the Rural Development Consolidated Financial Statements for FY 1996 50601-8-KC* 01/25/00 03/31/03 FSA Conservation Reserve Program Acreage Enrollments—Signup 18 (13) Pending results of internal monitoring or program review 03099-14-KC* 08/12/96 10/31/03 FSA Grain Warehouse Examination Process 04601-8-SF* 01/12/00 05/31/03 RHS Farm Labor Housing Program—State of Washington 05099-1-KC* 03/03/98 04/30/05 RMA Transfer of Catastrophic Risk Protection Policies to Reinsured Companies 05099-1-TE* 09/30/97 10/31/03 RMA Reinsured Companies Actual Production History Self-Reviews 05099-6-KC* 09/30/99 04/30/05 RMA Servicing of Catastrophic Risk Protection Policies 05600-1-TE* 09/28/89 10/31/03 RMA Crop Year 1988 Insurance Contracts with Claims 08001-1-HQ* 06/28/00 09/30/03 FS Implementation of the Government Performance and Results Act 08601-25-SF 06/22/01 12/30/03 FS Working Capital Fund Enterprise Services 08801-4-TE* 02/15/98 09/30/03 FS Collection of Royalties on Oil and Gas Production 26099-1-FM 05/14/01 09/30/03 NASS Security of NASS Information Technology Resources 27401-8-HY* 06/27/97 09/30/05 FNS FY 1996 Financial Statements 27601-6-KC* 06/18/97 09/30/03 FNS Food Distribution Program on Indian Reservations 50801-2-HQ 02/27/97 09/30/04 DA Evaluation Report for the Secretary on Civil Rights Issues (Phase 1) (3) Pending results of request for change in management decision50099-2-HQ* 07/11/96 10/31/02 DA Review of USDA Contracts with Synex, Inc. 50099-28-FM* 07/18/00 10/31/02 OCIO President’s Council on Integrity and Efficiency Critical Infrastructure Protection Review 50401-35-FM 02/25/00 09/30/02 OCFO FY 1999 USDA Consolidated Financial Statements (1) Pending OGC or OIG advice 05099-22-AT 01/31/94 12/31/02 RMA Tobacco Indemnity Payments— Mitchell County, Georgia (5) External Action Required 04004-4-CH* 03/13/98 07/30/03 RHS Evaluation of Rural Rental Housing Tenant Income Verification Process in East Lansing, MI 04801-5-KC* 11/02/98 03/01/03 RHS Rural Rental Housing Program, Brookview Management, Inc., St. Louis, MO 08003-5-SF 12/15/00 06/30/03 FS Land Acquisitions and Urban Lot Management Lake Tahoe Basin Management Unit 27099-9-HY* 12/14/99 03/31/03 FNS State Option Food Stamp Program 50401-36-FM* 11/09/00 12/30/02 OCFO FY 1999 Working Capital Fund Consolidated Financial Statements (3) Pending Administrative Action 04801-11-TE 09/23/99 TBD RHS Calhoun Property Management—Mansfield, Louisiana 08099-6-SF 03/27/01 12/30/02 FS Security Over USDA Information Technology Resources 27010-20-SF 11/30/00 12/31/02 FNS Child and Adult Care Food Program State Oversight of Small, Independent Centers—California Total Number Audits (98) Total $ 
 USDA Performance and Accountability Report for FY 2002

95

FEDERAL MANAGERS’ FINANCIAL INTEGRITY ACT REPORT ON 

MANAGEMENT CONTROLS 

Highlights 

For the first time in more than ten years, USDA’s Message From the Secretary provides reasonable 

assurance that the Department is in compliance with the objectives of both Section 2 and Section 4 of the 

FMFIA, except for the weaknesses described in Exhibit 67. A major achievement this year is the removal 

of the Central Accounting System as a material financial system nonconformance for the Department. As 

of September 30, 2002, all but two USDA agencies have been converted from the Central Accounting 

System to the Foundation Financial Information System (FFIS). For the remaining two agencies, the 

effective date of conversion was October 1, 2002. Based on the work performed during FY 2002 and 

prior years, the Department’s integrated financial management system is compliant with the objectives of 

Section 4 of FMFIA. 

There were no new material financial system nonconformances identified in FY 2002. Individual agencies 

identified material deficiencies and/or financial systems nonconformances, but these did not rise to the 

level of Departmental material deficiencies. Criteria are listed on page 94. 

In FY 2002 USDA reduced the number of material deficiencies by almost half—a noteworthy achievement that reflects an improving environment of internal control. We began the year with 32 material 

deficiencies and closed it with 19 material deficiencies: 17 material weaknesses and two financial system 

nonconformances. Our FY 2003 goal is to reduce the remaining deficiencies by half and eliminate them 

in FY 2004. 

Background 

The Federal Managers’ Financial Integrity Act (FMFIA) requires agencies to provide an assurance 

statement that Federal programs are operated efficiently and effectively; provide reasonable assurance 

that obligations and costs comply with applicable laws and regulations; Federal assets are safeguarded 

against fraud, waste and mismanagement; and transactions are accounted for and properly recorded. The 

law also requires a separate statement as to whether financial management systems conform to standards, 

principles, and other requirements to ensure that Federal managers have timely, relevant, and consistent 

financial information for decision-making purposes. 

Under the Federal Financial Management Improvement Act (FFMIA) agencies are required to report 

whether financial management systems substantially comply with the federal financial management 

systems requirements, federal accounting standards, and the United States Government Standard General 

Ledger at the transaction level. If any agency is not in compliance with the FFMIA, a remediation plan to 

bring the agency’s financial management systems into substantial compliance is required. The Department has a remediation plan to correct its material financial system nonconformances and FFMIA 

noncompliances. These plans are included in the FY 2002 Five-Year Financial Management Plan. 

Management Controls Program 

USDA’s management controls program ensures compliance with the requirements of the FMFIA and the 

Office of Management and Budget (OMB) Circulars A–123, “Management Accountability and Control,” 

and A–127 “Financial Management Systems.” 
 USDA Performance and Accountability Report for FY 2002

96

Within USDA, Sub-cabinet Officials, Agency Heads, and Heads of Staff Offices are responsible for 

ensuring that their programs are operating efficiently, effectively, and in compliance with relevant laws; 

and that financial management systems conform to applicable laws, standards, principles, and related 

requirements. In conjunction with the Office of Inspector General, USDA’s management works 

aggressively to determine the root causes of our material deficiencies and quickly remedy them. 

Under the leadership of the Office of the Chief Financial Officer, a new Management Controls 

Manual will be implemented during FY 2003 to institutionalize processes and aid in the early 

identification, detection and correction of internal control weaknesses. 

USDA Guidelines for Reportable Material Weaknesses 

A Departmental Material Weakness is a weakness in internal controls that satisfies one or more of the 

following criteria: 

• Merits the attention of the Executive Office of the President and the relevant Congressional oversight 

committees. 

• Violates statutory or regulatory requirements. 

• Deprives the public of needed services. 

• Significantly weakens safeguards against waste, loss, unauthorized use or misappropriation of funds, 

property or other assets. 

• Significantly impairs fulfillment of the Department’s mission. 

• Results in a conflict of interest. 

• Is of a nature that omission from the annual Report on Management Controls could reflect adversely 

on the actual or perceived management integrity of the Department. 

A Departmental Material Financial System Nonconformance satisfies one or more of the following 

criteria: 

• Merits the attention of the Executive Office of the President and the relevant Congressional oversight 

committees. 

• Prevents USDA’s primary financial management system from achieving central control over agency 

financial transactions and resource balances. 

• Prevents compliance of the primary financial management system with standards published by the 

OMB circular A–127, which include the availability of timely, consistent, and relevant financial 

information for decision-making purposes. 

Material Weaknesses and Nonconformances Reported in the FMFIA and FFMIA 

The following summarizes a few of USDA’s 19 material deficiencies. Exhibit 67 identifies the corrective 

actions planned for these and other material deficiencies. 

Administration of the Food Stamp Program at State Agencies 

The Food and Nutrition Service (FNS) Food Stamp Program national level error rate needs to be reduced. 

Over-issuance of program benefits results in a loss of program dollars while under-issuance results in 

eligible clients receiving less benefits than they are entitled to receive. FNS will continue to provide oversight to ensure that controls and error reduction strategies continue. Focus will remain on the development 

of error analysis and corrective actions for States with the greatest impact on the national error rate. 
 USDA Performance and Accountability Report for FY 2002

97

Adequacy of Financial Systems 

The Forest Service (FS) financial accounting system lacks controls in the accounting and reporting subsystems to ensure financial information is reliable and funds are adequately controlled. The FS will 

implement improvements identified as a result of the assessment of the fire activity business cycle. 

Additionally, FS will establish reconciliation procedures and revise financial management manuals and 

handbooks. 

USDA Information Security Weakness 

The Department’s ability to protect its assets 

from fraud, misuse, disclosure, and disruption needs strengthening. The Department, 

under the direction of the Office of the Chief 

Information Officer, will continue to develop 

policy, publish guidance and regulations, and 

provide training in the areas of information 

system risk assessment and mitigation, 

physical and logical access controls, disaster 

recovery and contingency planning, intrusion 

detection and response, certification and 

accreditation, and security awareness. 

Historical Data on Material Deficiencies 

Exhibit 64 reflects the Department’s 

progress over the last four years in 

resolving material deficiencies. The 

Department has reduced the number of material deficiencies from a high of 36 in FY 1999 to 19 for 

FY 2002. This represents a 47 percent decrease in the number of outstanding material deficiencies 

reported over the past four years. The level of correction continues to exceed the number of new 

deficiencies reported. 

Of the 32 material deficiencies reported last year, 15 or 47 percent were corrected or determined to be no 

longer material. Two new Section 2 material weaknesses were identified in FY 2002. 

USDA continues to focus on correcting its longstanding weaknesses. Exhibit 66 shows that 8 or 53 

percent of the corrected deficiencies were identified in 1999 or prior years. Of the 19 remaining material 

deficiencies, more than half are scheduled for completion in FY 2003. 

Exhibit 65: Material Deficiencies Aging Analysis 

Fiscal Year Identified 1999 and Prior 2000 2001 2002 Total 

Beginning Balance FY 2002 16 7 9 - 32 

Add: New Weaknesses Reported in FY 2002 - - - 2 2 

Deduct: Completed or Deemed Nonmaterial in FY 2002 8 4 3 - 15 

Pending Completion 8 3 6 2 19 

Exhibit 66 identifies material deficiencies where corrective actions were completed or the weakness is 

deemed no longer material (as of the end of FY 2002). 

Exhibit 64: Material Deficiencies Decline by 

nearly 50% 

10 11 10

15

7 8 9

2

36

33 32

19

0

10

20

30

40

1999 2000 2001 2002

Corrected Deficiencies New Deficiencies Remaining Deficiencies
 USDA Performance and Accountability Report for FY 2002

98

Exhibit 66: Material Deficiencies Corrected or No Longer Material 

Responsible 

Agency Title of Material Deficiencies Year Identified 

FNS Illegal Transactions Involving the Exchange of Food Stamps 1990 

FS Management and Use of Forest Resources 1992 

 Internal Controls in the Contracting Area 1998 

 Real Property Management Subsystem 1989 

RD Business Programs Compliance with All Applicable Civil Rights Laws, Executive Orders, and 

Program Requirements 

2000 

 Lack of and Effective System of Controls Over Performance Reporting 2001 

 Lack of Controls in Place to Protect Alternative Agricultural Research and Commercialization 

Corporation Investment Portfolio 

1999 

OCFO Adjustments and Reconciliations of Ledger Accounts at the National Finance Center 1996 

 Financial Management Systems Do Not Meet Current Accounting Standards 2000 

 Material Internal Control Problems Exist in the Accountability and Valuation of Personal Property 

in Working Capital Fund Activity Centers 

2000 

 FFIS Account Reconciliations 2001 

 Controls Over Unliquidated Obligations 2001 

 Departmental Financial Information System 1992 

OCIO Telecommunications and Network Planning 1995 

 Weakness of Security Over Data-Transmission in USDA 2000 

Exhibit 67: Summary of Outstanding Material Deficiencies and Estimated Completion Dates 

Responsible 

Agency Material Deficiency Description Corrective Actions Remaining To Be Taken 

Year 

Identified 

Estimated 

Completion

Date 

 Section 2 Material Weaknesses 

DA USDA Agencies’ Internal Controls Over 

the Purchase Card Management System 

(PCMS): Strengthen and improve internal 

controls over purchase card operations 

and better use the PCMS automated 

system. 

Issue revised PCMS guidance and 

develop oversight queries. Complete 

deployment on upgraded PCMS 

software and provide training. 

FY 2002 FY 2004 

FNS Management of the Food Stamp Program 

(FSP) Recipient Claims: Procedures for 

establishing, recording, adjusting and 

reporting on claims need strengthening. 

Evaluate and monitor State agencies’ 

(SA) procedures and systems for the 

establishment and reporting of claims 

for the Food Stamp Program. 

FY 1991 FY 2005 

 Administration of the FSP at State Agencies: Over issuance of program benefits 

results in a loss of program dollars while 

under issuance results in eligible clients 

receiving less benefits than they are 

entitled to receive. The rate of inaccurate 

benefit payments exceeds acceptable 

levels in some States. 

Implement revised guidance and 

forms to improve States quality and 

control data coding and analysis. 

Implement monitoring process to 

allow for early identification and 

intervention of rising error rates in 

States. 

FY 1991 FY 2003 

Management of the Child and Adult Care 

Food Program (CACFP): Management 

and monitoring of weaknesses in the 

CACFP need strengthening. Sponsoring 

organizations have been identified as 

receiving excessive Federal funding for 

meal service and administration. 

Publish the CACFP management 

improvement regulations. Conduct 

management evaluations in 

approximately half of the CACFP 

SA’s. Reassess, revise, and 

implement training on final 

regulations. 

FY 1994 FY 2004 
 USDA Performance and Accountability Report for FY 2002

99

Exhibit 67: Summary of Outstanding Material Deficiencies and Estimated Completion Dates 

Responsible 

Agency Material Deficiency Description Corrective Actions Remaining To Be Taken 

Year 

Identified 

Estimated 

Completion

Date 

FNS 

(Cont’d) 

National School Lunch (NSL) and 

Breakfast Program Eligibility: Data 

indicate a problem with the integrity of 

household eligibility determination for free 

and reduced price meals. 

Develop and implement legislative 

provisions requiring State Agencies 

to collect and report on data 

verification activities to FNS. 

FY 1999 FY 2004 

 Procurement in the Child Nutrition Program: Improper procurement of goods and 

services have been found to occur in the 

NSL, School Breakfast and CACFP, and 

Summer Food Service Programs. 

Revise procurement guidance and 

evaluate its effectiveness against 

improper procurement of goods and 

services. 

FY 2001 FY 2004 

 Administrative Cost Reimbursements Made 

to Partner Agencies Operating Food 

Assistance Programs Under the Auspices 

of FNS: Assure that SA’s operating Federal 

food assistance programs adhere to 

legislative, OMB, Departmental and 

program guidelines when claiming Federal 

reimbursement for program operations and 

Automated Data Processing (ADP) 

acquisitions. 

Develop, implement, and evaluate 

the effectiveness of guidance on WIC 

cost allocations and ADP approval 

processes to ensure that cost 

reimbursement made to States are 

appropriate. 

FY 2001 FY 2004 

FS Adequacy of Financial Systems: The 

financial accounting system lacks controls 

in the accounting and reporting 

subsystems to ensure financial 

information is reliable and funds are 

adequately controlled. 

Identify and implement 

improvements needed to ensure 

transactions are entered into FFIS 

timely. Develop reconciliation procedures for FFIS interfaces with 

subsidiary systems. 

FY 1989 FY 2003 

 Administration of Lands Special Use 

Permits: Lands Special Use Permits are 

not being administered to a standard 

consistent with law, regulations, or policy. 

Complete solicitation, analysis and 

publication of comments on 

proposed revisions to categorical 

exclusions on Special Uses. Issue 

guidance to clarify agency policy for 

use by field units. Provide “Special 

Uses” training in every region. 

Publish and implement final rule for 

recovery of costs. 

FY 1992 FY 2003 

 Performance Reporting: The FS currently 

lacks effective internal controls over the 

quality of data included in the performance 

accomplishment report under GPRA. 

Implement a new set of performance 

measures and use them as a tool to 

assess and report on agency 

performance. 

FY 2000 FY 2004 

 Timber Sale Environmental Analysis: 

Administrative controls over the analysis 

and preparation of environmental 

documents and implementation of 

mitigation measures applicable to timber 

sales have not been effective. Heritage 

resources, water quality, and threatened, 

endangered, or sensitive species and their 

habitat may be adversely affected. 

Revise FS manual and handbooks 

for implementing the National 

Environment Policy Act (NEPA). 

Implement corrective actions detailed 

in the Administrative Control Plan. 

Identify existing and develop new 

training and tools for effective 

analysis of NEPA and Endangered 

Species Act documentation. 

FY 2001 FY 2004 

FSA Reimbursement Claims Not Made for 

Excess Ocean Freight Payments: 

Unclaimed cargo preference reimbursements for costs incurred under the 

P.L. 480 food assistance programs 

administered by the U.S. Agency for 

International Development. 

Work with the U.S. Agency for 

International Development (USAID) 

to reach an agreement on 

outstanding billing issues Bill and 

request reimbursements from the 

Department of Transportation—

Maritime Administration and submit 

semi-annual apportionment requests 

to OMB, as needed. 

FY 2001 FY 2003 
 USDA Performance and Accountability Report for FY 2002

100

Exhibit 67: Summary of Outstanding Material Deficiencies and Estimated Completion Dates 

Responsible 

Agency Material Deficiency Description Corrective Actions Remaining To Be Taken 

Year 

Identified 

Estimated 

Completion

Date 

OCFO USDA’s Financial Statement Preparation is 

Not Timely or Reliable: OCFO uses manual 

processes to compile the statements. Additionally, the process is inadequately documented and results in additional delays to 

the audit. * 

Design and implement data 

extraction and cross-walking 

functionality. Select and implement 

reporting tool for information 

delivery. 

FY 2001 FY 2003 

OCIO USDA Information Security Weaknesses: 

Weaknesses have been identified in the 

Department’s ability to protect its assets 

from fraud, misuse, disclosure, and 

disruption. 

Improve controls in the Department’s 

information security in the areas of 

risk assessment and mitigation, 

physical and logical access controls, 

disaster recovery and contingency 

planning, intrusion detection and 

response, certification and 

accreditation and security 

awareness. 

FY 2000 FY 2003 

 Information Security Weaknesses at the 

National Information Technology Center 

(NITC): Weaknesses in logical access 

controls, identifying vulnerabilities on 

systems, controlling access to its network 

from the Internet, and compliance with 

existing Federal security guidelines. 

Identify NITC common resources 

requiring public internet access and 

migrate them to the Demilitarized 

Zone (DMZ), and encrypt all 

sensitive data transported in and out 

of the DMZ through securing 

services. Assist agencies in 

identifying resources needed to 

maintain their applications, and 

define the actions needed to bring 

systems into compliance with 

requirements. 

FY 2001 FY 2003 

 Security Weaknesses in USDA’s Controls 

Over Website Content 

Ensure that agencies have reviewed 

their websites and expunge any data 

considered to be sensitive. Finalize 

guidance on defining sensitive data 

to be excluded from all USDA web 

content, and work with USDA’s OIG 

to address concerns on maintaining 

an inventory of agency websites. 

FY 2002 FY 2003 

RD Oversight of the Multi-Family Housing Program (MFH): The MFH Program lacks 

adequate oversight and internal controls 

which has led to program abuse by 

program participants. 

Publish Final Rule for Multi-Family 

Housing Loan Programs. 

FY 1992 FY 2003 

Section 4 Financial Management System Nonconformance 

RD Direct Loan Servicing and Reporting Subsystem: Direct Loan Servicing and 

Reporting system not in compliance with 

OMB Circular A–127 “Financial 

Management Systems.” 

Complete incremental implementation of the Rural Utilities Loan 

Servicing System to replace legacy 

loan systems. 

FY 1994 FY 2003 

FSA Report Systems: Foreign credit subsidiary 

and credit reform systems are not fully 

automated and integrated into the 

Commodity Credit Corporation’s Core 

Accounting Foreign Credit Subsidiary and 

Credit System (CORE). 

Implement new General Sales 

Manager System to interface directly 

with the CORE general ledger and 

replace the Financial Management 

System accounting structure in the 

APLUS System (P.L. 480) with the 

CORE accounting structure. 

FY 2000 FY 2004 

* On January 7, 2003, USDA obtained a clean audit report on the FY 2002 Financial Statements.
USDA Performance and Accountability Report for FY 2002 

101

III. CONSOLIDATED FINANCIAL STATEMENTS 
USDA Performance and Accountability Report for FY 2002 

102

U.S. Department of Agriculture 

CONSOLIDATED BALANCE SHEET 

As of September 30, 2002 

(in millions)

Assets (Note 2):

Intragovernmental:

Fund balance with treasury (Note 3) $ 39,617

Investments (Note 5) 96

Accounts receivable, net (Note 6) 242

Other (Note 10) 1

Total intragovernmental 39,956

Cash and other monetary assets (Note 4) 165

Investments (Note 5) 15

Accounts receivable, net (Note 6) 1,866

Loans receivable and related foreclosed property, net (Note 7) 75,543

Inventory and related property, net (Note 8) 749

General property, plant, and equipment, net (Note 9) 4,862

Other (Note 10) 284

Total assets 123,440

Liabilities (Note 11):

Intragovernmental:

Accounts payable 637

Debt (Note 12) 75,868

Other (Note 14 & 15) 21,393

Total intragovernmental 97,898

Accounts payable 3,046

Loan guarantee liability (Note 7) 1,077

Debt held by the public (Note 12) 84

Environmental and disposal liabilities (Note 13) 22

Other (Note 14 & 15) 10,560

Total liabilities 112,687

Commitments and contingencies (Note 16)

Net position:

Unexpended appropriations 26,196

Cumulative results of operations (15,443)

Total net position 10,753

Total liabilities and net position $ 123,440

The accompanying notes are an integral part of these statements. 
USDA Performance and Accountability Report for FY 2002 

103

U.S. Department of Agriculture 

CONSOLIDATED STATEMENT OF NET COST 

For the Year Ended September 30, 2002 

(in millions) 

Program Costs (Notes 17, 18, 19):

Intragovernmental gross costs $ 7,897

Less: Intragovernmental earned revenues 983

Intragovernmental net costs 6,914

Gross costs with the public

Grants 51,837

Loan Cost Subsidies (994)

Indemnities 3,945

Commodity program costs 5,408

Stewardship land acquisition 212

Other 15,145

Less: Earned revenues from the public 9,597

Net cost with the public 65,956

Net Cost of Operations $ 72,870

The accompanying notes are an integral part of these statements. 
USDA Performance and Accountability Report for FY 2002 

104

U.S. Department of Agriculture 

CONSOLIDATED STATEMENT OF CHANGES IN NET POSITION 

For the Year Ended September 30, 2002 

(in millions) 

Cumulative

 Results of Unexpended 

Operations Appropriations

Beginning Balances $ (21,379) $ 31,639

Prior period adjustments (Note 19) (907) 210

Beginning balances, as adjusted (22,286) 31,849

Budgetary Financing Sources:

Appropriations received 72,616

Appropriations transferred out (19,746)

Other adjustments (rescissions, etc.) (986)

Appropriations used 80,229 (57,536)

Non-exchange revenue 2

Transfers out without reimbursement (478)

Other budgetary financing sources (105)

Other Financing Sources:

Donations and forfeitures of property 14

Transfers out without reimbursement (1,351)

Imputed financing from costs absorbed by others 1,328

Other 74

Total Financing Sources 79,713 (5,653)

Net Cost of Operations 72,870

Ending Balances $ (15,443) $ 26,196

The accompanying notes are an integral part of these statements. 
USDA Performance and Accountability Report for FY 2002 

105

U.S. Department of Agriculture 

COMBINED STATEMENT OF BUDGETARY RESOURCES 

For the Year Ended September 30, 2002 

(in millions) 

Non-Budgetary 

Credit Program 

Budgetary Financing Accounts

Budgetary Resources:

Budget authority:

Appropriations Received $ - 84,637 $ 

Borrowing authority (Notes 21 & 22) 9,689 34,055 

Net transfers (2,281)

Unobligated balances:

Beginning of period 2,341 24,498 

Net transfers, actual 125

Spending authority from offsetting collections:

Earned

Collected 7,183 21,603 

Receivable from Federal sources (695) (762)

Change in unfilled customer orders

Advance received 148

Without advance from Federal sources 55 664 

Subtotal 7,084 21,112 

Recoveries of prior year obligations 2,664 288 

Permanently not available (52,408) (1,893)

Total Budgetary Resources 17,509 112,402 

Status of Budgetary Resources:

Obligations incurred (Note 20):

Direct 12,245 64,482 

Reimbursable 29,382

Subtotal 12,245 93,864 

Unobligated balance:

Apportioned 4,252 4,578 

Exempt from apportionment 276

Other available 299

Unobligated balance not available 1,012 13,385 

Total Status of Budgetary Resources: 112,402 17,509 

Relationship of Obligations to Outlays:

Obligated balance, net, beginning of period 10,812 19,624 

Obligated balance, net, end of period:

Accounts receivable (107) (1,048) 

Unfilled customer orders from Federal sources (267) (676) 

Undelivered orders 14,107 14,561 

Accounts payable 438 6,292 

Outlays:

Disbursements 9,105 92,034 

Collections (7,182) (21,751) 

Subtotal 1,923 70,283 

Less: Offsetting receipts 130 1,275 

Net Outlays $ 1,793 69,008 $ 

The accompanying notes are an integral part of these statements 
USDA Performance and Accountability Report for FY 2002 

106

U.S. Department of Agriculture 

CONSOLIDATED STATEMENT OF FINANCING

For the Year Ended September 30, 2002 

(in millions)

Resources Used to Finance Activities:

Budgetary Resources Obligated

Obligations incurred $ 106,271 

Less: Spending authority from offsetting collections and recoveries 31,166 

Obligations net of offsetting collections and recoveries 75,105

Less: Offsetting receipts 1,404

Net obligations 73,701

Other resources

Donations and forfeitures of property 14

Transfers out without reimbursement (1,351)

Imputed financing from costs absorbed by others 1,328

Other 74

Net other resources used to finance activities 64

Total resources used to finance activities 73,765

Resources Used To Finance Items Not Part of the Net Cost of Operations:

 4,371

Resources that fund expenses recognized in prior periods 3,174

Budgetary offsetting collections and receipts that do not affect net cost of operations

 (9,739)

Other (13,805)

Resources that finance the acquisition of assets 16,310

 6,069

Total resources used to finance items not part of the net cost of operations 6,380

Total resources used to finance the net cost of operations 67,385

Components Requiring or Generating Resources in Future Periods:

Increase in annual leave liability 88

Upward/Downward reestimates of credit subsidy expense (167)

Increase in exchange revenue receivable from the public (4,045)

Other 1,636

 (2,488)

Components not Requiring or Generating Resources:

Depreciation and amortization 520

 397

Other 7,056

 7,974

 5,485

Net Cost of Operations $ 72,870 

Change in budgetary resources obligated for goods, services, and benefits ordered but not yet provided

Components of Net Cost of Operations that will not Require or Generate Resources in the Current Period:

Total components of Net Cost of Operations that will not require or generate resources

Revaluation of assets or liabilities

Total components of Net Cost of Operations that will not require or generate resources in the current period

Credit program collections which increase liabilities for loan guarantees or allowances for subsidy

Other resources or adjustments to net obligated resources that do not affect net cost of operations

Total components of Net Cost of Operations that will require or generate resources in future periods

The accompanying notes are an integral part of these statements 
USDA Performance and Accountability Report for FY 2002 

107

NOTES TO THE FINANCIAL STATEMENTS 

As of September 30, 2002 

(in millions) 

Note 1. Significant Accounting Policies 

Reporting Entity 

The Department provides a wide variety of services in the United States and around the world in seven 

distinct mission areas: Farm and Foreign Agricultural Services; Food, Nutrition, and Consumer Services; 

Natural Resources and Environment; Food Safety and Inspection Services; Marketing and Regulatory 

Programs; Research, Education, and Economics; and Rural Development. 

Principles of Consolidation 

The financial statements are prepared in accordance with generally accepted accounting principles for the 

Federal Government and the form and content for entity financial statements specified by the Office of 

Management and Budget (OMB) in OMB Bulletin No. 01–09, as applicable. The financial statements 

include the accounts of the Department of Agriculture and its twenty-one agencies, including four 

Government corporations. Significant intradepartmental activity and balances have been eliminated, 

except for the Statement of Budgetary Resources that is presented on a combined basis. 

Comparative Reporting 

Comparative financial statements are not presented since the Department received a disclaimer of opinion 

in fiscal year 2001. The OMB agreed that the financial management resources of USDA are best directed 

toward improving underlying financial accounting weaknesses rather than preparing comparative 

financial statements for fiscal year 2002. 

Use of Estimates

The preparation of financial statements requires management to make estimates and assumptions that 

affect the amounts reported in the financial statements and accompanying notes. Actual results could 

differ from those estimates. 

Revenue and Other Financing Sources

Revenue from exchange transactions is recognized when persuasive evidence of an arrangement exists, 

delivery has occurred or services have been rendered, the sales price is fixed or determinable, and 

collectibility is reasonably assured. In certain cases, the prices charged by the Department are set by law 

or regulation, which for program and other reasons may not represent full cost. Prices set for products and 

services offered through the Department’s working capital funds are intended to recover the full costs 

incurred by these activities. Revenue from non-exchange transactions is recognized when a specifically 

identifiable, legally enforceable claim to resources arises, to the extent that collection is probable and the 

amount is reasonably estimable. Appropriations are recognized as a financing source when used. An 

imputed financing source is recognized for costs subsidized by other Government entities. 

Investments

The Department is authorized to invest certain funds in excess of its immediate needs in Treasury 

securities. Investments in nonmarketable par value Treasury securities are classified as held to maturity 

and are carried at cost. Investments in market-based Treasury securities are classified as held to maturity 

and are carried at amortized cost. The amortized cost of securities is based on the purchase price adjusted 

for amortization of premiums and accretion of discounts using the straight-line method over the term of 

the securities. 
USDA Performance and Accountability Report for FY 2002 

108

Accounts Receivable

Accounts receivable with the public are reduced to net realizable value by an allowance for uncollectible 

accounts. The adequacy of the allowance is determined based on past experience and age of outstanding 

balances. 

Direct Loans and Loan Guarantees 

Direct loans obligated and loan guarantees committed after fiscal year 1991 are reported based on the 

present value of the net cash-flows estimated over the life of the loan or guarantee. The difference 

between the outstanding principal of the loans and the present value of their net cash inflows is 

recognized as a subsidy cost allowance; the present value of estimated net cash outflows of the loan 

guarantees is recognized as a liability for loan guarantees. The subsidy expense for direct or guaranteed 

loans disbursed during the year is the present value of estimated net cash outflows for those loans or 

guarantees. A subsidy expense also is recognized for modifications made during the year to loans and 

guarantees outstanding and for reestimates made as of the end of the year to the subsidy allowances or 

loan guarantee liability for loans and guarantees outstanding. 

Direct loans obligated and loan guarantees committed before fiscal year 1992 are valued using the 

present-value method. Under the present-value method, the outstanding principal of direct loans is 

reduced by an allowance equal to the difference between the outstanding principal and the present value 

of the expected net cash flows. The liability for loan guarantees is the present value of expected net cash 

outflows due to the loan guarantees. 

Inventories and Related Property 

Operating materials and supplies are valued on the basis of historical cost using a weighted average method. 

Commodities are valued at the lower of cost or net realizable value using a weighted average method. 

Property, Plant and Equipment 

Property, plant, and equipment are stated at cost less accumulated depreciation. Depreciation is determined using the straight-line method over the estimated useful lives of the assets. Useful lives for 

personal property and real property range from 5 to 8 years and 10 to 50 years, respectively. Capitalization thresholds for personal property, except for internal use software, and real property are $5,000 and 

$25,000, respectively. The capitalization threshold for internal use software is $100,000. The capitalization threshold for real property was changed from $5,000 to $25,000 effective October 1, 2001. 

Pension and Other Retirement Benefits

Pension and other retirement benefits (primarily retirement health care benefits) expense is recognized at 

the time the employees’ services are rendered. The expense is equal to the actuarial present value of 

benefits attributed by the pension plan’s benefit formula, less the amount contributed by the employees. 

An imputed cost is recognized for the difference between the expense and contributions made by and for 

employees. 

Other Postemployment Benefits

Other postemployment benefits expense for former or inactive (but not retired) employees is recognized 

when a future outflow or other sacrifice of resources is probable and measurable on the basis of events 

occurring on or before the reporting date. The liability for long-term other postemployment benefits is the 

present value of future payments. 

Contingencies

Contingent liabilities are recognized when a past event or exchange transaction has occurred, a future 

outflow or other sacrifice of resources is probable, and the future outflow or sacrifice of resources is 

measurable. 
USDA Performance and Accountability Report for FY 2002 

109

Note 2. Non-Entity Assets 

 

Intragovernmental:

Fund balance with Treasury $ 1,337

Cash and other monetary assets 71

Accounts receivable 126

Total non-entity assets 1,534

Total entity assets 121,906

Total assets $ 123,440

Non-entity assets include proceeds from the sale of timber payable to Treasury and employer 

contributions and payroll taxes withheld for agencies serviced by the National Finance Center. 

Note 3. Fund Balance with Treasury 

Fund Balances:

 Trust Funds $ 370

 Revolving Funds 8,943

 Appropriated Funds 29,091

 Other Fund Types 1,212

Total $ 39,617

Status of Fund Balance with Treasury:

Unobligated Balance:

 Available $ 10,625

 Unavailable 12,645

Obligated Balance not yet Disbursed 16,347

Total $ 39,617

Other fund types include deposit and clearing accounts. 

Note 4. Cash and Other Monetary Assets 

Cash $ 165

 

Cash includes excess cash reserves from fee-for-service programs of $86 million and cash held in escrow 

to pay property taxes and insurance for single-family housing borrowers of $71 million. 
USDA Performance and Accountability Report for FY 2002 

110

Note 5. Investments 

Unamortized Market

Amortization Premium/ Investments, Value

Cost Method (Discount) Net Disclosure

Intragovernmental Securities:

Non-marketable:

Par value 63 $ - $ 63 $ 63 $ 

Market-based 30 Straight Line 3 33 33 

Total 93 3 96 96 

Other Securities:

AARC 15 - 15 15 

Total 15 $ - $ 15 $ 15 $ 

Note 6. Accounts Receivable, net 

Accounts 

Receivable, 

Gross

Allowance for

Uncollectible 

Accounts

Accounts 

Receivable, Net

Accounts Receivable 

Intragovernmental $ 1 243 $ 242 $ 

With the Public 2,137 271 1,866

Total $ 272 2,380 $ 2,108 $ 
USDA Performance and Accountability Report for FY 2002 

111

Note 7. Direct Loans and Loan Guarantees, Non-Federal Borrowers 

Table 1. Total Loans Receivable and Related Foreclosed Property, Net 

Total Loans Receivable and Related Foreclosed Property, Net

FY 2002 Loans Present Value of Assets

Direct Loans Receivable, Interest Foreclosed Value Related to

Gross Receivable Property Allowance Direct Loans

Obligated Pre-1992

Foreign Loans 7,852 $ 90 $ - $ 4,259 $ 3,683 $ 

Farm Loans 3,976 307 44 456 3,871 

Home Loans 14,957 108 39 5,178 9,925 

Utility Loans 20,093 50 - 1,874 18,268 

Community Loans 2,821 30 - 22 2,829 

Business and Industry Loans 49 - - 11 38 

Pre-1992 Total 49,748 584 84 11,801 38,615

Obligated Post-1991

Foreign Loans 2,978 36 - 1,702 1,312 

Farm Loans 4,588 109 4 1,545 3,157 

Home Loans 13,190 64 35 2,171 11,119 

Utility Loans 11,564 6 - 572 10,998 

Community Loans 5,055 55 - 754 4,356 

Business and Industry Loans 524 4 - 197 332 

Post-1991 Total 37,900 274 40 6,939 31,274 

Total Direct Loan Program Receivables 87,648 $ 858 $ 123 $ 18,740 $ $ 69,889 

Defaulted Guarantee Loans

Pre-1992

Foreign Loans 5,171 $ 28 $ - $ 2,566 $ $ 2,632 

Business and Industry Loans 12 - - 9 3 

Pre-1992 Total 5,182 28 - 2,575 2,635

Post-1991

Foreign Loans 1,759 47 - 770 1,036 

Home Loans 4 - - - 4 

Business and Industry Loans 180 - - 108 72 

Post-1991 Total 1,943 47 - 878 1,112 

Total Defaulted Guarantee Loans 7,125 $ 75 $ - $ 3,453 $ 3,747 $ 

Loans Exempt from Credit Reform Act:

Commodity Loans 1,729 $ - $ - $ 177 $ $ 1,552 

Other Foreign Receivables 364 - - 10 354 

Total Loans Exempt 2,093 $ - $ - $ 187 $ 1,906 $ 

Total Loans Receivable and Related Foreclosed Property, Net 75,543 $ 
USDA Performance and Accountability Report for FY 2002 

112

Table 2. Schedule for Reconciling Subsidy Cost Allowance Balances (Post-1999) 

Direct Loans 

Beginning Balance, Changes, and Ending Balance FY 2002 FY 2001

Beginning balance of the subsidy cost allowance 7,909 $ 6,383 $ 

Add: subsidy expense for direct loans disbursed during the year by component

Interest rate differential costs 416 383 

Default costs (net of recoveries) 143 141 

Fees and other collections (102) (77) 

Other subsidy costs 67 35 

Total of the above subsidy expense components 485 521 

Adjustments

Loan modifications 35 9 

Fees received 7 12 

Loans written off (133) (188) 

Subsidy allowance amortization (454) (123) 

Other 96 197 

Ending balance of the subsidy cost allowance before reestimates 7,970 6,786 

Add or subtract subsidy reestimates by component:

Interest rate reestimate 696 20 

Technical/default reestimate 428 (943) 

Total of the above reestimate components (923) 1,123 

Ending balance of the subsidy cost allowance 7,047 $ 7,909 $ 
USDA Performance and Accountability Report for FY 2002 

113

Table 3. Direct Loan Subsidy Expense by Program and Component 

Current Reporting Year

Interest Fees and Other Total Rate Tech

Direct Loan Programs Differential Defaults Collections Other Total Modifications Reestimates Reestim

P.L. 480, Title I 37 $ 29 $ - $ 15 $ 80 $ - $ (138) $ 

$ 

Debt Reduction Fund - - - - - 9 - 

 

Food for Progress - - - - - - - 

 

Farm Storage Facility Loan Program - 1 - - 1 - (1) 

 

Apple Loan Program - - - - - - - 

 

Agriculture Credit Insurance Fund (ACIF) 10 88 (1) (26) 72 - (30) 

 

Rural Community Facilities Fund 18 1 (1) - 18 - 3 

 

Rural Housing Insurance Fund 220 13 (75) 51 210 - (47) 

 

Rural Electrification Loans (2) 2 - (2) (2) - 210 

 

Rural Telephone Loans 4 - - - 4 - 4 

 

Rural Telephone Bank 1 - - - 1 - 1 

 

Rural Water and Waste Disposal Loans 83 1 - (3) 80 - 22 

 

Rural Business and Industry Loans (6) 8 - - 2 - (3) 

 

Rural Development Loan Fund 16 - - - 16 - - 

 

Rural Economic Development Loans 4 - - - 4 - - 

 

Total Subsidy Expense, Direct Loans 383 $ 143 $ (77) $ 35 $ $ 485 $ 9 20 $ $ 

Prior Reporting Year

Interest Fees and Other Total Rate Tech

Direct Loan Programs Differential Defaults Collections Other Total Modifications Reestimates Reestim

P.L. 480, Title I 28 $ 24 $ - $ - $ 52 $ - $ 6 $ 

$ 

Debt Reduction Fund - - - - - 35 - 

 

Food for Progress - - - - - - - 

 

Farm Storage Facility Loan Program - 2 - - 2 - 1 

 

Apple Loan Program - - - - 1 - (2) 

 

Agriculture Credit Insurance Fund (ACIF) 26 86 (25) 22 108 - (29) 

 

Rural Community Facilities Fund 16 - (2) 1 16 - 8 

 

Rural Housing Insurance Fund 228 13 (74) 48 214 - 271 

 

Rural Electrification Loans (3) 12 (1) (1) 8 - 326 

 

Rural Telephone Loans 3 - - - 4 - 42 

 

Rural Telephone Bank 1 - - - 1 - 11 

 

Rural Water and Waste Disposal Loans 96 1 - (3) 93 - 47 

Rural Business and Industry Loans (2) 2 - - 1 - 13 

Rural Development Loan Fund 19 - (1) 1 20 - (1) 

 

Rural Economic Development Loans 4 - - - 4 - 2 

 

Total Subsidy Expense, Direct Loans 416 $ 141 $ (102) $ 67 $ 521 $ 35 $ 696 $ 

$ 

Subsidy Expense for New Direct Loans DisbursedSubsidy Expense for New Direct Loans Disbursed
USDA Performance and Accountability Report for FY 2002 

114

Table 4. Total Amount of Direct Loans Disbursed (Post-1991)

Current Year

Over (Under)

Direct Loans Current Year Prior Year Prior Year

Farm and Foreign Agricultural Services Mission Area

P.L. 480, Title I 122 $ 101 $ 21 $ 

Farm Storage Facility Loan Program 66 84 (17) 

Boll Weevil Loan Program - 10 (10) 

Apple Loan Program 1 11 (10) 

Agriculture Credit Insurance Fund (ACIF) 963 1,072 (109) 

Mission area total 1,153 1,278 (125) 

Rural Development Mission Area

Rural Community Facilities Fund 201 163 38 

Rural Housing Insurance Fund 1,207 1,222 (16) 

Distance Learning and Telemedicine Loans 40 14 25 

Rural Electrification Loans 2,080 1,951 129 

Rural Telephone Loans 329 200 129 

Rural Telephone Bank 60 55 5 

Rural Water and Waste Disposal Loans 643 694 (51) 

Rural Business and Industry Loans 36 27 10 

Rural Development Loan Fund 33 40 (6) 

Rural Economic Development Loans 17 16 1 

Mission area total 4,646 4,383 262 

Total Direct Loans Disbursed 5,799 $ 5,661 $ 137 $ 
USDA Performance and Accountability Report for FY 2002 

115

Table 5. Loan Guarantees Outstanding 

Pre - 1992 Post - 1991 Total Pre - 199

Outstanding 

Principal,

Outstanding 

Principal,

Outstanding 

Principal,

Outstandin

Principa

Face Value Face Value Face Value Guarantee

Guaranteed Loans (FY 2002)Farm and Foreign Agricultural Services Mission Area

Agriculture Credit Insurance Fund (ACIF) 271 $ 9,379 $ 9,650 $ 240 $ 

Export Credit Guarantee Programs - 4,917 4,917 

 

Mission area total 14,296 271 14,567 240 

Rural Development Mission Area

Rural Community Facilities Fund - 301 301 

 

Rural Housing Insurance Fund 16 13,602 13,618 14 

Rural Electrification Loans 199 317 516 317 

Rural Water and Waste Disposal Loans - 30 30 

 

Rural Business and Industry Loans - 3,884 3,884 

 

Rural Cooperative Development Fund 4 - 4 4 

Rural Development Insurance Fund 80 - 80 57 

Mission area total 18,015 417 18,432 391 

Total Guarantees Disbursed $ 32,312 688 $ 33,000 $ 632 $ 
USDA Performance and Accountability Report for FY 2002 

116

Table 6. Liability for Loan Guarantees (Present Value Method for Pre-1992 Guarantees) 

FY 2002

Liabilities for

Losses on Pre1992 Guarantees 

Present Value

Liabilities for Loan 

Guarantees on 

Post-1991 

Guarantees 

Present Value

Total Liabilities for 

Loan Guarantees

Liability for Loan Guarantees

Farm and Foreign Agricultural Services Mission Area

Export Credit Guarantee Programs - $ 411 $ 411 $ 

Agriculture Credit Insurance Fund (ACIF) 13 144 157 

ACRD 2 - 2 

Mission area total 13 557 570 

Rural Development Mission Area

Rural Community Facilities Fund - 5 5 

Rural Housing Insurance Fund 3 327 330 

Rural Electrification Loans 23 - 24 

Rural Business and Industry Loans - 146 146 

Rural Development Insurance Fund 3 - 3 

Mission area total 30 477 507 

Total Liability for Loan Guarantees 43 $ 1,034 $ 1,077 $ 
USDA Performance and Accountability Report for FY 2002 

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Table 7. Schedule for Reconciling Loan Guarantee Liability 

Beginning Balance, Changes, and Ending Balance FY 2002 FY 2001

Beginning balance of the loan guarantee liability 1,066 $ 964 $ 

Add: subsidy expense for guaranteed loans disbursed during the year by component

Interest rate differential costs 23 65 

Default costs (net of recoveries) 294 338 

Fees and other collections (97) (76) 

Other subsidy costs (3) - 

Total of the above subsidy expense components 283 260 

Adjustments

Loan modifications - - 

Fees received 82 102 

Interest supplements paid (67) (62) 

Claim payments to lenders (189) (204) 

Interest accumulation on the liability balance 17 114 

Other (71) 26 

Ending balance of the subsidy cost allowance before reestimates 1,229 1,093 

Add or subtract subsidy reestimates by component:

Interest rate reestimate 97 (392) 

Technical/default reestimate (124) 196 

Total of the above reestimate components (195) (26) 

Ending balance of the loan guarantee liability 1,034 $ 1,066 $ 
USDA Performance and Accountability Report for FY 2002 

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Table 8. Guarantee Loan Subsidy Expense by Program and Component 

Current Reporting Year

Interest

Interest Fees and Other Total Rate Techn

Guaranteed Loan Programs Supplement Defaults Collections Other Total Modifications Reestimates Reestim

Export Credit Guarantee Programs - $ 120 $ (10) $ - $ 110 $ - $ (588) $ 

$ 

Farm Operating—unsubsidized - 46 (9) - 37 - 243 

 

Farm Operating—subsidized 47 20 - - 67 - 141 

 

Farm Ownership—unsubsidized - 14 (10) - 5 - (78) 

 

Rural Community Facilities - - - - - - (2) 

 

Rural Housing Insurance Fund 18 56 (38) - 37 - (45) 

 

Rural Water and Waste Disposal Loans - - - - - - - 

 

Rural Business and Industry Loans - 37 (9) - 28 - (75) 

 

ARCD - - - - - - 13 

 

Total Loan Guarantee Subsidy Expense 65 $ 294 $ (76) $ - $ 283 $ - $ (392) $ 

$ 

Prior Reporting Year

Interest

Interest Fees and Other Total Rate Techn

Guaranteed Loan Programs Supplement Defaults Collections Other Total Modifications Reestimates Reestim

Export Credit Guarantee Programs - $ 214 $ (17) $ - $ 197 $ - $ - $ 

$ 

Farm Operating—unsubsidized - 20 (7) - 13 - - 

 

Farm Operating—subsidized 28 10 - - 38 - (3) 

 

Farm Ownership—unsubsidized - 12 (6) (2) 4 - - 

 

Rural Community Facilities - - - - (1) - (2) 

 

Rural Housing Insurance Fund (5) 60 (53) - 3 - 46 

 

Rural Water and Waste Disposal Loans - - - - - - - 

 

Rural Business and Industry Loans - 20 (14) (1) 6 - 58 

 

Total Loan Guarantee Subsidy Expense 23 $ 338 $ (97) $ (3) $ 260 $ - $ 97 $ 

$ 

Subsidy Expense for New Loan GuaranteesSubsidy Expense for New Loan Guarantees
USDA Performance and Accountability Report for FY 2002 

119

Table 9. Guaranteed Loans Disbursed 

Principal, Face 

Value Disbursed

Principal, 

Guaranteed 

Disbursed

Principal, Face 

Value Disbursed

Principal, 

Guaranteed 

Disbursed

Guaranteed Loans

Farm and Foreign Agricultural Services Mission Area

Export Credit Guarantee Programs 3,340 $ 3,131 $ 2,974 $ 2,892 $ 

Agriculture Credit Insurance Fund (ACIF) 2,551 2,290 2,363 2,121 

Mission area total 5,891 5,421 5,337 5,014 

Rural Development Mission Area

Rural Community Facilities Fund 59 49 74 62 

Rural Housing Insurance Fund 2,450 2,205 2,170 1,953 

Rural Electrification Loans 54 54 92 92 

Rural Water and Waste Disposal Loans 9 7 4 3 

Rural Business and Industry Loans 839 658 809 636 

Mission area total 3,410 2,973 3,149 2,746 

Total Guaranteed Loans Disbursed 9,301 $ 8,394 $ 8,486 $ 7,759 $ 

Current Year Prior Year

Table 10. Administrative Expenses 

Direct Loan Programs Guaranteed Loan Programs

P.L. 480, Title 1 2 $ Export Credit Guarantee Programs $ 4

Agriculture Credit Insurance Fund (ACIF) 273 Rural Development 131 

Rural Development 178 

Total 452 $ Total 135 $ 
USDA Performance and Accountability Report for FY 2002 

120

Table 11. Subsidy Rates for Direct Loans (percentage) 

Interest 

Differential Defaults

Fees and Other

Collections Other Total

Direct Loan Programs

Farm Storage Facility Loan Program 0.30 2.24 (0.12) - 2.42 

P.L. 480, Title 1 46.07 30.82 - 4.84 81.73 

Farm Operating 0.05 12.43 - (3.55) 8.93 

Farm Ownership 2.04 4.13 - (3.54) 2.63 

Emergency Disaster 9.42 4.12 - (0.09) 13.45 

Indian Land Acquisition 5.95 - - (0.03) 5.92 

BollWeevil Eradication (4.42) 2.24 - - (2.18) 

Community Facilities Loans 4.53 1.18 - (0.28) 5.43 

Modular Housing Loans 17.94 0.03 (1.64) 1.35 17.68 

 1.31 13.20 (7.15) 5.80 13.16 

Section 504 Direct Housing Repair 29.96 2.30 (5.98) 5.85 32.13 

Section 203 Credit Sales (SFH) (20.20) 4.55 (10.51) 21.34 (4.82) 

Section 514 Farm Labor Housing 46.94 0.08 (2.51) 2.80 47.31 

Section 515 Rural Rental Housing 50.56 (0.03) (30.91) 22.70 42.32 

Section 524 Housing Site Development (1.75) 1.77 (9.64) 10.17 0.55 

Section 523 Self-Help Housing Land 3.54 1.03 (9.14) 9.65 5.08 

Section 209 Credit Sales 50.52 (0.02) (1.96) (6.37) 42.17 

Electric Municipal (0.15) 0.03 - 0.03 (0.09) 

FFB Electric (1.12) 0.03 - (0.04) (1.13) 

Direct Electric Hardship 2.92 0.03 - 0.03 2.98 

Telephone Treasury - 0.04 - 0.06 0.10 

FFB Telephone (0.92) 0.11 - (0.04) (0.85) 

Telephone Hardship 2.27 0.03 - 0.02 2.32 

Rural Telephone Bank 2.29 0.02 - (0.17) 2.14 

Direct Water and Waste Disposal 6.96 0.12 - (0.20) 6.88 

Direct Business and Industry Loans (30.79) 58.98 - 0.28 28.47 

Intermediary Relending Program 43.22 - - (0.01) 43.21 

Rural Economic Development 24.91 0.05 - (0.80) 24.16 

Electric Treasury (0.06) 0.03 - (0.01) (0.04) 

Distance Learning and Telemedicine 0.01 - - (0.08) (0.07) 

Section 502 Direct Single Family Housing

Table 12. Subsidy Rates for Loan Guarantees (percentage) 

Interest Fees and Other

Differential Defaults Collections Other Total

Guaranteed Loan Programs

Export Credit Guarantee Program 7.41 - (0.66) - 6.75 

Farm Operating—Unsubsidized - 4.41 (0.90) - 3.51 

Farm Operating—Subsidized 9.55 4.01 - - 13.56 

Farm Ownership—Unsubsidized - 1.34 (0.89) - 0.45 

Rural Community Facilities Loans - 0.12 (0.80) - (0.68) 

Section 502 Subsidy Repair - 3.28 (2.00) - 1.28 

Section 539 Multiple Family 8.82 2.24 (7.13) - 3.93 

Section 502 Single Family - 3.28 (2.00) - 1.28 

NADBANK Loans - 5.28 (1.60) - 3.68 

Business and Industry Loans - 5.22 (1.48) - 3.74 

Electric - 0.08 - - 0.08 

Water and Waste Disposal Loans - - (0.80) - (0.80) 
USDA Performance and Accountability Report for FY 2002 

121

Direct Loans 

Direct loan obligation or loan guarantee commitments made pre-1992 and the resulting direct loans or 

loan guarantees are reported at net present value. 

Direct loan obligations or loan guarantee commitments made post-1991, and the resulting direct loan or 

loan guarantees, are governed by the Federal Credit Reform Act of 1990 as amended. The Act requires 

agencies to estimate the cost of direct loans and loan guarantees at present value for the budget. Additionally, the present value of the subsidy costs (i.e. interest rate differentials, interest subsidies, 

delinquencies and defaults, fee offsets and other cash flows) associated with direct loans and loan 

guarantees are recognized as a cost in the year the loan or loan guarantee is disbursed. The net present 

value of loans or defaulted guaranteed loans receivable at any point in time is the amount of the gross 

loan or defaulted guaranteed loans receivable less the present value of the subsidy at that time. 

The net present value of Loans Receivable and Related Foreclosed Property, Net is not necessarily 

representative of the proceeds that might be expected if these loans were sold on the open market. 

Loans Receivable and Related Foreclosed Property, Net at the end of FY 2002 were $75.5 billion compared to $76.4 billion at the end of FY 2001. Loans exempt from the Federal Credit Reform Act of 1990 

represent $1.9 billion of the total compared to $2.1 billion in FY 2001. Table 1 illustrates the overall 

composition of the Department credit program balance sheet portfolio by mission area and credit program 

for FY 2002. 

During the fiscal year the gross outstanding balance of the direct loans obligated post-1991 is adjusted by 

the value of the subsidy cost allowance held against those loans. Current year subsidy expense, modifications, and reestimates all contribute to the change of the subsidy cost allowance through the year. The 

subsidy cost allowance moved from $7.9 billion to $7 billion during FY 2002, a decrease of $0.9 billion. 

During FY 2001, the allowance increased $1.5 billion. Table 2 shows the reconciliation of subsidy cost 

allowance balances from FY 2001 to FY 2002. 

Total direct loan subsidy expense for FY 2002 is a combination of subsidy expense for new direct loans 

disbursed in the current year, modifications to existing loans, and interest rate and technical reestimates to 

existing loans. Total direct loan subsidy expense in FY 2002 was negative $0.4 billion compared to $1.7 

billion in FY 2001. Table 3 illustrates the breakdown of total subsidy expense for FY 2002 and FY 2001 

by program. 

The downward subsidy expense was caused by significant downward subsidy reestimates of $470 million 

for housing loans and $529 million for foreign loans (PL 480, Food for Progress, & Debt Reduction programs). The subsidy change in housing loans was mainly caused by changes in the estimation method for 

interest credit in single-family housing programs in FY 2002. Additionally, in FY 2002, OMB revised the 

default estimation method for foreign loans. This change resulted in significantly lower default estimates. 

Direct loan volume increased from $5.7 billion in FY 2001 to $5.8 billion in FY 2002. Volume distribution between mission area and program is shown in Table 4. 

Guaranteed Loans 

The Department offers both direct and guaranteed loan products through the Farm and Foreign Agricultural Service mission area and the Rural Development mission area. Guaranteed loans are administered in 

coordination with conventional agricultural lenders for up to 95 percent of the principal loan amount. 

Under the guaranteed loan programs, the lender is responsible for servicing the borrower's account for the 

life of the loan. The Department, however, is responsible for ensuring borrowers meet certain qualifying 
USDA Performance and Accountability Report for FY 2002 

122

criteria to be eligible and monitoring the lender's servicing activities. Borrowers interested in guaranteed 

loans must apply to a conventional lender, which then arranges for the guarantee with a Department 

agency. Guaranteed loans are reflected on the balance sheet in two ways: estimated losses on loan and 

foreign credit guarantees must be valued and carried as a liability and defaulted guaranteed loans are 

carried, at net realizable value, in credit program receivables and related foreclosed property, net. 

Guaranteed loans outstanding at the end of FY 2002 were $33.0 billion in outstanding principal, and 

$29.4 billion in outstanding principal guaranteed, compared to $30.8 billion and $27.5 billion at the end 

of FY 2001. Table 5 shows the outstanding balances by credit program. 

During the fiscal year the value of the guaranteed loans is adjusted by the value of the loan guarantee 

liability held against those loans. Current year subsidy expense, modification, and reestimates all 

contribute to the change of the loan guarantee liability through the year. The loan guarantee liability is a 

combination of the liability for losses on pre-1992 guarantees and post-1991 guarantees. The total liability 

moved from $1.11 billion to $1.08 billion during FY 2002, a decrease of $33 million. The post-1991 

liability moved from $1.07 billion to $1.03 billion, a decrease of $0.04 billion. Table 7 shows the 

reconciliation of loan guarantee liability post-1991 balances and the total loan guarantee liability. 

Total guaranteed loan subsidy expense for FY 2002 is a combination of subsidy expense for new 

guaranteed loans disbursed in the current year, modifications to existing loans, and interest rate and 

technical reestimates to existing loans. Total guaranteed loan subsidy expense in FY 2002 was $88 

million compared to $234 million in FY 2001. Table 8 illustrates the breakdown of total subsidy expense 

for FY 2002 and FY 2001 by program. The decrease in subsidy expense is largely due to downward 

reestimates in the housing, foreign, and farm loan programs. 

Guaranteed loan volume increased from $8.5 billion in FY 2001 to $9.3 billion in FY 2002. Volume 

distribution between mission area and program is shown in Table 9. 

Credit Program Discussion and Descriptions 

The Department offers direct and guaranteed loans through credit programs in the Farm and Foreign 

Agricultural Services (FFAS) mission area through the Farm Service Agency (FSA) and the Commodity 

Credit Corporation (CCC), and in the Rural Development mission area through the Rural Housing Service 

(RHS), the Rural Business Service (RBS), and the Rural Utilities Service (RUS). 

The Farm and Foreign Agricultural Services (FFAS) mission area 

The FFAS mission area helps keep America's farmers and ranchers in business as they face the 

uncertainties of weather and markets. FFAS delivers commodity, credit, conservation, disaster, and 

emergency assistance programs that help improve the strength and stability of the agricultural economy. 

FFAS contributes to the vitality of the farm sector with programs that encourage the expansion of export 

markets for U.S. agriculture. FFAS programs are administered through the FSA and CCC. 

The FSA offers direct and guaranteed loans to farmers that are temporarily unable to obtain private, 

commercial credit and nonprofit entities that are engaged in the improvement of the nation's agricultural 

community. Often, FSA borrowers are beginning farmers who cannot qualify for conventional loans 

because they have insufficient financial resources. In addition, the agency helps established farmers who 

have suffered financial setbacks from natural disasters, or whose resources are too limited to maintain 

profitable farming operations. FSA officials also provide borrowers with supervision and credit counseling. 
USDA Performance and Accountability Report for FY 2002 

123

FSA's mission is to provide supervised credit. FSA works with each borrower to identify specific 

strengths and weaknesses in farm production and management, then works with the borrower on 

alternatives and other options to address the weaknesses and achieve success. To help keep borrowers 

operating, FSA is able to provide certain loan servicing options to borrowers whose accounts are 

distressed or delinquent. These options include reamortization, restructuring, loan deferral, lowering 

interest rate, acceptance of easements, and debt write-downs. The eventual goal of FSA's farm credit 

programs is to graduate its borrowers to commercial credit. 

CCC's foreign programs provide economic stimulus to both the U.S. and foreign markets, while also 

giving humanitarian assistance to the most needy people throughout the world. CCC offers both guarantee 

credit and direct credit programs for buyers of U.S. exports, suppliers, and sovereign countries in need of 

food assistance. 

CCC permits debtor nations to reschedule debt under the aegis of the Paris Club (The Club). The Club is 

an internationally recognized organization whose sole purpose is to confront, on a case-by-case basis, 

liquidity problems faced by the world's most severely economically disadvantaged countries. The general 

premise of the Club's activities is to provide disadvantaged nations short-term liquidity relief to enable 

them to re-establish their credit worthiness. The Departments of State and Treasury lead the U.S. 

Delegation and negotiations for all U.S. Agencies. 

Farm and Foreign Agricultural Service list of programs 

Farm Service Agency Commodity Credit Corporation 

Direct Farm Ownership 

Direct Farm Operating 

Direct Emergency Loans 

Direct Indian Land Acquisition 

Direct Boll Weevil Eradication 

Direct Seed Loans to Producers 

Guaranteed Farm Operating Subsidized/Unsubsidized 

Agricultural Resource Demonstration Fund (ARCD) 

Bureau of Reclamation Loan Fund (BRLF) 

Guaranteed Sales Manager Credit Program 

Supplier Credit Guarantee Program 

Facility Program Guarantee 

P.L. 480 Title 1 Program 

The Rural Development (RD) mission area 

Each year, Rural Development (RD) programs create or preserve tens of thousands of rural jobs and 

provide or improve the quality of rural housing. To leverage the impact of its programs, RD is working 

with state, local and Indian tribal governments, as well as private and nonprofit organizations and userowned cooperatives. RD programs are administered through three services, the Rural Housing Service 

(RHS), the Rural Business Service (RBS), and the Rural Utilities Service (RUS). 

Through its loan and grant programs, RHS provides affordable housing and essential community facilities 

to rural communities. RHS programs help finance new or improved housing for moderate, low, and very 

low-income families each year. RHS program also help rural communities to finance, construct, enlarge 

or improve fire stations, libraries, hospitals and medical clinics, industrial parks, and other community 

facilities. 

RBS's goal is to promote a dynamic business environment in rural America. RBS works in partnership 

with the private sector and community based organizations to provide financial assistance and business 

planning. It also provides technical assistance to rural businesses and cooperatives, conducts research into 

rural economic issues, and provides cooperative educational materials to the public. 
USDA Performance and Accountability Report for FY 2002 

124

The RUS helps to improve the quality of life in rural America through a variety of loan programs for 

electric energy, telecommunications, and water and environmental projects. RUS programs leverage 

scarce Federal funds with private capital for investing in rural infrastructure, technology and development 

of human resources. 

RD agencies are able to provide certain loan servicing options to borrowers whose accounts are distressed 

or delinquent. These options include reamortization, restructuring, loan deferral, lowering interest rate, 

acceptance of easements, and debt write-downs. The choice of servicing options depends on the loan 

program and the individual borrower. 

Rural Development List of Programs 

Rural Housing Service Rural Business Service Rural Utilities Service 

Home Ownership Direct Loans 

Home Ownership Guaranteed Loans 

Home Improvement and Repair Direct Loans 

Home Ownership and Home Improvement and 

Repair Nonprogram Loans 

Rural Housing Site Direct Loans 

Farm Labor Housing Direct Loans 

Rural Rental and Rural Cooperative Housing 

Loans 

Rental Housing Guaranteed Loans 

Multi-family Housing–Nonprogram–Credit Sales 

Community Facilities Direct Loans 

Community Facilities Guaranteed Loans 

Business and Industry Direct Loans 

Business and Industry Guaranteed Loans 

Intermediary Relending Program Direct Loans 

Rural Economic Development Direct Loans 

Water and Environmental Direct Loans 

Water and Environmental Guaranteed Loans 

Electric Direct Loans 

Electric Guaranteed Loans 

Telecommunications Direct Loans 

Rural Telephone Bank 

Federal Financing Bank-Telecommunications 

Guaranteed 

Distance Learning and Telemedicine Direct 

Broadband Telecommunications Services 

Discussion of Administrative Expenses, Subsidy Costs, and Subsidy Rates 

Administrative Expenses 

Consistent with the Federal Credit Reform Act of 1990 as amended, subsidy cash flows exclude direct 

Federal administrative expenses. Administrative expenses for FY 2002 are shown in Table 10. 

Reestimates, Default Analysis, and Subsidy Rates 

The Federal Credit Reform Act of 1990 as amended governs the proprietary and budgetary accounting 

treatment of direct and guaranteed loans. The long-term cost to the government for direct loans or loan 

guarantees is referred to as "subsidy cost". Under the Act, subsidy costs for loans obligated beginning in 

FY 1992 are recognized at the net present value of projected lifetime costs in the year the loan is 

disbursed. Subsidy costs are revalued annually. Components of subsidy include interest subsidies, 

defaults, fee offsets, and other cash flows. 

Based on sensitivity analysis conducted for each cohort or segment of a loan portfolio, the difference 

between the budgeted and actual interest for both borrower and Treasury remain the key components for 

the subsidy formulation and reestimate rates of many USDA direct programs. USDA uses the government-wide interest rate projections provided by the Office of Management and Budget in order to do its 

calculations and analysis. 

The Inter-agency Country Risk Assessment System (ICRAS) is a Federal interagency effort chaired by 

the Office of Management and Budget under the authority of the Federal Credit Reform Act of 1990 as 

amended. The system provides standardized risk assessment and budget assumptions for all direct credits 

and credit guarantees provided by the Government, to foreign borrowers. Sovereign and non-sovereign 
USDA Performance and Accountability Report for FY 2002 

125

lending risks are sorted into risk categories, each associated with a default estimate. A revised default 

methodology developed by the Office of Management and Budget was implemented in FY 2002. The 

revised methodology resulted in significantly lower estimated defaults and resulting allowance balances. 

The CCC delinquent debt is estimated at 100% allowance. When the foreign borrower reschedules their 

debt and renews their commitment to repay CCC, the allowance is estimated at less than 100 percent. 

The estimation method for interest credit in single-family housing loans was changed in FY 2002. This 

change in estimation resulted in lower subsidy rates, downward FY 2002 reestimates, and related 

decreases to allowance balances. 

Generally, due to the implementation of new models, new reestimate calculators, and the accumulation of 

prior year reestimates, it is difficult to compare current and prior period subsidy expense or the current 

and prior year movement in the subsidy cost allowance. 

Subsidy rates are used to compute each year's subsidy expenses as disclosed above. The subsidy rates 

disclosed in tables 11 and 12 pertain only to the current year FY 2002 cohorts. These rates cannot be 

applied to the direct and guaranteed loans disbursed during the current reporting year to yield the subsidy 

expense. The subsidy expense for new loans reported in the current year could result from disbursements 

of loans from both current year cohorts and prior year cohorts. The subsidy expense reported in the 

current year also includes reestimates. 

As a result of new guidance provided by the credit reform Treasury certificate training class, the 

Commodity Credit Corporation chose to reflect interest on downward reestimates of $413 million in the 

Statement of Changes in Net Position in line Financing Sources other than Exchange Revenues, Transfers 

Out. The remainder of USDA credit programs chose to reflect downward reestimates in Earned Revenue 

on the Statement of Net Cost. Both methodologies are accepted alternatives that have been promulgated 

by Treasury. 

Foreclosed Property 

Property is acquired largely through foreclosure and voluntary conveyance. Acquired properties 

associated with loans are reported at their market value at the time of acquisition. The projected future 

cash flows associated with acquired properties are used in determining the related allowance (at present 

value). 

As of September 30, 2002, foreclosed property consisted of 1,114 rural single-family housing dwellings, 

with an average holding period of 20 months. As of September 30, 2002, Farm Service Agency-Farm 

Loan Program properties consist primarily of 253 farms. The average holding period for these properties 

in inventory for FY 2002 was 54 months. At the end of FY 2002, there were 681 borrowers for which 

foreclosure proceedings were in process. Certain properties can be leased to eligible individuals. 

Non-performing Loans 

Rural Development and FSA loan interest income on non-performing receivables is calculated but the 

recognition of revenue is deferred. Non-performing receivables are defined as receivables that are in 

arrears by 90 or more days. 

CCC interest income on non-performing receivables is calculated but the recognition of revenue is 

deferred. Non-performing receivables are defined as receivables that are in arrears by 90 or more days or 

on rescheduling agreements where until such time as two consecutive payments have been made 
USDA Performance and Accountability Report for FY 2002 

126

following the rescheduling. Late interest is accrued on arrears. Interest revenue and late interest on nonperforming receivables are also deferred. 

Loan Modifications 

The Debt Reduction Fund is used to account for CCC's "modified debt". Debt is considered to be 

modified if the original debt has been reduced or the interest rate of the agreement changed. In contrast, 

when debt is "rescheduled" only the date of payment is changed. Rescheduled debt is carried in the 

original fund until paid. All outstanding CCC modified debt is carried in the debt reduction fund and is 

governed by the Federal Credit Reform Act of 1990 as amended. 

During FY 2002, two debts were modified. The first resulted in a $3 million reduction in principal with 

the remaining amount of debt transferred from CCC's liquidating fund to CCC's Debt Reduction Fund. 

The discount rate used for calculating the modification expense was 6.2971 percent. The second 

modification reduced principal owed to CCC by $10.6 million with the remaining amount of debt 

transferred from CCC's liquidating fund to CCC's Debt Reduction Fund. The discount rate used for 

calculating the modification expense was 5.4684 percent. 
USDA Performance and Accountability Report for FY 2002 

127

Note 8. Inventory and Related Property, Net 

Operating Materials and Supplies:

Items held for Use $ 25 

Commodities: Volume (in millions)

Corn (In Bushels):

On hand at the beginning of the year

Acquired during the year 22 45 

Disposed of during the year 74 165 

Sales (62) (136)

Donations (39) (14)

Other (1) (2)

On hand at the end of the year 33 18

Wheat (In Bushels):

On hand at the beginning of the year

Acquired during the year 404 118

Disposed of during the year 371 105

Sales (246) (69)

Donations (193) (52)

Other 28 -

On hand at the end of the year 364 102

Nonfat Dry Milk (In Pounds):

On hand at the beginning of the year

Acquired during the year 860 857

Disposed of during the year 563 626

Sales (16) (16)

Donations (135) (121)

Other 6 (14)

On hand at the end of the year 1,279 1,332

Sugar (In Pounds):

On hand at the beginning of the year

Acquired during the year 329 1,505

Disposed of during the year 4 17

Sales (176) (721)

Donations (3) (13)

Other (52) (274)

On hand at the end of the year 101 514

Tobacco (In Pounds):

On hand at the beginning of the year 599 225

Acquired during the year

Disposed of during the year - -

Sales - -

Donations - -

Other - -

On hand at the end of the year 599 225

Other (Various):

On hand at the beginning of the year

Acquired during the year 39 

Disposed of during the year 4,496 

Sales (4,112)

Donations (329)

Other 17 

On hand at the end of the year 110 

Allowance for losses (1,763)

Total Commodities 723 

Total Inventory and Related Property, Net $ 749 
USDA Performance and Accountability Report for FY 2002 

128

Operating material and supplies consist of tree seeds for a variety of tree species, tree seedlings (nursery 

stock) and Smoky Bear memorabilia. The tree seeds and seedlings are used for reforestation and the 

Smoky Bear memorabilia promotes forest fire prevention. 

Commodity inventory is restricted for the purpose of alleviating distress caused by natural disasters, 

providing emergency food assistance in developing countries, and price support and stabilization. 

Commodity donations and loan forfeitures are estimated to be $548 million and $69 million, respectively, 

in fiscal year 2003. 

Note 9. General Property, Plant, and Equipment, Net 

Useful Net

Life Accumulated Book

Category (Years) Cost Depreciation Value

Land and Land Rights 77 $ 2 $ 75 $ 

Improvements to Land 10-50 4,827 2,337 2,489 

Construction-in-Progress 95 - 95 

Buildings, Improvements and Renovations 30 1,669 827 843 

Other Structures and Facilities 15-50 1,607 1,002 605 

Equipment 5-15 1,915 1,276 638 

Leasehold Improvements 10 7 3 4 

Internal-Use Software 5-8 172 76 96 

Internal-Use Software in Development 13 1 12 

Other General Property, Plant and Equipment 5-15 6 - 6 

Total $ 5,524 10,386 $ 4,862 $ 

Note 10. Other Assets 

Intragovernmental:

Advances to Others $ 1

With the Public:

Advances to Others 243

Other Assets 41

Total Other Asssets $ 285
USDA Performance and Accountability Report for FY 2002 

129

Note 11. Liabilities Not Covered By Budgetary Resources

Intragovernmental:

Other $ 351

Federal employee and veterans' benefits 862

Environmental and disposal liabilities 7

Other 3,094

Total liabilities not covered by budgetary resources 4,314

Total liabilities covered by budgetary resources 108,373

Total liabilities $ 112,687

Other liabilities not covered by budgetary resources includes accrued rental payments under the 

Conservation Reserve program of $1,600 million, unfunded leave of $494 million, estimated losses on 

insurance claims of $367 million, and contract dispute claims payable to Treasury’s Judgment Fund of 

$189 million. 

Note 12. Debt 

Beginning Balance Net Borrowing Ending Balance

Agency Debt:

Held by the Public $ (3) 87 $ 84 $ 

Total Agency Debt (3) 87 84 

Other Debt:

Debt to the Treasury 55,433 (1,944) 53,489 

Debt to the Federal Financing Bank 25,221 (2,842) 22,379 

Total Other Debt (4,786) 80,654 75,868 

Total Debt $ (4,789) 80,741 $ 75,952 $ 

Note 13. Environmental and Disposal Liabilities 

The Department is subject to the Comprehensive Environmental Response, Compensation, and Liability 

Act, the Clean Water Act, and the Resource Conservation and Recovery Act for cleanup of hazardous 

waste. The Forest Service and Commodity Credit Corporation estimates the liability for total cleanup 

costs for sites known to contain hazardous waste to be $7 million and $15 million, respectively, based on 

actual cleanup costs at similar sites. These estimates will change as new sites are discovered, remedy 

standards change and new technology is introduced. 
USDA Performance and Accountability Report for FY 2002 

130

Note 14. Other Liabilities 

Non-Current Current Total

Intragovernmantal

Other Accrued Liabilities 189 $ 189 $ 378 $ 

Employer Contributions and Payroll Taxes - 16 16 

Unfunded FECA Liability 38 120 158 

Advances from Others 21 28 49 

Liability for Deposit Funds, Clearing Accounts - 1,018 1,018 

Liability for Subsidy Related to Undisbursed Loans - 990 990 

Resources Payable to Treasury - 18,598 18,598 

Custodial Liability 31 23 55 

Other Liabilities - 130 130 

Total Intragovernmental 280 21,112 21,393 

With the Public

Other Accrued Liabilities 107 2,634 2,741 

Accrued Funded Payroll and Leave - 25 25 

Other Post-Employment Benefits Due and Payable - 8 8 

Benefit Premiums Payable to Carriers - 36 36 

Unfunded Leave 19 475 494 

Other Unfunded Employment Related Liability 572 52 623 

Advances from Others (21) 35 14 

Deferred Credits - 42 42 

Liability for Deposit Funds, Clearing Accounts 31 1,399 1,430 

Contingent Liabilities 37 7 44 

Custodial Liability - 68 68 

Other Liabilities 22 5,013 5,034 

Total Other Liabilities 1,048 $ 30,905 $ 31,953 $ 

Other liabilities include estimated losses on insurance claims of $2,865 million and stock payable to Rural 

Telephone Bank borrowers of $1,343 million. 

Note 15. Leases 

Operating Leases:

Future Payments Due:

Fiscal Year Land & Buildings

Machinery & 

Equipment Totals

2003 $ 1 71 $ 72 $ 

2004 65 1 66 

2005 56 - 57 

2006 58 - 58 

2007 51 - 51 

After 5 Years 239 - 239 

Total Future Lease Payments $ 2 541 $ 543 $ 
USDA Performance and Accountability Report for FY 2002 

131

Note 16. Commitments and Contingencies 

The Department is subject to various claims and contingencies related to lawsuits as well as commitments 

under contractual and other commercial obligations. 

For cases in which payment has been deemed probable and for which the amount of potential liability has 

been estimated, $38 million has been accrued in the financial statements as of September 30, 2002. 

No amounts have been accrued in the financial statements for claims where the amount or probability of 

judgment is uncertain. The Department’s potential liability for these claims ranges from $1,703 million to 

$1,727 million. 

Commitments under contractual and other commercial obligations are estimated to be $52,800 million, 

primarily consisting of $20,000 million in rental payments under the Conservation Reserve Program, 

$15,000 million in undelivered orders, $14,000 million in direct loans, and $3,000 million in loan 

guarantees.
USDA Performance and Accountability Report for FY 2002 

132

Note 17. Suborganization Program Costs/Program Costs by Segment 

FNCS FFAS NRE RD REE MRP FSIS 

Program Costs :

Intragovernmental Gross Costs 910 $ 1,286 $ 1,004 $ 3,558 $ 318 $ 1,118 $ $ 

196 $ 

Less: Intragovernmental Earned Revenue 1 370 299 297 57 7 2 

Intragovernmental Net Costs 909 916 704 3,261 261 1,111 193 

Gross Costs With the Public : -- 

Grants 36,036 12,620 678 1,443 974 43 43 

Loan Cost Subsidies - (620) - (373) - - - 

Indemnities 3,895 12 - 37 

Commodity Program Costs 594 4,813 - - - - 

Stewardship Land Acquisition - 105 108 - - - - 

Other 187 3,176 5,287 3,077 1,297 962 643 

Less: Earned Revenues from the Public 104 4,574 174 4,047 50 535 101 

Net Costs with the Public 36,714 19,414 5,910 99 2,221 508 585 

Net Cost of Operations 37,623 $ 20,330 $ 6,614 $ 3,360 $ 2,482 $ 1,618 $ $ 

779 $ 
USDA Performance and Accountability Report for FY 2002 

133

Note 17. Suborganization Program Costs/Program Costs by Segment Food, Nutrition, and Consumer Service 

Child Nutrition Food Stamp Food Donations Women, Infa

and Childre

Program Costs :

Intragovernmental Gross Costs $ 56 23 $ 822 $ 

$ 

Less: Intragovernmental Earned Revenue 1 Intragovernmental Net Costs 22 55 822 Gross Costs With the Public :

Grants 9,698 21,662 169 4,Loan Cost Subsidies ---IndemnitiesCommodity Program Costs 367 91 56 Stewardship Land Acquisition ---Other 52 120 1 

Less: Earned Revenues from the Public 6 78 - Net Costs with the Public 10,111 21,796 225 4,Net Cost of Operations $ 21,851 10,133 $ 1,047 $ 4,

$ 
USDA Performance and Accountability Report for FY 2002 

134

Note 17. Suborganization Program Costs/Program Costs by Segment Farm and Foreign Agricultural Services 

Commodity 

Operations

Income 

Support

Conservation 

Reserve

Foreign 

Programs

Farm Loan 

Programs Crop Insurance 

Program Costs :

Intragovernmental Gross Costs 596 $ 659 $ 106 $ 739 $ 397 $ 61 $ 

$ 

Less: Intragovernmental Earned Revenue 528 11 - 140 175 - Intragovernmental Net Costs 68 648 106 612 222 61 Gross Costs With the Public :

Grants - 9,120 1,726 855 3 - Loan Cost Subsidies - (2) - (552) (67) - Indemnities - - - - - 3,894 Commodity Program Costs 4,813 - - - - Stewardship Land Acquisition - - - - - Other 356 862 (2) 123 140 710 

Less: Earned Revenues from the Public 2,098 71 (1) 572 601 1,199 Net Costs with the Public 3,071 9,909 1,725 (146) (525) 3,405 Net Cost of Operations 3,139 $ 10,556 $ 1,830 $ 466 $ (302) $ 3,466 $ 

$ 
USDA Performance and Accountability Report for FY 2002 

135

Note 17. Suborganization Program Costs/Program Costs by Segment Natural Resources and Environment 

National 

Forests and 

Grasslands

Forest 

Research

State and 

Private 

Forestry

Wildland Fire 

Management

Working 

Capital Fund

N

Re

Con

Program Costs :

Intragovernmental Gross Costs 484 $ 15 $ 13 $ 386 $ (219) $ 

$ 

Less: Intragovernmental Earned Revenue 135 20 6 10 - Intragovernmental Net Costs 350 (5) 8 376 (219) Gross Costs With the Public :

Grants 376 4 217 10 Loan Cost Subsidies -- -Indemnities 10 1 Commodity Program Costs - - - Stewardship Land Acquisition 108 - - Other 2,214 231 55 1,680 144 

Less: Earned Revenues from the Public 90 3 60 - Net Costs with the Public 2,618 232 272 1,631 144 Net Cost of Operations $ 227 2,968 $ 279 $ 2,007 $ (76) $ 

$ 
USDA Performance and Accountability Report for FY 2002 

136

Note 17. Suborganization Program Costs/Program Costs by Segment Rural Development 

Mortgage 

Credit

Housing 

Assistance

Area and 

Regional 

Development

Ener

Con

Program Costs :

Intragovernmental Gross Costs $ 13 1,172 $ 730 $ 

$ 

Less: Intragovernmental Earned Revenue 118 113 Intragovernmental Net Costs 1,054 12 617 Gross Costs With the Public :

Grants 2 728 710 Loan Cost Subsidies (486) 2 51 Indemnities ---Commodity Program Costs ---Stewardship Land Acquisition ---Other 3,458 23 (668) 

Less: Earned Revenues from the Public 1,635 - 683 Net Costs with the Public 1,340 753 (590) Net Cost of Operations $ 766 2,394 $ 26 $ 

$ 
USDA Performance and Accountability Report for FY 2002 

137

Note 17. Suborganization Program Costs/Program Costs by Segment Research, Education, and Economics 

Agricultural 

Research

Economic 

Research

National 

Agricultural 

Statistics

Co

R

Edu

E

Program Costs :

Intragovernmental Gross Costs $ 24 230 $ 40 $ $ 

Less: Intragovernmental Earned Revenue 34 3 7 

Intragovernmental Net Costs 196 21 33 

Gross Costs With the Public : 

Grants 17 2 - 

Loan Cost Subsidies --- Indemnities 

Commodity Program Costs --- 

Stewardship Land Acquisition --- Other 868 55 92 

Less: Earned Revenues from the Public 23 1 5 

Net Costs with the Public 862 56 87 

Net Cost of Operations $ 78 1,059 $ 120 $ $ 
USDA Performance and Accountability Report for FY 2002 

138

Note 17. Suborganization Program Costs/Program Costs by Segment Marketing and Regulatory Programs 

Agricultural 

Marketing

Animal and 

Plant Health 

Inspection

Ins

Pac

Sto

Program Costs :

Intragovernmental Gross Costs $ 854242 $ 

$ 

Less: Intragovernmental Earned Revenue (7) 22 Intragovernmental Net Costs 860 220 

Gross Costs With the Public : 

Grants 2 41 Loan Cost Subsidies --Indemnities 37 Commodity Program Costs -- 

Stewardship Land Acquisition --Other 119 788 

Less: Earned Revenues from the Public 188 315 Net Costs with the Public (67) 551 

Net Cost of Operations $ 793771 $ 

$ 
USDA Performance and Accountability Report for FY 2002

139

Note 18. Gross Cost and Earned Revenue by Budget Functional 

Classification 

Budget Functional Classification Gross Cost Earned Revenue Net Cost

050 National Defense

150 International Affairs 1,026 $ 229 $ 797 $ 

270 Energy 1,967 1,795 172 

300 Natural Resources and Environment 6,596 500 6,096 

350 Agriculture 66,783 5,414 61,369 

370 Commerce and Housing Credit 4,158 1,765 2,394 

450 Community and Regional Development 855 796 63 

550 Health 882 103 779 

600 Income Security 682 1 681 

800 General Government 500 (23) 493 

Total $ 83,450 10,580 $ 72,870 $ 

Intragovernmental Total Cost and Earned Revenue by Budget Functional Classification:

Budget Functional Classification Gross Cost Earned Revenue Net Cost

050 National Defense

150 International Affairs 508 $ - $ 508 $ 

270 Energy 1,643 65 1,578 

300 Natural Resources and Environment 1,013 303 709 

350 Agriculture 1,847 378 1,468 

370 Commerce and Housing Credit 1,173 119 1,054 

450 Community and Regional Development 732 113 619 

550 Health 195 2 193 

600 Income Security 785 2 783 

Total $ 983 7,897 $ 6,914 $ 
USDA Performance and Accountability Report for FY 2002

140

Note 19. Prior Period Adjustments

During the year, the Department of Agriculture contracted with independent appraisers and accounting 

firms to determine the proper valuation of certain property. Additionally, the Department conducted an 

inventory of both personal and real property. The net result of these initiatives was to write-down 

property by approximately $616 million. 

The Department has determined that certain balances converted to the Foundation Financial Information 

System (FFIS) were not adequately supported. After researching these balances, the Department has made 

a decision to remove the balances. The net result is to increase Net Position by $314 million. 

Commodity Credit Corporation, the Forest Service and the Food and Nutrition Service prepare standalone financial statements and recorded adjustments to their financial records for fiscal year 2001 after the 

Departments fiscal year 2001 consolidated financial statements were prepared. The net amount of these 

adjustments is a decrease to Net Position of $960 million. 

Corrections to Fund Balance with Treasury have been made to agree with Treasury’s amounts, which 

resulted in an increase to Net Position of $194 million. 

Forest Service corrected accounting errors that occurred in previous fiscal years that resulted in an 

increase to Net Position of approximately $372 million. 

Note 20. Apportionment Categories of Obligations Incurred 

Direct Reimbursable Total

Category A $ 672 32,955 $ 33,627 $ 

Category B 43,599 28,686 72,285 

Exempt from Apportionment 173 24 197 

Total Obligations Incurred 76,727 $ 29,382 $ 106,109 $ 

Note 21. Available Borrowing Authority, End of Period 

Available borrowing authority at September 30, 2002 for the Rural Development mission area, 

Commodity Credit Corporation, and the Farm Service Agency was $13,200 million, $12,334 million, and 

$97 million, respectively. 

Note 22. Terms of Borrowing Authority Used 

USDA has a permanent indefinite borrowing authority, as defined by OMB Circular A–11, Preparation 

and Submission of Budget Estimates. The Secretary of Agriculture has the authority to make and issue 

notes to the Secretary of Treasury for the purpose of discharging obligations for RD’s insurance funds and 

CCC’s nonreimbursed realized losses and debt related to foreign assistance programs. 

The permanent indefinite borrowing authority includes both interest bearing and non–interest notes. 

These notes are drawn upon daily when disbursements exceed deposits. Notes payable under the 

permanent indefinite borrowing authority have a term of one year. On January 1 of each year, USDA 

refinances its outstanding borrowings, including accrued interest, at the January borrowing rate. 
USDA Performance and Accountability Report for FY 2002

141

In addition, USDA has permanent indefinite borrowing authority for the foreign assistance and export 

credit programs to finance disbursements on post-credit reform, direct credit obligations, and credit 

guarantees. In accordance with credit reform, USDA borrows from Treasury on October 1, for the entire 

fiscal year, based on annual estimates of the difference between the amount appropriated (subsidy) and 

the amount to be disbursed to the borrower. Repayment under this agreement may be, in whole or in part, 

prior to maturity by paying the principal amount of the borrowings plus accrued interest to the date of 

repayment. Interest is paid on these borrowings based on weighted average interest rates for the cohort, to 

which the borrowings are associated. Interest is earned on the daily balance of uninvested funds in the 

credit reform financing funds maintained at Treasury. The interest income is used to reduce interest 

expense on the underlying borrowings. 

USDA has authority to borrow from the FFB and private investors in the form of certificates of beneficial 

ownership (CBO) or loans executed directly between the borrower and FFB with an unconditional USDA 

repayment guarantee. CBO’s outstanding with the FFB and private investors are generally secured by 

unpaid loan principal balances. CBO’s outstanding are related to pre-credit reform loans and no longer 

used for program financing. 

FFB CBO’s are repaid as they mature and are not related to any particular group of loans. Borrowings 

made to finance loans directly between the borrower and FFB mature and are repaid as the related group 

of loans become due. Interest rates on the related group of loans are equal to interest rates on FFB 

borrowings, except in those situations where an FFB funded loan is restructured and the terms of the loan 

are modified. 

Prepayments can be made on Treasury borrowings without a penalty; however, they cannot be made on 

FFB CBO’s, without a penalty. 

Funds may also be borrowed from private lending agencies and others. USDA reserves a sufficient 

amount of its borrowing authority to purchase, at any time, all notes and other obligations evidencing 

loans made by agencies and others. All bonds, notes, debentures, and similar obligations issued by the 

Department are subject to approval by the Secretary of the Treasury. Reservation of borrowing authority 

for these purposes has not been required for many years. 

Note 23. Adjustments to Beginning Balance of Budgetary Resources 

The beginning balance of budgetary resources decreased by $122 million. This decrease was caused 

primarily by the exclusion of allocation transfer appropriations received from other federal entities that 

were included in prior year financial statements. 

Note 24. Permanent Indefinite Appropriations 

USDA has permanent indefinite appropriations available to fund 1) subsidy costs incurred under credit 

reform programs, 2) certain costs of the crop insurance program, and 3) certain costs associated with FS 

programs. The permanent indefinite appropriations for credit reform are mainly available to finance any 

disbursements incurred under the liquidating accounts. These appropriations become available pursuant 

to standing provisions of law without further action by Congress after transmittal of the Budget for the 

year involved. They are treated as permanent the first year they become available, as well as in 

succeeding years. 
USDA Performance and Accountability Report for FY 2002

142

However, they are not stated as specific amounts but are determined by specified variable factors, such as 

“cash needs” for liquidating accounts, and information about the actual performance of a cohort or 

estimated changes in future cash flows of the cohort in the program accounts. 

The permanent indefinite appropriation for the crop insurance program is used to cover premium subsidy, 

delivery expenses, losses in excess of premiums and research and delivery costs. The permanent 

indefinite appropriation for FS programs are used to fund Pacific Yew, Recreation Fee Collection Costs, 

Brush Disposal, License programs, Smokey Bear and Woodsey Owl, Restoration of Forest Lands and 

Improvements, Roads and Trails for State, National Forest Fund, Timber Roads, Purchaser Elections, 

Timber Salvage Sales and Operation, Maintenance of Quarters, Construction, National Forest System, 

Research, and State and Private. Monies received are appropriated and made available until expended by 

the FS to fund the costs associated with their appropriate purpose. Federal law (16 U.S.C. Section 556d) 

provides that the FS may advance money from any FS appropriation to the fire fighting appropriation for 

the purpose of fighting fires. 

Note 25. Legal Arrangements Affecting Use of Unobligated Balances 

Unobligated budget authority is the difference between the obligated balance and the total unexpended 

balance. It represents that portion of the unexpended balance unencumbered by recorded obligations. 

Appropriations are provided on an annual, multi-year, and no-year basis. An appropriation expires on the 

last day of its period of availability and is no longer available for new obligations. Unobligated balances 

retain their fiscal-year identity in an expired account for an additional five fiscal years. The unobligated 

balance remains available to make legitimate obligation adjustments, i.e., to record previously unrecorded obligations and to make upward adjustments in previously underestimated obligations for five 

years. At the end of the fifth year the authority is canceled. Thereafter, the authority is not available for 

any purpose. 

Any information about legal arrangements affecting the use of the unobligated balance of budget 

authority is specifically stated by program and fiscal year in the appropriation language or in the 

alternative provisions section at the end of the appropriations act. 

Note 26. Explanation of Differences Between the Statement of Budgetary 

Resources and the Budget of the United States Government 

The fiscal year 2004 Budget of the United States Government with actual numbers for fiscal year 2002 

has not yet been published. It is expected to be published in February 2003 and will be available from the 

Government Printing Office. 

Note 27. Explanation of the Relationship Between Liabilities Not Covered 

by Budgetary Resources on the Balance Sheet and the Change in 

Components Requiring or Generating Resources in Future Periods 

Liabilities not covered by budgetary resources are liabilities for which Congressional action is needed 

before budgetary resources can be provided. The current portion of liabilities not covered by budgetary 

resources recognized as a component of the net cost of operations is the change in components requiring 

or generating resources in future periods. 
USDA Performance and Accountability Report for FY 2002

143

Note 28. Description of Transfers that Appear as a Reconciling Item on the 

Statement of Financing 

Allocation transfers that appear as reconciling items on the Statement of Financing include funds received 

from the Department of Labor for training underemployed youths; the Department of Transportation for 

maintenance and upkeep of federal highways traversing National Forest System lands; the Appalachian 

Regional Commission and Economic Development Administration for accounting services; and funds 

transferred to the Agency for International Development for transportation in connection with foreign 

commodity donations. 

Note 29. Incidental Custodial Collections 

Revenue Activity:

Sources of Collections:

Miscellaneous $ 83 

Total Cash Collections 83 

Accrual Adjustments 292 

Total Custodial Revenue 375 

Disposition of Collections:

Transferred to Others:

Treasury (357)

( Increase )/Decrease in Amounts Yet to be Transferred (18)

Net Custodial Activity $ -

The majority of custodial collections represent National Forest Fund receipts from the sale of timber and 

other forest products. The balance represents miscellaneous general fund receipts such as collections on 

accounts receivable related to canceled year appropriations, civil monetary penalties and interest, and 

commercial fines and penalties. Custodial collection activities are considered immaterial and incidental to 

the mission of the Department. 
USDA Performance and Accountability Report for FY 2002

144

REQUIRED SUPPLEMENTARY STEWARDSHIP INFORMATION 

USDA has stewardship responsibility for certain resources entrusted to it that do not meet the criteria for 

assets and liabilities required to be reported in the financial statements. Information about these resources 

are important to understanding USDA’s mission, operations, and financial condition at the date of the 

financial statements and in subsequent periods. Costs of these stewardship-type resources are treated as 

expenses in the Statement of Net Cost in the year the costs are incurred; however, the costs and resultant 

resources are intended to provide long-term benefits to the public and are reported to highlight USDA’s 

accountability over them. 

The two general types of stewardship resources are investments in physical capital and investments in 

other than physical capital. 

Investments in physical capital include stewardship land, the solid part of the surface of the earth (i.e., 

excluding natural depletable or renewable resources) not acquired for or in connection with items of 

general property, plant, and equipment. USDA’s stewardship land consists of national forests and 

grasslands, and easements acquired for conservation purposes. These are reported in acres of land 

rather than dollar amounts. 

Investments in other than physical capital include nonfederal physical property, where title to the property 

is held by State or local governments; investments in human capital for education and training; and 

research and development. 

These stewardship investments are made for the benefit of the Nation. They are reported as expenses in 

the Statement of Net Cost in the year incurred, but they are also reported as supplemental stewardship 

information because USDA has been entrusted with and made accountable for the resources. 
USDA Performance and Accountability Report for FY 2002

145

Stewardship Land 

Description FY 2002 Balance Additions (+) Withdrawals (-) FY 2001 Balance

National Forest System Land (In acres):

National Forests 143,796,683 - (52,114) 143,848,797 

Wilderness Areas 34,789,308 - (23,349) 34,812,657 

Primitive Areas 173,762 - - 173,762 

Wild and Scenic River Areas 946,378 1,223 - 945,155 

Recreation Areas 2,910,364 - - 2,910,364 

Scenic–Research Areas 135,815 - - 135,815 

Game Refuges and Wildlife Preserve Areas 1,198,099 31,725 - 1,166,374 

Monument Areas 3,840,582 - - 3,840,582 

National Grasslands 3,836,577 10 - 3,836,567 

Purchase Units 357,053 6,452 - 350,601 

Land Utilization Projects 1,876 - - 1,876 

Other Areas 451,261 89,716 - 361,545 

Total National Forest System Land 192,437,758 129,126 (75,463) 192,384,095 

Conservation Easements (In acres):

Commodity Credit Corporation

Wetlands Reserve Program 971,680 342,615 - 629,065 

Natural Resources Conservation Service

Emergency Wetlands Reserve Program 92,159 - - 92,159 

Emergency Watershed Protection Program 88,020 - - 88,020 

Total Conservation Easements 1,151,859 342,615 - 809,244 

National Forest System 

The Forest Service manages over 192 million acres of public land, the majority of which are classified as 

stewardship land. Stewardship land is valued for its environmental resources, recreational and scenic 

value, cultural and paleontological resources, vast open spaces, and resource commodities and revenue 

they provide to the Federal government, states and counties. The National Forest System is comprised of 

the following: 

National Forests 

A unit formerly established and permanently set aside and reserved for National Forest purposes. The 

following categories of NFS lands have been set-aside for specific purposes in designated areas: 

• Wilderness Areas: Areas designated by Congress as part of the National Wilderness Preservation 

System. 

• Primitive Areas: Areas designated by the Chief of the Forest Service as primitive areas. They are 

administered in the same manner as wilderness areas, pending studies to determine sustainability as a 

component of the National Wilderness Preservation System. 

• Wild and Scenic River Areas: Areas designated by Congress as part of the National Wild and Scenic 

River System. 

• Recreation Areas: Areas established by Congress for the purpose of assuring and implementing the 

protection and management of public outdoor recreation opportunities. 

• Scenic-Research Areas: Areas established by Congress to provide use and enjoyment or certain ocean 

headlands and to insure protection and encourage the study of the areas for research and scientific 

purposes. 

• Game Refuges and Wildlife Preserve Areas: Areas designated by Presidential Proclamation or by 

Congress for the protection of wildlife. 
USDA Performance and Accountability Report for FY 2002

146

• Monument Areas: Areas including historic landmarks, historic and prehistoric structures, and other 

objects for historic or scientific interest, declared by Presidential Proclamation or by Congress. 

National Grasslands 

A unit designated by the Secretary of Agriculture and permanently held by the USDA under Title III of 

the Bankhead-Jones Tenent Act. 

Purchase Units 

A unit of land designated by the Secretary of Agriculture or previously approved by the National Forest 

Reservation Commission for purposes of Weeks Law acquisition. The law authorizes the federal government to purchase lands for stream-flow protection, and maintain the acquired lands as national forests. 

 

Land Utilization Projects 

A unit reserved and dedicated by the Secretary of Agriculture for forest and range research and 

experimentation. 

Other Areas 

Areas administered by the Forest Service that are not included in one of the above groups. 

The Forest Service monitors the condition of NFS lands based on information compiled by two national 

inventory and monitoring programs. Annual inventories of forest status and trends are conducted by the 

Forest Inventory and Analysis (FIA) program in 45 states covering 65 percent of the forested lands of the 

lower 48 states. The Forest Health Monitoring (FHM) program is active in 48 states providing surveys 

and evaluations of forest health conditions and trends. While most of the 192 million acres of forestland 

on NFS lands continue to produce valuable benefits (i.e. clean air, clean water, habitat for wildlife, and 

products for human use), significant portions are at risk to pest outbreaks and/or catastrophic fires. 

Between 1997 and 2001, tree mortality caused by insects and diseases was detected by aerial surveys on 

approximately 8 million acres of NFS forestland. About 33 million acres of NFS forestland are at risk to 

future mortality from insects and diseases (based on the current Insect and Disease Risk Map). Nearly 73 

million acres of NFS forestland are prone to catastrophic fire based on current condition and departure 

from historic fire regimes (Fire Regimes 1&2 and Condition Classes 2&3). Approximately 9.5 million 

acres are at risk to both pest caused mortality and fire. Invasive species of insects, diseases and plants 

continue to impact our native ecosystems by causing mortality to, or displacement of, native vegetation. 

The National Fire Plan has focused our efforts to prevent and suppress future fires adequately and restore 

acres that are at risk. Risk to fires was reduced by fuel hazard treatments on 1.4 million acres of NFS 

lands in 2001 and 1.2 million acres in 2002. Insect and disease prevention and suppression treatments 

were completed on over one million acres of NFS lands in 2001 and nearly one million acres in 2002. 

At the time of submission of this information the net change values include the net effects of Forest 

Service land transactions with the exception of the Northern regions 2002 transactions. This information will be updated to include the Northern Region’s information as soon as it becomes available. 

Land that is needed to protect critical wildlife habitat, cultural and historic values; to support the 

purposes of congressional designation; and for recreation and conservation purposes is acquired 

through purchase or exchange. 

Conservation Easements 

Wetlands Reserve Program 

The Wetlands Reserve Program (WRP) is a voluntary program established to restore, protect, and 

enhance wetlands on agricultural land. Participants in the program may sell a conservation easement or 
USDA Performance and Accountability Report for FY 2002

147

enter into a cost-share restoration agreement with CCC in order to restore and protect wetlands. The 

landowner voluntarily limits the future use of the land, yet retains private ownership. The program 

provides many benefits for the entire community, such as better water quality, enhanced habitat for 

wildlife, reduced soil erosion, reduced flooding, and better water supply. 

To be eligible for WRP, land must be restorable and be suitable for wildlife benefits. Once land is 

enrolled in the program, the landowner continues to control access to the land—and may lease the land—

for hunting, fishing, and other undeveloped recreational activities. Once enrolled, the land is monitored to 

ensure compliance with contract requirements. At any time, a landowner may request that additional 

activities (such as cutting hay, grazing livestock, or harvesting wood products) be evaluated to determine 

if they are compatible uses for the site. Compatible uses are allowed if they are fully consistent with the 

protection and enhancement of the wetland. The condition of the land is immaterial as long as the 

easement on the land meets the eligibility requirements of the program. 

CCC records an expense for the acquisition cost of purchasing easements plus any additional costs such 

as closing transactions, survey, and restoration costs. Easements can be either permanent or 30-year 

duration. In exchange for establishing a permanent easement, the landowner receives payment up to the 

agricultural value of the land and 100 percent of the restoration costs for restoring the wetlands. The 30-

year easement payment is 75 percent of what would be provided for a permanent easement on the same 

site and 75 percent of the restoration cost. 

Withdrawals from the program are rare. The Secretary of Agriculture has the authority to terminate 

contracts, with agreement from the landowner, after an assessment of the effect on public interest, and 

following a 90-day notification period of the House and Senate agriculture committees. 

In fiscal year 2002, funding responsibility for WRP returned to NRCS; however, CCC remains 

responsible for obligations arising prior to 2002. Additionally, CCC acres acquired during fiscal year 

2002 were purchased with CCC funds, as in the past. 

Emergency Wetlands Reserve Program (EWRP) 

The Emergency Wetlands Reserve Program (EWRP) administered by NRCS was established as part of 

the emergency restoration package following the flooding of the Mississippi River and its tributaries in 

1993. EWRP provides landowners an alternative to bringing back into agricultural production lands that 

had been wetlands at one time. The program is patterned after the Wetlands Reserve Program. 

Participants in the program sell a conservation easement to USDA in order to restore and protect 

wetlands. The landowner voluntarily limits the future use of the land, yet retains private ownership. 

 

To be eligible, the land must have been damaged by a natural disaster and be restorable as a wetland. 

Once the land is enrolled in the program, the landowner continues to control access to the land. The land 

is monitored to ensure if the wetland is in compliance with contract requirements, including compatible 

uses, such as recreational activities or grazing livestock. 

Easements purchased under this program meet the definition of stewardship land. NRCS records an 

expense for the acquisition cost of purchasing easements plus any additional costs such as closing, survey, 

and restoration costs. Easements purchased under EWRP are permanent duration. In exchange for 

establishing a permanent easement, the landowner receives payment based on agricultural value of the 

land, a geographic land payment cap, or the landowner offer. Easement values are assessed on predisaster conditions. The landowner may receive up to 100 percent of restoring the wetland. There are no 

provisions in the easement to terminate the purchase. 

Emergency Watershed Protection Program (EWP) 

The Emergency Watershed Protection Program (EWP) Floodplain Easements is administered by NRCS. 

A floodplain easement is purchased on flood prone lands to provide a more permanent solution to 

repetitive disaster assistance payments and to achieve greater environmental benefits where the situation 
USDA Performance and Accountability Report for FY 2002

148

warrants and the affected landowner is willing to participate in the easement approach. The easement is to 

restore, protect, manage, maintain, and enhance the functions of wetlands, riparian areas, conservation 

buffer strips, and other lands. 

 

Easements purchased under this program meet the definition of stewardship land. NRCS records an 

expense for the acquisition cost of purchasing easements plus any additional costs such as closing, survey, 

and restoration costs. Easements purchased under EWP are permanent duration. In exchange for establishing a permanent easement, the landowner receives payment based on agricultural value of the land, a 

geographic land payment cap, or the landowner offer. Easement values are assessed on pre-disaster 

conditions. The landowner may receive up to 100 percent of the installation and maintenance of land 

treatment measures deemed necessary and desirable to effectively achieve the purposes of the easement. 

The easements provide permanent restoration of the natural floodplain hydrology as an alternative to 

traditional attempts to restore damaged levees, lands, and structures. There are no provisions in the 

easement to terminate the purchase. 
USDA Performance and Accountability Report for FY 2002

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Stewardship Investments 

(in millions) 

FY 2002 FY 2001 FY 2000

Program Expense Expense Expense

Non-Federal Physical Property:

Food and Nutrition Service

Food Stamp Program $ 41 - $ 28 $ 

Special Supplemental Nutrition Program - 18 29 

Cooperative State Research, Education, and Extension Service

Extension 1890 Facilities Program 14 12 12 

Total Non-Federal Property 14 $ 71 $ 69 $ 

Human Capital:

Cooperative State Research, Education, and Extension Service

Higher Education and Extension Programs 532 $ 479 $ 466 $ 

Food and Nutrition Service

Food Stamp Program 57 - 156 

Child Nutrition Program - - - 

Forest Service

Job Corps Program 104 101 94 

Agricultural Research Service

National Agricultural Library 20 21 19 

Risk Management Agency

Risk Management Education - - 1 

Total Human Capital $ 658 656 $ 736 $ 

Research and Development:

Agricultural Research Service

Plant Sciences $ 324 384 $ 296 $ 

Commodity Conversion and Delivery 182 194 172 

Animal Sciences 146 102 133 

Soil, Water, and Air Sciences 100 98 89 

Human Nutrition 77 80 72 

Integration of Agricultural Systems 40 34 31 

Collaborative Research Program 11 11 - 

Cooperative State Research, Education, and Extension Service

Land-grant University System 542 495 476 

Forest Service

Natural Resource Management 267 200 255 

Economic Research Service

Economic and Social Science 67 66 64 

National Agricultural Statistics Service

Statistical 4 5 4 

Total Research and Development 1,780 $ 1,649 $ 1,592 $ 

Nonfederal Physical Property 

Food and Nutrition Service

FNS’ nonfederal physical property consists of computer systems and other equipment obtained by the 

State and local governments for the purpose of administering the Food Stamp Program. The total Food 

Stamp Program Expense for ADP Equipment & Systems has been reported as of the date of FNS’ 

financial statements. FNS’ nonfederal physical property also consist of computer systems and other 
USDA Performance and Accountability Report for FY 2002

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equipment obtained by the State and local governments for the purpose of administering the Special 

Supplemental Nutrition Program for Women, Infants and Children (WIC). 

Cooperative State Research, Education, and Extension Service 

The Extension 1890 facilities program supports the renovation of existing buildings and the construction 

of new facilities that permit faculty, students, and communities to benefit fully from the partnership 

between USDA and the historically African-American land-grant universities. In FY 2002, 18 grants were 

awarded to support this program. 

Human Capital 

Cooperative State Research, Education, and Extension Service Programs 

The Higher Education programs include graduate fellowship grants, competitive challenge grants, 

Secondary/2-year Post Secondary grants, Hispanic serving institutions education grants, a multicultural 

scholars program, a Native American institutions program, a Native American institutions endowment 

fund, a capacity building program at the 1890 institutions, and an Alaska Native-Serving and Native 

Hawaiian-Serving institutions education grants programs. In FY 2002, approximately 200 Higher 

Education grants were awarded to more than 125 institutions of higher education. These programs enable 

universities to broaden their curricula, increase faculty development and student research projects, and 

increase the number of new scholars recruited in the food and agriculture sciences. 

Food and Nutrition Service 

FNS’ human capital consists of employment and training (E&T) for the Food Stamp Program. The E&T 

program requires recipients of food stamp benefits to participate in an employment and training program 

as a condition to food stamp eligibility. 

Outcome data for the E&T program is only available through the third quarter. As of this period, FNS’ 

E&T program has placed 621,000 work registrants subject to the 3-month Food Stamp Program 

participant limit and 529,000 work registrants not subject to the limit in either job-search, job-training, 

job-workfare, education, or work experience. 

Forest Service 

In partnership with the U.S. Department of Labor (DOL), the Forest Service operates 18 Job Corps 

Civilian Conservation Centers. Job Corps is the only Federal residential employment and education 

training program for economically challenged young people, ages 16-24. The purpose of the program is to 

provide young adults with the skills necessary to become employable, independent, and productive 

citizens. Job Corps is funded from DOL with the program year beginning on July 1 and ending on June 

30 of each year. During FY 2002 (July 1st to June 30th), there were 8,976 participants with 3,748 

placements. The average starting hourly wage for our Forest Service Job Corps students was $8.49, which 

is above the DOL national average rate. 

Established in 1964, Job Corps has trained and educated about 219,000 young people. The program is 

administered in a structured, coeducational, residential environment that provides, education, vocational 

and life skills training, counseling, medical care, work experience, placement assistance and follow-up, 

recreational opportunities, and biweekly monetary stipends. Job corps students can choose from a wide 

variety of careers such as urban forestry, heavy equipment operations and maintenance, business clerical, 

carpentry, culinary arts, painting, cement and brick masonry, welding, auto mechanics, health services, 

building and apartment maintenances, warehousing, and plastering. The 18 centers had 2,056 women 

students training in nontraditional vocations last program year. The program received the National Job 

Corps Association Community Partners Alpha Award for the partnership of the Frenchburg Job Corps 
USDA Performance and Accountability Report for FY 2002

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Center and the Hazard Community College in assisting young people earn college credits. Over 700 Job 

Corps students assisted the agency in its fire fighting efforts. An Interagency Agreement with the 

Secretaries of Interior, Labor, and Agriculture was signed for the establishment of the first National 

Apprentice Training Program—which will allow Job Corps students to participate. The Firefighter 

Apprentice of the Future representative is one of our female Job Corps students. 

Agricultural Research Service 

As the Nation's primary source for agricultural information, the National Agricultural Library (NAL) has 

a mission to increase the availability and utilization of agricultural information for researchers, educators, 

policymakers, consumers of agricultural products, and the public. The Library is one of the world's largest 

and most accessible agricultural research libraries and plays a vital role in supporting research, education, 

and applied agriculture. 

The National Agricultural Library was created as the departmental library for the U.S. Department of 

Agriculture in 1862 and became a national library in 1962. One of four national libraries of the United 

States (with the Library of Congress , the National Library of Medicine , and the National Library of 

Education), it is also the coordinator for a national network of State land-grant and USDA field libraries. 

In its international role, the National Agricultural Library serves as the U.S. center for the international 

agricultural information system, coordinating and sharing resources and enhancing global access to 

agricultural data. The National Agricultural Library's collection of over 3.5 million items and its 

leadership role in information services and technology applications combine to make it the foremost 

agricultural library in the world. 

Risk Management Agency 

In response to the Secretary’s 1996 Risk Management Education (RME) initiative, and as mandated by 

the 1996 Act, the FCIC has formed new partnerships with the Cooperative State Research, Education, and 

Extension Service (CSREES), the Commodity Futures Trading Commission, the USDA National Office 

of Outreach, Economic Research Service, and private industry to leverage the federal government’s 

funding of its RME program by using both public and private organizations to help educate their members in agricultural risk management. The RME effort was launched in 1997 with a Risk Management 

Education Summit that raised awareness of the tools and resources needed by farmers and ranchers to 

manage their risks. RMA has built on this foundation during fiscal year 2002 by expanding State and 

Regional education partnerships; encouraging the development of information and technology decision 

aids; supporting the National Future Farmers of America (FFA) foundation with an annual essay contest; 

facilitating local training workshops; and supporting Cooperative Agreements with Educational and 

outreach organizations. 

One of the directives of ARPA is to step up the FCIC’s educational and outreach efforts in certain areas 

of the country that have been historically underserved by the Federal crop insurance program. The 

Secretary determined that fifteen states met the underserved criteria. These states are Maine, Massachusetts, Connecticut, Wyoming, New Jersey, New York, Delaware, Nevada, Pennsylvania, Vermont, 

Maryland, Utah, Rhode Island, New Hampshire, and West Virginia.

Research and Development 

Agricultural Research Service

ARS is the principal in-house research agency of USDA. Its mission is to conduct research to develop the 

following program activities: 
USDA Performance and Accountability Report for FY 2002

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Plant Sciences 

The research emphasis is on increasing the productivity and quality of crop plants, and improving the 

competitiveness of agricultural products in domestic and world markets. The research involves 

developing improved production practices, and methods for reducing crop losses caused by weeds, 

diseases, insects, and other pests. The research also includes broadening the germplasm resources of 

plants and beneficial organisms to ensure genetic diversity for improving productivity. 

Commodity Conversion and Delivery 

The research program focuses on maximizing the use of agricultural products in domestic and international markets. New agricultural products and processes are developed along with technologies for 

reducing or eliminating post harvest losses caused by pests, spoilage, and physical and environmental 

damage. Also, research is conducted on food safety to reduce pathogens, naturally-occurring toxicants, 

mycotoxins, and chemical residues in the food supply. 

Animal Sciences 

The research program places primary emphasis on increasing the productivity of animals and the quality 

of animal products. The research involves increasing the genetic capacity of animals for production, 

improving the efficiency of reproduction, improving animal nutrition and feed efficiency, and controlling 

or preventing losses from pathogens, diseases, parasites, and insect pests. In addition, the research 

includes the development of systems and technologies to better manage and utilize animal wastes. 

Soil, Water, and Air Sciences 

The research program is directed to managing and conserving the nation’s soil, water, and air resources to 

maintain a stable and productive agriculture. The research focuses on developing technologies and 

systems to conserve water and protect its quality, enhance soil quality and reduce erosion, and improve air 

quality. The effects of global change are also researched. 

Human Nutrition 

The research program emphasis is on promoting optimum human health and well-being through improved 

nutrition. Research is directed to defining the nutrient requirements of humans at all stages of the life 

cycle. The research also focuses on determining the nutrient content of agricultural products and 

processed foods consumed, and establishing the bioavailability of their nutrients. 

Integration of Agricultural Systems 

The research integrates scientific knowledge of agricultural production, processing, and marketing into 

systems that optimize resources management and facilitate the transfer of technology to users. 

Collaborative Research Program 

Funds from the U.S. Agency for International Development (AID) allow USDA to provide short-term 

scientific exchanges with the new independent states of the former Soviet Union to develop market-based 

agricultural systems necessary to meet the food needs of their populations and develop and strengthen trade 

linkages between their countries and related agribusiness and agricultural enterprise in the United States. 

The National Agricultural Library also provides support to ARS’ research programs. 

Cooperative State Research, Education, and Extension Service Program 

CSREES participates in a nationwide land-grant university system of agriculture related research and 

program planning and coordination between State institutions and USDA. It assists in maintaining 

cooperation among the State institutions, and between the State institutions and their Federal research 

partners. CSREES administers grants and formula payments to State institutions to supplement State and 

local funding for agriculture research. 
USDA Performance and Accountability Report for FY 2002

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Forest Service 

Forest Service research and development provides reliable science based information that is incorporated 

into natural resource decision-making. Efforts consist of developing new technology, and then adapting 

and transferring this technology to facilitate more effective resource management. Some major research 

areas include: 

• Vegetation Management and Protection; 

• Wildlife, Fish, Watershed, and Air; 

• Resource Valuation and Use Research; and 

• Forest Resources Inventory and Monitoring. 

Research staff is involved in all areas of the Forest Service supporting agency goals by providing more 

efficient and effective methods where applicable. 

A representative summary of FY 2002 accomplishments include: 

• Estimated 316 new interagency agreements and contracts; 

• Estimated 221 interagency agreements and contracts continued; 

• Estimated 1,326 articles published in journals; 

• Estimated 1,829 articles published in all other publications; 

• six patents granted; and 

• 37 rights to inventions established. 

Economic Research Service 

ERS provides economic and other social science research and analysis for public and private decisions on 

agriculture, food, natural resources, and rural America. Research results and economic indicators on these 

important issues are fully disseminated through published and electronic reports and articles; special staff 

analyses, briefings, presentations, and papers; databases; and individual contacts. ERS’ objective information and analysis helps public and private decision makers attain the goals that promote agricultural 

competitiveness, food safety and security, a well-nourished population, environmental quality, and a 

sustainable rural economy. 

National Agricultural Statistics Service 

Statistical research and service is conducted to improve the statistical methods and related technologies used 

in developing U.S. agricultural statistics. The highest priority of the research agenda is to aid the NASS 

estimation program through development of better estimators at lower cost and with less respondent burden. 

This means greater efficiency in sampling and data collection coupled with higher quality data upon which 

to base the official estimates. In addition, new products for data users are being developed with the use of 

technologies such as remote sensing and geographic information systems. Continued service to users will be 

increasingly dependent upon methodological and technological efficiencies. 
USDA Performance and Accountability Report for FY 2002

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REQUIRED SUPPLEMENTARY INFORMATION 
USDA Performance and Accountability Report for FY 2002

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Statement of Budgetary Resources 

FNCS FSIS MRP NRE REE 

Budgetary

NonBudgetary 

Credit 

Program 

Financing 

Accounts

Budgetary

NonBudgetary 

Credit 

Program 

Financing 

Accounts

Budgetary Budgetary Budgetary Budgetary Budgetary 

Budgetary Resources:

Budget authority:

Appropriations received 30,037 $ - $ 4,618 $ - $ 32,806 $ 734 $ 7,260 $ 6,162 $ 2,51

$ 

Borrowing authority 34,054 1,586 1 8,103 - - - - Net transfers (3,501) - 588 - 5,173 - (5,046) 470 1

Unobligated balances: 

Beginning of period 5,443 1,728 1,159 612 15,541 45 488 1,365 33Net transfers, actual (7) - - - 20 - 2 110 Anticipated Transfers balances - - - - - - - - 

Spending authority from offsetting collections: 

Earned 

Collected 13,762 3,548 5,877 3,634 143 101 162 1,094 8Receivable from Federal sources (479) (68) (12) (694) 2 17 (216) 1

Change in unfilled customer orders 

Advance received 209 - - - (15) - (48) Without advance from Federal sources (3) (2) - 666 - - 26 1

Subtotal 13,489 3,478 5,866 3,606 128 103 179 856 10

Recoveries of prior year obligations 472 78 268 210 712 73 176 125 77Permanently not available (42,135) (597) (5,290) (1,296) (4,931) (1) (10) (22) (1

Total Budgetary Resources (Note ) 37,852 6,273 7,210 11,236 49,450 954 3,050 9,066 3,73

FFAS RD
USDA Performance and Accountability Report for FY 2002

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FNCS FSIS MRP NRE REE 

Budgetary

NonBudgetary 

Credit 

Program 

Financing 

Accounts

Budgetary

NonBudgetary 

Credit 

Program 

Financing 

Accounts

Budgetary Budgetary Budgetary Budgetary Budgetary 

Status of Budgetary Resources:

Obligations incurred (Note ):

Direct 8,419 2,085 5,242 10,160 37,614 795 2,006 6,865 3,021 

Reimbursable 26,956 - 481 - 79 102 418 821 149 

Subtotal 35,375 2,085 5,723 10,160 37,693 897 2,424 7,686 3,170 

Unobligated balance

Apportioned 1,834 3,978 207 274 517 43 432 1,055 409 

Exempt from apportionment 42 - - - 1 172 5 56 Other available 299 - - - - - - - - 

Unobligated balance not available 301 210 1,279 802 11,239 13 21 320 97 

Total Status of Budgetary Resources 37,852 6,273 7,210 11,236 49,450 954 3,050 9,066 3,732 

Relationship of Obligations to Outlays:

Obligated balance, net, beginning of period 5,890 580 6,729 10,232 3,058 73 360 1,968 1,464 Obligated balance transferred, net - - - - - - - - - 

Obligated balance, net, end of period:

Accounts receivable (654) (107) (24) - - (23) (58) (156) (68

(6) (10) - (666) - - (156) (77

Undelivered orders 4,041 284 6,360 13,823 340 80 265 1,759 1,584 

Accounts payable 2,556 437 438 2,546 17 118 498 56 

Outlays:

Disbursements 35,339 2,053 5,422 7,053 37,226 821 2,296 7,774 2,340 

Collections (13,972) (3,548) (5,877) (3,634) (128) (101) (162) (1,046) (83

Subtotal 21,368 (1,495) (455) 3,418 37,098 720 2,134 6,728 2,258 Less: Offsetting Receipts 57 130 356 - - 1 10 852 Net Outlays 21,311 $ (1,625) $ (811) $ 3,418 $ $ 720 37,098 $ $ 5,876 2,124 $ 2,257 $ 

FFAS RD

Unfilled customer orders from Federal sources
USDA Performance and Accountability Report for FY 2002

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Deferred Maintenance 

Cost to Return 

to Acceptable 

Condition

Cost of Critical 

Maintenance

Cost of Noncritical 

Maintenance

Asset Class

Forest Service

Roads, Bridges, and Major Culverts 4,955 $ 1,161 $ 3,794 $ 

Buildings 189 518 329 

Developed Recreation Sites 291 99 192 

Dams 9 30 21 

Range Structures 491 491 - 

Wildlife, Fish, and Threatened and Endangered Species Structures 4 3 1 

Trails 51 138 87 

Heritage Assets 42 73 31 

Total Forest Service $ 2,047 6,501 $ 4,454 $ 

Deferred maintenance is maintenance that was scheduled to be performed and delayed until a future 

period. Deferred maintenance represents a cost that the government has elected not to fund and, therefore, 

the costs are not reflected in the financial statements. Maintenance is defined to include preventative 

maintenance, normal repairs, replacement of parts and structural components, and other activities needed 

to preserve the asset so that it continues to provide acceptable service and achieve its expected life. It 

excludes activities aimed at expanding the capacity of an asset or otherwise upgrading it to service needs 

different from, or significantly greater than, those originally intended. Deferred maintenance is reported 

for general Property, Plant and Equipment (PP&E), stewardship assets, and heritage assets. It is also 

reported separately for critical and non-critical amounts of maintenance needed to return each class of 

asset to its acceptable operating condition. 

The Forest Service uses condition surveys to estimate deferred maintenance on all major classes of PP&E. 

There is no deferred maintenance for fleet vehicles and computers that are managed through the Agency’s 

working capital fund. Each fleet vehicle is maintained according to schedule. The cost of maintaining the 

remaining classes of equipment is expensed. 

Condition of Administrative Facilities 

• 22 percent of buildings are obsolete, over 50 years old 

• 27 percent of buildings are in poor condition needing major alterations and renovations 

• 24 percent of buildings are in fair condition needing minor alterations and renovations 

• 27 percent of buildings are in good condition needing routine maintenance and repairs 

Condition of Dams

The overall condition of dams is below acceptable. The condition of dams is acceptable when the dam 

meets current design standards and does not have any deficiencies that threaten the safety of the structure 

or public, or are needed to restore functional use, correct unsightly conditions, or prevent more costly 

repairs. 

Condition of General Property, Plant and Equipment

The standards for acceptable operating condition for various classes of general PP&E, 

stewardship and heritage assets are: 

Buildings 

Comply with the National Life Safety Code, the Forest Service Health and Safety Handbook, and the 

Occupational Safety Health Administration as determined by condition surveys. 
USDA Performance and Accountability Report for FY 2002

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Roads and Bridges 

Conditions of the National Forest System Road system are measured by various standards that include 

applicable regulations for the Highway Safety Act developed by the Federal Highway Administration, 

best management practices for road construction and maintenance developed by the Environmental 

Protection Agency and the states to implement the non-point source provisions of the Clean Water Act, 

road management objectives developed through the forest planning process prescribed by the National 

Forest Management Act, and the requirements of Forest Service Manuals and Handbooks. 

Developed Recreation Sites 

This category that includes campgrounds, trailheads, trails, wastewater facilities, interpretive facilities, 

and visitor centers. All developed sites are managed in accordance with Federal laws and regulations 

(CFR 36). Detailed management guidelines are contained in the Forest Service Manual (FSM 2330, 

Publicly Managed Recreation Opportunities) and regional and forest level user guides. Standards of 

quality for developed recreation sites were developed under the meaningful measures system and 

established for the following categories: health and cleanliness, settings, safety and security, 

responsiveness, and the condition of facility. 

Range Structures 

The condition assessment was based on: 1) a determination by knowledgeable range specialists or other 

district personnel of whether or not the structure would perform the originally intended function, and 2) a 

determination through the use of a protocol system to assess conditions based on age. A long-range 

methodology is used to gather this data. 

Dams 

Managed according to Forest Service Manual 7500, Water Storage and Transmission, and Forest Service 

Handbook 7509.11, Dams Management as determined by condition surveys. 

Wildlife, Fish, and Threatened and Endangered Species Structures 

Field biologists at the forest used their professional judgment to determine deferred maintenance. 

Deferred maintenance was considered as upkeep that had not occurred on a regular basis. The amount 

was considered critical if resource damage or species endangerment would likely occur if maintenance 

was deferred much longer. 

Trails 

Trails are managed according to Federal law and regulations (CFR 36). More specific direction is 

contained in the Forest Service Manual (FSM 2350, Trail, River, and Similar Recreation Opportunities) 

and the Forest Service Trails Management Handbook (FSH 2309.18). 

Heritage Assets 

These assets include archaeological sites that require determinations of National Register of Historic 

Places status, National Historic Landmarks, and significant historic properties. Some heritage assets may 

have historical significance, but their primary function within the agency is as visitation or recreation sites 

and, therefore, may not fall under the management responsibility of the heritage program. 
USDA Performance and Accountability Report for FY 2002

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Intragovernmental Amounts 

Assets 

Fund Balance with 

Treasury Investments

Accounts 

Receivable Other

Trading Partner (Code)

Unknown (00) $ 169 5 $ 2 $ 

Department of Interior (14) - 4 - 

Department of Justice (15) - 1 - 

Department of Labor (16) - 7 - 

Department of State (19) - 1 

Department of the Treasury (20) 39,617 $ 91 13 - 

Department of the Army (21) - 7 - 

Office of Personnel Management (24) - 2 - 

General Services Administration (47) - 7 - 

Department of the Air Force (57) - 1 - 

Environmental Protection Agency (68) - 3 - 

Department of Transportation (69) - 1 (1)

Department of Health and Human Services (75) - 5 - 

National Aeronautics and Space Administration (80) - 1 - 

Department of Energy (89) - 17 - 

U.S. Army Corps of Engineers (96) - 1 

Office of the Secretary of Defense-Defense Agencies (97) - 3 - 

Total Assets 39,617 $ 96 $ 242 $ 1 $ 

Liabilities

Accounts Payable Debt

Resources 

Payable to 

Treasury Other

Trading Partner (Code)

Unknown (00) (17) $ - $ 212 $ 

Department of Commerce (13) - - 1 

Department of Interior (14) - - 68 

Department of Justice (15) - - 8 

Department of Labor (16) - - 94 

Department of the Navy (17) - - (1)

Department of State (19) - (4)

Department of the Treasury (20) 113 75,868 1,063 

Department of the Army (21) - 1 

Office of Personnel Management (24) - 20 

General Services Administration (47) - 11 

Department of Transportation (69) - - 7 

Agency for International Development (72) 541 - 4 

Department of Health and Human Services (75) - 1 

National Aeronautics and Space Administration (80) - - (1)

Department of Energy (89) - - 5 

U.S. Army Corps of Engineers (96) 1 - (66)

Treasury General Fund (99) - - 18,598 $ 1,372 

Total Liabilities 637 $ 75,868 $ 18,598 $ 2,795 $ 
USDA Performance and Accountability Report for FY 2002

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Earned Revenue, Federal 

Earned Revenue 

Federal

Earned Revenue Federal:

Trading Partner (Code)

Unknown (00) $ 97 

Library of Congress (03) 1 

General Accounting Office (05) 1 

Department of Commerce (13) 5 

Department of Interior (14) 47 

Department of Justice (15) 15 

Department of Labor (16) 57 

U.S. Postal Service (18) 1 

Department of State (19) 2 

Department of the Treasury (20) 567 

Department of the Army (21) 17 

Office of Personnel Management (24) 5 

Smithsonian Institution (33) 1 

Appalachian Regional Commission (46) 11 

General Services Administration (47) 73 

Federal Deposit Insurance Corporation (51) 1 

Department of the Air Force (57) 2 

Federal Emergency Management Agency (58) (5)

Environmental Protection Agency (68) 12 

Department of Transportation (69) 16 

Agency for International Development (72) 8 

Small Business Administration (73) 1 

Department of Health and Human Services (75) 8 

National Aeronautics and Space Administration (80) 2 

Department of Housing and Urban Development (86) 2 

Department of Energy (89) 25 

U.S. Army Corps of Engineers (96) 7 

Office of the Secretary of Defense-Defense Agencies (97) 6 

Total Earned Revenue Federal $ 983 

Cost to Generate Earned Revenue Federal: 

Functional Classification

 350 Agriculture $ 440 

Total Cost to Generate Revenue $ 440 

Federal and Non-Federal
USDA Performance and Accountability Report for FY 2002

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Cost, Federal 

Cost Federal

Trading Partner (Code)

Unknown (00) $ 2,007 

Library of Congress (03) 1 

Government Printing Office (04) 12 

General Accounting Office (05) 1 

Department of Commerce (13) 11 

Department of Interior (14) 73 

Department of Justice (15) 26 

Department of Labor (16) 67 

Department of the Navy (17) 6 

U.S. Postal Service (18) 17 

Department of State (19) 18 

Department of the Treasury (20) 4,129 

Department of the Army (21) 2 

Office of Personnel Management (24) 1,343 

Social Security Administration (28) 8 

Department of Veterans Affairs (36) 1 

General Services Administration (47) 138 

Office of Special Counsel (62) 1 

Environmental Protection Agency (68) 1 

Department of Health and Human Services (75) 11 

National Aeronautics and Space Administration (80) 3 

Department of Energy (89) 13 

Independent Agencies (95) 2 

U.S. Army Corps of Engineers (96) 3 

Office of the Secretary of Defense-Defense Agencies (97) 4 

Total Cost Federal $ 7,897 

Non-exchange Revenue Federal: 

Transfers-In Transfers-Out

Trading Partner (Code)

Unknown (00) $ $ 1,409 

Department of Interior (14) (200)

Department of the Treasury (20) 2,619 (3,101)

Agency for International Development (72) (611)

Treasury General Fund (99) (1,945)

Total Non-exchange Revenue Federal $ (5,857) 4,028 $ 
USDA Performance and Accountability Report for FY 2002

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Segment Information 

The Departmental Working Capital Fund and the Forest Service Working Capital Fund are not separately 

reported in the consolidated financial statements. The following information summarizes the working 

capital funds’ financial condition and results of operations as of and for the fiscal year ending September 

30, 2002. 

Departmental Forest Service Total

Working Capital Working Capital Working Capital

Fund Fund Funds

Condensed Information

Fund Balance $ 108 74 $ 182 $ 

Accounts Receivable 28 1 29 

Property, Plant, and Equipment 50 338 388 

Other Assets 22 3 25 

Total Assets 469 155 624 

Liabilities and Net Position

Accounts Payable 17 3 20 

Deferred Revenues - - - 

Other Liabilities (38) 52 14 

Unexpended Appropriations 26 4 30 

Cumulative Results of Operations 74 486 560 

Total Liabilities and Net Position 155 $ 469 $ 624 $ 

Excess of

Cost of Goods Related Costs Over

and Services Exchange Exchange

Provided Revenue Revenue

Product or Business Line

Departmental Working Capital Fund:

Finance and Management 185 $ 204 $ (19) $ 

Communications 5 5 0 

Information Technology 74 81 (7) 

Administration 29 26 (3) 

Executive Secretariat 2 2 (0) 

Total Departmental Working Capital Fund 292 321 (29) 

Forest Service Working Capital Fund:

Other 218 146 (72) 

Total Working Capital Funds 438 $ 539 $ (101) $ 
USDA Performance and Accountability Report for FY 2002

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Departmental Working Capital Fund 

Twenty-two activity centers performed operations and provided the following services in FY 2002: 

• Administration: Administrative and Supply Services. 

• Communications: Video, Teleconferencing, Graphic and Exhibit Services. 

• Finance and Management: Payroll, Accounting and Administrative Services and Thrift Saving Plan 

Support. 

• Information Technology: ADP Services, Application Development, and Telecommunications 

Services. 

• Executive Secretariat: Executive correspondence control and tracking. 

In FY 2002, the Departmental Working Capital Fund had two major customers that comprised more than 

15 percent of the fund’s revenue. USDA’s Forest Service provided revenue in the amount of $60 million. 

The Thrift Investment Board (Thrift Savings Plan) provided revenue in the amount of $54 million. 

Forest Service Working Capital Fund 

Services provided by the Forest Service Working Capital Fund include: fleet services, including rental 

and maintenance; aircraft services, including operation and maintenance; supply services; and computer 

services, including the replacement of computer hardware and software. Forest Service units are the major 

customers of the fund. 
USDA Performance and Accountability Report for FY 2002

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IV. REPORT OF THE OFFICE OF THE INSPECTOR 

GENERAL AND MANAGEMENT’S RESPONSE 
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APPENDIX A – EXHIBITS 

Exhibit 1: Resources Dedicated to Expanding Marketing Opportunities ....................................................................20

Exhibit 2: Increasing U.S. Marketing Opportunities ...................................................................................................21

Exhibit 3: Upward Trade Trends .................................................................................................................................21

Exhibit 4: Food Aid Exports........................................................................................................................................22

Exhibit 5: Decline in Food Aid Exports ......................................................................................................................22

Exhibit 6: Promoting Assistance on Sustainable Food Supplies .................................................................................23

Exhibit 7: Investments on Food Supply Research.......................................................................................................23

Exhibit 8: Improved Grain Marketing and Financial Trade Practice Protection .........................................................24

Exhibit 9: Success in Monitoring Grain Quality and Providing Financial and Trade Practice Protection ..................24

Exhibit 10: Resources Dedicated to Providing Risk Management and Credit/Financing Tools .................................28

Exhibit 11: Increasing Use of Risk Management Tools ..............................................................................................29

Exhibit 12: Increase in Producers Using Risk Management Tools................................................................................29

Exhibit 13: Standard of Living in Rural Communities................................................................................................30

Exhibit 14: Rural Standard of Living Continued to Improve ......................................................................................30

Exhibit 15: Success in Sustaining Family Farms.........................................................................................................31

Exhibit 16: Maintained Small Farms in Relation to all Farms at 1999 Levels (%) .....................................................32

Exhibit 17: Loans to Beginning and Socially Disadvantaged Farmers and Ranchers ($ Mil).....................................32

Exhibit 18: Resources Dedicated to Homeland Security Responsibilities...................................................................33

Exhibit 19: Resources Dedicated to Protect the Nation’s Agriculture and Food Supply ............................................35

Exhibit 20: Number and Severity of Pests and Diseases .............................................................................................36

Exhibit 21: Reducing Pest and Disease Outbreaks......................................................................................................36

Exhibit 22: Ensuring the Safety of Meat, Poultry, and Egg Products..........................................................................37

Exhibit 23: Declining Instances of Salmonella and Listeria .......................................................................................38

Exhibit 24: Resources Dedicated to Improving the Nation’s Nutrition and Health.....................................................41

Exhibit 25: Nutrition Assistance Results.....................................................................................................................42

Exhibit 26: Nutrition Assistance Programs Reached Those in Need...........................................................................42

Exhibit 27: Improving Diet Quality Through Assistance............................................................................................44

Exhibit 28: Better Diet Quality and Access to Fresh Fruit/Vegetables Grew Among Target Segments....................44

Exhibit 29: Improving Diet Quality.............................................................................................................................45

Exhibit 30: People Using the Eating Index and Dietary Guidelines (thousands) ........................................................46

Exhibit 31: Resources Dedicated to Managing Our Natural Resources ......................................................................48

Exhibit 32: Maintaining Productivity and Health of the Land ....................................................................................49

Exhibit 33: Improving the Land ..................................................................................................................................49

Exhibit 34: Fluctuations in Wildland Fire Activities Due to Fire Season Severity (2000 and 2002 Experienced 

Severe Wildland Fire Seasons).................................................................................................................50

Exhibit 35: Protecting and Improving the Environment..............................................................................................52

Exhibit 36: Soil Improvements....................................................................................................................................52

Exhibit 37: Environmental Improvements...................................................................................................................53

Exhibit 38: Resources Dedicated to Implementing the Farm Security and Rural Investment Act ............................56

Exhibit 39: Civil Rights of Employees........................................................................................................................58

Exhibit 40: Civil Rights Case Processing Improved. ..................................................................................................58

Exhibit 41: USDA Rates Above U.S. Government Worker Satisfaction ....................................................................59

Exhibit 42: Employees Reported Above Average Job Satisfaction...............................................................................59

Exhibit 43: Competitive Sourcing Activities...............................................................................................................59

Exhibit 44: USDA’s Eligible Service Contracts..........................................................................................................60

Exhibit 45: Increased Use of Performance-Based Contracts.......................................................................................60

Exhibit 46: Financial Management Information Timely and Reliable ........................................................................61

Exhibit 47: Financial Management Programs Showed Improvement .........................................................................61

Exhibit 48: Better Stewardship of the Food Assistance Programs ..............................................................................62

Exhibit 49: Food Assistance Indicators Show Improved Program Delivery and Design ............................................62

Exhibit 50: Integrated eGovernment Environment......................................................................................................64
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Exhibit 51: Improving eGovernment Process............................................................................................................. 64

Exhibit 52: Securing the IT Environment................................................................................................................... 65

Exhibit 53: IT Security/Confidence Grew .................................................................................................................. 65

Exhibit 54: Management Challenge Accomplishments.............................................................................................. 75

Exhibit 55: Funding by Key Outcome ........................................................................................................................ 82

Exhibit 56: Definitions ............................................................................................................................................... 89

Exhibit 57: Decrease in Total Resolved Audit Inventory............................................................................................. 89

Exhibit 58: Decrease in Reportable Audits................................................................................................................. 89

Exhibit 59: Inventory of Audits With Disallowed Costs ............................................................................................ 90

Exhibit 60: Inventory of Audits With Funds to be Put to Better Use ......................................................................... 90

Exhibit 61: Distribution of Adjustments to Disallowed Cost ..................................................................................... 90

Exhibit 62: Distribution of Audits by USDA Agency (In U.S. dollars) ..................................................................... 91

Exhibit 63: Audits One Year or More Past the Management Decision Date.............................................................. 92

Exhibit 64: Material Deficiencies Decline by nearly 50%.......................................................................................... 97

Exhibit 65: Material Deficiencies Aging Analysis ..................................................................................................... 97

Exhibit 66: Material Deficiencies Corrected or No Longer Material ......................................................................... 98

Exhibit 67: Summary of Outstanding Material Deficiencies and Estimated Completion Dates................................. 98
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APPENDIX B – ACRONYMS 

ADP Automated Data Processing 

AICPA American Institute of Certified Public Accountants 

AMS Agricultural Marketing Service 

APHIS Animal and Plant Health Inspection Service 

AQI Air Quality Index 

AQIMS Agriculture Quarantine Inspection Monitoring System 

ARC Archival Research Catalogue 

AREERA Agricultural Research, Extension, and Education Reform Act of 1998 

ARPA Agriculture Risk Protection Act of 2000 

ARS Agricultural Research Service 

BFES Budget Formulation and Execution System 

CBO certificates of beneficial ownership 

CCC Commodity Credit Corporation 

CCE Common Computing Environment 

CDC Centers for Disease Control and Prevention 

CERCLA Comprehensive Environmental Response, Compensation, and Liability Act 

CNMP comprehensive nutrient management plans 

CNPP Center for Nutrition Policy and Promotion 

CR Office of Civil Rights 

CRE Coordinated Review Effort 

CRP Conservation Reserve Program 

CSREES Cooperative State Research, Education, and Extension Service 

CACFP Child and Adult Care Food Program 

CWA Clean Water Act 

CSRS Civil Service Retirement System 

DA Departmental Administration 

DC Disallowed Costs 

DC-ARC District of Columbia ARC 

DMZ Demilitarized Zone 

DOI Department of the Interior 

EDEN Extension Disaster Education Network 

EEO Equal Employment Opportunity 

EFNEP Expanded Food and Nutrition Education Program 

EFOTG Electronic Field Office Technical Guide 

eGovernment Electronic Government 

EQIP Environmental Quality Incentives Program 

ERS Economic Research Service 

EWP Emergency Watershed Protection Program 

EWRP Emergency Wetlands Reserve Program 

EZ/EC Empowerment Zone and Enterprise Communities 

E&T Employment and Training 

FAIR Federal Activities Inventory Reform (Act) 

FAO Food and Agricultural Organization 

FAS Foreign Agricultural Service 

FASAB Federal Accounting Standards Advisory Board 

FBWT Fund Balance with Treasury 

FCIC Federal Crop Insurance Corporation 

FDPIR Food Distribution Program on Indian Reservations 

FECA Federal Employees’ Compensation Act 

FERS Federal Employees Retirement System 

FFAS Farm and Foreign Agricultural Services 

FFB Federal Financing Bank 

FMFIA Federal Managers’ Financial Integrity Act 

FNCS Food Nutrition and Consumer Services 

FNS Food and Nutrition Service 

FPP Farmland Protection Program 

FS Forest Service 

FSA Farm Service Agency 

FSH Forest Service Trails Management Handbook 

FSIS Food Safety and Inspection Service 

FSM Forest Service Manual 

FSP Food Stamp Program 

FSRIA Farm Security Rural Investment Act 

FSWCF Forest Service Working Capital Fund 
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FTBU funds to be put to better use 

FY Fiscal Year 

GAO Government Accounting Office 

GIPSA Grain Inspection, Packers and Stockyards Administration 

GPEA Government Paperwork Elimination Act 

GPRA Government Performance and Results Act 

GSA General Services Administration 

HACCP Pathogen Reduction/Hazard Analysis and Critical Control Point 

HMMG Hazardous Material Management Group 

ISO International Organization for Standardization 

IT Information Technology 

LDL Low Density Lipoprotein 

LDP Loan Deficiency Payments 

LTIP Long Term Improvement Plan 

MAR Management Attainment Report 

MARCIS Microbiological and Residue Computer Information System 

MD management decisions 

MEL Most Efficient Level 

MRP Marketing Regulatory Programs 

MFH Multi-Family Housing Program 

AND National Appeals Division 

NAL National Agricultural Library 

NAP Noninsured Assistance Program 

NASS National Agricultural Statistics Service 

NAHEMS National Animal Health Emergency Management Steering Committee 

NFC National Finance Center 

NFP National Fire Plan 

NFS National Forest System 

NSL National School Lunch 

NITC National Information Technology Council 

NIS New Independent States of the former Soviet Union 

NRCS Natural Resources Conservation Service 

NRE Natural Resources and Environment (Mission Area) 

NTIS National Technical Information Services 

OBPA Office of Budget and Program Analysis 

OC Office of Communications 

OCE Office of the Chief Economist 

OCFO Office of the Chief Financial Officer 

OCIO Office of the Chief Information Officer 

OGC Office of the General Counsel 

OIG Office of Inspector General 

OMB Office of Management and Budget 

OPM Office of Personnel Management 

OSEC Office of the Secretary 

PART Program Assessment Rating Tool 

PAS Performance Accountability System 

PBSC performance-based service contracts 

PCAS Project Cost Accounting System 

PCIMS Processed Commodities Inventory Management System 

PCMS Purchase Card Management System 

PMA President’s Management Agenda 

PAOT Persons At One Time 

PPQ Plant Protection and Quarantine’s 

PWPS Project Work Planning System 

PP&E property, plant, and equipment 

QC Quality Control 

RBS Rural Business - Cooperative Service 

RBCS Rural Business Cooperative Service 

RCFTS Rural Community Facilities Tracking System 

RCRA Resource Conservation and Recovery Act 

RD Rural Development (Mission Area) 

RDAPTS RD Application Processing Tracking System 

REE Research, Education, and Economics 

RHS Rural Housing Service 

RMA Risk Management Agency 

RME Risk Management Education 

ROI Report of Investigation 

RUS Rural Utilities Service 
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R&D Research and Development 

SCGP Supplier Credit Guarantee Program 

SDA Socially Disadvantaged farmers 

SFSP Summer Food Service Program 

SGL Standard General Ledger 

SSOPs Sanitation Standard Operating Procedures 

SRA Standard Reinsurance Agreement 

STARS Store Tracking and Redemption Subsystem 

TRQs Tariff Rate Quotas 

USAID United States Agency for International Development 

USDA United States Department of Agriculture 

WADS Work Accomplishment Data monitoring systems 

WCF Departmental Working Capital Fund 

WIC Women, Infants, and Children 

WHIP Wildlife Habitat Incentives Program 

WRP Wetlands Reserve Program 

WS Wildlife Services 
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APPENDIX C – OIG MAJOR USDA MANAGEMENT 

CHALLENGES 

(November 8, 2002) 

USDA Homeland Security 

1. Homeland Security Issues 

The events of September 11, 2001, and the subsequent anthrax attacks on Government and media officials 

have alerted U.S. Department of Agriculture (USDA) at all levels to the need for increased vigilance and 

the strongest possible defenses. The Administration established the Office of Homeland Security to 

provide coordination and guidance across the Federal Government. As reflected in the Office of Homeland Security’s priorities and the Administration’s request for supplemental funding, homeland security 

comprises four missions: to support first responders to terrorist attacks, to defend against biological 

attacks, to secure our borders, and to share information about suspect activity. USDA’s operations involve 

it in all four missions. The attacks also added a new dimension to the Department’s priorities, particularly 

its mission to ensure the safety and abundance of the Nation’s food supply, from the farm to the American 

people’s table. However, based on our past and ongoing reviews, if the Department is to effectively 

respond to these new circumstances, it faces several challenges which it has not often confronted in the 

past: increased communication and coordination across the Department and its agencies, consistent 

departmental policies and procedures, and an emphasis on security (as opposed to safety) from potentially 

terrorist activities or other deliberate conspiracies. 

The Office of Inspector General (OIG) experienced these challenges that the Department now faces in our 

recent efforts reviewing the USDA laboratory facilities. High on the list of potential weapons are the 

biological agents that USDA laboratories use for research on plant and animal diseases. OIG recently 

issued an audit report on the Department’s controls over the security of its biological agents. The aim of 

the audit was to determine what pathogens the Department used and stored in over 300 laboratories 

around the country and what security those laboratories established to guard against break-ins. Our audit 

found that the responsibility for dealing with security was fragmented among the laboratory units. There 

were no policies or procedures in place to identify the type and location of the pathogens. Security in 

general at the laboratories needed improvement, but laboratory managers also needed to restrict access. 

In response to the need for greater biosecurity in the wake of the September 11 attacks, the Secretary 

assigned a task force to develop policies and procedures for biosecurity within the Department. On 

August 30, 2002, the Secretary’s Chief of Staff signed for the Secretary the decision memorandum 

adopting for USDA-wide implementation Departmental Memo 9610–1, entitled “USDA Security Policies 

and Procedures for Biosafety Level-3 Facilities.” (The Department is also currently working on the draft 

policies and procedures for its other laboratories and technical facilities excluding Biosafety Level-3 

facilities.) The affected USDA agencies have been developing corrective actions in response to our report 

and in response to the new Department policies and procedures on biosecurity. The recently-issued 

policies and procedures constitute the first major effort by the Department to issue departmentwide 

biosecurity policies and procedures. Furthermore, any effective implementation of these corrective 

actions will entail a major change in the approach by the agencies’ staff. To ensure that the current 

impetus is carried forth effectively, we have planned follow-up reviews to evaluate and verify whether 

these facilities have properly implemented their corrective actions. 

Inadequate security procedures even after September 11 were observed during OIG’s review of the 

security provided by the Forest Service over aircraft, including air tankers used for aerial dispersal of 
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flame retardant chemicals and other fire suppression activities, because of its potential use as a weapon. 

The Forest Service owns 44 aircraft and leases another 800 under contract. Our review found that the 

Forest Service had not assessed the risk of theft and misuse by terrorists of these aircraft, because prior to 

September 11, officials did not consider the threat significant. In response to our concerns, the Forest 

Service assembled a team of security experts to review their air bases. At each site visited, the team 

planned to conduct a threat assessment and analyze the countermeasures needed to mitigate that threat. 

We have been reviewing the Department’s operation to prevent the entry of Foot and Mouth Disease and 

contaminated food products into the United States (see also sections on “Food Safety” and “Marketing 

and Regulatory Programs”). In an earlier review, we found that the two USDA agencies (that is, Animal 

and Plant Health Inspection Service (APHIS) and Food Safety and Inspection Service (FSIS)) responsible 

for preventing contaminated meat and poultry products from entering the Nation’s food supply did not 

always coordinate their activities, giving importers an opportunity to bypass the inspection system. We 

are continuing our oversight of FSIS’ inspection activities, particularly their systems to track, account for, 

and inspect all meat and poultry products arriving at U.S. ports of entry. If the Department is to ensure the 

safety of the American food supply, the Department and particularly the two affected agencies, APHIS 

and FSIS, must increase coordination and communication among themselves. 

Currently, we have a number of ongoing reviews evaluating the spectrum of USDA agencies’ homeland 

security initiatives and activities in response to the heightened alert resulting from September 11. These 

include a number of ongoing efforts looking at APHIS’ role in monitoring America’s vulnerable ports of 

entry; a review of APHIS’ permit system involving the importation and domestic transshipment of 

biological agents (for example, animal and plant pests and pathogens), and a review of APHIS’ agricultural imports inspection system, particularly on inspections of cargo and passengers at major ports of 

entry and border crossings to prevent entry of prohibited pests and diseases into the United States. We 

have initiated the second phase of our reviews of controls and oversight over biohazardous agents; in this 

phase, we are evaluating the biosecurity and biosafety controls and procedures at USDA-funded 

laboratories (that is, university and private laboratory facilities receiving USDA financial assistance). So 

far, we have found minimal or no departmental guidance involving biosecurity to these laboratories. We 

have also initiated a review of controls and procedures over chemicals and radioactive materials stored 

and used at USDA facilities. In our earlier audit several years ago, we had reported material accountability problems. The urgency for strengthened Department controls over these substances materialized 

with the recent “dirty bomb” alert. 

Communications and information technology are among the Department’s primary assets and have been a 

target of hackers in the past. OIG has been involved in strengthening the Department’s security of this 

technology well before September 11. To date, we have reviewed or are in the process of reviewing nine 

separate information systems within the Department. Our reviews found several weaknesses in the 

security of information technology within the Department. Increased cyber security remains a priority for 

the Department. (See also section 15 on Information Resources Management.) 

As the Department and its agencies have undertaken efforts to identify vulnerable assets and to perform 

vulnerability assessments of their facilities and programs, they have realized the need to secure sensitive 

information that could be subject to criminal misuse by potential terrorists or cause major harm to the 

agriculture sector of the economy. In response, the Department and some agencies initiated actions to 

remove some sensitive information from their websites. However, they are still faced with the required 

public disclosure of any document or information they have compiled or collected under the Freedom of 

Information Act since they do not have classification authority. Because of this vulnerability, the 

Department and agencies expressed concerns about compiling such information or issuing vulnerability 

reports. Recently, the Department was granted classification authority and is drafting regulations and 

procedures to implement this classification authority. 
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On January 10, 2002, President Bush signed the Defense Appropriations Act, which included $328 

million for security upgrades and other activities in response to the terrorist attack. Emphasizing the 

protection of the Nation’s food supply, the Act designates $119 million for APHIS, $113 million for the 

Agricultural Research Service, and $15 million for the Food Safety and Inspection Service. The 

remaining $80 million is designated for other USDA homeland security priorities. The Department faces 

a challenge in ensuring that these significant funds are expeditiously expended for the purposes 

specifically authorized by the act. 

Farm and Foreign Agricultural Services

2. Federal Crop Insurance 

Crop insurance has become USDA’s farmer “safety net.” The Federal Crop Insurance Reform Act of 1994 

did away with the traditional crop loss disaster payments, and the Federal Agricultural Improvement and 

Reform (FAIR) Act of 1996 phased out the traditional crop deficiency payments. Between crop years 1996 

and 2001, crop insurance coverage increased from 205 million acres to 212 million acres (or an increase of 

about 3.4 percent), and the Government’s total insurance liability increased from $26.9 billion to $36.7 

billion (an increase of about 36.4 percent), as of March 18, 2002. Although both the number of acres and 

total liability has increased, the total liability has had a substantially larger increase. This illustrates that the 

total liability per acre has increased, probably due to increases in specialty crop acreage, as well as, the 

increase in revenue coverage. This substantial increase in liability per acre also results in a probability for 

larger per acre indemnity payment. The total indemnity payments in 1996 were $1.5 billion compared to 

$2.8 billion in 2001 (or an increase of approximately 88 percent), as of March 18, 2002. For the 2001 

calendar year (CY), the total annual premiums were about $3 billion; of which, $1.8 billion (or approximately 59 percent) was paid by the Government through the legislated subsidy. The Government’s 

subsidy was $982,062,000, out of a total premium of $1,838,559,000 (or 53.4 percent) for CY 1996. This 

represents an 80.2 percent increase in total subsidy payments from the 1996 CY to the 2001 CY. 

Areas within the Federal crop insurance program where we believe management controls need to be 

strengthened based on past audit reviews or that we believe pose high vulnerability based on our 

assessment include the following: 

Implementation of ARPA 

The Agricultural Risk Protection Act (ARPA), enacted in June 2000, required the Secretary to develop 

and implement additional methods of ensuring Federal crop insurance program compliance and integrity, 

including a plan for the Farm Service Agency (FSA) to assist the Risk Management Agency (RMA) in 

the ongoing monitoring of crop insurance programs. ARPA also increased the Government’s support 

(subsidy) of the insurance premium. The subsidy ranges from 67 percent for additional coverage equal to 

or greater than 50 percent, but less than 55 percent, of the recorded or appraised average yield to 38 

percent for additional coverage equal to or greater than 85 percent. In the case of additional coverage, all 

insurance other than catastrophic, the amount of the premium shall: 1) be sufficient to cover anticipated 

losses and a reasonable reserve, and 2) include an amount for operating and administrative expenses, as 

determined by the Federal Crop Insurance Corporation, on an industry-wide basis as a percentage of the 

amount of the premium used to define loss ratio. RMA has begun the process of modifying the basic 

policy provisions to incorporate the changes mandated by ARPA, particularly the program integrity 

provisions. For example, RMA believes that data mining has provided constructive feedback to the 

agency. We will continue to actively monitor and provide oversight as RMA continues to implement the 

multitude of provisions mandated by ARPA. 
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Oversight by Insurance Companies and RMA 

To evaluate overall program integrity and compliance on the claims for loss filed by insured producers, 

RMA uses a quality control (QC) review system that consists largely of reinsurance company internal 

reviews and periodic agency verifications. This process of oversight and monitoring procedures by the 

reinsurance companies and by RMA needs to be strengthened. In our current audit of the oversight and 

monitoring procedures titled “Monitoring of RMA’s Implementation of Manual 14 Reviews/Quality 

Control Review System,” we raised the following concerns: 1) over the years, RMA has been 

unsuccessful at responding to recommendations regarding the establishment of an effective QC review 

made by both OIG and the General Accounting Office; 2) RMA abandoned its standard error rate review; 

3) reinsurance company internal reviews implemented through the Manual 14 process were not reliable; 

4) the QC process does not have regulatory authority; and 5) RMA’s error rate does not count all errors. 

RMA’s earlier stated commitment to QC has not answered basic policy questions. In our report, in 

addition to recommending the need to strengthen its QC review system, we also recommended that RMA 

identify and report the absence of a reliable QC review system as a material internal control weakness in 

its Federal Managers’ Financial Integrity Act (FMFIA) report. 

According to RMA, this QC review system is part of a more comprehensive package of oversight and 

monitoring activities over the insurance companies. RMA agrees that the QC review system as being 

conducted by insurance companies and its oversight of this process need to be strengthened and is 

working closely with OIG to that end. To address our recommendations, RMA is (1) updating its Manual 

14 which prescribes the type and number of internal reviews to be performed by the insurance companies 

and (2) evaluating alternative methods to improve its oversight responsibilities which will be included in 

a new Manual 14. RMA has issued a statement of work seeking non-government services of performance 

management experts to develop a more effective QC review system. Furthermore, before implementing 

any changes, RMA believes that it may need to re-evaluate the best method for implementing these 

changes; for example, evaluating the pros and cons for seeking statutory versus regulatory changes. We 

will continue to monitor this process to ensure that an effective QC review system is implemented. 

3. Farm Security and Rural Investment Act of 2002 

The Farm Security and Rural Investment Act of 2002 (also referred to as the 2002 FSRIA) was signed by 

President Bush on May 13, 2002. The Act covers the plethora of programs administered by the 

Department—re-authorizing many existing programs, establishing new programs and initiatives, 

establishing significantly higher program caps and budget authority—from fiscal year (FY) 2002 through 

FY 2007. However, many of the provisions are effective for the current crop year (2002). In addition to 

strengthening the safety net for producers, the bill also provides a major commitment to and strengthening 

of the conservation programs, reinforces our international trade and export programs, improves nutrition 

programs, and continues strong support for developing rural communities and businesses. According to 

the Congressional Budget Office’s recently released cost estimate, the 10-year cost of the bill is $82.8 

billion. By some estimates, it is expected to cost about $190 billion over 10 years. 

With enactment of the FAIR Act of 1996, OIG was actively involved with the Department and its 

agencies from the early stages of developing the then-mandated program procedures through the 

implementation of these programs. We believe that our initial, proactive approach as FAIR was being 

implemented was beneficial and efficient in ensuring that adequate management controls and procedures 

were timely implemented by the agencies. Based on the perceived vulnerabilities and risks in those 

programs, we continued to monitor and review many of those programs. Although the 2002 FSRIA 

reauthorized many of the programs from the FAIR Act of 1996, this new bill authorizes a number of new 

programs. Furthermore, the bill not only reauthorized many existing programs, but established significantly increased funding authority or increased program caps for many of these existing programs. Prior 

OIG audits have reported serious problems with some of these existing programs, particularly with 
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respect to some smaller programs that were re- introduced. Therefore, as we previously did as FAIR was 

being implemented, we believe an upfront, proactive approach during the initial stages of implementing 

the 2002 FSRIA will be more cost effective to the agency and to the Department. 

Examples of areas in the 2002 FSRIA where our resources need to be targeted follow. 

Farm Programs 

The bill continued and enhanced many of the provisions of the FAIR Act of 1996, which provided longterm planting flexibility contract payments to major program commodities plus marketing assistance 

loans and loan deficiency payments. To strengthen the safety net to producers against falling prices, the 

bill provides for new counter-cyclical payments based on established target prices. In addition to the crops 

authorized under the 1996 bill, the 2002 FSRIA expanded the scope of marketing assistance loans and 

loan deficiency payments to new crops—wool, mohair, honey, dry peas, lentils, and chickpeas. The bill 

terminated the marketing quota program for peanuts, which was basically a no-cost program, by authorizing a quota buyout program, a direct and counter-cyclical program, and marketing assistance loans and 

loan deficiency payments for peanuts. Although limitations on program payments were not significantly 

changed from current levels for ongoing programs, eligibility for payments are now subject to a $2.5 

million adjusted gross income cap. Furthermore, the bill supplanted the existing regional dairy compacts 

by establishing a national safety-net program, Dairy Market Loss Payment Program, and continuing the 

Milk Price Support Program. Prior audits have reported ineligible producers resulting from comparable 

adjusted gross income caps in the disaster assistance programs, and have recommended discontinuing 

some special crop programs that have been reintroduced in the current bill. The net outlays on commodity 

programs in Title I of the bill alone are estimated to increase by $49.7 billion over the next 10 years. 

Conservation Programs 

The 2002 FSRIA represents the single most significant commitment of resources toward conservation on 

private lands in the Nation’s history. The bill also establishes a balanced portfolio of tools, including 

technical assistance, cost-sharing, land retirement, and a new stewardship incentives program. The bill not 

only reauthorized the Environmental Quality Incentives Program through 2007, but also provided 

significant budget authority amounting to approximately $6 billion for the period. The bill established a 

new Conservation Security Program to assist producers in implementing conservation practices rewarding 

ongoing stewardship on working lands; the new program is intended to supplement the other ongoing 

conservation programs. The bill reauthorized a number of other conservation programs: Conservation 

Reserve Program (CRP), Wetlands Reserve Program (WRP), Wildlife Habitat Incentives Program 

(WHIP), and Farmland Protection Program (FPP). In the cases of CRP and WRP, the bill increased their 

overall acreage caps. And with respect to WHIP and FPP, the bill significantly increased the budget 

authority for these programs. Overall, the increased budget authority for all of these changes will amount 

to $17.1 billion over the 6-year time period of the bill (or additional net outlays over the 10-year time 

period of $13.2 billion). Monitoring the changes, particularly in light of substantially increased funding 

authority and increased acreage, for the reauthorized programs and monitoring the new initiatives will 

require substantial audit resources. Compliance reviews will play a key role in ensuring program integrity, 

and our past reviews indicate that the USDA agencies will need to strengthen their monitoring and 

oversight activities. 

Food, Nutrition and Consumer Services 

4. Food Stamp Program 

The Food Stamp Program (FSP), administered by the Food and Nutrition Service (FNS), helps put food 

on the table of some 7.3 million households, about 17.3 million people. It provides low-income households with coupons or electronic benefits they can use like cash at participating grocery stores to access a 
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healthy diet. Because of the size and vulnerability of the FSP, OIG has annually devoted a large number 

of staff days auditing and investigating the program. 

Electronic Benefits Transfer (EBT) Systems Implementation 

All States are mandated to implement EBT for food stamps by October 2002. As of July 2002, 48 States 

and the District of Columbia have operational systems with 45 being operational State or district wide. 

About 87 percent of food stamp benefits are now issued through EBT systems. OIG has audited controls 

over these systems as they were implemented and it will continue to audit the remaining systems as they 

are implemented. 

Six State agencies will not meet the October 2002 deadline including California, Delaware, Guam, Iowa, 

Maine, and West Virginia. With the exception of Guam, all have negotiated a contract for a statewide 

EBT system and are in the development phase. While FNS has made great strides in getting EBT systems 

implemented, the remaining States will provide a challenge, in particular California with its countycentered organizational structure. 

Improper Payments 

FNS has had a quality control (QC) system in place for a number of years to measure the accuracy of 

States’ certification of participants. Between FY’s 1993 and 2001, the annual error rates have fluctuated 

between 10.81 percent and 8.7 percent, which include both overpayments and underpayments. In FY 

2001, the latest year testing was completed, the total erroneous payments were $1.33 billion. At the time 

of OIG’s audit in 1997 to review FNS’ efforts to reduce the error rate through reinvestment of QC 

penalties, it was thought that the high error rate was attributable to large increases of participation without 

a corresponding increase in State certification personnel. However, between 1995 and 2001, there was a 

significant decline in the number of participants and program outlays (34 percent in program dollars). 

While there was a decline in certification errors, about eight percent for the same period, the decline in 

participation did not result in a corresponding drop in the certification errors. The Under Secretary for 

Food, Nutrition and Consumer Services noted in his testimony in March 2002, that while payment 

accuracy was at its highest level, 91.3 percent, this also meant that 8.7 percent of the payments were 

erroneous. His testimony indicated that FNS’ budget proposes revamping the QC system and having it 

focus sanctions on States with the most serious problems and consistently high error rates. 

Retailer Abuses 

Curbing the incidence of unlawful transactions (trafficking) by authorized and unauthorized retailers 

remains an area of significant mutual concern for FNS and OIG. FNS’ latest estimate is over $600 million 

annually. Over the past several years, OIG and FNS have explored and developed a series of corrective 

measures to address trafficking. Conversion to EBT systems has allowed for more timely information to 

identify possible violations. However, further reducing the amount of trafficking will remain a challenge. 

5. National School Lunch and School Breakfast Programs 

Eligibility Determinations for Free and Reduced-Price Meals 

In its FY 2003 budget, FNS estimates that the National School Lunch Program (NSLP) outlays will be 

about $6 billion with the School Breakfast Program (SBP) approaching $1.7 billion. Both programs share 

common eligibility requirements for free and reduced-price meals. For FY 2001, the latest reporting year, 

almost 57 percent of lunches were served free or reduced-price, while 83 percent of breakfasts were 

served free or reduced-price. Eligibility is based on income with households submitting applications to 

school food authorities for eligibility determinations at the beginning of each school year. To ensure that 

households correctly report their income, school food authorities (SFA) are required to sample applications to verify the information. Two sampling methods are provided by regulations, and most SFAs select 

a random sampling method of the lesser of 3,000, or three percent of the applications. 
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In August 1997, OIG issued a report concerning Illinois’ application verification process for the NSLP. 

While SFAs were generally following regulations, SFAs did not expand sampling when high error rates 

were found. Overall, Illinois had a 19 percent error rate of households underreporting income or failing to 

respond to verification requests. This meant that up to $31.2 million per year, 18.9 percent of $165.1 

million Illinois received from FNS for free or reduced-price lunches, was potentially paid out for 

households that were not eligible. OIG recommended that FNS establish a threshold for the maximum 

percentage of errors allowable during the verification process and require additional sampling when that 

percentage is exceeded. OIG further recommended that States be required to monitor SFA verification 

efforts and take appropriate follow-up action. 

FNS did not initially agree to make regulatory change based only on Illinois, but subsequently revised this 

position when information it gathered on additional States showed an average error rate of 26 percent. 

FNS will publish a proposed rule requiring State agencies to collect, analyze, and act on verification 

results of SFAs annually. FNS currently has pilot projects underway in 23 SFAs to assess 3 different 

options to address the verification process and the current high error rate. The Under Secretary for Food, 

Nutrition and Consumer Services noted in his testimony before the House Subcommittee on Agriculture, 

Rural Development, Food and Drug and Related Agencies, in March 2002, that the evidence is strong that 

more students are certified for free or reduced-price school meals than appear to be eligible with the most 

recent data showing it to be 27 percent. He also noted that the issue is complicated because certification 

data is used to distribute billions of dollars in education aid. FNS and OIG both agree that the eligibility 

determination and verification process is a management challenge that must be addressed. 

Food Safety 

6. Food Safety Issues 

Food safety and quality issues have received considerable attention over the last few years, including the 

implementation of the Hazard Analysis and Critical Control Point (HACCP) inspection system. OIG 

issued four audits in FY 2000 on the Food Safety and Inspection Service’s (FSIS) Implementation of the 

Hazard Analysis and Critical Control Point System; FSIS Laboratory Testing of Meat and Poultry 

Products; FSIS’ Imported Meat and Poultry Inspection Process, Phase I; and FSIS’ District Enforcement 

Operations Compliance Activities. FSIS generally agreed with our findings and recommendations with 

the exception of two recommendations in the Imported Meat and Poultry Inspection Process, Phase I. The 

two recommendations concerned reporting control weaknesses in the equivalency determination process 

as a material internal control weakness for FSIS and establishing a follow-up process to obtain annual 

certifications from foreign countries that failed to timely submit them. 

OIG currently has two audits underway reviewing additional facets of FSIS’ responsibilities for imported 

meat and poultry products. Countries may export meat and poultry products to the United States if their 

meat and poultry inspection systems are determined to be equivalent to the U.S. inspection system. 

Individual plants within a country may then be approved to export to the United States. Product entering 

the United States is subject to FSIS reinspection before entering U.S. commerce. 

One audit is focusing on FSIS’ reinspection process and whether it has effective procedures and controls 

to provide FSIS with a means of ensuring that only wholesome, unadulterated and properly labeled 

product enters U.S. commerce. The fieldwork has been completed and OIG has determined there are 

reportable conditions warranting FSIS’ corrective action. 

The second audit is also underway and concerns the equivalency determinations FSIS makes of foreign 

inspection systems. In the Phase I audit cited above, OIG reviewed equivalency determinations for 
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Sanitation Standard Operation Procedures (SSOP) and E. coli testing. At that time, the HACCP and 

Salmonella testing requirements were not in place. The audit is focusing on equivalency determinations 

for HACCP and Salmonella. 

Marketing and Regulatory Programs 

7. Animal and Plant Health Inspection Service (APHIS) 

APHIS carries out inspections at U.S. ports-of-entry to prevent the introduction of foreign plant and 

animal pests and diseases which are harmful to our country’s agriculture. It engages in cooperative 

programs to control pests of imminent concern to the United States and carries out surveys in cooperation 

with States to detect harmful plant and animal pests and diseases. The programs also help determine if 

there is a need to establish new pest or disease eradication programs. Through APHIS’ Wildlife Services 

program, it protects agriculture from detrimental animal predators. 

The importance of APHIS’ mission and challenges has been highlighted over the past few years as Asian 

longhorn beetle, citrus canker, and Karnal bunt found their way into the United States and foot and mouth 

disease (FMD) broke out in the United Kingdom. The foreign terrorist attack on the U.S. mainland alerted 

USDA to the need for increased vigilance to protect U.S. agriculture from potential threats of terrorism to 

agriculture. OIG has reviews underway, some which began prior to September 11, 2001, to assess 

APHIS’ activities to protect U.S. agriculture, as well as safeguarding APHIS’ assets which could be used 

to further terrorist activities. 

• In July 2001, OIG issued a report detailing a review of the Department’s controls to ensure that the 

Nation was adequately protected against the increased threat of an FMD outbreak from abroad. We 

determined the Department needed more stringent controls to ensure meat products entering the 

United States were free of FMD. Communications between APHIS and FSIS were weak. Both 

agencies initiated action to address the weaknesses. OIG currently has a review underway focusing on 

APHIS’ policies and procedures for (1) identifying and assessing risk among the various types of 

imported goods to prevent the entry of exotic pests and diseases; (2) conducting inspections at 

airports, seaports, and land-border crossings; (3) providing inspection coverage at all major ports-ofarrival of cargo and passengers, particularly during times of high volume traffic; and (4) ensuring that 

sealed transportation and exportation shipments entering the United States exit the country under seal 

as required. We have issued Management Alerts to APHIS on weaknesses that needed to be 

immediately addressed. 

• In protecting agriculture from animal predators, APHIS’ Wildlife Services uses pesticides, drugs, and 

other hazardous materials which in the wrong hands could be harmful to people and animals alike. In 

a review begun prior to September 11, 2001, OIG found APHIS could not account for 60 pounds of 

strychnine-treated bait and over 2,000 capsules containing sodium cyanide. Transfers of agents 

between locations were not documented. A second phase of this review is now underway with 

specific focus on pesticide and drug accountability. We will determine if the missing strychnine and 

cyanide have been accounted for, as well as 13 other restricted-use compounds.

• APHIS’ Plant Protection and Quarantine and Veterinary Services divisions each have separate permit 

systems for the importation and domestic transfer of specified plant and animal pathogens and other 

restricted materials. Anthrax is one example of a pathogen which would fall under the permit requirements. OIG currently has a review underway to evaluate APHIS’ controls over permits issued to 

colleges and universities, public and private laboratories, and other users. An adequate control 

structure is needed to ensure that the pathogens and restricted materials are not made available to 

terrorists or others intent on harming U.S. citizens or agriculture. 
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Natural Resources and Environment 

8. Forest Service (FS) Management and Program Delivery Issues 

Management issues within the FS have proven resistant to change. We attributed part of this to the 

agency's decentralized management structure. The agency delegates broad authority to its field units 

(regions, forests, and ranger districts) without having an adequate system of internal controls to ensure 

policies established by top management are followed. The use and accuracy of management performance 

information is severely limited. As a result, agency actions often run counter to the intent of top 

management. Following are some of the areas where recent audits and evaluations have identified 

significant issues. 

• Our reviews of the agency’s administration of grants to State and nonprofit organizations have 

disclosed significant weaknesses in all aspects of management of the program. These weaknesses 

increase the likelihood that program objectives will not be achieved and Federal funds will be spent 

for unauthorized purposes. 

• We identified serious weaknesses in the controls over the preparation and implementation of the 

environmental analyses required for timber sales. These weaknesses could result in environmental 

damage that could be either mitigated or avoided. In addition, weaknesses in the FS’ environmental 

analyses process have resulted in successful appeals of FS management decisions. This has halted or 

delayed FS efforts at ecosystem management. It has also resulted in successful lawsuits for monetary 

damages from the timber industry and exposed the FS to significant future damages.

• FS has not developed agency-wide policies for dealing with partnerships with private parties. As the 

agency moves to increase the use of partnerships with private groups to meet its mission 

requirements, direction will be needed to ensure these relationships comply with existing laws. 

• FS’ Strategic and Annual Plans have lacked meaningful goals and objectives with relevant 

performance measures. Past performance measurement data has been irrelevant and lacks basic 

accuracy. 

FS has reported initiating management action to address many of these challenges. However, at this 

time OIG has not verified the extent or effectiveness of these corrective actions. 

9. Forest Service National Fire Plan 

As a result of the devastating 2000 wildfire season the President and Congress directed and funded the 

“National Fire Plan” (NFP). The NFP included objectives to prepare to fight future forest fires, 

rehabilitate burned lands, actively reduce fuel loads in vulnerable areas, and assist local communities. In 

October 2000, Congress provided FS over $1.1 billion of additional funding. This increased funding has 

continued and is projected to continue for at least 10 years. This program has support from both State and 

local governments. The dramatic increase in funding has presented FS with challenges in effectively and 

efficiently implementing the NFP. Our initial survey identified issues regarding the agency’s ability to 

accurately project funding requirements and ensure funds were spent for only authorized purposes. Our 

survey work indicates that this area is vulnerable to waste and misuse of funds. 

10. Grant and Agreement Administration

FS has not effectively managed grants agreements to ensure that funds appropriated by Congress were 

expended for their intended purposes and grantees complied with applicable financial management 

standards. Our reviews identified the following issues. 

• Funds were used for purposes not authorized under the enabling legislation. 

• Grantees were not matching Federal funds with required private funding. 
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• Unauthorized expenditures were paid with Federal funds. 

• Accounting records were not adequate to allow for audits. 

• Records were not adequate to determine if the grants achieved their intended purpose. 

• FS created a new agreement “Participating agreements” that did not conform to the Federal Grants 

and Cooperative Agreements Act or to the Office of Management and Budget (OMB) and 

departmental regulations, to transfer funds without obtaining contractual assurance that the recipient 

will use the funds for intended purposes and without the provisions necessary for effective FS 

oversight. 

FS officials have taken some actions to address these issues. Our future audits will address the adequacy 

of these actions. 

Rural Development 

11. Rural Rental Housing (RRH) 

Portfolio Management 

The Rural Housing Service (RHS) RRH program provides low-cost apartments to residents with low 

incomes in rural areas. The 2003 budget reflects a decision by the Administration to conduct a thorough 

review of alternatives for both making new loans and servicing the existing portfolio of over 17,000 RRH 

projects that contain about 460,000 housing units, with indebtedness of almost $12 billion. A substantial 

portion of this portfolio is over 20 years old. The FY 2003 proposed budget does not include funding for 

the direct loans for new RRH projects, although funding for RRH construction may be reinstated. 

However, it does include $60 million in direct loans for repair and rehabilitation of the current portfolio. 

RHS faces a major challenge to maintain its current portfolio in good repair so that it will provide safe, 

decent, and affordable housing for rural Americans. 

Guaranteed RRH Program 

We reported that during the first 4 years of the pilot program RHS reported to Congress, and included in 

their Government Performance and Results Act (GPRA) accomplishment report, the construction of over 

6,000 apartment units. Our audit found that as of August 25, 2000, the pilot program had completed 

construction of only 222 units. RHS had reported apartment units that were obligated to be built, as being 

built. RHS restated the GPRA report to reflect the status of the units proposed for construction rather than 

built. We need to continue to monitor the program’s growth and success and whether RHS has 

implemented sufficient controls to ensure accurate reporting of units built. 

Rental Assistance 

The RRH rental assistance program was increased from $707 million in FY 2002 to $712 million in FY 

2003. This assistance makes up the difference between what the tenant pays and the rent required for the 

project owner to meet debt servicing and other costs. Tenants receiving this assistance are mostly elderly 

and have very low incomes. Most recipients pay only a small portion of the average $300 monthly rent. 

Currently, there are proposed regulatory changes that will require project owners to increase the balances 

in the RRH reserve accounts used to fund the increasing demands for repair and rehabilitation of aging 

projects. The increased reserves will be funded by increased rents. For those tenants on rental assistance, 

their basic rent will not increase. To match the increased rents, the amount of rental assistance needed to 

make up the difference between what the tenant pays, and the actual rent necessary for the project owner 

to meet expenses, will increase. Thus, the cost to the Government will increase because funding for rental 

assistance will need to increase. RHS needs to plan for these increased funding requirements. 
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RRH Projects Leaving the Program 

As the RRH portfolio continues to mature, the possibility that project owners will want to pre-pay their 

loans will increase. Loans made between 1979 and 1989 can pre-pay their loans after 20 years. Projects 

obligated after 1989 cannot pre-pay. However, the majority of the over 17,000 projects in the portfolio are 

over 20 years old. The incentives for owners to pre-pay include increasing repair costs, loss of tax credits, 

and the possibility of higher rents from more affluent tenants. 

RHS offers incentive payments for project owners to stay in the program. The payments are equal to the 

equity value in the property at the time pre-payment is planned. To be eligible for the incentive payment, 

owners must maintain the property in good physical condition and they must continue to serve lower 

income rural residents. RHS and OIG need to monitor the number of incentive payments and ensure that 

once made, project owners continue to meet the conditions of the incentive payment. 

Unallowable and Excessive Expenses Charged to RRH Projects 

RRH programs are vulnerable to program fraud and abuse because of the large cashflows involved. OIG 

has worked with RHS to detect fraud and abuse and remove from participation those who abuse the 

program. Our March 1999 report entitled “Uncovering Program Fraud and Threats to Tenant Health and 

Safety,” described the results of our team approach with RHS to identify and act on the worst offenders. 

We found 18 owners who misused over $4.2 million while neglecting the physical condition of the 

properties, some of which threatened the health and safety of tenants. Our audits continue to disclose 

unallowable and excessive expenses charged to RRH projects. Currently, RHS has proposed major 

regulatory revisions, which are intended to resolve 19 open recommendations from OIG audits that 

address improper RRH project expenses and program deficiencies. The proposed regulation is intended to 

bring consistency and better controls to the RRH program, as well as to resolve the open recommendations. We are working with RHS to ensure that the proposed regulation adequately addresses the open 

recommendations, or that appropriate alternative corrective actions, such as program handbooks to 

supplement the proposed regulation, are issued along with the regulation. Continued monitoring of the 

agency’s implementation of the new regulation is needed to ensure the desired results are achieved. 

12. Rural Business-Cooperative Service (RBS) 

Business and Industry (B&I) Loan-making and Servicing Procedures 

RBS loan-making and servicing procedures in the B&I guaranteed loan program are not being properly 

administered by some State and field office program staff. In a few cases, States have had their loanmaking and servicing authority rescinded by the National office, due to concerns pertaining to compliance 

with rules and regulations. We are in the process of conducting a Nationwide review of RBS’ B&I 

program and have, so far, issued 13 reports on the guaranteed B&I program with monetary findings of 

$32 million. Six more reports on the B&I program have yet to be issued, with two reports due on the 

direct B&I loan program. An additional $30 million in monetary findings is projected. We have found 

serious conditions with the B&I loans including borrowers with insufficient collateral to secure the loan, 

businesses that default within months after the loan is made, and loan proceeds used for unauthorized 

purposes. We are working with the RBS National office to implement corrective actions to these issues. 

Waivers of Internal Controls 

The previous Administrator of RBS endangered the integrity of the B&I Program by granting improper 

and undocumented waivers to B&I loan regulations. Based on these waivers many improper B&I loans 

were made which resulted in large dollar losses to the Government. RBS’ internal review programs and 

future OIG reviews should focus on any waivers to established regulations and instances where internal 

control mechanisms have been eliminated or bypassed. In an audit dated January 2001, we recommended 

the reestablishment of loan review controls which had been abolished by the previous Administrator. RBS 

agreed to re-establish the requirement that the National Office Executive Loan (NOEL) committee review 
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proposed waivers for consistency with existing regulations. RBS also agreed to have the Under Secretary 

and the Office of the General Counsel resolve any inconsistencies between the findings of NOEL and the 

Administrator’s reasons for the waiver. We need to continually monitor the use of waiver authority by 

RBS and Rural Development to ensure that waivers are fully documented and justified. 

Administration 

13. Civil Rights Complaints 

The Director of the Office of Civil Rights (CR) has full responsibility for investigating, adjudicating and 

resolving complaints of discrimination arising out of USDA employment activities or in the context of 

federally assisted or federally conducted programs. This includes complaints made by USDA employees, 

applicants for employment and USDA program participants and customers. During fiscal years 1997 

through 2000, OIG performed seven reviews of CR’s operations relating to program and employment 

complaint processing at the requests of the Secretary and the Assistant Secretary for Administration. 

Our reviews resulted in seven reports and one Confidential Memorandum with 94 recommendations to 

address the weaknesses reported. As of April 17, 2002, management decision had been reached on 84 

recommendations, but 10 recommendations in four reports and the Confidential Memorandum remain 

without management decision. These recommendations involved things such as: 1) designing corrective 

actions to address civil rights review results in two counties; 2) finalizing operating procedures to ensure 

recipients of USDA financial assistance comply with civil rights laws and regulations; 3) vetting of 

settlements with OIG to ensure there are no outstanding fraud or criminal actions involving the 

complainant; 4) re-review of 70 civil rights cases to assess their proper disposition; and 5) review of 

employment-related case files to assess whether necessary documents are available and accounted for. 

Until action plans are drafted, and timeframes developed to implement the actions, CR activities will 

remain a management challenge at USDA. 

Chief Financial Officer 

14. Financial Management 

Financial management in the Department is of major importance; USDA's balance sheet, for example, 

exceeds $127 billion. Financial management within the Department has not, however, been sufficient to 

provide assurances that its consolidated financial statements are reliable and presented in accordance with 

generally accepted accounting principles. For the past eight years our disclaimer of opinion means the 

Department does not know whether it correctly reported all collected monies, the cost of its operations, or 

other meaningful measures of financial performance. 

The Office of Chief Financial Officer (OCFO) has taken extraordinary strides, however, in the past year 

to resolve these longstanding issues. According to the Chief Financial Officer, among the initiatives 

consummated or in process are the following. 

• Providing effective leadership and talent from OCFO to USDA’s agencies and the National Finance 

Center (NFC) to capture break-through rather than incremental value from extensive changes in 

financial management accountability and accounting operations. 

• Implementing effective operational accounting processes within the branches of then NFC, problem 

agencies, and OCFO while transferring knowledge through documentation and training. 

• Successfully completing the implementation of a standard accounting system at USDA. 

• Renovating related corporate administrative systems during FY 2002 with focused, disciplined 

effective projects. 
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• Resolving Credit Reform deficiencies and maintaining improvements. 

• Transforming the Forest Service into operating as an effective, sustainable, accountable, financial 

management function. 

• Correcting real and personal property accounting and stewardship inadequacies. 

• Developing cost accounting capabilities. 

• Enhancing decision-making and cash management of USDA’s Working Capital Fund. 

• Providing guidance on USDA’s lending function. 

• Installing the leadership and management structure to support sustained excellence within USDA’s 

financial management and accounting operations. 

Although many of these have been completed, others await audit verification, which we will focus upon 

in our upcoming audit of the FY 2002 Departmentwide financial statements.*

Chief Information Officer 

15. Information Resources Management 

As the Department continues to expand its use of information technology (IT) for program and service 

delivery, this component of USDA’s infrastructure has become a key element for operational integrity 

and control. The Department has numerous information assets, which include market-sensitive data on the 

agricultural economy and its commodities, signup and participation data for programs, personal 

information on customers and employees, agricultural research, and Federal inspection information 

ensuring the safety of the food supply, as well as accounting data. 

Public confidence in the security and confidentiality of the Department’s information and technology is 

essential. Our audit of USDA Information Technology, required by the Government Information Security 

Reform Act, found that USDA had initiated actions to strengthen information security in the Department. 

The Department, through its Chief Information Officer (CIO) has established a Department-wide security 

program, implemented a departmental security incident response program, and strengthened its oversight 

function through review of USDA agencies’ security programs. In this report we stated that the 

Department and its agencies had other IT security weaknesses that included: 

• The Department is not fully compliant with several requirements of OMB Circular A–130 and 

Presidential Decision Directive (PDD) 63 that require all Federal departments and agencies (1) 

prepare and test contingency and business continuity plans, (2) have certified the security controls in 

place on their systems, and (3) assess the risks to their systems and establish plans to mitigate those 

risks. 

• Inadequate physical and logical access controls to ensure that only authorized users can access critical 

agency data. 

• Nine of 11 USDA agencies had not assessed the risks of their systems and initiated a plan to eliminate 

or mitigate those risks. 

• Inadequate oversight to ensure that contractors have the proper security clearances and background 

checks and they are sufficiently trained in Federal Security Requirements. 

OCIO has reported that many of these items have been mitigated but more needs to be done. 

 

* Note from the Office of the Chief Financial Officer, USDA: On January 7, 2003, USDA obtained a clean 

audit opinion on the FY 2002 Financial Statements.