This Performance and Accountability Report (PAR) can be downloaded at 

www.usda.gov. From there, click on “About USDA.” The U.S. Department of Agriculture 

(USDA) can be contacted through the same Web site by clicking “Contact Us.”

USDA prohibits discrimination in all of its programs and activities on the basis of 

race, color, national origin, age, disability, and where applicable, sex, marital status, 

familial status, parental status, religion, sexual orientation, political beliefs, genetic 

information, reprisal, or because all or part of an individual's income is derived 

from any public assistance program. (Not all prohibited bases apply to all 

programs.) Persons with disabilities who require alternative means for 

communication of program information (Braille, large print, audiotape, etc.) should 

contact USDA's TARGET Center at (202) 720-2600 (voice and TDD)." To file a 

complaint of discrimination, write to USDA, Assistant Secretary for Civil Rights, 

Office of the Assistant Secretary for Civil Rights, 1400 Independence Avenue, S.W., 

Stop 9410, Washington, DC 20250-9410, or call toll-free at (866) 632-9992 

(English) or (800) 877-8339 (TDD) or (866) 377-8642 (English Federal-relay) or 

(800) 845-6136 (Spanish Federal-relay). 

USDA is an equal opportunity provider and employer.

Only Federal employees participated in the preparation of the performance and financial 

information contained in this report.
FY 2010 Performance and Accountability Report

i

Table of Contents

Message from the Secretary ................................................................................................................................... ii

About this Report .................................................................................................................................................... vi 

1. Management’s Discussion and Analysis ......................................................................................................... 1

Resources................................................................................................................................................................... 6

Performance Goals, Objectives, and Results ........................................................................................................... 7

Future Demands, Risks, Uncertainties, Events, Conditions, and Trends ............................................................. 9

Financial Statement Highlights .............................................................................................................................10

Systems, Controls, and Legal Compliance............................................................................................................. 15

Federal Managers’ Financial Integrity Act Report on Management Control ...................................................... 16

2. Annual Performance Report ......................................................................................................................... 25

Strategic Goal 1: Assist Rural Communities to Create Prosperity So They Are Self-Sustaining, Repopulating, 

and Economically Thriving ...............................................................................................................................25

Strategic Goal 2: Ensure Our National Forests and Private Working Lands are Conserved, Restored, and 

Made More Resilient to Climate Change, While Enhancing Our Water Resources ......................................43

Strategic Goal 3: Help America Promote Agricultural Production and Biotechnology Exports as America 

Works to Increase Food Security ......................................................................................................................58

Strategic Goal 4: Ensure that All of America’s Children Have Access to Safe, Nutritious, and 

Balanced Meals .................................................................................................................................................. 63

Selected Results in Research, Extension, and Statistics ....................................................................................... 77

Selected 2010 Program Evaluations ..................................................................................................................... 84

3. Financial Statements, Notes, Supplemental, and Other Accompanying Information ............................. 89

Message from the Chief Financial Officer ............................................................................................................ 89

Report of the Office of Inspector General .............................................................................................................. 91

Consolidated Financial Statements ...................................................................................................................... 111

Required Supplementary Stewardship Information...........................................................................................182

Required Supplementary Information ................................................................................................................ 191

4. Other Accompanying Information ............................................................................................................. 201

Appendix A — Response to Management Challenges.........................................................................................201

Appendix B — Improper Payment and Recovery Auditing Details ...................................................................212

Appendix C — Inspector General Act Amendments of 1988: Management’s Report on Audit Follow-Up....235

Appendix D — Acronyms ......................................................................................................................................241
FY 2010 Performance and Accountability Report

ii

Message from the Secretary

In fulfillment of its duty to the people, the President, and Congress, the U.S. 

Department of Agriculture (USDA) respectfully submits this Fiscal Year (FY) 

2010 Performance and Accountability Report. 

As the Obama Administration worked to stabilize and grow the economy, USDA 

worked to implement the American Recovery and Reinvestment Act of 2009 

(ARRA) and other measures to create and save tens of thousands of jobs. At the 

same time, the Department supported families hard hit by the recession. It 

provided food assistance to one in four Americans, and credit and disaster 

assistance to help struggling farmers and ranchers maintain their operations. 

USDA also worked to build a foundation for long-term economic growth. The Department helped 

138,000 rural families become homeowners by building and renovating critical infrastructure like 

broadband, hospitals and police stations across the Nation, and expanding production of renewable 

energy.

The Department’s wide range of programs and responsibilities touched the lives of every American, 

every day. USDA worked to support the American agricultural economy, to strengthen rural 

communities, to protect and conserve our natural resources, and to provide a safe, sufficient and 

nutritious food supply for the American people.

Together with President Obama, we outlined a plan to build a revitalized rural economy that creates 

real opportunity for growth and prosperity. To make this vision a reality, USDA is ensuring access to 

innovative technologies, opening new markets for crops, and better utilizing our natural resources and 

promoting production of renewable fuel and energy. The Department accomplishes these tasks by:

• Providing financing to help rural businesses expand and innovate, creating or saving 128,000 jobs;

• Using ARRA funding to help nearly 7 million rural Americans gain access to broadband, which is 

expected to save or create more than 25,000 jobs while expanding access to state-of-the-art health 

care, educational, and cultural resources. This funding also allowed local businesses to compete in 

the global economy;

• Supporting the expansion of U.S. agricultural exports, expected to exceed $105 billion in FY 2010, 

with grants and loan guarantees to support international market development. These exports 

support more than 800,000 American jobs; and

• Funding thousands of renewable energy and energy efficiency projects, providing more than $240 

million in funding under the Biomass Crop Assistance Program, and establishing 5 regional 

research centers to focus, accelerate, and coordinate the science and technology needed to develop a 

national biofuels industry powered by feedstocks produced in every corner of the country.

USDA also looked at new efforts – and at streamlining and targeting existing work – to preserve the 

Nation’s forests and clean waterways, while mitigating global climate change. The Department:

• Used $40 million through the Migratory Bird Habitat Initiative to improve habitat on more than 

471,000 acres for migratory birds that could be impacted by the Deepwater Horizon oil spill;

• Improved water and soil quality, enhanced wildlife habitat, and addressed the effects of climate 

change, through the Conservation Stewardship Program. USDA awarded almost 21,000 contracts 

to improve and sustain conservation efforts on nearly 25.2 million acres, a land area equivalent in 

size to the State of Virginia;
FY 2010 Performance and Accountability Report

iii

• Protected 53,000 acres of the most critical and important farmland from conversion to 

nonagricultural uses by conservation easements;

• Supported jobs and rural economies through the sale of more than 2.56 billion board feet of timber. 

Many of these projects were designed with restoration as an emphasis on these public lands; and

• Accepted 4.3 million acres into the Conservation Reserve Program to give farmers the tools they 

need to continue filtering our air and water, and preventing soil erosion long into the future.

The Department worked to improve the health of America’s children with partnerships to encourage 

nutritious eating and more physical activity. In FY 2010, USDA:

• Made it easier for low-income working families to get the Supplemental Nutrition Assistance 

Program by encouraging States to adopt broad-based categorical eligibility and other policy options. 

Today, 39 States use broad-based categorical eligibility;

• Enabled low-income children to receive free school meals without an application by promoting 

direct certification. This effort allowed 1.6 million more children to be directly certified in School 

Year 2009-10 than the previous year;

• Supported and recognized healthier nutrition environments for school children through 

HealthierUS School Challenge awards – reaching a cumulative total of more than 800 by the end of 

FY 2010;

• Spurred innovation to make healthy food choices and physical activity fun for children through the 

Let’s Move! Apps for Healthy Kids competition – resulting in nearly 100 entries from students, 

software designers, game developers, and independent entrepreneurs; and

• Helped researchers, policy makers, and the public find information on a range of factors that affect 

access to healthy, affordable food, with the launch of Your Food Environment Atlas, an online 

mapping tool that compares the food environment of U.S. counties.

USDA is ensuring that America is the world leader in sustainable crop production. It conducts cuttingedge agricultural research and provides farmers and ranchers across America with direct support, 

disaster assistance, technical assistance, and access to credit. This work included:

• Making approximately $5 billion in direct and counter-cyclical payments, and $6.7 billion in 

marketing assistance loans to farmers and ranchers;

• The Department completing its first year of competitive grant funding through National Institute of 

Food and Agriculture. It awarded more than $176 million to research universities and colleges 

across the U.S. for projects focused on critical issues for America, including sustainable production 

of food and biomass for biofuels;

• Revealed the genetic blueprints of a host of plants and animals including the genomes of apples, 

pigs, turkeys, and a grass with great potential as a biofuel crop. This work allows us to bypass 

generations of selective breeding to bring more abundant, nutritious food to the American table, 

and increase domestic energy supplies; and

• Protected the U.S. citrus industry against the further spread of the devastating citrus greening 

disease—saving thousands of jobs and preventing $2.88 billion in lost production annually. FY 

2010 also marked the eradication of Plum Pox Virus from Pennsylvania, protecting the $1.4 billion 

U.S. stone fruit industry.

And as we fulfill our responsibility to serve the American people, we are working to live up to President 

Obama’s call to deliver the most transparent, accountable, and responsive government in history. 

USDA worked hard to make the best use of the taxpayers’ dollars. By putting farmers and taxpayers 

first, the Department saved $6 billion by negotiating a new Standard Reinsurance Agreement for crop 

insurance. Of that total, $4 billion will go to pay down the Federal deficit while the balance will expand 
FY 2010 Performance and Accountability Report

iv

critical programs for America’s producers. Other USDA agencies have identified millions of dollars in 

savings by finding efficiencies in travel, facilities, processes, and other operating expenses.

Federal oversight of food safety was identified by the Government Accountability Office’s high risk 

report in 2009, the only USDA area on the list. The Department is committed to ensuring Americans 

have access to safe, nutritious, and balanced meals. Prevention is the foundation principle for USDA’s 

approach to food safety. Thus, it takes a farm-to-table approach to reducing and preventing foodborne 

illness. USDA also works closely with its Federal partners to improve the organization of Federal food 

safety responsibilities. From our front line inspectors to our labs and management, USDA is working to 

ensure it has the tools to build the best food safety system possible. While the Department works to 

improve the system, until it makes it perfect, we consider it our responsibility to communicate with 

consumers about appropriate food handling and preparation. USDA invests in its inspection workforce 

and data infrastructure to prevent harm to consumers. The Department strives to reduce the 

prevalence of food contaminants and to quickly identify and prevent foodborne illness outbreaks. 

While the Food Safety Inspection Service did not meet its FY 2010 performance standards, it will build 

upon its ongoing initiatives, including the following specific actions taken to further protect and 

improve public health:

• Continuing to participate in President Obama’s Food Safety Working Group to build an interagency 

food safety system that will meet the challenges posed by the global food supply of the 21st century;

• Issuing draft performance standards for the pathogen Salmonella in raw poultry products and 

proposing the first standards for the pathogen Campylobacter in poultry, both of which can cause 

severe illness;

• Beginning a new verification testing program for beef manufactured trimmings derived from cattle 

not slaughtered on site at an establishment, and issuing draft guidelines on methods for controlling 

the pathogen E. coli O157:H7 on the farm before cattle come to slaughter; and

• Continuing to develop and test its dramatically improved surveillance and data collection and 

analysis system – known as the Public Health Information System – which will help USDA respond 

more rapidly to current and potential threats in the food safety system, and thus better prevent

contamination, recalls, and, ultimately, foodborne illnesses.

The Department’s management team continues to oversee USDA’s assessment of internal control over 

its programs, operations, financial systems, and financial reporting. The Department’s work is 

consistent with the provisions of the Federal Managers’ Financial Integrity Act (FMFIA) and the 

Federal Financial Management Improvement Act (FFMIA). USDA’s continuous monitoring and 

remediation efforts allow us to provide the taxpayers reasonable assurance that the content of this 

report is based on sound, accurate data.

Nevertheless, continued improvement is needed to remediate existing material weaknesses and 

financial system non-compliance. To accomplish this goal, management continues to implement 

corrective action plan activities. Therefore, I provide qualified assurance that, except for the areas in 

need of improvement as described in the Management Assurances section of this report, USDA’s 

internal control over operations, financial systems, and financial reporting meet the objectives of 

FMFIA and FFMIA. The financial and performance information presented herein is complete and 

accurate, and in accordance with law and Office of Management and Budget guidance.

I salute USDA employees for their outstanding work. I thank you for your interest in the Department. I 

am proud to share this information with our stakeholders. We will continue to serve the needs of the 

people every day and in every way.
FY 2010 Performance and Accountability Report

v

Thomas J. Vilsack

Secretary of Agriculture

November 15, 2010
FY 2010 Performance and Accountability Report

vi

About this Report

This Fiscal Year 2010 Performance and Accountability Report (PAR) is the year-end progress report of 

the United States Department of Agriculture (USDA). The Department reviews its strategic goals, 

objectives, and performance measures it set for itself at the beginning of the fiscal year. USDA then 

compares these targets to the year’s performance. The data used by the Department to measure 

performance are collected using a standardized methodology. This methodology has been vetted by 

Federally employed scientists and policymakers, and, ultimately, the Under Secretaries of the respective 

mission areas. All attest to the completeness, reliability, and quality of the data.

The Government Performance and Results Act of 1993 (GPRA) is the basis of Federal agency planning 

and reporting. GPRA and later laws and executive branch guidance drive the planning and reporting 

process in this fashion: the 5-year Strategic Plan is used to craft the Annual Performance Plan, and 

progress on the Annual Performance Plan is reported in the PAR. All plans and reports are available at 

usda.gov. 

The PAR is divided into four sections:

1. Management’s Discussion and Analysis

• Summarizes the information contained in Sections 2, 3, and 4 of the PAR

• Includes the Secretary’s Statement of Assurance

2. Annual Performance Report

• Reports results of actions taken toward meeting the performance measures put forth in the 

Annual Performance Plan. Note that this FY 2010 PAR has a different performance measure 

numbering scheme than the FY 2009 PAR, based on differences in the FY 2010 Annual 

Performance Plan 

3. Financial Statements, Notes, Supplemental, and Accompanying Documents

• Highlights USDA’s progress in financial management during FY 2010

4. Other Accompanying Documents

• Includes appendices and additional information USDA deems relevant, but that may not be 

required to be reported

The American Recovery and Reinvestment Act of 2009 (ARRA) augmented the delivery of USDA 

programs to the American people. This report highlights some of the diverse benefits that ARRA funds 

had on numerous USDA programs. Additional information on USDA’s role in recovery can be found at 

USDA.gov/recovery. 

The programs once rated by the Performance Assessment Rating Tool (PART) are represented by 

performance measures or program discussion presented in the Annual Performance Plan and 

subsequently reported in the PAR.
FY 2010 Performance and Accountability Report

vii
Management’s Discussion and Analysis

1

1. Management’s Discussion and Analysis

he U.S. Department of Agriculture (USDA) was founded by President Abraham Lincoln in 1862, 

when more than half of the Nation’s population lived and worked on farms. The population has 

increased approximately tenfold, and is estimated at 307 million people, the vast majority of whom 

do not live on farms or in rural areas. The magnitude of America’s evolved needs for food, fiber, forest 

products, and public services has required USDA to grow and deliver expanded public services.

Today, USDA improves the Nation’s economy and quality of life by touching the lives of almost every

American every day. More than 100,000 employees deliver more than $188.7 billion to provide public 

services through USDA’s more than 300 programs worldwide.

Because America’s food and fiber producers operate in a global, technologically advanced, rapidly 

diversifying, and highly competitive business environments, USDA is constantly helping producers

meet the needs of the Nation.

USDA’s strategic goals, as outlined in the Strategic Plan for FY 2010-2015 (usda.gov, see “About 

USDA”), are:

• Assist Rural Communities to Create Prosperity So They are Self-Sustaining, Repopulating, and 

Economically Thriving;

• Ensure Our National Forests and Private Working Lands are Conserved, Restored, and Made More 

Resilient to Climate Change, While Enhancing Our Water Resources;

• Help America Promote Agricultural Production and Biotechnology Exports as America Works to 

Increase Food Security; and

• Ensure That All of America’s Children Have Access to Safe, Nutritious, and Balanced Meals.

These goals mirror USDA’s commitment to provide first-class service, state-of-the-art science, and 

consistent management excellence across the Department. USDA assesses and seeks to improve 

program performance so that the Department can maximize its impact. Program assessments identify 

how well and efficiently a program is working and what specific actions can be taken to improve its 

performance. Summary program evaluations conducted during fiscal year (FY) 2010 are included in 

this document at the end of Section 2, “Annual Performance Report.”

USDA’s management structure can be found in Exhibit 1, Headquarters Organization.

USDA’s FY 2010 accomplishments include:

• Helping more than 38 million Americans who needed food assistance by administering an average 

increase in benefits of $80 per month to low-income households of 4. This funding is a fast-acting 

economic stimulus as every $1 in food benefits generates up to $1.84 in total economic activity;

T

Section 1. 

Management’s Discussion and Analysis
Management’s Discussion and Analysis

2

• Unveiling the “Know Your Farmer, Know Your Food” Initiative, which promotes local and regional 

food systems by stimulating community economic development and ensuring equitable access to 

affordable, fresh, and local food;

• Providing 2,636 loans to farmers and ranchers help them purchase the farm equipment, feed, seed, 

and fuel they needed to keep their farms operating and support jobs in the rural economy 

(approximately half of these loans went to beginning farmers and 25 percent to socially 

disadvantaged farmers); 

• Aiding 85,420 rural Americans in purchasing or repairing their homes with affordable loans while 

simultaneously stimulating the economy, and creating jobs in the construction and real estate 

sectors;

• Helping create private sector jobs that protect rural communities from large wildfires, while 

improving the health of our forests, water, and air resources;

• Creating green jobs at plants that use wood from forest restoration activities to generate renewable 

energy – grants worth $50 million went to projects that will power 223,000 homes;

• Assisting more than 5,000 schools to purchase equipment to ensure that safe and healthy meals are

served to children;

• Donating 11,000 tons of rice, vegetable oil, yellow peas, and lentils to help feed 390,000 children in 

Haiti and Afghanistan under the McGovern-Dole International Food for Education and Child 

Nutrition Program;

• Announcing annual funding to help all States and trust territories sustain the Nation's urban and 

rural forests, and to protect communities and the environment from wildfires, insects, diseases, and 

invasive species;

• Debuting the first-ever joint public workshop with the U.S. Department of Justice on competition 

and regulatory issues in the agriculture industry. The workshop, led by USDA Secretary Thomas J.

Vilsack and U.S. Attorney General Eric Holder, featured panel discussions on a variety of topics 

important to America's farmers and ranchers, including competitive dynamics in the seed industry, 

trends in contracting, transparency, and buyer power, and concluded with public testimony; and

• Announcing that soil erosion on cropland declined by more than 40 percent during the past 25 

years with help from USDA conservation programs.
Management’s Discussion and Analysis

3

Exhibit 1: Headquarters Organization (FY 2010)

Agricultural Research 

Service

National Institute of 

Food and Agriculture

National Agricultural 

Library

National Agricultural 

Statistics Service

Economic Research 

Service

National Agricultural 

Library

National Agricultural 

Statistics Service

Economic Research 

Service

Agricultural Marketing 

Service

Animal and Plant 

Health Inspection 

Service

Grain Inspection, 

Packers and 

Stockyards 

Administration

Agricultural Marketing 

Service

Animal and Plant 

Health Inspection 

Service

Grain Inspection, 

Packers and 

Stockyards 

Administration

Under Secretary for 

Marketing and 

Regulatory Programs

Food Safety and 

Inspection 

Service

Under Secretary for 

Food Safety

Forest Service

Natural Resources 

Conservation 

Service

Under Secretary for 

Natural Resources

and Environment

Food and Nutrition 

Service

Center for Nutrition 

Policy and Promotion

Under Secretary for 

Food, Nutrition and 

Consumer Services

Farm Service 

Agency

Foreign Agricultural 

Service

Risk Management 

Agency

Under Secretary for 

Farm and Foreign 

Agricultural Services

Rural Utilities 

Service

Rural Housing 

Service

Rural BusinessCooperative Service

Under Secretary

for Rural

Development

Deputy Secretary

SECRETARY

Under Secretary for 

Research, Education 

and Economics

Assistant Secretary for 

Congressional Relations

Assistant Secretary for 

Administration

Assistant Secretary for 

Civil Rights

Director of

Communications

Inspector

General

General

Counsel

Chief Information

Officer

Chief Financial

Officer

Executive 

Operations
Management’s Discussion and Analysis

4

MISSION AREAS

The Department’s work is organized by mission areas, 

which are a collection of agencies that work together to 

achieve USDA’s strategic goals. Descriptions of USDA’s 

seven mission areas are as follows. 

Natural Resources and Environment

The Natural Resources and Environment (NRE) 

mission area ensures the health of the land through 

sustainable management. Its agencies work to prevent 

damage to natural resources and the environment, restore the resource base, and promote good land 

management. NRE consists of the Forest Service (FS) and the Natural Resources Conservation Service 

(NRCS). FS manages public lands in national forests and grasslands, which encompass 193 million 

acres. NRCS provides leadership in a partnership effort to help America's private land owners and 

managers conserve their soil, water, and other natural resources. Both agencies work in partnership 

with tribal, Federal, State, and local Governments; and community-related groups to protect soils, 

watersheds, and ecosystems.

Farm and Foreign Agricultural Services

The Farm and Foreign Agricultural Services (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 stability and 

strength of the agricultural economic sector. This mission area is comprised of the Farm Service Agency 

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

administers and manages farm commodity, credit, conservation, disaster, and loan programs as laid out 

by Congress through a network of Federal, State, and county offices. FAS works to improve 

international market access for U.S. products, build new markets, improve the competitive position of 

domestic agriculture in the global marketplace, and provide food aid and technical assistance to other 

countries. RMA helps producers manage their business risks through effective, market-based risk 

management solutions.

This mission area also includes two Government-owned corporations. The Commodity Credit 

Corporation (CCC) works to stabilize farm income to help ensure an adequate, affordable supply of food 

and fiber. This corporation is a financial mechanism by which agricultural commodity, credit, export, 

conservation, disaster, and emergency assistance is provided. The Federal Crop Insurance Corporation 

(FCIC) improves the economic stability of agriculture through a sound system of crop insurance.

Rural Development

The Rural Development (RD) mission area focuses on helping improve the economy and quality of life 

in all of rural America. RD provides financial programs to support such essential public facilities and 

services as water and sewer systems, housing, health clinics, emergency service facilities, and electric 

and telephone services. RD promotes economic development by providing loans to businesses through 

banks and community-managed lending pools, while also helping communities participate in 

community empowerment programs. RD provides grants, loans, and loan guarantees to farmers, 

ranchers, and rural small businesses to develop renewable energy systems and make energy efficient 

improvements.

Mission Statement

USDA provides leadership on food, 

agriculture, natural resources, and 

related issues based on sound public 

policy, the best available science, and 

efficient management. 
Management’s Discussion and Analysis

5

Food, Nutrition, and Consumer Services

The Food, Nutrition, and Consumer Services (FNCS) mission area works to harness the Nation's 

agricultural abundance to reduce hunger and improve health in the U.S. FNCS’s agencies administer 

Federal domestic nutrition assistance programs. FNCS is comprised of the Food and Nutrition Service 

(FNS) and the Center for Nutrition Policy and Promotion (CNPP). FNS administers USDA’s 15 Federal 

nutrition assistance programs. CNPP works to improve the health and well-being of Americans by 

developing and promoting dietary guidance that links scientific research to the nutrition needs of 

consumers.

Food Safety

The Food Safety and Inspection Service (FSIS) is the public health agency responsible for ensuring that 

the Nation’s commercial supply of meat, poultry, and egg products is safe, wholesome, labeled, and 

packaged correctly.

Research, Education, and Economics

The Research, Education, and Economics (REE) mission area is dedicated to the creation of a safe, 

sustainable, competitive U.S. food and fiber system, as well as the development of strong communities, 

families, and youth through integrated research, analysis, and education. REE is comprised of the 

Agricultural Research Service (ARS), the National Institute of Food and Agriculture (NIFA), the 

Economic Research Service (ERS), the National Agricultural Statistics Service (NASS), and the National 

Agricultural Library (NAL).

MARKETING AND REGULATORY PROGRAMS

The Marketing and Regulatory Programs (MRP) mission area facilitates the domestic and international 

marketing of U.S. agricultural products and ensures the health and care of animals and plants. MRP is 

made up of the Agricultural Marketing Service (AMS), the Animal and Plant Health Inspection Service 

(APHIS), and the Grain Inspection, Packers, and Stockyards Administration (GIPSA). AMS administers 

programs that facilitate the efficient, fair marketing of U.S. agricultural products, including food, fiber, 

and specialty crops. APHIS provides leadership in ensuring the health and care of animals and plants. 

GIPSA facilitates the marketing of livestock, poultry, meat, cereals, oilseeds, and related agricultural 

products.

DEPARTMENTAL MANAGEMENT

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

and administrative functions. Their efforts maximize the energy and resources agencies devote to the 

delivery of services to USDA customers and stakeholders.
Management’s Discussion and Analysis

6

Resources

Congressional appropriations are the primary funding source for USDA operations. FY 2010 program 

obligations totaled $188.7 billion, an increase of $18.2 billion compared to FY 2009. These are current 

year obligations from unexpired funds.

Exhibit 2 shows USDA’s net cost of program operations for FY 2010, organized by strategic goal and 

compared to FY 2009. Total net costs for FY 2010 were $132.4 billion compared to $119 billion for FY 

2009.

Exhibit 2: FY 2010 USDA Net Cost of Program Operations by Strategic Goals (in millions)

Goal 1: Assist Rural Communities to Create Prosperity So They are Self-Sustaining, Repopulating, and 

Economically Thriving;

Goal 2: Ensure Our National Forests and Private Working Lands are Conserved, Restored, and Made 

More Resilient to Climate Change, While Enhancing Our Water Resources;

Goal 3: Help America Promote Agricultural Production and Biotechnology Exports as America Works 

to Increase Food Security; and

Goal 4: Ensure That All of America’s Children Have Access to Safe, Nutritious, and Balanced Meals.
Management’s Discussion and Analysis

7

Performance Goals, Objectives, and Results

Of the 41 performance measures contained in USDA’s FY 2010 Annual Performance Plan, 31 were met 

or exceeded, 8 were unmet, and 2 were deferred. The following Performance Scorecard table, organized 

by USDA’s strategic goals and objectives, provides a summary of the Department’s performance results. 

Additional analysis of these results can be found in the Annual Performance Report section of this 

report.

PERFORMANCE SCORECARD FOR FY 2010

Objectives Annual Performance Goals Result

Strategic Goal 1: Assist Rural Communities to Create Prosperity So they are self sustaining, repopulating and Economically Thriving

1.1 Enhance Rural Prosperity 1.1.1 Number of jobs created or saved through USDA financing of businesses

1.1.2 Number of borrowers/subscribers receiving new or improved 

telecommunication services (millions)

Exceeded

Met 

1.2 Create Thriving Communities 1.2.1 Number of borrowers/subscribers receiving new or improved service from 

agency funded water facility

Exceeded

1.2.2 Homeownership Opportunities Provided

• Guaranteed Loans

• Direct Loans

• Total

1.2.3 Percentage of customers who are provided access to new and/or improved 

essential community facilities

• Health Facilities

• Safety Facilities

1.2.4 Number of borrowers/subscribers receiving new and/or improved electric

Exceeded

Exceeded

Exceeded

Exceeded

Exceeded

1.3 Support a Sustainable and Competitive 

Agricultural System

1.3.1 Percentage of beginning farmers, racial and ethnic minority farmers, and 

women farmers financed by USDA

Exceeded

1.3.2 Dollar value of agriculture trade preserved through trade agreement 

negotiation, monitoring, and enforcement ($ billions) NonSanitary/Phytosanitary (SPS) Activities

Exceeded

1.3.3 Value of trade preserved annually through USDA staff interventions leading 

to resolution of barriers created by SPS or Technical Barrier to Trade (TBT) 

actions

Exceeded

1.3.4 Value of Federal Crop Insurance Corporation (FCIC) risk protection 

coverage provided through FCIC sponsored insurance ($ billions)

Met

1.3.5 Normalized value of FCIC risk protection coverage provided through FCIC 

sponsored insurance ($ billions)

Met

1.3.6 The number of farmers and ranchers that gained an economic, 

environmental or quality-of-life benefit from a change in practice learned by 

participating in a Sustainable Agricultural Research and Education (SARE) 

project.

Met

1.3.7 Percent of industry compliance with the Packers Stockyards Act Unmet

1.3.8 Maintain or increase percentage of program benefits delivered through a 

Web environment

Deferred

Strategic Goal 2: Ensure Our National Forests and Private Working Lands are Conserved, Restored, and Made More Resilient to Climate 

Change, While Enhancing Our Water Resources

2.1 Restore and Conserve the Nation’s 

Forests, Farms, Ranches, and 

Grasslands

2.1.1 Conservation Reserve Program (CRP): Restored wetland acreage (millions of acres)Exceeded

2.1.2 Conservation Technical Assistance (CTA): Cropland with conservation 

applied to improve soil quality (millions of acres)

Met

2.1.3 Envirionmental Quality Incentive Program (EQIP): Cropland with conservation applied to improve soil quality (millions of acres)Met

2.1.4 CTA: Grazingland and forest land with conservation applied to protect and improve the resource base (millions of acres)Exceeded
Management’s Discussion and Analysis

8

PERFORMANCE SCORECARD FOR FY 2010

Objectives Annual Performance Goals Result

2.1.5 EQIP: Grazinglands and forest lands with conservation applied to protect 

and improve the resource base (millions of acres)

Exceeded

2.1.6 Farmland Ranchland Protection Program (FRPP): Prime, unique or 

important farmland protected from conversion to non-ag uses by conservation easements (acres)

Exceeded

2.1.7 Wildlife Habitat Incentive Program (WHIP): Non-Federal land with 

conservation applied to improve fish and wildlife habitat quality (acres)

Unmet

2.2 Protect and Enhance America’s Water 

Resources

2.2.1 CTA: Comprehensive nutrient management plans applied. (number of 

plans)

Met

2.2.2 EQIP: Comprehensive nutrient management plans applied (number of 

plans)

Unmet

2.2.3 Wetlands Reserve Program (WRP): Wetlands created, restored or 

enhanced (acres)

Met

2.3 Reduce risk from catastrophic wildfire 

and restore fire to its appropriate place 

on the landscape

2.3.1 Percentage of total National Forest System land base for which fire risk is 

reduced through movement to a better condition class

Unmet

2.3.2 Acres of Wildland Urban Interface (WUI) fuels treated to reduce the risk of 

catastrophic fire

Exceeded

2.3.3 Percenatge of acres treated in the WUI that have been indentified in 

Community Wildfire Protection Plans

Met

Strategic Goal 3: Help America promote Agriculutral Production and Biotechnology Exports as America Works to Increase Food Security

3.1 Ensure U.S. Agricultural Resources 

Contribute to Enhanced Global 

Security

3.1.1 Food Aid Targeting Effectiveness Ratio (percent) Met

3.2 Enhance America’s Ability to Develop 

and Trade Agricultural Products 

Derived From New Technologies

3.2.1 Cumulative number of genetically engineered plant lines reviewed by 

USDA and found safe for use in the environment

Unmet 

Strategic Goal 4: Ensure that All of America’s Children Have Access to Safe, Nutritious, and Balanced Meals

4.1 Increase Access to Nutritious Foods 4.1.1 Participation levels for major Federal nutrition assistance programs Supplemental Nutrition Assistance Program (SNAP) (millions per month)

4.1.2 Improve SNAP payment accuracy rate

4.1.3 Pariticipation levels for the major Federal nutrition assistance programs

Special Supplemental Nutrition Program for Women, Infants, and Children 

(WIC) (millions per month)

• National School Lunch Program

• School Breakfast Program

4.1.4 Pariticipation levels for the major Federal nutrition assistance programs.

(millions per month)

Met

Deferred

Met

Met

Met

4.2 Promote healthy diet and physical 

activity behavior

4.2.1 Application and usage level of nutritional guidance tools (billions of pieces 

of information)

Unmet

4.3 Protect Public Health by Ensuring Food 

is Safe

4.3.1 Overall public exposure to Salmonella from broiler carcasses.

4.3.2 Total illnesses from all Food Safety and Inspection Service (FSIS) 

regulated products

4.3.3 Percent of establishments with a functional food defense plan

Unmet

Unmet

Exceeded

4.4 Protect Agricultural Health by 

Minimizing Major Diseases and Pests 

Ensuring Access to Safe, Plentiful, and 

Nutritious Food

4.4.1 Value of damage prevented and mitigated annually as a result of selected 

plant and animal health monitoring and surveillance efforts ($ billions) 

Met
Management’s Discussion and Analysis

9

ACTIONS ON UNMET AND DEFERRED GOALS

USDA continuously works to improve its performance across all of its strategic goals and objectives. 

Sometimes circumstances arise that result in the Department falling short of its goals. At other times, 

the Department consciously alters its approach in ways that enhance its service to the public, but that 

make a specific performance goal a less effective indicator of real progress.

The “Annual Performance Report” section of this report offers further discussion of the Department’s 

actions on its goals, objectives, and performance measures.

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

Farmers and food companies operate in highly competitive markets, both domestically and 

internationally. Rapid shifts in consumer demands associated with quality, convenience, taste, and 

nutrition dictates that farming and marketing infrastructures become more fluid and responsive.

National security is a significant, ongoing priority for the Department. USDA is working with the U.S. 

Department of Homeland Security to help protect agriculture from intentional and accidental acts that 

might impact America’s food supply or natural resources.

External factors that will challenge USDA’s ability to achieve its goals include:

• Weather-related hardships and other uncontrollable events domestically and abroad;

• Domestic and foreign macroeconomic factors, including consumer purchasing power, the strength 

of the U.S. dollar, and political changes abroad that can impact domestic and global markets greatly 

at any time;

• Sharp fluctuations in farm prices, interest rates, and unemployment that could 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;

• The increased movement of people and goods, which provides the opportunity for crop and animal 

pests and diseases, such as avian influenza and bovine spongiform encephalopathy, to move quickly 

across national and foreign boundaries;

• Potential exposure to hazardous substances, which may threaten human health and the 

environment, and the ability of the public and private sectors to collaborate effectively on food 

safety, security, and related emergency preparedness efforts;

• The risk of catastrophic fire, depending on weather, drought conditions, and the expanding number 

of communities in the wildland-urban interface; and

• Efforts to reduce hunger and improve dietary behaviors depend on strong coordination between 

USDA and a wide array of Federal, State, and local partners.
Management’s Discussion and Analysis

10

Financial Statement Highlights

BUDGETARY RESOURCES

USDA receives most of its funding from appropriations authorized by Congress and administered by the 

U.S. Department of the Treasury. Total budgetary resources consist of the balance at the beginning of 

the year, appropriations received during the year, spending authority from offsetting collections, and 

other budgetary resources. Total budgetary resources was $225.3 billion for FY 2010 compared to 

$208.7 billion in FY 2009, an increase of $16.6 billion. 

The unobligated balance brought forward, including recoveries of prior year unpaid obligations, 

increased $4.5 billion, budget authority net of transfers and resources temporarily not available 

increased $30.1 billion. and budgetary resources permanently not available increased $18 billion.

Obligations Incurred And Net Outlays

Obligations Incurred increased $18.1 billion in 

FY 2010. This increase is primarily due to a $16.3 

billion increase at FNS for the Supplemental Nutrition 

Assistance (SNAP) program; a $6.3 billion increase at 

RD for ARRA; a $2.2 billion increase at FSA for 

disaster programs; offset by a $5 billion decrease at RMA for indemnities paid.

Net Outlays increased $13.8 billion in FY 2010, primarily in relation to the increase in obligations 

described above.

BALANCE SHEET

CONDENSED BALANCE SHEET DATA

FY 2010 FY 2009 % CHANGE

Fund Balance with Treasury $75,805 $72,334 5% 

Accounts Receivable, Net 7,608 8,866 -14% 

Direct Loan and Loan Guarantees, Net 89,405 85,657 4% 

General Property, Plant and Equipment, Net 2,964 2,972 0% 

Other 626 810 -23% 

Total Assets 176,408 170,639 3% 

Debt 87,915 84,119 5% 

Loan Guarantee Liability 2,857 1,844 55% 

Benefits Due and Payable 3,356 3,119 8%

Other 34,796 36,642 -5% 

Total Liabilities 128,924 125,724 3% 

Unexpended Appropriations 36,261 38,302 -5%

Cumulative Results of Operations 11,223 6,613 70% 

Total Net Position 47,484 44,915 6%

Total Liabilities and Net Position $176,408 $170,639 3% 

2010 2009

% 

Change

Total Budgetary 

Resources 

$225,385 $208,761 8%

Obligations Incurred $188,668 $170,508 11%

Net Outlays $135,634 $121,759 11%

Data in millions
Management’s Discussion and Analysis

11

As of September 30, 2010 and 2009 

(in millions)

Total Assets

Total assets increased $5.7 billion in FY 2010. This increase is primarily due to an increase in Fund 

Balance with Treasury of $3.4 billion; an increase in Direct Loan and Loan Guarantees, Net of $3.7

billion; offset by a decrease in accounts receivable for the Tobacco Transition Payment Program at CCC 

of $807 million and premiums from Approved Insurance Providers at RMA of $395 million. 

Direct Loan and Loan Guarantees, Net is the single largest asset on the USDA Consolidated Balance 

Sheet. RD offers both direct and guaranteed loan products for rural housing and rural business 

infrastructure. These represent 86 percent of the total USDA loan programs. Loan programs 

administered by the FSA represent 8 percent of the total. FSA provides support to farmers who are 

temporarily unable to obtain private, commercial credit. The remaining 6 percent represents 

commodity loans and credit programs administered by CCC. CCC’s loans are used to improve economic 

stability and provide an adequate supply of agricultural commodities. CCC credit programs provide 

foreign food assistance, expand foreign markets and provide domestic low-cost financing to protect 

farm income and prices.

Total Liabilities

Total liabilities increased $3.2 billion in FY 2010. This increase is primarily due to a $3.7 billion 

increase in Debt, a $1 billion increase in Loan Guarantee Liability, offset by a $1.8 billion decrease in 

other liabilities. 

Debt represents amounts owed primarily to the Treasury by CCC and RD. For CCC, the debt primarily 

represents financing to support Direct and Countercyclical, Crop Disaster, and Loan Deficiency 

programs. For RD, the debt primarily represents financing to support electric and housing loan 

programs. 

Total Net Position

Total net position increased $2.5 billion in FY 2010. This increase is due to an increase in cumulative 

results of operations of $4.6 billion less $2 billion in unexpended appropriations.
Management’s Discussion and Analysis

12

NET COST OF OPERATIONS

CONDENSED STATEMENT OF NET COST

For the Years Ended September 30, 2010 and 2009 

(in millions) 

FY 2010 FY 2009

% 

CHANGE

Goal 1: Assist Rural Communities to Create Prosperity so They 

Are Self-Sustaining, Repopulating, and Economically Thriving: $20,611 $26,193 -21% 

Goal 2: Ensure Our National Forests and Private Working Lands 

Are Conserved, Restored, and Made More Resilient to Climate 

Change, While Enhancing Our Water Resources: 11,134 9,864 13% 

Goal 3: Help America Promote Agricultural Production and 

Biotechnology Exports as America Works to Increase Food 

Security: 2,856 1,510 89% 

Goal 4: Ensure that All of America’s Children Have Access to 

Safe, Nutritious, and Balanced Meals: 97,837 81,501 20% 

Net Cost of Operations $132,438 $119,068 11% 

Net Cost of Operations

Net cost of operations increased $13.3 billion in 

FY 2010. This increase is primarily due to 

increased participation in the SNAP program at 

FNS of $16.1 billion; an increase in disaster 

program payments at FSA of $2 billion; offset by 

decreased price support and indemnity payments 

at CCC and RMA of $3 billion and $3.6 billion, 

respectively.

Stewardship Investments

Stewardship investments are substantial investments made by the Federal Government for the benefit 

of the nation but are not physical assets owned by the Federal Government. When incurred, they are 

treated as expenses in determining the net cost of operations. However, these items merit special 

treatment so that users of Federal financial reports know the extent of investments that are made for 

long-term benefit. Such investments are measured in terms of expenses incurred for non-Federal 

physical property, human capital, and research and development.

Limitations of the Financial Statements

The principal 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 

GAAP for Federal entities and the formats prescribed by 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.

2010 2009 % Change

Non-Federal Physical 

Property 

$77 $87 -11%

Human Capital $652 $595 10%

Research and 

Development

$2,307 $2,202 5%

Data in millions
Management’s Discussion and Analysis

13

Financial Management Systems

The Financial Management Modernization Initiative (FMMI) Project was initiated to modernize 

USDA’s outdated financial system technology. FMMI will replace the Corporate Financial Management 

System (CFMS), including the mainframe-based Foundation Financial Information System (FFIS), with 

Systems, Applications and Products Enterprise Resource Planning 6.0, migrating the current 

distributed, multi-instance mainframe system to a Federally compliant, consolidated, single-instance 

Web-based system. FMMI is operational and 74 percent complete. It has or will result in the following 

accomplishments: 

• All corporate interfaces, including Payroll, Procurement, Travel and Property, are completed and 

deployed; 

• Operational in 13 Departmental staff offices and 6 agencies. By the end of calendar year 2010, 

FMMI will be implemented in 4 more agencies; 

• Processing 20 percent of total accounting transaction volume in the FMMI system, which will 

increase to approximately 40 percent during the next 6 months;

• More than 1,500 users conducting business in the system daily and another 1,750 will be added by 

early 2011;

• Data warehouse for financial statement, and standard and ad hoc reporting is in production; and

• On track for schedule, cost, and performance.

FMMI has the following key attributes:

• Integration with eGovernment Travel Services, ePayroll, Grants.gov, and eLoans; corporate 

solutions for which results must be reflected in the budgetary and general ledger accounts of the 

Department (e.g., asset management and procurement); and program-specific systems that support 

the general ledger;

• Integration with performance management and budgeting, allowing USDA to meet management’s 

objects and Government and Performance Results Act requirements; and

• Compliance with FFMIA, including Federal financial management system requirements, applicable 

Federal accounting standards, and U.S. Government Standard General Ledger at the transaction 

level.

The FMMI project addresses the need for improved financial performance through a modern financial 

system that provides maximum support to the mission and USDA’s financial objectives, including: 

• Ensuring that financial management systems support data integrity, reliability, and consistency 

across the Department and for the community of direct users;

• Providing online, on-demand querying capabilities and access to reports for financial managers and, 

ultimately, program managers (new users);

• Ensuring that information and reports are clearly communicated and organized in a format that 

promotes understanding, and is directly relevant to the needs of end users;

• Providing technology that supports future growth and changes in requirements;

• Promoting USDA’s credibility and trust with Congress, the Executive Office of the President, and 

the public by demonstrating full compliance with financial laws, regulations, and Federal financial 

standards, including maintaining an unqualified audit opinion;

• Ensuring that the investment advances the Department’s strategic plan, including its 

responsiveness to the fulfillment of mandates such as Federal core financial management system 

requirements;

• Demonstrating the strategic use of USDA’s human capital by supporting the realignment from 
Management’s Discussion and Analysis

14

internally focused positions to decision support or citizen-facing roles, and enhancing workplace 

desirability for current and future financial employees;

• Demonstrating the strategic use of the Department’s information technology (IT) by leveraging IT 

within USDA and across the Government to facilitate streamlining and unification of services; and

• Demonstrating good stewardship of public funds by securing the best performance and highest 

measure of accountability in the use of taxpayer dollars.
Management’s Discussion and Analysis

15

Systems, Controls, and Legal Compliance

Management Assurances

STATEMENT OF ASSURANCE

The United States Department of Agriculture’s (USDA) management is providing a 

qualified statement of assurance that its management has established and 

maintained effective internal controls over financial reporting and financial 

management systems that meet the objectives of the Federal Managers’ Financial 

Integrity Act (FMFIA), with the exception of two material weaknesses in internal 

controls over financial reporting and one financial system non-conformance. 

Management is providing reasonable assurance that the internal controls over 

operations are effective. The details of the exceptions are provided in the FMFIA and the Federal 

Financial Management Improvement Act (FFMIA) sections of this report.

USDA conducted an assessment of its financial management systems and internal controls over the 

effectiveness and efficiency of operations and compliance with applicable laws and regulations as of 

September 30, 2010, and financial reporting as of June 30, 2010, which includes safeguarding of assets 

and compliance with applicable laws and regulations, in accordance with the requirements of Office of 

Management and Budget (OMB) Circular A-123, “Management’s Responsibility for Internal Control.”

Other than the exceptions noted, USDA financial management systems conform substantially with the 

objectives of FMFIA and the internal controls were operating effectively and no other material 

weaknesses were found in the design or operation of the internal control over 1) the effectiveness and 

efficiency of operations and compliance with applicable laws and regulations as of September 30, 2010, 

and 2) financial reporting as of June 30, 2010. The Department identified violations of the 

Antideficiency Act that were not considered chronic or significant. Rural Development loan 

disbursements were made beyond their statutory time limitations for the Rural Utilities Service 

Broadband Program. Commodity Credit Corporation entered into contracts administered by Farm 

Service Agency for matching agreements that extended beyond the period of performance authorized by 

Office of Management and Budget’s apportionment for the Biomass Crop Assistance Program. The 

letters reporting these violations are pending clearance by Department officials.

Thomas J. Vilsack

Secretary of Agriculture

November 15, 2010
Management’s Discussion and Analysis

16

Federal Managers’ Financial Integrity Act Report on Management Control

BACKGROUND

The Federal Managers’ Financial Integrity Act (FMFIA) requires ongoing evaluations of internal control 

and financial management systems. These evaluations lead to an annual statement of assurance that:

• Obligations and costs comply with applicable laws and regulations;

• Federal assets are safeguarded against fraud, waste, and mismanagement;

• Transactions are accounted for and properly recorded; and

• Financial management systems conform to standards, principles, and other requirements to ensure 

that Federal managers have timely, relevant, and consistent financial information for decisionmaking purposes.

USDA annually evaluates its internal controls over financial reporting in accordance with Office of 

Management and Budget (OMB) Circular A-123, “Management’s Responsibility for Internal Control,” 

Appendix A, “Internal Control Over Financial Reporting” (A-123, Appendix A).

The Department operates a comprehensive internal control program. This program ensures compliance 

with the requirements of FMFIA and other laws and OMB Circulars A–123, Appendix A, and A–127, 

“Financial Management Systems.” All USDA managers must ensure that their programs operate 

efficiently and effectively, and comply with relevant laws. They must also ensure that financial 

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

conjunction with the Office of Inspector General (OIG) and the Government Accountability Office 

(GAO), the Department’s management works aggressively to determine the root causes of its 

material weaknesses so that it can direct resources to focus on their remediation.

USDA remains committed to reducing and eliminating the risks associated with its deficiencies. It also 

strives to efficiently and effectively operate its programs in compliance with FMFIA.

FY 2010 Results

USDA has two existing material weaknesses: Information Technology and Financial Reporting – 

Unliquidated Obligations. There is one system non-conformance: Funds Control Management. Thus, 

the Secretary’s Statement of Assurance provides qualified assurance that USDA’s system of internal 

controls complies with FMFIA objectives. The following exhibit summarizes the results reported in 

USDA’s Consolidated Financial Statements Audit Report.

Exhibit 3: Summary of Financial Statement Audit

Audit Opinion Unqualified

Restatement No

Material Weakness

Beginning 

Balance New Resolved Consolidated Reassessed

Ending 

Balance

Improvement Needed in Overall Financial 

Management

1 1 

Improvements Needed in Information Technology 

Security and Controls

1 1

TOTAL MATERIAL WEAKNESSES 2 2 

The following exhibit lists USDA’s material weaknesses and the financial system non-conformance as 

related to management’s assurance for FMFIA and the certification for FFMIA.
Management’s Discussion and Analysis

17

Exhibit 4: Summary of Management Assurances

Effectiveness of Internal Control Over Financial Reporting (FMFIA § 2)

Statement of Assurance Qualified

Material Weakness 

Beginning 

Balance New Resolved Consolidated Reassessed

Ending 

Balance

Information Technology 1 1 

Financial Reporting – Unliquidated Obligations 1 1 

Financial Reporting – Credit Reform 1 1 

TOTAL MATERIAL WEAKNESSES 3 1 2

Effectiveness of Internal Control Over Operations (FMFIA § 2)

Statement of Assurance Unqualified

Material Weakness

Beginning 

Balance New Resolved Consolidated Reassessed

Ending 

Balance

TOTAL MATERIAL WEAKNESSES

Conformance with Financial Management System Requirements (FMFIA § 4)

Statement of Assurance Qualified

Material Weakness

Beginning 

Balance New Resolved Consolidated Reassessed

Ending 

Balance

Funds Control Management 1 1 

TOTAL NON-CONFORMANCE 1 1 

Compliance with Federal Financial Management Improvement Act (FFMIA)

Agency Auditor

Overall Substantial Compliance No No

1. System Requirements No No

2. Accounting Standards No No

3. United States Standard General Ledger at 

Transaction Level

No No

4. Information security policies, procedures, and 

practices

No No

Material Weakness Reassessed and Downgraded

Financial Reporting – Credit Reform — This weakness was reassessed and downgraded to a significant 

deficiency. During FY 2010 RD completed the following actions:

• Ensured that second party review procedures are performed and documented by personnel 

independent of those preparing the assumption curves;

• Established process improvements for version control related to the curves;

• Evaluated automation support to determine feasibility of performing curve calculations 

systematically; and

• Determined the reasonableness of the curves for re-estimation purposes that focused on the 

accuracy of the calculations and portfolio trends.
Management’s Discussion and Analysis

18

Summary of Outstanding Material Weaknesses

Material Weakness 

Existing

1. USDA Information Technology (IT) Overall Estimated Completion Date FY 2011

Internal control design and operating effectiveness deficiencies occurred in four areas: logical access controls, 

configuration management, physical access and environmental protection, and disaster recovery. These deficiencies 

represent an overall IT material weakness.

FY 2010 Accomplishments: FY 2011 Planned Actions:

• Expanded encryption to include mobile media, such as thumb drives,

by the end of the fiscal year;

• Finalized deployment of the Department-wide end-point management 

tool;

• Expanded the Department-wide Security Operations Center, 

incorporating 24/7 border protection and monitoring, end point 

compliance, and improved incident response processes;

• Established improved and sustainable processes and procedures for 

identity and access management;

• Standardized the configuration management and change control 

processes through improved processes and procedures;

• Improved the A-123, Appendix A, and FISMA monitoring and reporting 

process to ensure weaknesses are timely identified and corrected; and

• Established functional disaster recovery site for mainframe and critical 

mid-range systems.

• Implement the "Getting to Federal Information Security 

Management Act (FISMA) Green" and the Office of Inspector 

General “Get Healthy” Plans;

• Continue leveraging cyber security assessment and management 

system (CSAM) and the monthly FISMA scorecard to manage 

information technology security program compliance and oversight;

• Continue using CSAM to implement Continuous Monitoring and 

automate the Concurrency Review process;

• Continue using Security Metrics and agency program reviews to 

measure agency Security Program compliance and maturity;

• Monitor compliance with the Department’s IT security regulations;

• Develop the Department-wide Privilege Management Plan;

• Implement Digital Signature and Encryption Plans;

• Complete Identity Credential Access Management technical 

infrastructure;

• Continue Departmental initiatives to establish and fund alternate 

"hot sites" for Service Center Agencies; and

• Continue Departmental training and oversight activities to ensure 

effective Continuity of Operations for all systems.

Material Weakness 

Existing

2. Financial Reporting – Unliquidated 

Obligations

Overall Estimated Completion Date FY 2011

Lack of consistent review and follow-up on unliquidated obligations (ULO). (Department and NRCS)

FY 2010 Accomplishments: FY 2011 Planned Actions:

• Developed and shared executive scorecard with the Chief 

Financial Officer Council to present obligations inactive for 12 

months by major category;

• Initiated fast-track action to deobligate balances with no activity 

in 2 years through the ULO workgroup;

• Assembled a team of subject matter experts for contracts and 

grants to analyze deobligation/closeout processes to determine 

the root causes of invalid unliquidated contract and grant 

obligations;

• Analyzed risk and controls objectives for the closeout process 

and established minimum control activities to lead to timely 

deobligation and closeout of grants;

• Established procedures to process final Greenbook billings in 

FMMI annually by September 30 and automatically deobligate 

any remaining balances; and

• Developed weekly reports to track overdue unsubmitted travel 

vouchers and began monitoring agencies performance to 

improve timeliness of voucher submissions. 

• Department will:

• Revise policies, procedures, and processes to improve the 

management, review, and close out of ULOs;

• Conduct training on new processes to manage, review, and 

close out ULOs;

• Monitor implementation of agencies’ corrective action plans; 

and

• Work with USDA agencies to complete cleanup of obligations 

recorded in FFIS and FMMI.

• NRCS will:

• Create a risk-based statistical sample that segments the 

obligation population, then select samples for testing and 

perform testing on a quarterly basis;

• Increase accountability by including an unliquidated obligation 

performance objective in the performance plans of State 

Conservationists;

• Provide training for open obligation reviews that address audit 

findings; and

• Publish procedures for fund certification, upward and 

downward adjustments, monitoring of unliquidated 

obligations, and obligation/close outs.
Management’s Discussion and Analysis

19

SUMMARY OF OUTSTANDING SYSTEM NON-CONFORMANCE

System NonConformance

Existing

1. Funds Control Management Overall Estimated Completion Date FY 2012

System improvements needed in recording obligations at the transactions level. (CCC)

Non-compliance with Federal Financial Management Improvement Act of 1996. (NRCS)

FY 2010 Accomplishments: FY 2011 Planned Actions:

• CCC:

• Enhanced the use of the Electronic Funds Management System (eFMS) 

by incorporating transaction level obligations for the Tobacco Transition 

Payment Program, and Direct Payments, that check funds availability at 

the time of obligation;

• Implemented Web-based Supply Chain Management (WBSCM) to 

integrate obligation transactions for the CCC Commodity Operations 

programs into eFMS for the programs currently “live” or deployed in 

WBSCM; and

• Completed planning phase and began software and acquisition phase of 

the Modernize and Innovate the Delivery of Agriculture Systems (MIDAS) 

project.

• NRCS:

• Issued final policy on reimbursable agreements, open obligations, 

accruals, capital leases, internal use software, and unfilled customer 

orders.

• CCC:

• Incorporate transaction level obligations for the Conservation 

Reserve Program (CRP) Annual Rental program as well as 

additional Farm Programs as they are implemented;

• Continue to incorporate WBSCM programs into eFMS as those 

programs are moved from the Processed Commodities Inventory 

Management System (PCIMS) to WBSCM; and

• Continue to develop the MIDAS project, and to make sure 

financial requirements are clearly captured in the design of this 

system.

• NRCS:

• Obtain United States Standard General Ledger (USSGL) posting 

models to appropriately record transactions without 

reclassification; includes easements and advances;

• Revise process and procedures to capture and properly report in 

the Statement of Net Costs in accordance with U.S. generally 

accepted accounting principles (GAAP); and

• Revise process and procedures to record and report on 

stewardship, property, plant, and equipment as required by 

Statement of Federal Financial Accounting Board (SFFAS) 29.

Federal Financial Management Improvement Act Report on Financial Management Systems

BACKGROUND

The Federal Financial Management Improvement Act (FFMIA) is designed to improve financial and 

program managers’ accountability, provide better information for decision-making, and improve the 

efficiency and effectiveness of Federal programs. FFMIA requires that financial management systems 

provide reliable, consistent disclosure of financial data in accordance with generally accepted 

accounting principles and standards. These systems must also comply substantially with: 1) Federal 

Financial Management System requirements; 2) applicable Federal accounting standards; and 3) the 

USSGL at the transaction level. Additionally, the FISMA requires that there be no significant 

weaknesses in information security policies, procedures, or practices to be substantially compliant with 

FFMIA. The following exhibit contains the outstanding initiatives to achieve compliance.

Exhibit 5: Initiatives To Be Completed

Outstanding Initiatives to Achieve FFMIA Compliance

Initiative

Section of

Non-compliance Agency

Target Completion 

Date

Information Technology1 Federal Financial Management 

System requirements, and Information 

security policies, procedures, and/or 

practices.

Multiple 9/30/2011

Funds Control Management Federal Financial Management 

System requirements.

CCC 12/30/2012
Management’s Discussion and Analysis

20

Outstanding Initiatives to Achieve FFMIA Compliance

Initiative

Section of

Non-compliance Agency

Target Completion 

Date

Federal Financial Management 

System requirements, Federal 

Accounting Standards, and U.S. 

Standard General Ledger at the 

transaction level.

NRCS 4/15/2011

1 The information technology material weakness, which is reported in the Federal Managers’ Financial Integrity Act Report on Management Control, is comprised of four 

issues: logical access controls, configuration management, physical access and environmental protection, and disaster recovery.

FY 2010 RESULTS

During FY 2010, USDA evaluated its financial management systems to assess substantial compliance 

with the act. In assessing FFMIA compliance, the Department considered auditors opinions on 

component agencies’ financial statements, and progress made in addressing the material weaknesses 

identified in the FY 2009 Performance and Accountability Report. The Department is not compliant 

with Federal Financial Management System requirements, Federal accounting standards, and the 

standard general ledger at the transaction level. Additionally, as reported in the FMFIA section of this 

report, USDA continues to have weaknesses in information technology controls that result in noncompliance with the FISMA requirement. As part of USDA’s financial systems strategy, USDA agencies 

continue working to meet FFMIA and FISMA objectives.

Forest Service mitigated deficiencies related to its systems and methodologies to comply with USSGL at 

the transaction level.

Federal Financial Management System Requirements

CCC continues to develop a fully integrated funds control system, eFMS, within the FSA/CCC core 

financial management system. This work includes integration with CCC’s general ledger system at the 

transaction level. The eFMS system will also provide management with timely information to monitor 

and control the status of budgetary resources recorded in the general ledger.

FY 2010 accomplishments include: 

• Enhanced use of eFMS by incorporating transaction level obligations for the Tobacco Transition 

Payment Program, and Direct Payments, that check funds availability at the time of obligation;

• Implemented WBSCM to integrate obligation transactions for CCC Commodity Operations 

programs into eFMS for the programs currently “live” or deployed in WBSCM; and

• Completed planning phase and began software and acquisition phase of MIDAS.

In FY 2011, CCC will:

• Incorporate transaction level obligations for CRP Annual Rental Program as well as additional Farm 

Programs as they are implemented;

• Continue to incorporate WBCSM programs into eFMS as those programs are moved from the 

Processed Commodities Inventory Management System to WBSCM; and

• Continue to develop the MIDAS Program, and to make sure financial requirements are clearly 

captured in the design of this system.

In FY 2012, CCC will:

• Complete software modifications to Web-based program applications to send obligation 

transactions for CCC Farm Programs;

• Implement FMMI for FSA/CCC program activity; and
Management’s Discussion and Analysis

21

• Complete Initial Operating Capability for FSA's MIDAS.

NRCS continues working to mitigate auditor-identified deficiencies. Financial management systems do 

not substantially comply with Federal Financial Management System Requirements, the USSGL at the 

transaction level, and applicable Federal Accounting Standards for obligations; accruals; capital leases 

and internal use of software as part of property, plant, and equipment; and unfilled customer orders.

Deficiencies were also noted regarding proper use of USSGL.

FY 2010 accomplishments included: 

• Issued final policy on internal controls, reimbursable agreements, obligations, accruals, real and 

personal property, capital leases, internal use software, and unfilled customer orders. 

In FY 2011, NRCS will:

• Review and enhance A-123, Appendix A program for open obligations, unrecorded obligations, and 

non-referencing transactions, including feedback to reporting entities;

• Provide training for open obligations review based on quarterly certifications process, audit 

exceptions and A-123 findings; and

• Develop procedures on funds certification.

ELIMINATING IMPROPER PAYMENTS

The Improper Payments Information Act (IPIA) of 2002 is designed to identify programs susceptible to 

significant improper payments and reduce the amount and number of erroneous payments. IPIA’s goal 

is to improve the integrity of the government's payments and the efficiency of its programs and 

activities.

USDA first reported on improper payments in the 2004 Performance and Accountability Report (PAR) 

by disclosing error rates and amounts for SNAP and the Federal Crop Insurance Corporation Program. 

The Department now has 16 programs considered at risk for significant improper payments. Measuring 

and reporting improper payments is mandatory for five of the programs under OMB Circular A-11, 

Preparation, Submission, and Execution of the Budget. USDA identified the additional 11 programs at 

risk of significant improper payments through the Departmental risk assessment process.

IPIA requires that agencies measure their improper payments annually, establish reduction targets and 

corrective action plans, and track the results to ensure that the corrective actions are effective. USDA’s 

Office of the Chief Financial Officer (OCFO) issued specific policy guidance including templates and 

timelines for implementing IPIA. USDA continues to make progress in accurately measuring and 

reporting improper payments, developing and implementing corrective actions, and recovering 

improper payments.

USDA’s improper payment error rate of 5.37 percent for FY 2010 declined from 5.92 percent in FY 

2009. However, due to a $21.5 billion increase (30 percent) in high risk program outlays from FY 2009 

to FY 2010, USDA’s estimated improper payments amount were $5.0 billion for FY 2010, an increase 

from $4.3 billion in FY 2009. The increase in outlays was largely attributable to the increase in demand 

for food and nutrition assistance due to the economic downturn. The FY 2010 results demonstrate that 

improper payment error rates are being reduced and progress is being made:

• Seven USDA high risk programs reported improper payment error rates below their FY 2009 error 

rate;

• Six USDA high risk programs, representing 61 percent of USDA’s total high risk program outlays, 

reported error rates below their reduction targets in FY 2009. This exceeded USDA’s goal of 
Management’s Discussion and Analysis

22

achieving reduction targets for 50 percent or more of the Department’s total high risk program 

outlays;

• FS’ Wildland Fire Suppression Management Program error rate of 0.00 percent was below its 

reduction target of 0.02 percent and equal to its FY 2009 error rate of 0.00 percent; 

• FNS’ SNAP error rate of 4.36 percent was below its reduction target of 5.00 percent, and below its 

FY 2009 error rate of 5.01 percent. The SNAP error rate is a historic low for the program. This is the 

sixth year in a row the program’s error rate has been less than 6 percent; 

• FNS’ Child and Adult Care Food Program error rate of 0.99 percent was below its reduction target 

of 1.46 percent, and below its FY 2009 error rate of 2.07 percent;

• FNS’ National School Lunch Program (NSLP) error rate of 16.28 percent was below its FY 2009 

error rate of 16.44 percent; however, this was above its reduction target of 15.60 percent;

• FNS’ Special Supplemental Nutrition Program for Women, Infants and Children error rate of 1.17 

percent was below its FY 2009 error rate of 1.27 percent; however, this was above its reduction 

target of 0.80 percent;

• RD’s Rental Assistance Program error rate of 1.39 percent was below its reduction target of 2.00 

percent, and below its FY 2009 error rate of 2.06 percent;

• FSA’s Market Assistance Loan Program error rate of 0.81 percent was below its reduction target of 

1.50 percent, and below its FY 2009 error rate of 2.56 percent;

• FSA’s Loan Deficiency Payments Program error rate of 0.44 percent was below its reduction target 

of 0.60 percent; and

• FSA’s Noninsured Assistance Program error rate of 11.65 percent was below its FY 2009 error rate 

of 14.18 percent; however, this was above its reduction target of 9.22 percent. 

The root causes of improper payments are summarized into the error categories of verification, 

authentication, and administrative. Verification errors relate to verifying recipient information such as 

earnings, income, assets, work status, etc. Authentication errors relate to authenticating the accuracy of

qualifying for program specific requirements, criteria, or conditions. Administrative errors relate to the 

accuracy of the entry, classification, or processing of information associated with applications, 

supporting documents, or payments.

For FY 2010, the root causes of USDA improper payments were categorized as:

• 49 percent attributable to verification error; and

• 51 percent attributable to administrative error.

USDA establishes improper payment recovery targets for high risk programs, where appropriate, and 

actively collects recoveries. Actions taken by USDA during FY 2010 include:

• Implemented Departmental High-Dollar Quarterly Report of improper payments identified in highrisk programs and actions taken by agencies to recover overpayments;

• Developed and provided additional error measurements with semi-annual reporting, designated a 

Senate-confirmed appointee as the Accountable Official, and provided an Annual Accountable 

Official Report to the USDA Inspector General for the USDA high-priority programs (SNAP and 

NSLP);

• Provided Departmental improper payments information for the Government-wide 

PaymentAccuracy.gov Web site that includes key indicators and statistics by program;

• Completed 32 risk assessments for 32 programs in FY 2010 as scheduled on a three year cycle. No new 

programs were declared high risk as a result of the risk assessments;

• Recovered $310 million in improper payments, exceeding the Departmental recovery target of $54 

million;
Management’s Discussion and Analysis

23

• Analyzed requirements and impacts of S. 1508, Improper Payments Elimination and Recovery Act 

of 2010, and provided comments to OMB;

• Participated in OMB workgroups established under Executive Order (EO) 13520 “Reducing 

Improper Payments” to research specific topics identified in the EO and made recommendations to 

OMB on actions to aid Federal agencies in reducing improper payments; and

• Led the Executive Order (EO) 13520, “Reducing Improper Payments,” Forensic Accounting and 

Auditing Workgroup. The workgroup submitted recommendations to OMB for utilizing forensic 

accounting and auditing techniques to prevent improper payments.

USDA’s goal is to continue to achieve error reduction and recovery targets established for FY 2011. In 

addition to meeting the requirements of the IPIA, USDA is preparing to implement the new 

requirements of EO 13520, the Presidential Memorandum “Enhancing Payment Accuracy Through a 

‘Do Not Pay List,’” the Presidential Memorandum “Finding and Recapturing Improper Payments,” and 

the Improper Payments Elimination and Recovery Act (IPERA) of 2010.

USDA’s actions planned for FY 2011 include:

• Develop a Departmental action plan outlining the requirements and actions necessary to implement 

IPERA; EO 13520, “Reducing Improper Payments”; and the other new Government-wide 

requirement to reduce, eliminate, and recover improper payments;

• Develop and implementing policies, controls, procedures, and checklists at appropriate levels to 

reduce the number of improper payments;

• Create aggressive correction plans that target the verification and administrative root causes of 

errors and address internal control issues for each program;

• Provide training to field personnel and cooperative partners that address specific issues found in 

internal controls, control procedures, and the potential risks of noncompliance;

• Sustain accountability at all levels by incorporating the employee’s individual results into their 

annual performance evaluations;

• Provide grants and technical assistance to State agencies aimed at simplifying the application and 

eligibility determination systems of SNAP;

• Provide Departmental criteria for statutory, technical, and other functionality of the Governmentwide “Do Not Pay List” Web site being developed to allow agencies to verify eligibility against 

multiple databases before grants, contract, benefit award, and/or payments are issued;

• Issue a Departmental payment recapture/recovery auditing contract available to all programs to 

address IPERA requirements for identifying and recovering overpayments; and

• Participate in interagency workgroups to assist OMB in developing Government-wide guidance for 

implementing IPERA, EO 13521, and other initiatives to reduce improper payments and recover 

overpayments.
Management’s Discussion and Analysis

24
Annual Performance Report

25

2. Annual Performance Report

he mission of the United States Department of Agriculture (USDA) is to provide leadership on 

food, agriculture, natural resources, and related issues based on sound public policy, the best 

available science, and efficient management.

The Department has established strategic goals to fulfill this vital mission. The goals were introduced in 

USDA’s Strategic Plan Fiscal Year 2010-2015 (usda.gov, see “About USDA”). The goals are:

1. To Assist Rural Communities to Create Prosperity So They are Self-Sustaining, Repopulating, and 

Economically Thriving;

2. To Ensure Our National Forests and Private Working Lands are Conserved, Restored and Made 

More Resilient to Climate Change, While Enhancing Our Water Resources;

3. To Promote Agricultural Production and Biotechnology Exports as America Works to Increase Food 

Security; and

4. To Ensure That All of America’s Children Have Access to Safe, Nutritious, and Balanced Meals.

This Annual Performance Report section of the Performance and Accountability Report (PAR) is 

organized by the Department’s strategic goals. The goals are then divided by objectives, which are 

supported by performance measures. These measures track activities and determine if a program met 

targets for the fiscal year (FY) just ended that were established at the beginning of the year and 

published in USDA’s Annual Performance Plan. When performance targets are unmet, an explanation 

is provided.

Strategic Goal 1: Assist Rural Communities to Create Prosperity So They are Self-Sustaining, 

Repopulating, and Economically Thriving

USDA is the leading advocate for rural America. The Department supports rural communities and 

enhances quality of life for rural residents by improving their economic opportunities, community 

infrastructure, environmental health, and the sustainability of agricultural production. The common 

goal is to help create thriving rural communities where people want to live and raise families, and where 

the children have economic opportunities and a bright future.

USDA revitalizes rural communities by expanding economic opportunities and creating jobs for rural 

residents. The Department, in cooperation with its public and private partners, is connecting rural 

residents to the global economy. USDA is expanding access to broadband to unserved and underserved 

communities; promoting rural leadership in sustainable renewable energy development; creating new 

opportunities for small agricultural producers to market their products by developing local and regional 

food systems; ensuring that rural residents capitalize on potential opportunities presented by the 

Nation’s efforts to develop markets for ecosystem services and mitigate climate change; and generating 

jobs through recreation and natural resource conservation, restoration, and management in rural areas. 

T

Section 2.

Annual Performance Report
Annual Performance Report

26

USDA operates job training and business development programs that give rural residents the tools and 

capacity to access markets and enter the green economy.

The Department is working to enhance the livability of rural communities. USDA uses 21st century 

technology to rebuild infrastructure, ensure that rural residents have decent housing, and 

homeownership opportunities, clean water, adequate systems for handling waste, reliable electricity 

and renewable energy systems, and critical community facilities including healthcare centers, schools, 

and public safety departments. USDA also helps communities invest in strategic green-infrastructure 

planning and protection of critical natural resources.

OBJECTIVE 1.1 ENHANCE RURAL PROSPERITY

1.1.1 Number of jobs created or saved through USDA financing of business

Overview

USDA’s programs help finance rural businesses and promote opportunities for economic growth as 

measured by jobs created and saved.

The Department provides capital to enable rural businesses to participate in the global economy. A 

primary program furthering this goal is the Business and Industry Guaranteed Loan Program (B&I). 

B&I provides capital in the form of loan guarantees designed to improve, develop, or finance business, 

industry, and employment, and to improve the economic and environmental climate in rural 

communities. This is achieved by bolstering the existing private credit structure through the guarantee 

of quality loans, which provide lasting community benefits. During FY 2010, B&I obligated 

approximately $1.4 billion in guaranteed loans, and assisted in the creation of approximately 21,000 

jobs in a struggling economy. B&I also obligated $1.6 billion in American Recovery and Reinvestment 

Act of 2009 (ARRA) stimulus funds that created or saved more than 33,000 jobs for rural Americans.

USDA’s grants to under-resourced rural communities help improve local infrastructure or expertise to 

attract new businesses, and maintain appeal to local residents. For instance, while rural improvements 

are usually funded by special local business tax assessments, these assessments may not be affordable 

in marginally viable areas. When companies looking to relocation need special skill sets, USDA grants 

can fund small targeted job-training programs. In addition to B&I, Rural Business and Cooperative 

Programs offer a full menu of economic development loan and grant options. These options are 

delivered through cooperatives, non-profit organizations, institutions of higher learning, local and tribal 

governments, and other rural business and economic development stakeholders. These programs 

increase access to capital and business based services for rural communities and finance 

infrastructure to assist with business development.

The Rural Energy for America Program provides grants and loan guarantees to rural residents, 

agricultural producers, and rural businesses. These guarantees can be used for energy efficiency and 

renewable energy systems, energy audits, and technical assistance. The program funds projects ranging 

from biofuels to wind, solar, geothermal, methane gas recovery, advanced hydro, and biomass.

Renewable energy projects funded by USDA loans and grants improve the local economy by creating 

new jobs at energy plants, enhancing the tax base, and increasing local business profits. Recent funds 

allowed many agricultural producers and rural small business owners to decrease their energy 

consumption and increase their profit margins.

Analysis of Results

USDA exceeded the target for this performance measure. The number of jobs created or saved is linked 

directly to the amount of total available funding, amounts obligated and disbursed to awardees, and 
Annual Performance Report

27

local economic conditions. ARRA funds helped USDA exceed the target. Annual job targets are based on 

historic program operations, subsidy rates, and annual appropriations. The target job numbers assume 

a level funding horizon and timely allocations of funds without regard to the potential impact of major 

natural disasters. Budget authorities, subsidy rates, and program levels vary annually. Recently, these 

factors resulted in a general decline in annual job numbers. The targets, results, and usage of funds for 

USDA programs fulfilled expectations. Remaining program funds will be carried over into FY 2011, and 

will continue to provide benefits to rural communities.

Annual Performance Goals, Indicators, 

and Trends 2006 2007 2008 2009 Fiscal Year 2010

Target Actual Result

1.1.1 Number of jobs created or saved through 

USDA financing of businesses.

71,715 72,710 72,907 68,969 74,0051 128,808 Exceeded

1The target in the Annual Performance Plan, 72,369, was revised upward to 74,005 to reflect actual performance in FY 2009, as final numbers were unavailable when the 

Annual Performance Plan was drafted. The performance data for FY2008 and FY2009 were revised to reflect updated performance figures.

Rationale for Met Range: Job projected data are gathered when projects are obligated in the Guaranteed Loan System (GLS) data warehouse based on a formula 

driven by historic results. Final job counts are verified on closing the loan and grant.

Data Assessment of Performance Measure 1.1.1

Business program data are collected in various systems and ways. The program’s finance office records and reports total loan and grant obligations as 

of the date they are executed. These data are collected as part of the obligation process. The GLS, collects additional information to satisfy reporting 

requirements, and for management and evaluation purposes. This information includes the number of jobs projected at obligation and verified jobs 

created or saved at the transaction’s closing. Data used to determine the Business and Industry Guaranteed Loan Program’s delinquency status are 

generally reported directly by lenders into GLS. For other programs, USDA staff reports delinquency information.

• Completeness of Data — Business program data are considered final and complete as of September 30 at the close of the fiscal year, 

unless there are any year-end closing adjustments.

• Reliability of Data — Business and Industry guaranteed loan borrower financial performance is reported by many, but not all, lenders semiannually to USDA. Grantees generally report quarterly or semi-annually. There is inconsistency in the time periods represented by lender 

reports. In lieu of a reliable, consistent, and complete data set from lenders, the program’s finance office’s financial data have been found 

acceptable to the Office of Inspector General, as are state office-verified data on the financial performance of loans. Data for jobs created or 

saved are obtained by state office staff from borrowers and lenders. They are entered into GLS at the same time obligations are recorded. 

These data are reliable when they have been updated and verified by state staff. USDA reports the computed jobs saved or created based 

on underlying market and financial feasibility projections that support loan applications. The jobs are counted only in the fiscal year in which 

the loan is obligated. The delinquency rate, which excludes loans in bankruptcy, is based on reports supplied by lenders on the performance 

of each loan. While the percentage of States verifying third-party financial and jobs data have improved each year, further improvements are 

needed. The Department is testing an economic model to more accurately and completely show the impact of business programs in rural 

areas.

• Quality of Data — While the percentage of States verifying third-party financial and jobs data has improved each year, further 

improvements are needed. The economic model described above should lead to these improvements.

Challenges for the Future

Rural economies face many challenges, including:

• Land development pressure and regulatory influences;

• Low profit margins on commodity sales, yet strong competition from commodities produced 

overseas;

• Large-scale changes in technology; and

• A lagging national economy.

Rural areas typically have underdeveloped public services that make it difficult to attract or retain 

businesses. The lack of public funding for amenities which are common in urban areas, such as 

dedicated business parks or expanded transportation links, creates additional challenges. Furthermore, 

a persistent lack of well paying job opportunities (and the related local tax base ramifications) places 
Annual Performance Report

28

many rural county and municipal governments under great stress as they attempt to meet the 

community development and human services needs of their constituents.

1.1.2 Number of borrowers/subscribers receiving new or improved telecommunication services (broadband) 

(millions) 

Overview 

USDA’s telecommunications program provides loans and grants specifically targeted for the 

deployment of broadband service in small towns and communities. Utilizing advanced 

telecommunications services, the program is a powerful tool in building strong rural economies, and 

increasing educational and healthcare services in rural communities across the country. The 

telecommunications program finances broadband services that support the economic growth of rural 

communities, including the creation or retention of rural businesses and jobs. All facilities financed 

must be capable of providing high-speed Internet services.

The telecommunications program provides direct support to prospective loan and grant applicants 

through the general field representatives who live and work in the rural communities that they serve. In 

cooperation with USDA state offices, field and headquarters staff conduct outreach. This work increases 

awareness of and participation in the program’s broadband loan and grant program and the broadband 

initiatives program of ARRA. It provides funding to ensure that farmers continue to contribute to local 

economies, take steps to build and preserve critical infrastructure in communities across America, and 

implement new resource conservation measures.

Analysis of Results

The telecommunications program met the FY 2010 performance target for number of 

borrowers/subscribers receiving new and/or improved telecommunication services (broadband).

Annual Performance Goals, Indicators, 

and Trends 2006 2007 2008 2009 Fiscal Year 2010

Target Actual Result

1.1.2 Number of borrowers/subscribers receiving 

new and/or improved telecommunication 

services (broadband)(millions)

0.30 0.36 0.78 0.19 0.711 0.66 Met

1The 2009 figure includes ARRA funds. The FY 2010 Annual Performance Plan figure was calculated without ARRA funds. The amount reported in the FY 2009 PAR was 

recalculated for FY 2010.

Rationale for Met Range: Annual targets for this measure are based on historic activity and adjusted according to program level received each fiscal year. Met range 

represents a possible 7 percent deviation from target.

Data Assessment of Performance Measure 1.1.2

• Completeness of Data — The county data are collected from each approved loan application. Applicants are required to detail their 

proposed service territories. This includes the number of subscribers to be served in the location by county. Loan funds are advanced only 

for approved purposes. Measuring the extent to which broadband service is deployed in rural America on a county-by-county basis will 

enable USDA to assess improved economic conditions because of the availability of high-speed telecommunications network access for 

residents and business. The data on the number of counties to be served for each loan are derived from applicants’ loan applications. Data 

must be complete before loans can be approved.

• Reliability of Data — While applicants are required to perform market surveys of their proposed service areas, the actual counties served 

may vary from the plan if all funds are not used, or the borrower later requests a change of purpose from the original loan application. 

Overall, the data on counties served are reliable.

• Quality of Data — All applications undergo an extensive review to determine eligibility. Additionally, all approved applications must show 

feasibility from a financial and technical standpoint. Applicants also are required to perform market surveys of their proposed service areas. 

Therefore, the data are reliable. As previously noted, the data on the number of counties to be served for each loan approved come from 

the applicant’s loan application. The data depend on the borrower drawing down loan funds and constructing the system as portrayed in the 

applicant’s loan design. Loan funds only may be used for the approved purposes for which the loan was made. Variance may result if a 

borrower does not draw down all loan funds or request approval for a change of purpose from the original loan. This could result in a 

different number of counties served from the number specified in the plan. 
Annual Performance Report

29

Challenges for the Future

ARRA provided an additional $3.5 billion in funding for broadband projects. The hundreds of new 

ARRA broadband projects must be monitored to ensure completion of the projects within the required 

timeframe.

The Department will continue to coordinate with the U.S. Federal Communications Commission as it 

prepares for the implementation of the National Broadband Plan. The plan is designed to ensure that all 

Americans have access to broadband.

OBJECTIVE 1.2 CREATE THRIVING COMMUNITIES

1.2.1 Number of borrowers/subscribers receiving new or improved service from agency funded water facility 

(millions) 

Overview

The water and environmental programs play a leading role in providing rural communities with 

modern, affordable water and waste disposal services. These programs direct technical and financial 

program resources to rural communities with the greatest need. These communities may be povertystricken because of out-migration, natural disasters, or economic stress.

Analysis of Results

The water program exceeded the performance target for number of borrowers/subscribers receiving 

new and/or improved service from USDA-funded water facilities. The target for the water program was 

calculated without ARRA funds, but the program received ARRA funding in addition to regular funding. 

Thus, the target was exceeded by 1.5 million borrows/subscribers.

Annual Performance Goals, Indicators, 

and Trends 2006 2007 2008 2009 Fiscal Year 2010

Target Actual Result

1.2.1 Number of borrowers/subscribers receiving 

new or improved service from agency funded 

water facility (millions).

1.7 1.3 4.4 4.21 3.42 4.9 Exceeded

1,2The 2009 figure includes ARRA funds; the FY 2010 Annual Performance Plan figure was calculated without ARRA funds. The amount reported in the FY 2009 PAR 

was recalculated for FY 2010.

Rationale for Met Range: Annual targets for this measure are based on historic activity and adjusted according to program level received each fiscal year. Also, ARRA 

performance goals were set, based on the amount of funding provided for the program level according to historical activity. Met range represents a 5 percent deviation 

from target.

Data assessment metrics to meet the target allow for an actual number in the range 3,122,010 – 3,524,850.

Data Assessment of Performance Measure 1.2.1

• Completeness of Data — The Water and Environmental Programs (WEP) collects data initially through the Community Programs Application 

Processing (CPAP) system. CPAP is a non-financial system in which the agency field staff input data about applicants, borrowers, funding 

and services provided. The data obligations flow through the Rural Utilities Loan Servicing System, to the Program Loan Accounting 

System, and through a data server to a data warehouse.

• Reliability of Data — USDA’s data warehouse stores historical information on Department programs and such non-agency data as census 

information. Program data are downloaded to the warehouse every evening from several accounting databases. Data generally are current 

through the previous day. The warehouse provides data about obligations and can be used to measure the number of loans, loan amounts, 

number of borrowers and funds advanced. The warehouse is an easy, accessible online method of extracting information and data for 

reports and analyses.

• Quality of Data — Based on information in CPAP, the number of subscribers receiving new or improved water or wastewater service can be 

extrapolated from the data warehouse. The WEP National Office and USDA field offices use data from CPAP, the data warehouse, and 

Department accounting systems to review or evaluate the financial, operational, and managerial programs of the utilities serving rural 

customers. 
Annual Performance Report

30

Challenges for the Future

Rural communities must invest in modern water and wastewater facilities to attract families and 

businesses vital to thriving communities. The communities must decide how to balance investing in 

new facilities to serve new or proposed customers, with investing in upgrades to facilities that serve 

existing customers. They must weigh growing their customer base, controlling costs, and modernizing 

aging facilities. Gaining access to credit markets and leveraging funds from Federal, State, and private 

sources will continue to challenge rural communities.

1.2.2 Homeownership opportunities provided

Overview

USDA provides homeownership opportunities through the Single Family Housing Direct and 

Guaranteed Programs. These programs provide homeownership opportunities to low- and moderateincome rural Americans through several loan, grant, and loan guarantee programs. The programs also 

make funding available to individuals to finance vital improvements necessary to make their homes 

decent, safe, and sanitary.

Revitalization of rural communities through the recovery of the ailing housing market is essential to a 

healthy national economy. USDA’s Direct and Guaranteed Loan Programs have helped to fill the void as 

private mortgage lenders pulled back from financing homes for very low, low- and moderate-income 

families. The Department provided record numbers of homeownership opportunities to rural families 

with direct loans or Government guarantees during FY 2010.

Analysis of Results

The housing programs exceeded targets for the number of homeownership opportunities provided. As a 

result of current mortgage credit markets, demand for guaranteed loans has increased. ARRA provided 

the Single Family Housing Direct and Guaranteed Programs with more than $11.6 billion. 

Annual Performance Goals, Indicators, 

and Trends 2006 2007 2008 2009 Fiscal Year 2010

Target Actual Result

1.2.2 Homeownership opportunities provided

• Guaranteed Loans 31,131 35,322 62,933 133,045 97,000 121,537 Exceeded

• Direct Loans 12,326 11,448 10,179 12,150 9,030 16,200 Exceeded

• Total 43,457 46,770 73,112 145,195 106,030 137,737

Variance in totals between the Annual Performance Plan and the PAR is due to infusion of ARRA funds.

Rationale for Met Range: The range of 10 percent is based on the historical variance from the target during the past several years in the number of houses sold in the 

Guaranteed and Direct Single Family Housing Loan Programs.

Data Assessment of Performance Measure 1.2.2

• Completeness of Data — Homeownership data are complete and final. Homeowenrship data are entered in the Web-based DLOS. This 

centralized server application ensures viable data collection. It tracks performance and can be used to forecast needs. Information is 

entered into UniFi and uploaded nightly to the MortgageServe System. This system obligates funds, establishes closed loans, administers 

escrow accounts, and performs other administrative functions. Hyperion, a query and reporting tool, serves as the interface between the 

data warehouse and USDA staff.

• Reliability of Data — Homeownership data originate in systems used to obligate funding and are reliable. Data for initial placement of 

households into their own homes are reliable. They are linked directly to homeownership loans maintained in USDA's financial accounting 

systems. No adjustments are made for later defaults and the resulting loss of homeownership.

• Quality of Data — Homeownership data are based on loan obligations collected in DLOS, and stored in USDA's Data Warehouse. Thus, 

the data on the number of households are auditable. Data represent the popultion served based on the available U.S. Census Data.
Annual Performance Report

31

Challenges for the Future

The demand for guaranteed loans is at an all time high and USDA is providing unprecedented support 

for the loan program.

To meet the demands of this challenging market environment, USDA is developing the necessary tools 

of automation and training. A comprehensive loan system designed to streamline the application and 

loan approval process for a number of Department loan and grant programs is under development. 

Improvements to USDA’s automation products will increase capacity and allow lenders, partners, and 

remotely located employees to interface with other data systems. These changes will increase the speed 

and efficiency of operations.

While economic growth is needed to help America’s housing market recover, USDA’s housing programs 

will continue to play a central role in providing funding and support to the many rural Americans still in 

need of adequate, safe, and affordable housing.

1.2.3 Percentage of customers who are provided access to new and/or improved essential community facilities

Overview

USDA’s Community Facilities (CF) Programs provide loans, grants, and loan guarantees for water and 

environmental projects, as well as community facilities projects. CF demand exceeded that for previous 

years. The Department attributes the increased demand to the lack of credit available for the capital 

needs of rural communities.

Analysis of Results

The programs exceeded goals in each category. Across all areas of the program, USDA touched roughly 

one-quarter of all rural Americans. Some of the CF projects received ARRA funds.

Annual Performance Goals, Indicators, 

and Trends 2006 2007 2008 2009 Fiscal Year 2010

Target Actual Result 

1.2.3 Percentage of customers who are provided 

access to new and/or improved essential 

community facilities

• Health Facilities 3.8 7.2 4.8 5.4 5.0 5.5 Exceeded

• Safety Facilities 3.8 6.2 5.7 5.0 5.4 6.0 Exceeded

Rationale for Met Range: It is a challenge to measure the range of residents served because grants may vary widely, even within a category. One grant for a fire 

engine, for example, may serve 1,000 people, whereas another grant for a similar amount for a healthcare project might serve 10,000. Therefore, USDA would consider 

its 2010 goal unmet if CF serves fewer than 4.7 percent of the rural population with new healthcare facilities and provides new fire, rescue and public safety facilities for 

less than 5.1 percent of the rural population. The ranges include all CF program funding, including ARRA funds.

Data Assessment of Performance Measure 1.2.3

• Completeness of Data — Program data are complete and final. The Finance Office records and reports total loan and grant obligations as of 

the date of obligations. Additionally, the Department collects information for management and evaluation purposes. Data on delinquencies 

are reported by the Finance Office for CF direct loans, and by lenders for CF guaranteed loans.

• Reliability of Data — CF data are entered into GLS by field staff as the program funds are obligated. These data are final, complete, and 

reliable. These data include the population served based on available U.S. census information. The service area for each facility is based on 

estimates. The Department screens the data regularly for irregularities. Given the variety of areas served by different types of community 

facilities, estimating the service area is not a precise science. Population estimates are based on engineering studies used for the design of 

new or expanded facilities. USDA is developing mapping technologies to improve this process.

• Quality of Data — Data are projected based on historical performance. The target information uses data dependent upon the baseline 

projections from numerous Department agencies.
Annual Performance Report

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Challenges for the Future

Management will need to carefully consider the best ways to meet the demand for the program. 

Increasing emphasis on partnering with other entities, requiring applicant contributions, and a

maximum loan ceiling may be considered. As long as the economic crisis continues, CF remains the 

major source for credit – in many cases, virtually the only source – in rural communities.

1.2.4 Number of borrowers/subscribers receiving new and/or improved electric facilities (millions)

Overview

Providing reliable, affordable electricity is essential to the economic well-being and quality of life for the 

Nation's rural residents. USDA’s electric loan program provides leadership and capital to upgrade, 

expand, maintain, and replace America's vast rural electric infrastructure. The electric program makes 

direct loans and loan guarantees to electric utilities and other entities that serve customers in rural 

areas. The loans and loan guarantees help finance electric distribution, transmission, and generation 

facilities, including system improvements and replacement, demand-side management, energy 

efficiency and conservation programs, and on-grid and off-grid renewable energy systems. Loans are 

made to corporations, States, territories and subdivisions, and local agencies, such as municipalities, 

utility districts, and cooperatives that provide retail electric service needs to rural areas, or supply the 

power needs of distribution borrowers in rural areas.

Analysis of Results

The electric program exceeded its goal for providing new and improved electric facilities. The 

$7.1 billion of approved new loan funding provides a major boost in modernizing electric infrastructure 

in rural America. More than $500 million in loans approved will support grid modernization with more 

than 35,000 miles of new and/or improved transmission and distribution improvements, and 

$133 million in new advanced meter systems. With the assistance of USDA electric loans, borrowers will 

provide improved electric service to more than 9.4 million retail consumers, including more than 

300,000 new rural customers. The program has continued its priority for renewable energy projects. 

More than $150 million in new loan guarantees for renewable electric generation facilities were 

approved in FY 2010. 

Annual Performance Goals, Indicators, 

and Trends 2006 2007 2008 2009 Fiscal Year 2010

Target Actual Result

1.2.4 Number of borrowers’ consumers receiving 

new or improved electric facilities (millions)

8.2 5.8 8.1 9.8 6.1 9.4 Exceeded

Rationale for Met Range: Targets for this measure are based on historical results and adjusted according to program funding. Met range represents a 5 percent 

deviation from target.

Data assessment metrics to meet the target allow for an actual number in the range 5.8 – 6.4 (millions).

Data Assessment of Performance Measure 1.2.4

• Completeness of Data — The Rural Utilities Service’s (RUS) Electric Programs performance data are collected from various agency 

documents, including RUS Form 740c, Borrower’s Statistical Profile, Information Publication 201-1, and borrower loan applications. The 

data are complete and accurate. They also are collected at the time of loan approval and/or reported annually.

• Reliability of Data — First-time loan applicants must submit extensive financial and electric system data in support of their loan. Existing 

borrowers are required to report financial and operating data annually to RUS. The data are used to administer Department loan funds and 

ensure the security of the loans. Borrower information and loan and grant approvals and advances are tracked in the Rural Utilities Loan 

Servicing System (RULSS). Borrower financial and system reports and information are collected and maintained through the data collection 

system in the Rural Development data warehouse.

• Quality of Data — Performance goal data on the number of borrower consumers receiving new or upgraded electric service are derived 

from information in loan applications and annual reports. All applications are reviewed for compliance with all eligibility requirements for the 

various electric programs loans, guarantees, and grants. All approved applications must demonstrate financial feasibility and adequate loan 

security. Loan funds may be used only for the approved purposes for which the loan was made. Borrower loan applications and annual 

submissions are reviewed by field representatives and headquarters staff for completeness and accuracy. 
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Challenges for the Future

Rural electric providers face many challenges and uncertainties because of economic conditions and 

new environmental and energy policy initiatives. Electricity demand has continued to grow in rural 

communities at a higher rate than in urban areas. This disparity reflects demographic conditions and 

economic development. Expansion of renewable energy production in rural areas has been an 

additional source of increased electricity demand in many rural areas. Interest in developing new 

renewable electricity projects and the expansion of energy efficiency and conservation programs is also 

increasing. The program is working on regulations and policies that will fully implement the new 

authorities of the Food Conservation and Energy Act of 2008 in these areas. 

OBJECTIVE 1.3 SUPPORT A SUSTAINABLE AND COMPETITIVE AGRICULTURAL SYSTEM

1.3.1 Percentage of beginning farmers, racial and ethnic minority farms, and women farmers financed by USDA

Overview

USDA provides direct and guaranteed farm ownership and operating loans that aid family farmers and 

ranchers in starting and maintaining profitable operations. The financial assistance provided through 

the loan programs is a vital component of the Department’s farm safety net. Loan funds are used to pay 

normal operating or family living expenses. They also help make capital improvements, refinance 

certain debts, and purchase farmland, livestock, equipment, feed, and other materials essential to farm 

and ranch operations.

The loan programs are particularly important to beginning, minority, and women farmers. Because 

these farming groups typically have fewer resources, they tend to be less likely to qualify for credit from 

a commercial source. Therefore, USDA specifically targets a portion of its lending to these groups each 

year. The credit provided by the Department helps reduce such barriers to entry as initial capital 

investment, high land values, and increasing input costs.

The long-term success of American agriculture is dependent upon new farmers and ranchers entering 

the economy. Unfortunately, the agricultural census indicates that the number of new entrants into 

farming has fallen over time. The USDA Farm Loan Programs (FLP) helps offset this trend. FLPs enable 

beginning, minority, and women farmers to enter the agricultural economy.

Analysis of Results

USDA exceeded its FY 2010 performance target for lending to beginning, minority, and women farmers. 

The Department has made significant progress in expanding credit access to beginning, minority, and 

women farmers. Lending to these groups has increased by more than 80 percent during the past 

decade, from $995 million in FY 2000 to nearly $1.8 billion in FY 2010. In FY 2010, USDA made more 

than 17,000 loans to beginning, minority, and women farmers. As of September 30, 2010, the 

Department has nearly 53,000 beginning, minority, and women farmers in its portfolio of direct and 

guaranteed loans.

Strong demand for USDA direct and guaranteed operating and farm ownership loans continues. Price 

weakness in the livestock sector and the unusually long harvest season, caused by adverse weather 

conditions, combined with heightened risk sensitivity in the commercial lending sector, resulted in 

increased application and loan activity. Loan obligations totaled nearly $5 billion, the highest amount 

since 1985.

Overall FLP portfolio performance remains strong despite the continued weaknesses in specific sectors 

of the agricultural economy during the past few years. Delinquency and loss rates for both direct and 

guaranteed loan programs remain well below historic averages. In the direct loan program, the loss rate 
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34

was 0.8 percent and the delinquency rate was 6.2 percent. The guaranteed loan program registered a 

loss rate of 0.41 percent and a delinquency rate of 1.88 percent.

Annual Performance Goals, Indicators, 

and Trends 2006 2007 2008 2009

Fiscal Year 2010

Target Actual Result

1.3.1 Percentage of beginning farmers, racial and 

ethnic minority farmers, and women farmers 

financed by USDA

15.5% 15.9% 16.2% 17.4% 17.5% 19.7% Exceeded

The FY 2010 result is estimated based on three quarters of actual data and a fourth quarter projection.

Rationale for Met Range: Data assessment metrics to meet the target allow for an actual number in the range 17.0-18.0 percent, since the threshold is +/-.5 percent.

Data Assessment of Performance Measure 1.3.1

Farm Loan Programs (FLP) data reside in the Program Loan Accounting System, Guaranteed Loan System, Direct Loan System, and FLP Databases. 

Information obtained from the 2002 Census of Agriculture is also used for this performance measure. The measure is calculated by taking the total 

number of minority, women, and beginning farmers in the loan portfolio, and dividing it by the number of members of those three groups listed in the

2002 Census of Agriculture with at least $10,000 in sales. (This sales figure excludes hobby farms, which are not the intended market for FLPs).

• Completeness of Data — Data reported will be considered final as of September 30, 2010.

• Reliability of Data — Data are considered reliable. System enhancements and built-in edits coupled with comprehensive internal control 

review programs help ensure data reliability and quality. While Census of Agriculture data are considered reliable, the resulting percentage 

reported likely understates the importance of USDA's service to these targeted groups. Despite this limitation, these data are the best 

available for estimating USDA's performance in reaching the targeted groups.

• Quality of Data — FLP data are of high quality. Most FLP data originate from accounting systems, which are subject to Office of Inspector 

General (OIG) audit. FLP data are collected for multiple purposes and gathered throughout the normal lending process. Data derived from 

the 2002 Census of Agriculture were developed in FY 2006. They will be used until new performance targets are developed as part of a 

strategic planning process to be completed in FY 2011. At that time, the 2002 Census data will be replaced with data from the 2007 Census.

Challenges for the Future

In recent years, USDA has improved FLP operational effectiveness and efficiency through program 

streamlining and information technology initiatives. Building on these efforts in the future will be 

necessary to continue providing high levels of customer service and program oversight and monitoring.

Additionally, as the U.S. agricultural sector continues to change, with farms becoming larger and 

increasingly dependent on technology, entry into farming is more capital intensive than ever before. 

The costs associated with operating a farm also continue to increase because of higher prices for feed, 

seed, fuel, and other input expenses. These factors result in significant barriers and challenges for the 

groups that the USDA FLPs are intended to assist.

1.3.2 Dollar value of agriculture trade preserved through trade agreement negotiation, monitoring, and 

enforcement ($ billions) Non-Sanitary Phyto/Sanitary (non-SPS) Activities

Overview

USDA continues to play a leadership role in negotiation of the Doha Development Agenda (DDA) which 

is designed to lower trade barriers around the world to allow countries to increase trade globally. DDA 

negotiations center around such issues as agriculture, tariffs, and trade remedies. An ambitious and 

balanced conclusion of the Doha Round will substantially expand global trading opportunities, increase 

U.S. agricultural exports, and contribute to the President’s goals for the National Export Initiative, 

which is designed to help farmers and small businesses increase their exports and expand their 

markets. Substantial progress has been made in addressing issues in all three “pillars” of the DDA 

agriculture negotiations – domestic support, market access, and export competition.

USDA is participating in Trans-Pacific Partnership (TPP) negotiations with Australia, Brunei, Chile, 

New Zealand, Peru, Singapore, and Vietnam. TPP is an Asian-Pacific trade agreement designed to 

increase American exports in the region and create jobs domestically.
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The Department also negotiated bilateral accession agreements with countries seeking World Trade 

Organization (WTO) membership. The WTO is an international body that oversees the rules of trade 

between nations. In 2010, USDA played a critical role in supporting negotiations with Russia, 

Kazakhstan, Serbia, and several other countries.

The Department works closely with the Office of the U.S. Trade Representative (USTR) to negotiate 

agreements to maintain access to global markets for U.S. agriculture. USTR develops and recommends 

U.S. trade policy, conducts trade negotiations, and coordinates trade policy within the Government. In 

June 2010, USDA played a critical role in negotiating a framework with Brazil regarding the WTO 

cotton dispute. In the dispute, a WTO panel found that the U.S. provided prohibited and actionable 

subsidies to domestic producers, users, and/or exporters of upland cotton. The framework with Brazil 

helped avert the imposition of countermeasures of more than $800 million in 2010.

Analysis of Results

The performance measure was exceeded. USDA employs a performance measure that estimates the 

value of trade preserved through WTO agreement, enforcement, creation, and maintenance of free 

trade agreements, and addresses trade barriers. Extensively monitoring and enforcing existing trade 

agreements helped the Department to reach its target.

Annual Performance Goals, Indicators, 

and Trends 2006 2007 2008 2009

Fiscal Year 2010

Target Actual Result

1.3.2 Dollar value of agricultural trade preserved 

through trade agreement negotiation, 

monitoring, and enforcement ($ millions)

$14 $670 $484 $368 $500 $520 Exceeded

This legacy performance goal, part of the 2010 Annual Performance Plan, will be dropped for FY 2011. A new measure has been developed for future planning and 

reporting.

Rationale for Met Range: The target for this measure is influenced by foreign parties. It reflects U.S. efforts to negotiate new agreements, addressing compliance with 

existing trade agreements, and resolving trade access issues that arise so that domestic exports can continue.

Data Assessment of Performance Measure 1.3.2

Data for the World Trade Organization and tariff rates are projected estimates based on results posted to the performance tracking system within 

USDA. Data for successfully retaining and assuring U.S. trade access to export markets are projected estimates based on results posted during the 

first three quarters of FY 2010

• Completeness of Data — Data for successfully retaining and assuring U.S. trade access to export markets are projected estimates based on 

results posted during the first three quarters of FY 2010.

• Reliability of Data — Data are reliable and used by the Department to highlight successes in the trade-policy arena.

• Quality of Data — USDA maintains a standardized methodology to forecast trade impacts. Calculation of trade benefits from preserving 

existing trade is fairly straightforward and easy using this standard methodology. The primary sources of trade data are Department of 

Homeland Security’s U.S. Customs and Border Protection, the Census Bureau, the USDA publication, Foreign Agricultural Trade of the 

United States, and other databases. Other sources include market reports compiled by USDA and industry estimates. Since measuring 

expected trade benefits from broad new trade agreements is extremely difficult, the Department evaluates its estimates against other 

outside estimates when available. 

Challenges for the Future

The key challenge for increasing access to global markets is progress in the WTO Doha Round 

negotiations. USDA will continue to monitor and take action on trade barriers relating to established 

trade agreements. Barriers will continue to be addressed through the WTO dispute-settlement process, 

while others will be addressed bilaterally. Improving market opportunities under bilateral and regional 

trade agreements depends on the approval and implementation of agreements by all partners.
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1.3.3 Value of trade preserved annually through USDA staff interventions leading to resolution of barriers created 

by Sanitary/Phytosanitary (SPS) or Technical Barrier to Trade (TBT) measures

Overview

While U.S. farmers and ranchers are among the world’s most productive and efficient, they frequently 

face complex Sanitary/Phytosanitary (SPS) and Technical Barrier to Trade (TBT) in the global 

marketplace. These barriers limit exports and/or impose additional costs on exporters. These factors 

reduce farm income and prevent job growth in the agricultural sector.

Overcoming such barriers requires exceptional coordination across USDA, the rest of the U.S. 

Government, the private sector, and with foreign officials. To overcome each barrier, the Department 

engages in such activities as exchanging technical information, high-level political dialogue, and formal 

dispute settlement proceedings.

In FY 2010, USDA facilitated the prevention or removal of more than 30 SPS and TBT measures in 

more than 15 countries. These successes benefitted a wide variety of U.S products and included:

• Reopening the Russian and Chinese markets for U.S. pork and pork products;

• Overcoming Turkey’s ban on the import of all unapproved products containing or derived from 

agricultural biotechnology, including soy, cotton, and corn;

• Persuading China and Indonesia to adopt less restrictive food safety laws that affected a wide variety 

of U.S. agricultural products;

• Persuading the European Union (EU) to align its standards for acceptable levels of aflatoxins in tree 

nuts to international standards;

• Persuading Taiwan to adopt a maximum residue level for the pesticide malathion, thereby 

facilitating the entry of U.S. cherries; and

• Ensuring that EU’s cosmetic standards for grapefruit would not downgrade Florida grapefruit to a 

lower quality category, which would command a lower price.

Analysis of Results

USDA exceeded this performance measure. USDA tracks the value of trade preserved by resolving trade 

barriers arising from SPS and TBT measures imposed by foreign governments. Trade issues and their 

impact on U.S. exports depend primarily on foreign action. Sometimes, this action is in response to 

events in the U.S., such as a livestock disease outbreak. Both the problems and the solutions are 

unpredictable. Solutions can range from a quick agreement with officials at the port of entry to a long 

negotiation process followed by a lengthy regulatory or legislative process in the country in question. 

The impact of an action can range from a few thousand to billions of dollars. While USDA can establish 

priorities in advance for known constraints, unforeseen events frequently require realigning priorities. 

In addition, volatile exchange rates affect the results reported for this measure.

The majority of SPS and TBT measures impacted food rather than bulk agricultural products. 

Resolution of barriers to Asian markets showed a relative upswing from FY 2009, with a decrease in 

those from the Americas. This reflects the growing importance of Asian markets as U.S. trading 

partners. Over the past 5 years, the top 10 destinations for U.S. agricultural products took 

approximately two-thirds of all agricultural exports, but the makeup of the top 10 shifted over this 

period. Canada, Mexico, Japan, China, Taiwan, and S. Korea make up the top six, with Turkey at 

number nine. By 2009, Hong Kong, Indonesia, and Russia had edged out the United Kingdom, the 

Netherlands, and Germany. Largely due to barriers to U.S. pork and poultry, Russia dropped off the list 

during the first half of 2010, replaced by the Philippines. China has overtaken Mexico and Japan to 

become the second largest importer of U.S. agricultural products, second only to Canada. With its rise 
Annual Performance Report

37

in importance as a U.S. trading partner, China also presents the Nation with a larger number of 

significant SPS and TBT. 

USDA changed the methodology for computing this measure. In prior years, the measure was an 

estimate of the annual value of trade preserved or gained as a result of Department intervention in SPS 

and TBT issues. Beginning in FY 2010, the measure is computed as actual, cumulative trade from the 

time a barrier is lifted, or from the proposed effective date of a restriction prevented by USDA 

intervention. Because of the change in methodology, the value of reported results will initially decline 

significantly from that reported in recent years. This decline is because of the cumulative nature of the 

new measure and the frequent lag between barrier resolution and the full restoration of interventions is 

not included in results reported under the new method, the reported value is expected to grow as 

impact is tracked over time.

Annual Performance Goals, Indicators, 

and Trends 2006 2007 2008 2009 Fiscal Year 2010

Target Actual Result

1.3.3 Value of trade preserved annually through 

USDA staff interventions leading to resolution 

of barriers created by Sanitary/Phytosanitary 

(SPS) ($ billions)

$2.6 $2.5 $7.3 $9.5 $3.6 $4.0 Exceeded

Rationale for Met Range: The target for this measure is influenced by foreign parties. It reflects U.S. goals for addressing compliance with existing trade agreements and 

resolving trade access issues that arise so that domestic exports can continue. A met or exceeded target reflects USDA successes in addressing these barriers. An 

unmet target may not reflect that USDA monitoring activities prevented noncompliance.

Data assessment metrics to meet the target allow for an actual number in the range $3.4-$3.8 ($ billions).

Data Assessment of Performance Measure 1.3.3

• Completeness of Data — USDA uses a performance tracking system to collect and analyze actual performance data. The data are collected 

from the Department’s network of overseas offices and headquarters staff. The staff conducts trade compliance and enforcement activities, 

and provides trade negotiation support to the U.S. Trade Representative.

• Reliability of Data — Data for successfully retaining and assuring U.S. trade access to export markets are projected estimates based on 

results posted during the first three quarters of FY 2010.

• Quality of Data — In addition to audits and internal control review of the performance tracking system, an established procedure is 

maintained to review each reported success for verification and the prevention of double counting.

Challenges for the Future

The prevention and resolution of SPS and TBT are essential if U.S. agricultural products are to enjoy the 

full benefits of market liberalization gained through multilateral trade negotiations. As developing 

countries become increasingly active in the global trading system and as U.S. trading partners, their 

ability to develop and implement transparent, science-based regulatory systems is increasingly vital to 

the long-term viability of U.S. agriculture and our food supply. Besides monitoring and enforcing its 

rights under the World Trade Organization SPS and TBT agreements, USDA continues to support the 

development and adoption of science-based international standards and SPS regulatory systems.

Meat and poultry exports continued to be hampered by a variety of unjustified SPS barriers including 

those related to animal diseases, maximum residue limits (MRLs) for veterinary drugs, zero tolerance 

pathogen standards, and slaughter and processing plant approvals, particularly foreign insistence on 

plant-by-plant approvals. Many of these problems manifest themselves in foreign export certification 

requirements that are neither science-based nor consistent with international guidelines. The largest 

single technical trade issue of concern to USDA remains the normalization of beef trade after the 

market closures caused by the 2003 findings of Bovine Spongiform Encephalopathy, a progressive 

neurological disorder of cattle, in the U.S.
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Trade barriers related to biotechnology also require increasing attention from USDA. To date, the most 

broadly accepted new technology has been genetically engineered (GE) crops (soybeans, corn and 

cotton) and products derived from these crops (oils, meal and feed). Together they comprise about onethird of total U.S. agricultural exports. In addition, it is estimated that some 80 percent of processed 

foods sold domestically contain ingredients and oils from GE crops. USDA efforts to overcome barriers 

to GE products include the advancement of science-based regulations, efforts to ensure adherence to 

and enforcement of existing global commitments governing trade, and coalition building with other 

countries interested in the safe use of agricultural biotechnology.

Finally, country-by-country variation in MRLs for pesticides poses a significant ongoing risk to U.S. 

fruit and vegetable exports to many countries. While the U.S. is a global leader in the development and 

approval of safer and more effective pesticides, the approval of pesticides in other countries and by 

international standards-setting organizations often lags behind. The variation in approved pesticides 

that exists between trading partners appears to be growing, increasing the potential for disrupting U.S. 

agricultural trade as new pesticides becomes approved for the U.S. market. Specialty crop products 

have a particularly high risk of incurring MRL violations because they require extensive pest control 

measures.

1.3.4 Value of Federal Crop Insurance Corporation (FCIC) risk protection coverage provided through FCIC 

sponsored insurance

1.3.5 Normalized value of FCIC risk protection coverage provided through FCIC sponsored insurance

Overview

USDA provides and supports cost-effective means for managing the risks of agricultural producers. This 

assistance is designed to improve the economic stability of agriculture and rural communities. After 

assessing the producers’ needs, USDA develops a variety of effective risk-management tools. These 

tools help farmers and ranchers protect their livelihood in times of disasters or other uncontrollable 

conditions.

The USDA Federal Crop Insurance Program overseen by the Federal Crop Insurance Corporation 

(FCIC) provides actuarially sound risk management insurance products to reduce agricultural 

producers’ economic losses due to natural disasters or low prices. The Department partners with private 

crop insurance companies who market and service individual policies and both share the risk. This 

partnership is governed by the Standard Reinsurance Agreement (SRA).

In response to an authorization from Congress in the Food, Conservation, and Energy Act of 2008, 

negotiations for the 2011 SRA began late in 2009, and were completed on July 13, 2010, when USDA 

announced that all approved crop insurance companies had signed the new SRA. The new SRA calls for 

insurance companies to deliver risk-management insurance products to eligible producers under 

specific terms and conditions. Companies are responsible for all aspects of customer service and 

guarantee payment of producer premiums to the FCIC. In return, FCIC reinsures the policies and 

provides premium subsidy to producers. It also reimburses the companies for administrative and 

operating expenses associated with delivering and servicing the insurance products. The new SRA will 

have no impact on farmers’ premium costs. It allows the administrative and operating subsidies paid to 

the insurance companies to fluctuate within a range, but removes the potential for unreasonable 

increases in payments, such as experienced during the 2007 through 2009 crop price bubble. It also 

reduces the rates of return insurance providers are expected to earn from underwriting gains to a 

reasonable level. The resulting agreement will achieve $6 billion in savings over the next 10 years 

against USDA program benchmarks.
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USDA has implemented initiatives to increase awareness and service to beginning, small, and limited 

resource farmers and ranchers and other underserved groups and areas. Through partnership 

agreements with public and private agricultural organizations, land grant colleges and universities, 

community-based organizations, farmers and ranchers, Hispanic Serving Institutions, and other 

stakeholders, the Department provides technical program assistance and risk management education 

on strategies associated with economic, legal, production, marketing, human resources, and labor risks.

The new SRA provides additional incentives for insurance companies to provide service in underserved 

states.

USDA uses the value of risk protection to measure the effectiveness of risk management. The value of 

risk protection denotes the amount of crop insurance in effect protecting and stabilizing individual 

producers’ incomes and consequently rural communities and economies.

Analysis of Results

The Department met its targets for the amount of risk protection provided to producers. The 

performance measures illustrate the normalized and real dollar values of FCIC coverage in force within 

the agricultural economy. The actual value performance measure (1.3.4) also shows the amount of 

potential collateral provided to qualify for commercial loans. The normalized value performance 

measure (1.3.5) is a rolling average of several years of actual value to account for the volatility of market 

prices. Since the 1999 crop year, the normalized value has increased by approximately $26 billion, while 

the real value has increased by approximately $48 billion. While there are a number of factors that 

influence these figures, including market-price increases and inflation, both represent a major growth 

in the amount of the agricultural economy insured via the FCIC-sponsored insurance. During the 2010 

crop year, which covered parts of both the 2009 and 2010 fiscal years, the economic risk of American 

agricultural producers was reduced by approximately $79 billion through Federal crop insurance 

coverage.

Annual Performance Goals, Indicators, 

and Trends 2006 2007 2008 2009 Fiscal Year 2010

Target Actual Result

1.3.4 Value of FCIC risk protection coverage 

provided through FCIC sponsored insurance 

($ billions)

$49.9 $67.3 $89.9 $79.91 $81.4 $78.9 Met

1.3.5 Normalized value of FCIC risk protection 

coverage provided through FCIC sponsored 

insurance ($ billions)

$48.1 $50.7 $51.5 $53.91 $51.9 $56.2 Met

These legacy performance goals, part of the 2010 Annual Performance Plan, will be dropped for FY 2011. A new measure has been developed for future planning and 

reporting.

1The baseline model uses actual inputs (acres covered, prices, and yields) as they become available over time replacing previously projected figures. Therefore the 

results for each year may and usually do change from one computation of the baseline model results to the next. End-of-year results will be different from previously used 

results for earlier budget submissions.

Rationale for Met Range: Annual targets for these measures allow a variation of plus or minus $4.4 billion to be met. The value of risk protection denotes the amount of 

insurance in effect protecting and stabilizing the agricultural economy. USDA’s value projection target is based on projections developed in November 2009, forecasted 

participation, and conditions current at that time. The normalized value of risk protection denotes the amount of insurance, holding prices constant, in effect protecting and 

stabilizing the agricultural economy. USDA’s normalized value projection target is based on projections developed in November 2009, forecasted participation, and 

conditions current at that time. The baseline model uses the latest information from the crop insurance program, and combines it with USDA baseline projections for major 

crops. These crops include corn, wheat, soybeans, sorghum, barley, rice, and cotton. In making the projections, the model holds various factors constant, such as 

premium rates and average coverage level. The model assumes that all non-major crops produce yields consistent with USDA projections for major crops. The baseline 

model is a tool for developing budget projections. The budget and performance projections for the crop insurance program depend on baseline projections from numerous 

USDA agencies.

Data Assessment of Performance Measure 1.3.4 and 1.3.5

• Completeness of Data — The data used in conjunction with performance information are based on actual information reported through the 

end of the third quarter. To provide the annual data, USDA projects the results for the fourth quarter of the fiscal year based on prior year 

performance. Analysis has shown that normally 99 percent of the final actual data will be reported to USDA during the first quarter of the 

next fiscal year. The Department receives the actual data from insurance companies. It then maintains data through two integrated 
Annual Performance Report

40

Annual Performance Goals, Indicators, 

and Trends 2006 2007 2008 2009 Fiscal Year 2010

Target Actual Result

processing systems that validate the information. The data then are sent through the system to generate all accounting functions. These 

processing systems ensure that data received are accurate, errors are corrected quickly, and timely monthly accounting reports are 

provided.

• Reliability of Data —The insurance companies receive data from the producers and transmit them to the Department. Once received, 

USDA takes extensive steps to verify the data’s accuracy and validity. The Standard Reinsurance Agreement also provides reinsured 

companies with disincentives for not following prescribed guidelines and procedures.

• Quality of Data — Data are projected based on historical performance. The target information uses data dependent upon the baseline 

projections from numerous USDA agencies. To the extent that any of the projections are inaccurate, the projection of value will also be 

inaccurate.

Challenges for the Future

USDA’s challenge is to maintain the core crop insurance products that provide the farm financial safety 

net for the vast majority of producers and rural communities, while expanding and improving insurance 

coverage and other risk management solutions, particularly for beginning producers, underserved 

states, areas, communities, and commodities. The Department is addressing the management systems 

and financial information technology costs associated with operating and maintaining existing program 

data needs. These systems and technologies also service new and revised products. USDA continues to 

research how to deliver more crop and livestock products. This research includes reviewing and 

approving private-sector insurance products reinsured by FCIC that are targeted to the needs of 

underserved areas and various specialty crops. The new SRA provides additional incentives for 

insurance companies to provide service in underserved states. 

1.3.6 Number of farmers and ranchers that gained an economic, environmental, or quality-of-life benefit from a 

change in practice learned by participating in a Sustainable Agricultural Research and Education (SARE)

project

Overview

SARE program is a regionally administered program that funds competitive grants for research, 

education, outreach, and training of agricultural professionals. SARE projects are designed to improve 

agricultural production systems. They bring scientists, educators, communicators, and producers 

together to develop new ways for farmers and ranchers to simultaneously improve profitability, protect 

the environment, and enhance their quality of life.

Analysis of Results 

USDA met this performance measure. SARE’s benefits have been measured through several analyses. 

These analyses have determined the number of farmers and ranchers reached by the various types of 

projects supported by SARE, the percentage of these who changed practices as a result, and the 

percentage where these changed practices persist. Through these analyses, USDA estimates the 

cumulative number of farmer and ranchers who have benefitted from SARE as the total number of 

projects it has funded has increased.

Additional measures of program benefits have included the percent of project participants performing 

an outreach activity (75 percent), the percent reporting improved soil quality (79 percent), and the 

percent reporting increased sales (64 percent). The program has also measured the number of 

producers adopting new practices after reading SARE publications (53 percent).

The high percentage of farmers and ranchers reporting a positive impact from SARE projects and 

publications can be attributed to multiple attributes of the program. These attributes include the 

regional structure of the program, the diverse composition of the regional administrative councils, a 
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41

focus on objectives and outcomes, the active involvement of farmers and ranchers throughout the 

process, a multidisciplinary approach, a broad portfolio of project types that addresses multiple nodes 

on the research, education and implementation continuum, and consistent consideration for outreach, 

training, and education.

Annual Performance Goals, Indicators, 

and Trends 2006 2007 2008 2009 Fiscal Year 2010

Target Actual Result

1.3.6 The number of farmers and ranchers that 

gained an economic, environmental or qualityof-life benefit from a change in practice 

learned by participating in a SARE project.

9,610 10,240 10,849 11,4881 11,800 11,800 Met

1The figure for 2009 has been updated since the Annual Performance Plan was released. The number is calculated in July each year for the previous year.

Rationale for Met Range: This measure assessesSARE's progress toward helping farmers and ranchers improve their knowledge of sustainable agriculture production 

and marketing practices that ultimately lead to improved profitability, environmental stewardship, and quality of life. Notes: (a) As part of the program's requirements, this 

measure is calculated from periodic program impact studies.

• Data assessment metrics to meet the target allow for an actual number in the range 11,550-12,050 (+/- 250)

Data Assessment of Performance Measure 1.3.6

The number of farmers and ranchers who gained an economic, environmental or quality-of-life benefit from a change in practice learned by 

participating in a SARE project. This measure assesses SARE's progress toward helping farmers and ranchers improve their knowledge of sustainable 

agriculture production and marketing practices that ultimately leads to improved profitability, environmental stewardship, and quality of life. Notes: (a) 

As part of the program's requirements, this measure is calculated from periodic program impact studies.

• Completeness of Data — The data are based on actual data reported by SARE.

• Reliability of Data—This measure is calculated from periodic program impact studies that are part of the program's requirements.

• Quality of Data — Data are projected based on historical performance. To the extent that any of the Department’s projections are 

inaccurate, the projection of value will also be inaccurate.

Challenges for the Future

USDA must extend its outreach and expand collaborative partnerships. These steps are necessary to 

satisfy the growing interest in sustainability across much of the Nation’s agricultural enterprise.

SARE has supported a number of systems research projects to characterize and quantify 

interrelationships between production, economic, environmental, and social factors over the years. 

There is now a growing interest to increase support for such larger scale systems research projects. At 

the same time, the program leaders want to be very careful to maintain a diverse portfolio of project 

types that includes small scale exploratory projects which have historically been a rich source of 

innovation.

1.3.7 Percentage of industry compliance with the Packers and Stockyards Act

Overview

USDA’s Packers and Stockyards Program measures its overall performance by annually measuring 

regulated entities’ compliance with the Packers and Stockyards Act (P&S). P&S prohibits unfair, 

deceptive, unjustly discriminatory, and fraudulent practices. It also bans regulated businesses from 

engaging in specific anti-competitive practices.

The performance measure encompasses activities the Department conducts that directly or indirectly 

influence industry compliance. The overall performance rate is a composite index of five program-wide 

audit and inspection activities. The index includes: 

• Poultry contract compliance reviews;

• Financial audits of a random sample of a firm’s custodial accounts with the sample size set to yield 

90 percent confidence when inferred to the population of regulated entities;
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42

• Financial audits of the prompt pay records of a random sample of firms with sample size set to yield 

90 percent confidence;

• Inspection of all scales and weighing practices in all packing plants purchasing more than 1,000 

head per year; and

• Inspection of all carcass evaluation devices and practices for a random sample of packing plants 

purchasing more than 1,000 head per year.

The aggregated industry compliance rate index reflects the statutory and regulatory compliance of the 

regulated industry with the P&S.

Analysis of Results

This performance measure was unmet. Industry compliance with P&S remained at 80 percent in 2010, 

sustaining 2008’s improvement over the 75 percent rate of 2007. Results of the individual component 

inspections and audits that comprise the aggregate index show a year-to-year increase in compliance 

rates in 2009 for four of the five areas’ reviews (not shown). The fifth component, poultry contract 

compliance review, replaced insolvency audits in 2009 and scored a relatively low rate of 60 percent. If 

insolvency audits had been included in the aggregate index as in prior years, the aggregate index score 

would have been 85 percent.

Annual Performance Goals, Indicators, 

and Trends 2006 2007 2008 2009

Fiscal Year 2010

Target Actual Result

1.3.7 Percent of industry compliance with the 

Packers and Stockyards Act

n/a 75% 80% 80% 83% 80% Unmet

These legacy performance goals, part of the 2010 Annual Performance Plan, will be dropped for FY 2011. A new measure has been developed for future planning and 

reporting.

Rationale for Met Range: This lower than expected rate is attributed to two factors not known at the time of the target forecast’s creation. One is the current financial 

turmoil the industry is experiencing and how that influences compliance with custodial account and prompt payment provisions. The second is how that influences 

compliance with prompt payment laws.

Data Assessment of Performance Measure 1.3.7

The index measure denotes the level of industry compliance with the Packers and Stockyards Act. USDA’s measure of industry compliance is a 

composite measure based on actual data collected through audit and inspection activities. Details about the composite index can be found in the 

narrative above.

• Completeness of Data—Depending on the activity, the data is based on either entities within a predefined threshold or random samples of 

entities with sample size to yield 90 percent confidence.

• Reliability of Data—Department employees conduct the audits and inspections and thus collect the data directly.

• Quality of Data—Data are collected by trained USDA employees. For items using a random sample, the sample size is chosen to yield a 90 

percent confidence level.

Descriptions of Actions for Unmet Measures

This lower-than-expected rate is due largely to the poor economy’s impact on the industry and how that 

influences compliance with prompt payment laws.

Challenges for the Future

In general, the index measures three business and two financial practices for industry compliance with 

P&S. While additional focus on activities to achieve industry compliance has resulted in increased 

compliance, general economic conditions within the industry will also affect year-to-year compliance. 

Weak economic conditions may increase the incentive for industry non-compliance more quickly in the 

financial components than in the business practice areas. The full effect of these external conditions on 

the compliance rate is unknown. To the degree that this measure only has a 4-year history, 
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43

understanding the interaction of these variables on the overall compliance rate will be a challenge 

USDA confronts in future years.

1.3.8 Maintain or increase percentage of program benefits delivered through a Web environment

The performance measure “Maintain or increase percentage of program benefits delivered through a 

Web environment” is not included in the FY 2010 PAR. Data supporting the measure did not provide 

information needed to accurately measure how farmers enter data into a Web-enabled form. It is also 

clear that development of two or more measures to track both short and longer term information 

technology (IT)/Web performance across the Farm Service Agency is necessary to provide an accurate 

picture of the effort USDA is putting forth to modernize its IT systems. The Department and Agency 

commit to this task and have set a target of including such measures in the FY 2011 PAR. Our goal will 

be to have a set of metrics that captures the key phases of implementing modernized IT applications, 

especially those which enable producers to transact business with USDA on the Web. Ultimately, this 

will make the process of participation in USDA programs by producers more effective and efficient.

Strategic Goal 2: Ensure Our National Forests and Private Working Lands are Conserved, 

Restored, and Made More Resilient to Climate Change, While Enhancing Our 

Water Resources

America’s prosperity is inextricably linked to the health of its lands and natural resources. Forests, 

farms, ranches, and grasslands offer enormous environmental benefits as a source of clean air, clean 

and abundant water, and wildlife habitat. These lands generate economic value by supporting the vital 

agriculture and forestry sectors, attracting tourism and recreation visitors, sustaining green jobs. They 

are also of immense social importance, enhancing rural quality of life, sustaining scenic and culturally 

important landscapes, and providing opportunities to engage in outdoor activity and reconnect with the 

land.

Federal, tribal, State, and private lands face increasing threats from climate change, catastrophic 

wildfires, intense floods and drought, air and water pollution, aggressive diseases and pests, invasive 

species, and development pressures. These threats result in land and water conversion and reduced 

wildlife habitat. At the same time, there are immense opportunities to capture and increase the 

environmental, economic, and social benefits these lands provide. USDA plays a pivotal role in 

protecting and restoring America’s forests, farms, ranches, and grasslands while making them more 

resilient to threats and enhancing natural resources. The Department partners with private landowners 

to help protect the Nation’s 1.3 billion acres of farm, ranch, and private forestlands. As public land 

stewards, USDA works to conserve and restore 193 million acres of National Forests and Grasslands in 

the National Forest System. The Department also partners with Federal, tribal, and State Governments 

and nongovernmental organizations to assist land and natural resource managers and connect people 

to the Nation’s magnificent lands.

USDA is also a key player in the President’s America’s Great Outdoors Initiative to build a 21st century 

conservation agenda, based on the experience and ideas of people from across the country. The goal of 

the initiative is to conserve natural resources, both public and private, while reconnecting Americans to 

the outdoors.
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OBJECTIVE 2.1 RESTORE AND CONSERVE THE NATION’S FORESTS,FARMS, RANCHES AND GRASSLANDS

2.1.1 Conservation Reserve Program (CRP): Restored wetland acreage (millions of acres)

Overview

USDA’s Conservation Reserve Program (CRP) allows producers to plant long-term, resource-conserving 

covers. CRP is designed to improve the quality of water, control soil erosion, and enhance wildlife 

habitat on land enrolled in the program. In return, USDA provides participants with rental payments 

and cost-share assistance. Contract duration is between 10 and 15 years. The program is designed to 

prevent degradation of wetland areas, increase sediment trapping efficiencies, improve water quality, 

prevent soil erosion and provide habitat for waterfowl and other wildlife.

CRP includes several initiatives for wetland restoration and enhancement. One is the Farmable 

Wetlands Program (FWP). FWP restores acres of farmable wetlands and associated buffers by 

improving the lands’ hydrology and vegetation. FWP is designed to prevent degradation of wetland 

areas, increase sediment trapping efficiencies, improve water quality, prevent soil erosion, and provide 

habitat for waterfowl and other wildlife. Other initiatives include the 250,000 acre Bottomland 

Hardwood Timber Initiative, the 250,000 acre Nonfloodplain Wetland Restoration Initiative, and the

150,000 acre Prairie Pothole Duck Nesting Habitat Initiative.

Analysis of Results

The target for this performance measure was exceeded. USDA has made substantial progress in 

protecting watershed health and enhancing soil quality. Total CRP enrollment stands at more than 31.3 

million acres. These acres annually reduce soil erosion by more than 450 million tons. They also reduce 

nitrogen, phosphorus, and sediment leaving the field by more than 85 percent, and sequester more than 

44 million metric tons of carbon dioxide. CRP has reached more than 2 million acres of restored 

wetlands.

CRP also contributes to increased wildlife populations. It has helped the duck population of the North 

Prairie Region expand by 2 million. The program has also recovered sage and sharp-tailed grouse 

populations in Eastern Washington and increased ring-necked pheasant and grassland bird 

populations.

Annual Performance Goals, Indicators, 

and Trends 2006 2007 2008 2009

Fiscal Year 2010

Target Actual Result

2.1.1 CRP: Restored wetland acreage (million 

acres)

2.03 2.08 1.98 2.04 1.99 2.05 Exceeded

This legacy performance goal, part of the 2010 Annual Performance Plan, will be dropped for FY 2011. A new measure has been developed for future planning and 

reporting.

Rationale for Met Range: Data assessment metrics to meet the target allow for an actual number in the range of 1.94-2.04 million acres.

Data Assessment of Performance Measure 2.1.1

The data source for this measure is the National CRP Contract and Offer Data Files.

• Completeness of Data — The targets and actual data are annual. Data are based on estimated results through September 30, 2010. The 

measure reports national acres under contract with the following wetland practices: Wetland Restoration, Marginal Pastureland Buffers, 

Bottomland Trees, and Shallow Water Areas for Wildlife, and Farmable Wetlands Programs. There are no known data limitations.

• Reliability of Data — Data are collected locally, cross-checked, and aggregated at HQ. CRP is authorized through FY 2012.

• Quality of Data — The Department is conducting research to quantify the environmental functions provided by CRP wetland restoration. 

When available, these estimates may also be used to track performance. 
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Challenges for the Future

In FY 2010, CRP enrollment authority was decreased in the Food, Conservation, and Energy Act of

2008 to no more than 32 million acres. The act is designed to expand food security programs, protect 

the Nation’s vital natural resources, promote healthier foods and local food networks, and reform 

commodity and biofuel programs to reflect domestic priorities. During FY 2011, enrollments are 

expected to be between 31 and 32 million acres. While creating a challenging situation, USDA remains 

strongly committed to attaining its conservation and global change objectives. Special focus will be 

placed on targeting and monitoring acreage impacts in the President’s High Priority Performance Goals 

priority areas. To advance this area, the Department will seek new wetland contracts for more than 

50,000 acres in FY 2011 and FY 2012. USDA will also seek contracts covering 40,000 acres to fulfill 

riparian buffers and grass filter goals. In addition, USDA will continue several initiatives, including the 

350,000-acre upland bird buffer, the 150,000-acre Duck Nesting Habitat Initiative, and the State Areas 

for Wildlife Enhancement Initiative. The latter is a 650,000-acre initiative announced in FY 2007 to 

improve habitat for endangered, threatened, or high-priority fish and wildlife species. USDA will also 

continue the 250,000-acre initiative to restore longleaf pine. In the early 1700s, more than 90 million 

acres of longleaf pine ecosystem existed. Today, fewer than 4 million acres exist.

2.1.2 Conservation Technical Assistance (CTA): Cropland with conservation applied to improve soil quality 

(millions of acres)

2.1.3 Environmental Quality Incentives Program (EQIP): Cropland with conservation applied to improve soil 

quality (millions of acres)

Overview

Agriculture and the quality of America’s soil and water resources are vital to the Nation’s welfare. 

Approximately 1.5 billion acres (79 percent of the total acres within the contiguous United States) are 

non Federal land. Approximately 90 percent of these acres are cropland, rangeland, pastureland, or 

private nonindustrial forestland. The care and health of privately owned working farm and ranch lands 

are dependent upon the individuals who own and manage them. High-quality soils support the efficient 

production of crops for food, fiber and energy. They support sustainability of agricultural operations 

through good stewardship, and minimize offsite environmental impacts to surface and groundwater 

systems.

Restoring and maintaining high-quality soils on working agricultural land is one of the objectives of 

conservation planning. USDA helps producers install conservation practices and systems that meet 

established technical standards and specifications. The Department also provides financial incentives 

and assistance to encourage producers to adopt land treatment practices proven to provide significant 

public benefits. Conservation planning is the first step in addressing a resource concern. These plans 

provide producers with information on the current condition of the land, irrigation management, and 

wildlife habitat needs. This work gives the owner/operator a full understanding of the conservation 

practices needed to address any problems. It also introduces the USDA programs available to assist in 

financing conservation practice implementation.

Analysis of Results

USDA met its targets for helping producers apply conservation practices on cropland to improve soil 

quality. The Department assisted landowners and operators in developing 14.1 million acres of 

conservation planning, and 14.6 million acres of applied conservation practices from all USDA 

programs on privately owned and operated crop and hay land. Operation changes in crop rotations, 

equipment, or management practices often necessitate the need for technical assistance to adjust 

conservation systems or conservation practice timing, even on land well-protected under previous 

systems. Approximately 13.2 million unique acres of cropland were treated for soil quality across the 
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46

nation. Sixty-three percent or 8.2 million acres of that land was treated through CTA technical 

assistance, and 36 percent or 4.8 million acres treated using EQIP technical and financial assistance1

. 

Annual Performance Goals, Indicators, 

and Trends 2006 2007 2008 2009 Fiscal Year 2010

Target Actual Result

2.1.2 CTA: Cropland with conservation applied to 

improve soil quality (millions of acres)

6.4 7.3 8.3 7.6 7.5 8.2 Met

2.1.3 EQIP: Cropland with conservation applied to 

improve soil quality (millions of acres)

3.4 5.3 5.6 4.8 5.0 4.8 Met

These legacy performance goals, part of the 2010 Annual Performance Plan, will be dropped for FY 2011. A new measure has been developed for future planning and 

reporting.

Actual performance October 1, 2009 through September 30, 2010.

Rationale for Met Range: Data assessment metrics to meet the target allow for an actual number in the range: CTA 6.8 (90 percent) – 8.3 (110 percent);

EQIP 4.5 (90 percent) – 5.5 (110 percent). The chief sources of data for these performance measures are the National Conservation Planning Database (NCP), the 

Program Contracts Database (ProTracts) and the Performance Results System (PRS).

Data Assessment of Performance Measure 2.1.2 and 2.1.3

To ensure program accountability and evaluate program efficiency, data on conservation plans written and conservation practices applied must be 

linked to the program that funded the staff time needed to carry out each activity. Data on the linkage of programs and conservation practices applied 

are accurate because the conservation program responsible for applying each practice is documented in the conservation plan developed in the 

Customer Service Toolkit (Toolkit). The same land unit may benefit from the application of more than one conservation practice. Where more than one 

program is used to apply practices on the same land unit, each program is credited under the performance measure.

• Completeness of Data — The performance reported for these measures is based on actual data reported through September 30 of FY2010. 

Numerous data quality mechanisms within PRS ensure the completeness of each performance record entry. Each performance record must 

adhere to a set of quality assurance requirements during the upload process to be credited towards the performance measure.

• Reliability of Data For FY 2010, the data reported for these performance measures were calculated within PRS based on information 

validated and received from the NCP and ProTracts. Conservation plans are developed in consultation with the customer, created with the 

Toolkit, and warehoused in the NCP. Applied conservation practices are date-stamped, geo-referenced and linked to an employee ID, 

enabling detailed quality-assurance reviews. Periodic reviews are conducted at the field, state and national level to assess the accuracy of 

reported data.

• Quality of Data — Overall quality of the data is good. The data are reported by field staff located where the conservation is occurring. Field 

staffs are trained and skilled in conservation planning and application suited to the local resource conditions. Error checking enhancements 

and reports within the PRS application maintain data quality and allow users at the local, state and national level to monitor data inputs.

Challenges for the Future

The economy influences producers’ decisions on conservation measures. Even with the availability of 

financial assistance, there is hesitation to commit to conservation practices in an uncertain economic 

climate.

2.1.4 CTA: Grazing land and forest land with conservation applied to protect and improve the resource base 

(millions of acres)

2.1.5 EQIP: Grazing land and forest land with conservation applied to protect and improve the resource base 

(millions of acres)

Overview

Grazed forests, range and grasslands comprise nearly 55 percent of the Nation’s total land area of 2.3 

billion acres. Healthy forests, grazing and grasslands contribute to the health and well-being of the 

Nation’s soil, water, air and wildlife. USDA’s strategic focus is to reduce fire danger, minimize the threat 

of invasive species, reduce soil erosion, maximize groundwater recharge and improve surface water 

quality. The Department provides technical assistance to farmers and ranchers on privately held forests, 

working agricultural lands and grasslands.

 

1 Approximately 0.2 million acres of cropland received soil quality improvement through other NRCS programs.
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47

Conservation planning is the first step in maintaining a sustainable, highly productive grazing system. 

Owners/operators are advised of USDA programs that may help finance conservation practice 

implementation. This process is designed to:

• Improve or maintain the natural moisture holding capacity of the soil;

• Maintain or enhance groundwater recharge areas;

• Maintain animal carrying capacity;

• Improve offsite water quality;

• Provide carbon sequestration;

• Reduce competition from invasive species on native plants; and

• Maximize forest productivity, all while minimizing wild fire fuel levels.

Analysis of Results

USDA exceeded both its CTA and EQIP targets for conservation applied to protect and enhance the 

Nation’s privately owned and operated grazing and forest lands. USDA conservation experts assisted 

landowners and operators in writing or updating conservation plans and applying conservation 

practices on private forest, grazing, and grasslands. Operation changes in crop rotations, equipment, or 

management practices often necessitate the need for technical assistance to adjust conservation systems 

or conservation practice timing, even on land well-protected under previous systems.

Annual Performance Goals, Indicators, 

and Trends 2006 2007 2008 2009 Fiscal Year 2010

Target Actual Result

2.1.4 CTA: Grazing land and forest land with 

conservation applied to protect and improve 

the resource base (millions of acres)

8.0 12.2 16.5 16.0 14.6 17.6 Exceeded

2.1.5 EQIP: Grazing land and forest land with 

conservation applied to protect and improve 

the resource base (millions of acres)

12.2 16.5 16.9 17.2 15.0 17.5 Exceeded

These legacy performance goals, part of the 2010 Annual Performance Plan, will be dropped for FY 2011. A new measure has been developed for future planning and 

reporting.

Data assessment metrics to meet the CTA target allow for an actual number in the range 13.1 (90 percent) – 16.1 (110 percent).

Data assessment metrics to meet the EQIP target allow for an actual number in the range 13.5 (90 percent) – 16.5 (110 percent).

Rationale for Met Range: The chief sources of data for these performance measures are the National Conservation Planning Database (NCP), the Program Contracts 

Database (ProTracts) and the Performance Results System (PRS).

Data Assessment of Performance Measure 2.1.4 and 2.1.5 

To ensure program accountability and evaluate program efficiency, data on conservation plans written and conservation practices applied must be 

linked to the program that funded the staff time needed to carry out each activity. Data on the linkage of programs and conservation practices applied 

are accurate because the conservation program responsible for applying each practice is documented in the conservation plan developed in Toolkit. 

The same land unit may benefit from the application of more than one conservation practice. Where more than one program is used to apply practices 

on the same land unit, each program is credited under the performance measure.

• Completeness of Data — The performance reported for these measures is based on actual data reported through September 30 of FY2010. 

Numerous data quality mechanisms within PRS ensure the completeness of each performance record entry. Each performance record must 

adhere to a set of quality assurance requirements during the upload process to be credited towards the performance measure.

• Reliability of Data — For FY 2010, the data reported for these performance measures were calculated within PRS based on information 

validated and received from the NCP and ProTracts. Conservation plans are developed in consultation with the customer, created with the 

Customer Service Toolkit (Toolkit), and warehoused in the NCP. Applied conservation practices are date-stamped, geo-referenced and 

linked to an employee ID, enabling detailed quality-assurance reviews. Periodic reviews are conducted at the field, state and national level 

to assess the accuracy of reported data.

• Quality of Data — Overall quality of the data is good. The data are reported by field staff located where the conservation is occurring. Field 

staffs are trained and skilled in conservation planning and application suited to the local resource conditions. Error checking enhancements 

and reports within the PRS application maintain data quality and allow users at the local, state and national level to monitor data inputs.
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48

Challenges for the Future

Several serious threats pose risks to public and private forestland and grassland. They include wild fire, 

invasive species, loss of open space and unmanaged outdoor recreation. In many areas, especially in the 

West, most watersheds and landscapes include public land managed by several Federal agencies and

private, State and tribal lands. Protecting the natural resources in these areas requires cooperation 

among a large number of stakeholders.

2.1.6 Farm and Ranchlands Protection Program (FRPP): Prime, unique, or important farmland protected from 

conversion to nonagricultural uses by conservation easements, acres

Overview

The health of the Nation’s working lands and natural resources directly affect the sustainability of food 

and fiber production, water quality and quantity, wildlife habitat, aquifer recharge, and clear air. The 

sustainability of working farms provides essential economic stability to the rural community.

USDA works with farmers, ranchers, and forest landowners to maintain working lands and preserve 

open space. This includes developing markets and purchasing land or conservation easements. The 

latter is designed to slow, and in some cases reverse, the conversion and fragmentation of 

environmentally and economically significant farms and grasslands. The Farm and Ranch Protection 

Program (FRPP) allows the Department to purchase conservation easements to protect topsoil by 

limiting nonagricultural uses of the land. USDA also partners with State, local, and tribal governments 

and nongovernment organizations to share in the costs of acquiring conservation easements. For every 

Federal dollar invested through FRPP, an additional two dollars has been contributed by the 

participating State, local, and tribal entities, and nongovernmental organizations and landowners.

Analysis of Results

The performance measure was exceeded, at 13,898 acres, or 35 percent, above target. The historical 

percentage of prime farmland easement acres to total FRPP easement acres is 65 percent (prime 

acres/farmland acres). In FY 2010, a combination of above-average closing on total FRPP farmland 

easements (+16,646 acres) and a prime to farmland percentage increase to 74 percent explain why the 

target exceeded estimates.

The combined acreage from all 4 easement programs totaled 173,323 acres. FRPP farmland made up 

72,646 of that total. FRPP easements on prime, unique, and important farmland was 53,898 acres. To 

achieve this result, USDA worked with eligible State, tribal, or local governments or nongovernmental 

organizations to acquire conservation easements from interested landowners. This performance 

measure emphasizes how vital prime, unique, and important farmland is to the Nation’s food security 

through sustained agricultural production.
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Annual Performance Goals, Indicators, 

and Trends 2006 2007 2008 2009 Fiscal Year 2010

Target Actual Result

2.1.6 FRPP: Prime, unique, or important farmland 

protected from conversion to nonagricultural 

uses by conservation easements (acres)

46,909 38,495 27,401 38,260 40,000 53,898 Exceeded

This legacy performance goal, part of the 2010 Annual Performance Plan, will be dropped for FY 2011. A new measure has been developed for future planning and 

reporting.

Actual performance October 1, 2009 through September 30, 2010.

Data assessment metrics to meet the target allow for an actual number in the range 36,000 (90 percent) – 44,000 (110 percent).

Rationale for Met Range: The chief sources of data for these performance measures are the National Conservation Planning Database (NCP), the Program Contracts 

Database (ProTracts) and the Performance Results System (PRS).

Data Assessment of Performance Measure 2.1.6

To ensure program accountability and evaluate program efficiency, data on conservation plans written and conservation practices applied must be 

linked to the program that funded the staff time needed to carry out each activity. Data on the linkage of programs and conservation practices applied 

are accurate because the conservation program responsible for applying each practice is documented in the conservation plan developed in Toolkit.

The same land unit may benefit from the application of more than one conservation practice. Where more than one program is used to apply practices 

on the same land unit, each program is credited under the performance measure.

• Completeness of Data — The performance reported for these measures is based on actual data reported through September 30 of FY 2010. 

Numerous data quality mechanisms within PRS ensure the completeness of each performance record entry. Each performance record must 

adhere to a set of quality assurance requirements during the upload process to be credited towards the performance measure.

• Reliability of Data — For FY 2010, the data reported for these performance measures were calculated within PRS based on information 

validated and received from the NCP and ProTracts. Conservation plans are developed in consultation with the customer, created with the 

Customer Service Toolkit (Toolkit), and warehoused in the NCP. Applied conservation practices are date-stamped, geo-referenced and 

linked to an employee ID, enabling detailed quality-assurance reviews. Periodic reviews are conducted at the field, State and national level 

to assess the accuracy of reported data.

• Quality of Data — Overall quality of the data is good. The data are reported by field staff located where the conservation is occurring. Field 

staffs are trained and skilled in conservation planning and application suited to the local resource conditions. Error checking enhancements 

and reports within the PRS application maintain data quality and allow users at the local, State, and national level to monitor data inputs. 

Challenges for the Future

Agricultural land conversions have slowed in recent years, but are expected to rise in the future. The 

loss of agricultural operations and their associated lands destabilizes rural economies and places stress 

on agricultural businesses. The demand for conservation easements far exceeds available funds, so 

providing easements to agricultural operations that provide the most benefits to the local community 

will remain a major challenge.

2.1.7 Wildlife Habitat Incentives Program (WHIP): Non-Federal land with conservation applied to improve fish 

and wildlife habitat quality (acres) 

Overview

USDA addresses the needs of wildlife on privately owned working agricultural lands. The Department 

provides technical and financial assistance to landowners and managers to restore, improve or maintain 

suitable habitat. USDA technical experts provide on-site assistance to assess the quality of wildlife 

habitat, the actions necessary to restore or enhance that habitat, and develop management plans to 

maintain the habitat in a suitable (sustainable) condition. These technical experts develop management 

plans with recommendations for wildlife shelter, nesting, water and food relative to current site 

conditions. Implementation of the plan results in sustained and enhanced wildlife habitat.

The Department combines financial and technical assistance through a variety of programs to improve 

resident or seasonal habitat for wildlife considered threatened and listed on endangered species lists 

(Federal or State). These programs are also designed to help other species experiencing serious declines 

due to habitat loss. USDA financial assistance may involve assistance with conservation practice 
Annual Performance Report

50

installation, the development of long-term easements to protect against conversion, or a combination of 

the two. USDA provided technical and financial assistance to restore or enhance wildlife habitat to 13 

million acres and, using the Wetlands Reserve Program (WRP), secured easements on an additional 

74,180 acres. WRP is a voluntary program offering landowners the opportunity to protect, restore, and 

enhance wetlands on their property.

USDA also works with other agencies and private organizations to provide producers with technical and 

financial assistance, information and other resources to evaluate, and encourage the adoption of 

conservation measures and management practices beneficial to wildlife.

Analysis of Results

The Department’s target was not met. The measure identifies where USDA technical experts, using 

WHIP, assisted landowners with the installation of conservation practices designed to improve or 

restore critical wildlife habitat. Some of the conservation practices installed were on WRP easements.

Annual Performance Goals, Indicators, 

and Trends 2006 2007 2008 2009 Fiscal Year 2010

Target Actual Result

2.1.7 WHIP: Non-Federal land with conservation 

applied to improve fish and wildlife habitat 

quality (acres)

175,543 388,769 316,896 335,402 350,000 295,227 Unmet

This legacy performance goal, part of the 2010 Annual Performance Plan, will be dropped for FY 2011. A new measure has been developed for future planning and 

reporting.

Actual performance October 1, 2009 through September 30, 2010.

Data assessment metrics to meet the target allow for an actual number in the range 315,000 (90 percent) – 385,000 (110 percent).

Rationale for Met Range: The chief sources of data for these performance measures are the National Conservation Planning Database (NCP), the Program Contracts 

Database (ProTracts) and the Performance Results System (PRS).

Data Assessment of Performance Measure 2.1.7

To ensure program accountability and evaluate program efficiency, data on conservation plans written and conservation practices applied must be 

linked to the program that funded the staff time needed to carry out each activity. Data on the linkage of programs and conservation practices 

appliedare accurate because the conservation program responsible for applying each practice is documented in the conservation plan developed in 

Toolkit. The same land unit may benefit from the application of more than one conservation practice. Where more than one program is used to apply 

practices on the same land unit, each program is credited under the performance measure.

• Completeness of Data — The performance reported for these measures is based on actual data reported through September 30 of FY 2010. 

Numerous data quality mechanisms within PRS ensure the completeness of each performance record entry. Each performance record must 

adhere to a set of quality assurance requirements during the upload process to be credited towards the performance measure.

• Reliability of Data — For FY 2010, the data reported for these performance measures were calculated within PRS based on information 

validated and received from the NCP and ProTracts. Conservation plans are developed in consultation with the customer, created with the 

Customer Service Toolkit (Toolkit), and warehoused in the NCP. Applied conservation practices are date-stamped, geo-referenced and 

linked to an employee ID, enabling detailed quality-assurance reviews. Periodic reviews are conducted at the field, state and national level 

to assess the accuracy of reported data.

• Quality of Data — Overall quality of the data is good. The data are reported by field staff located where the conservation is occurring. Field 

staffs are trained and skilled in conservation planning and application suited to the local resource conditions. Error checking enhancements 

and reports within the PRS application maintain data quality and allow users at the local, state and national level to monitor data inputs. 

Descriptions of Actions for Unmet Measures

Producers are less willing to make long-term commitments regarding the use of their land during times 

of economic uncertainty. This affects the creation and restoration of critical upland and wetland 

habitats.

Challenges for the Future

Many wildlife projects are supported by a combination of Federal, State, local, and private funds. State 

and local budget constraints may affect project implementation.
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OBJECTIVE 2.2 PROTECT AND ENHANCE AMERICAS WATER RESOURCES

2.2.1 CTA: Comprehensive nutrient management plans applied (number of plans)

2.2.2 EQIP: Comprehensive nutrient management plans applied (number of plans)

Overview

The Department provides science-based technical assistance to land users on privately owned lands to 

help protect and enhance the Nation’s water resources. The Conservation Technical Assistance Program 

(CTA) is designed to provide technical assistance to land users to address opportunities, concerns, and 

problems related to the use of natural resources. This assistance helps land users make sound natural 

resource management decisions on private, tribal, and other non Federal lands. A major component of 

a conservation plan on animal operations is the Comprehensive Nutrient Management Plan (CNMP). A 

CNMP addresses the specialized requirements of animal agriculture. The plan covers such issues as 

animal feed, animal manure storage, and manure (nutrient) application on crop and hay lands.

A CNMP is not one practice, but an integrated set of practices which fully address feed, storage, 

nutrient, and erosion control on all land associated with the animal operation. USDA conservation 

experts assist land owners and operators by developing CNMPs that take into account the crop 

production (food), nutrient applications, and potential offsite environmental impacts to surface and 

groundwater systems, such as soil and nutrient runoff. As a result, the technical expert and 

owner/operator agree to an integrated set of conservation practices consistent with the farm/ranch 

operation, maximize the use of nutrient resources and protect ground and surface water quality. In 

addition, the availability of financial assistance through one or more of the Department’s programs for 

practice implementation is discussed. More than 60 percent of USDA’s financial assistance for surface 

and groundwater protection is focused on animal operations.

Once a CNMP is developed, the Department provides owners and operators with technical and financial 

assistance. This assistance helps them install the conservation practices and systems identified within 

the CNMP. All practices designed and installed using USDA technical or financial assistance meet 

established technical standards and specifications. As animal agriculture has become more 

concentrated, public concern about potential environmental damage has increased. The Department 

focuses on helping producers comply with State and local regulations to minimize the potential for 

damage to water or air resources from livestock operations.

Analysis of Results

While USDA met its CTA target, it did not meet the EQIP target.

Annual Performance Goals, Indicators, 

and Trends 2006 2007 2008 2009 Fiscal Year 2010

Target Actual Result

2.2.1 CTA: Comprehensive nutrient management 

plans applied (number of plans) 2,269 1,911 1,745 1,485 1,300 1,349 Met

2.2.2 EQIP: Comprehensive nutrient management 

plans applied (number of plans) 2,774 2,490 2,520 2,019 2,000 1,739 Unmet

These legacy performance goals, part of the 2010 Annual Performance Plan, will be dropped for FY 2011. A new measure has been developed for future planning and 

reporting.

Actual performance October 1, 2009 through September 30, 2010.

Data assessment metrics to meet the target allow for an actual number in the range CTA 1,170 (90 percent) – 1,430 (110 percent).

Data assessment metrics to meet the target allow for an actual number in the range EQIP 1,800 (90 percent) – 2,200 (110 percent).

Rationale for Met Range: The chief sources of data for these performance measures are the National Conservation Planning Database (NCP), the Program Contracts 

Database (ProTracts) and the Performance Results System (PRS).

Data Assessment of Performance Measure 2.2.1 and 2.2.2
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Annual Performance Goals, Indicators, 

and Trends 2006 2007 2008 2009 Fiscal Year 2010

Target Actual Result

To ensure program accountability and evaluate program efficiency, data on conservation plans written and conservation practices applied must be 

linked to the program that funded the staff time needed to carry out each activity. Data on the linkage of programs and conservation practices applied 

are accurate because the conservation program responsible for applying each practice is documented in the conservation plan developed in Toolkit. 

The same land unit may benefit from the application of more than one conservation practice. Where more than one program is used to apply practices 

on the same land unit, each program is credited under the performance measure.

• Completeness of Data — The performance reported for these measures is based on actual data reported through September 30 of FY

2010. Numerous data quality mechanisms within PRS ensure the completeness of each performance record entry. Each performance 

record must adhere to a set of quality assurance requirements during the upload process to be credited towards the performance measure.

• Reliability of Data — For FY 2010, the data reported for these performance measures were calculated within PRS based on information 

validated and received from the NCP and ProTracts. Conservation plans are developed in consultation with the customer, created with the 

Customer Service Toolkit (Toolkit), and warehoused in the NCP. Applied conservation practices are date-stamped, geo-referenced and 

linked to an employee ID, enabling detailed quality-assurance reviews. Periodic reviews are conducted at the field, state and national level 

to assess the accuracy of reported data.

• Quality of Data — Overall quality of the data is good. The data are reported by field staff located where the conservation is occurring. Field 

staffs are trained and skilled in conservation planning and application suited to the local resource conditions. Error checking enhancements 

and reports within the PRS application maintain data quality and allow users at the local, state and national level to monitor data inputs. 

Descriptions of Actions for Unmet Measures

USDA fell short of its EQIP target by 261 plans.

Uncertainty within the economic sector continues to influence individual conservation practice 

installation and completion of CNMPs. This uncertainty affects the willingness of landowner/operators 

to invest in conservation practices that do not provide an immediate financial return. In most cases, 

low- or no-cost, easily implemented CNMPs have been completed. Those that remain, both planned and 

in the design stage, are far more complicated. They require a higher level of owner/operator financial 

investment. Since CNMPs are reported only after all planned practices are installed, postponing or 

cancelling the installation of even one practice seriously impacts Department performance with regard 

to anticipated workload. This was the case in FY 2010, and could be a factor over the next few years.

Challenges for the Future

The quality of ground and surface waters to support intended uses is a continuing concern, as is the 

supply of these waters to meet expanding demand. Challenges to maintaining the quality of ground and 

surface waters will include the continuing concentration of livestock operations, increased acreage 

cropped for ethanol and cellulosic sources of biomass, the risk of soil erosion from more frequent and 

intense storm events, and reduced surface plant cover due to drought. Competition for water will 

continue to increase, especially in areas with a limited or variable water supply. In addition, the 

expansion of cropped acres to produce energy may increase agricultural demand for water. Climate 

change may also impact future water quality and quantity. Drought, increasingly variable precipitation 

rates, and urban uses in many parts of the Nation, result in water shortages in areas that have had 

adequate supplies in the past.

If global market demands encourage increased food and feed production, agricultural producers may 

use environmentally sensitive land for production rather than establishing long-term crop rotations 

suitable for site conditions, such as conservation covers or buffers.

2.2.3 Wetlands Reserve Program (WRP): Wetlands created, restored or enhanced (acres)

Overview

Approximately 87 percent of the Nation’s surface supply of drinking water originates on forest, farms 

and range lands. Protection and restoration of America’s wetland ecosystems is crucial to improving 
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53

water quality. These ecosystems provide habitat for fish and wildlife, store floodwaters, and maintain 

surface water flow during seasonal dry periods. According to the Council on Environmental Quality, 

agricultural conservation and technical assistance accounts for 58 percent of the wetland acreage 

restored or created by Federal programs.

USDA has several programs to provide technical assistance in managing wetland habitats as well as 

financial assistance to secure easements and apply conservation practices. The Wetlands Reserve 

Program (WRP) is the primary USDA program dedicated to the restoration, creation, and enhancement 

of wetland ecosystems. Often, USDA partners with individuals, communities, nongovernmental 

organizations, tribes, State, and local governments to provide the assistance necessary to secure longterm or permanent easements on wetland habitat and systems in danger of conversion or loss.

Analysis of Results

The Department met the FY 2010 target for the performance measure. USDA provides technical and/or 

financial assistance to install one or more conservation practices designed to create, restore or enhance 

wetlands on working farms and ranches. The objective of practice installation is the restoration, 

creation, or enhancement of a working wetland system.

Annual Performance Goals, Indicators, 

and Trends 2006 2007 2008 2009 Fiscal Year 2010

Target Actual Result

2.2.3 WRP: Wetlands created, restored or 

enhanced. (acres) 181,979 149,330 128,860 106,379 125,000 129,082 Met

This legacy performance goal, part of the 2010 Annual Performance Plan, will be dropped for FY 2011. A new measure has been developed for future planning and 

reporting.

Actual performance October 1, 2009 through September 30, 2010.

Data assessment metrics to meet the target allow for an actual number in the range 112,500 (90 percent) – 137,500 (110 percent).

Rationale for Met Range: The chief sources of data for these performance measures are the National Conservation Planning Database (NCP), the Program Contracts 

Database (ProTracts) and the Performance Results System (PRS).

Data Assessment of Performance Measure 2.2.3

To ensure program accountability and evaluate program efficiency, data on conservation plans written and conservation practices applied must be 

linked to the program that funded the staff time needed to carry out each activity. Data on the linkage of programs and conservation practices applied 

are accurate because the conservation program responsible for applying each practice is documented in the conservation plan developed in Toolkit. 

The same land unit may benefit from the application of more than one conservation practice. Where more than one program is used to apply practices 

on the same land unit, each program is credited under the performance measure.

• Completeness of Data — The performance reported for these measures is based on actual data reported through September 30 of FY 2010. 

Numerous data quality mechanisms within PRS ensure the completeness of each performance record entry. Each performance record must 

adhere to a set of quality assurance requirements during the upload process to be credited towards the performance measure.

• Reliability of Data — For FY 2010, the data reported for these performance measures were calculated within PRS based on information 

validated and received from the NCP and ProTracts. Conservation plans are developed in consultation with the customer, created with the 

Customer Service Toolkit (Toolkit), and warehoused in the NCP. Applied conservation practices are date-stamped, geo-referenced and 

linked to an employee ID, enabling detailed quality-assurance reviews. Periodic reviews are conducted at the field, state and national level 

to assess the accuracy of reported data.

• Quality of Data — Overall quality of the data is good. The data are reported by field staff located where the conservation is occurring. Field 

staffs are trained and skilled in conservation planning and application suited to the local resource conditions. Error checking enhancements 

and reports within the PRS application maintain data quality and allow users at the local, state and national level to monitor data inputs.

Challenges for the Future

Commodity prices, economic conditions, weather, and developmental pressures influence the ability 

and willingness of agricultural producers to restore, improve, and protect habitat areas. In hard or 

uncertain economic times, producers are less willing to make long-term commitments regarding the use 

of their land. This hesitation may affect easement acquisition and wetland restoration of prior 

converted cropland.
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54

OBJECTIVE 2.3 REDUCE RISK FROM CATASTROPHIC WILDFIRE AND RESTORE FIRE TO ITS APPROPRIATE PLACE ON THE LANDSCAPE

2.3.1 Percentage of total National Forest System land base for which fire risk is reduced through movement to a 

better condition class

Overview

USDA measures the relative progress of hazardous fuels treatments against a 2005 baseline measure of 

Fire Regime Condition Class (FRCC). FRCC is an expression of the departure of the current condition 

from the historical fire regime, resulting in alterations to the ecosystem. A condition class is measured 

as a 1, 2, or 3, with 3 being the most significant departure from the historical fire regime. Activities that 

cause the departure include fire exclusion, timber harvesting, grazing, and the growth of exotic plant 

species, insects, and disease.

The measure is calculated by determining how many acres were moved to an improved condition class 

during the fiscal year. That number is added to the previous year’s cumulative total and divided by the 

baseline number of acres that “needed” improvement. The baseline was developed in 2005 based on an 

estimate of how many acres were in FRCC 2 or 3.

In 2005, it was estimated that 123 million acres were in FRCC 2 or 3. The acres which move to a better 

condition class are added to a cumulative total and divided by the 2005 baseline. Therefore, the annual 

increment is only a fraction of a percent.

Analysis of Results

USDA did not reach the performance target.

Hazardous fuel treatments are completed on more than 2 million acres each year. Though many 

treatments do not improve condition class, the area treated will likely have a reduced risk of unnaturally 

severe fire to communities and resources, while producing integrated benefits for restoring fire-adapted 

ecosystems, enhancing wildlife habitat, and increasing forest health and watershed quality. In addition, 

while some treatments maintain condition class and others are incremental steps toward an improved 

condition class, several hundred thousand acres are moved to a better condition class annually. A 

variety of factors influence the ability to meet this goal, including weather, resource availability, and the 

number of treatments required. It often takes multiple treatments to move an area toward its desired 

condition, and it may take repeated entries over time to move an area to the desired condition.

Annual Performance Goals, Indicators, 

and Trends 2006 2007 2008 2009 Fiscal Year 2010

Target Actual Result

2.3.1 Percentage of total National Forest System 

land base for which fire risk is reduced 

through movement to a better condition class

1.1% 1.9% 2.1% 3.0% 3.0% 2.55% Unmet

The FY 2010 result is estimated based on three quarters of actual data and a fourth quarter projection.

Rationale for Met Range: Data assessment metrics to meet the target allow for an actual number in the range of 2.85 percent to 3.15 percent. USDA projects that it will 

narrowly miss this target. While USDA has conducted numerous treatments using both prescribed fire and mechanical treatment in FY 2010, it often can take multiple 

treatments in a single area to move an acre to Condition Class 1. Condition Class 1 refers to acres in a condition where fire regimes are within a historical range and the 

risk of losing key ecosystem components is low. Also, while acres affected by wildland fires can contribute to improved condition class, the number of wildfires, and the 

acreage affected on National Forest System lands in FY 2010 was somewhat lower than expected.

Data Assessment of Performance Measure 2.3.1

The data for hazardous fuels treatments are reliable, of good quality, and certified by the respective line officer. USDA wildfire and other program 

managers collected, compiled, and analyzed the data.

• Completeness of Data — Values shown are final FY 2010 data.

• Reliability of Data — All data for hazardous fuels were reported through the National Fire Plan Operations Reporting System. USDA and 

the U.S. Department of the Interior land-management agencies co-developed the system. Its data are collected, compiled, and analyzed by 

program managers, and certified by the respective line officer.
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Annual Performance Goals, Indicators, 

and Trends 2006 2007 2008 2009 Fiscal Year 2010

Target Actual Result

• Quality of Data — Data quality has been assessed at about 90 percent for project data in all regions. The quality of these data is monitored 

continuously, and being improved with focused training and policy direction on reporting requirements. Data are projected based on 

historical performance and year-to-date actual accomplishments. If information is not entered into the systems of record immediately upon 

completion of the project, the quality of the projection will be compromised. USDA uses clear business rules and program direction to 

ensure the timely entry of project completions. In FY 2010, USDA redesigned its data entry system to increase overall product quality.

Descriptions of Actions for Unmet Measures

FRCC is primarily a measure of current ecological condition compared to an historic fire regime. It is 

not a direct measure of fire risk or fire danger. The performance measure was not met because the 

program shifted funds to treatment of Wildland Urban Interface (WUI) acres. WUI refers to residential 

areas in locations subject to wildland fire. This change in funding and emphasis reduced overall 

accomplishment of acres and thereby reduced the total number of acres that improved condition class.

Treatments in the WUI are more likely to emphasize objectives related to resource protection over 

objectives related to ecological conditions.

Challenges for the Future

USDA continues to increase its focus on treating more strategic acres in the more costly WUI. The 

Department’s shift in focus to these priority acres means that fewer acres overall will be treated, leading 

to fewer changes in condition class. In addition, rising costs, such as fuel and aviation, contributed to 

increased expenditures, not all of which could be offset by cost management actions. Other integrated 

accomplishments will decrease due to reduced budgets in programs that contribute to the overall 

unified fuels target. These reductions will affect progress towards the desired conditions.

2.3.2 Acres of WUI fuels treated to reduce the risk of catastrophic fire

Overview

USDA’s hazardous fuels reduction program conducts fuel-reduction treatments on forest lands. These 

treatments are designed to reduce the risk of catastrophic fire and restore and maintain fire-adapted 

ecosystems. Implementing fuel treatments near communities in the WUI continues to be a high 

priority. As part of this process, communities are allowed to determine the best ways to reduce the risk 

of wildfire through Community Wildlife Protection Plans (CWPPs).

Analysis of Results

USDA exceeded the target for this measure.

WUI treatments have become more expensive and increasingly more complex. This is due to the 

treatment proximity to communities and infrastructure, and the associated air quality regulations and 

safety concerns. USDA provides cost-effective protection to communities and resources by shifting its 

focus to the highest priority areas. As a result of a more focused application of resources, including 

California making significant contributions to the total acres treated, the 2010 target was exceeded.

Annual Performance Goals, Indicators, 

and Trends 2006 2007 2008 2009 Fiscal Year 2010

Target Actual Result

2.3.2 Acres of WUI fuels treated to reduce the risk 

of catastrophic fire (in thousands) 1,590 1,654 1,940 1,740 1,470 1,545 Exceeded

Rationale for Met Range: Data assessment metrics to meet the target allow for an actual number in the range of 1,397 to 1,544. USDA continues to emphasize 

treatments in the WUI. In addition, Recovery Act treatments and a less severe fire season allowing additional fuels work both contributed to meeting this target.
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56

Annual Performance Goals, Indicators, 

and Trends 2006 2007 2008 2009 Fiscal Year 2010

Target Actual Result

Data Assessment of Performance Measure 2.3.2

The data for hazardous fuels treatments are reliable, of good quality, and certified by the respective line officer. USDA wildfire and other program 

managers collected, compiled, and analyzed the data.

• Completeness of Data — Values shown are final FY 2010 data.

• Reliability of Data — All data for hazardous fuels were reported through the National Fire Plan Operations Reporting System. USDA and 

the U.S. Department of Interior (DOI) land-management agencies co-developed the system. Its data are collected, compiled, and analyzed 

by program managers, and certified by the respective line officer.

• Quality of Data — Data quality has been assessed at about 90 percent for project data in all regions. The quality of these data is monitored 

continuously, and being improved with focused training and policy direction on reporting requirements. Data are projected based on 

historical performance and year-to-date actual accomplishments. If information is not entered into the systems of record immediately upon 

completion of the project, the quality of the projection will be compromised. USDA uses clear business rules and program direction to 

ensure the timely entry of project completions. In FY 2010, USDA redesigned its data entry system to increase overall product quality. 

Challenges for the Future

In FY 2011, USDA will focus on complex high-priority work in WUIs where CWPPs or equivalent plans 

have been completed. Only 1,600 CWPPs have been completed out of the 69,696 communities 

identified as at-risk from wildfire.

2.3.3 Percentage of acres treated in the WUI that have been identified in Community Wildlife Protection Plans

Overview

USDA works with other Federal and State foresters, local communities, and non-governmental 

organizations in developing CWPPs. CWPPs are designed to enable communities to determine the best 

ways to reduce the risk of wildfire. This collaboration helps establish clear objectives for hazardous fuel 

reduction and wildfire prevention efforts. There are other equivalent plans and efforts to help make a 

community more fire adapted in the WUI where treatments are effective and important.

Analysis of Results

The Department exceeded the target for acres treated in the WUI that had been identified in a CWPP. 

USDA is progressing towards protecting high-priority values at risk, especially human life and property.

Annual Performance Goals, Indicators, 

and Trends 2006 2007 2008 2009 Fiscal Year 2010

Target Actual Result

2.3.3 Percentage of acres treated in the WUI that 

have been identified in Community Wildlife 

Protection Plans

17% 25% 36% 28% 41% 43% Met

Rationale for Met Range: Data assessment metrics to meet the target allow for an actual number in the range 38.95 percent to 43.05 percent. USDA projects that it will

meet the target for this measure. USDA continues to stress the importance of working with partners in helping communities plan and prepare for wildland fires, which has 

likely led to an increase in these types of treatments.

Data Assessment of Performance Measure 2.3.3

The data for hazardous fuels treatments are reliable, of good quality, and certified by the respective line officer. USDA wildfire and other program 

managers collected, compiled, and analyzed the data.

• Completeness of Data — Values shown are final FY 2010 data.

• Reliability of Data — All data for hazardous fuels were reported through the National Fire Plan Operations Reporting System. USDA and 

the U.S. Department of Interior (DOI) land-management agencies co-developed the system. Its data are collected, compiled, and analyzed 

by program managers, and certified by the respective line officer.
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57

Annual Performance Goals, Indicators, 

and Trends 2006 2007 2008 2009 Fiscal Year 2010

Target Actual Result

• Quality of Data — Data quality has been assessed at about 90 percent for project data in all regions. The quality of these data is monitored 

continuously, and being improved with focused training and policy direction on reporting requirements. Data are projected based on 

historical performance and year-to-date actual accomplishments. If information is not entered into the systems of record immediately upon 

completion of the project, the quality of the projection will be compromised. USDA uses clear business rules and program direction to 

ensure the timely entry of project completions. In FY 2010, USDA redesigned its data entry system to increase overall product quality.

Challenges for the Future

An even greater emphasis on high priority WUI treatments is planned. These treatments will take place 

in more costly and complex areas. These treatments already have been identified in CWPPs or an 

equivalent plan.
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Strategic Goal 3: Help America Promote Agricultural Production and Biotechnology Exports as 

America Works to Increase Food Security

A productive agricultural sector is critical to increasing global food security. For many crops, a 

substantial portion of domestic production is bound for overseas markets. USDA helps American 

farmers and ranchers use efficient, sustainable production, biotechnology, and other emergent 

technologies to enhance food security around the world and find export markets for their products.

Food security is measured by the availability of food and the ability to purchase food. A family is 

considered food secure when its members do not live in hunger or fear of starvation. Food security in 

foreign countries is affected by a number of factors, including the extent of the domestic food supply; 

the proportion of a nation’s total volume of commodities used for such nonfood uses as feed or fuel; 

post-harvest losses due to waste and decay; the ability to finance food and agricultural imports; 

population income levels; and the proportion of income that must be devoted to food.

The Department is working to ensure U.S. agricultural resources contribute to enhanced global food 

security; enhance America’s ability to develop and trade agricultural products derived from new 

technologies; and promote sustainable and productive agricultural systems that enable food-insecure 

nations to feed themselves.

OBJECTIVE 3.1 ENSURE US AGRICULTURAL RESOURCES CONTRIBUTE TO ENHANCED GLOBAL SECURITY

3.1.1 Food Aid Targeting Effectiveness Ratio

Overview

To combat hunger, malnutrition, and poverty, USDA is working to promote enhanced food security 

through its international development programs. Major goals include enhancing agricultural 

productivity, mitigating and adapting to global climate change, and increasing trade with, and 

investment in, developing countries. This work will enhance economic growth, food security, and the 

supply and affordability of food. USDA also provides food assistance to developing countries through 

the donation of food commodities via its Food for Education and Food for Progress Programs. In 

combination with food assistance that covers gaps in supplies and helps to keep the population healthy, 

the Department is assisting foreign governments in adopting productivity-enhancing technologies. 

These technologies include biotechnology, reconstructing agriculture in post-conflict or disaster areas, 

developing sustainable natural resource management systems, and strengthening agricultural research 

and extension programs. USDA also works with foreign counterparts to advance market-based policies 

and institutions, and expand international trade through trade capacity building. This work helps 

countries meet their World Trade Organization (WTO) obligations, avoid or eliminate barriers to trade, 

and strengthen policy and regulatory frameworks, with an emphasis on food safety and biotechnology. 

WTO is an international body that oversees the rules of trade between nations.

In FY 2010, USDA collaborated with other Federal agencies in crafting the Feed the Future (FTF) 

Initiative. FTF is designed to reduce global hunger and poverty by addressing their root causes and 

employing proven strategies for achieving large scale and lasting changes. Through the initiative, the 

Department works with host governments, development partners, and other stakeholders to achieve 

those goals. FTF links USDA’s technical assistance efforts with the U.S. Agency for International 

Development, the White House, the State Department, partner countries, multilateral institutions, 

private voluntary organizations, the private sector, donors, and civil societies around the world.

USDA’s technical assistance has fostered positive change in other countries. Under the Iraqi 

Agricultural Extension Revitalization Project, the Department and a five-member university consortium 

headed by Texas A&M University helped professors and extension agents improve advisory services for 
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59

Iraqi producers. They also conducted an independent training needs assessment for the Iraqi Red 

Meats Association. USDA has also provided technical assistance to the Government of the Republic of 

Georgia’s national statistics service, GeoStat. As a result, GeoStat has developed an emerging, highly 

skilled agricultural division. This division is now collecting and disseminating nationally- and 

regionally-representative statistics on the agricultural situation, while also providing critical 

information for policy makers and the private sector.

USDA also has seen international success with the McGovern-Dole International Food for Education 

and Child Nutrition Program. McGovern-Dole helps promote education, child development, and food 

security for some of the world’s poorest children. It provides for donations of U.S. agricultural products 

and financial and technical assistance for school feeding and maternal and child nutrition projects in 

developing countries. In Senegal, for example, USDA continued to fund Counterpart International 

(CPI) to enhance the education and health status of target communities. CPI provides school meals, 

health clinics, school gardens, and capacity building for parent-teacher associations. It has helped 

children show dramatic improvement in their ability to pass compulsory exams and advance to the next 

grade level. In Bolivia, the Department continued its support of Project Concern International. Project 

Concern is an international health organization that saves the lives of children and families around the 

world by preventing disease and providing access to clean water and nutritious food. This collaboration 

has provided school meals, teacher training, and government capacity building. Attendance rates for all 

children have increased more than 10 percent since the program’s 2005 inception.

Analysis of Results

The performance measure was met. The Food Aid Targeting Effectiveness Ratio (FATER) is based on a 

USDA food security assessment. For countries with greater food insecurity, there is a larger estimated 

food gap. FATER measures the effectiveness of USDA food aid in closing the gap. The higher the FATER 

score, the larger the percentage of the estimated food gap met by USDA programmed food aid. In 

countries with greater food insecurity, the FATER value would be relatively low because of large food 

gaps in those countries. The FATER value would be higher in countries with less food insecurity, where 

the food gaps are smaller. A target of 35 percent represents a balance of food aid programming across 

countries with greater and lesser levels of food insecurity. 

Annual Performance Goals, Indicators, 

and Trends 2006 2007 2008 2009 Fiscal Year 2010

Target Actual Result

3.1.1 Food Aid Targeting Effectiveness Ratio 

(Percent)

30-35% 38% 57% 49% 37% 37% Met

Rationale for Met Range: Data assessment metrics to meet the target allow for an actual number in the range 34-39 percent.

Data Assessment of Performance Measure 3.1.1

Data on quantities and use of food aid commodities of food aid are captured through the USDA Food Assistance Division database.

• Completeness of Data — Data for successfully reporting on the effectiveness ratio are based on the annual provision and use of food aid. 

Total quantities of commodities and how these commodities are used by the beneficiary in the country of donation is compiled and analyzed 

by USDA. Data include food aid provided by the Department.

• Reliability of Data — Data are reliable, of good quality, and used by agency officials to highlight the success and impacts of food aid 

programs and strengthen food security.

• Quality of Data — Data for successfully verifying the quantities and use of food aid commodities in which USDA analyzes to show the 

effectiveness of food aid are captured through the USDA Food Assistance Division database. The outcome from the analysis also is further 

confirmed through a variety of credible sources, including: 

− Reports from USDA and U.S. Department of State personnel at overseas posts;

− Program activity reports as provided by USDA partner organizations;

− Follow-on evaluations conducted by USDA;

− Reports from other USDA agencies, the U.S. Department of State, and the U.S. Agency for International Development;

− On-going assessment of the progress of projects; and
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Annual Performance Goals, Indicators, 

and Trends 2006 2007 2008 2009 Fiscal Year 2010

Target Actual Result

− Evaluation of activities by outside consulting firms.

Challenges for the Future

In the Food Security Assessment, 2010-2020, USDA estimates that the number of food-insecure people 

in developing countries will decrease about 7.5 percent from 953 million in 2009 to 882 million in 

2010. Despite this drop, the number of food-insecure people will not improve much during the next 

decade, declining by only 1 percent. While there will be notable improvements in Asia and Latin 

America, the situation in sub-Saharan Africa is projected to deteriorate after 2010. Food-insecure 

people are defined as those consuming less than the nutritional target of 2,100 calories per day per 

person. Any increase or decrease highlights that consumption for large portions of the populations in 

lower income countries is clustered around the nutritional target. Even a brief economic slowdown or 

food production shock could result in millions of additional people being subjected to food insecurity. 

Conversely, a slight improvement in economic conditions can propel people past the nutritional target. 

USDA will continue to work with other Federal agencies through FTF. The Department also will work 

with global stakeholders to provide the political momentum and resources needed to address these 

challenges.

USDA will also continue to improve the efficiency and effectiveness of its food aid programs. The Webbased Supply Chain Management Project and the Food Aid Information System will bring improved 

technology and up-to-date information to the grants process. Implementation of both systems will take 

place in FY 2011. The implementation will require testing, training, and resources. Increasing efficiency 

will be important to help offset expected increases in commodity prices and the budget environment.

OBJECTIVE 3.2 ENHANCE AMERICAS ABILITY TO DEVELOP AND TRADE AGRICULTURAL PRODUCTS DERIVED FROM NEW TECHNOLOGIES

3.2.1 Cumulative number of genetically engineered plant lines reviewed by USDA and found safe for use in the 

environment

Overview

USDA takes a science-based approach in regulating products derived from new technologies, such as 

genetic engineering (GE). GE is a precise and predictable method used to introduce new traits into 

plants and animals by moving genetic elements from one or more organisms into another. This system 

allows for the safe development and use of agricultural goods derived from genetic engineering. These 

technologies provide increased production options to agricultural producers. Before a GE crop can be 

commercialized, the Department thoroughly evaluates it to ensure there is no plant-pest risk. This 

evaluation process enhances public and international confidence in these products.

After a GE organism has been extensively field tested and demonstrates no plant pest risk, the 

developer may petition USDA for a nonregulated status. The Department also acts proactively to 

include the public in its regulatory processes. It gives the public a chance to comment on substantive 

regulatory changes and proposals through Federal Register notices and rulemaking procedures. USDA 

approves a petition when it is determined that the plant-pest risks posed by the GE organism are not 

greater than its nonGE counterparts.

Analysis of Results

The performance measure is unmet.
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61

The Department processed approximately 91,000 constructs during FY 2010, compared to 63,000 in 

FY 2009. Each construct requires individual environmental analyses. Technological and scientific 

advancements result in new crops and traits, concurrently increasing the complexity of sound 

regulatory decisions.

USDA tracks the cumulative number of GE crops it no longer regulates. When a GE plant line is no 

longer regulated, the developer is free to sell the product to producers who then make it available to 

growers. This process demonstrates the new and innovative GE technologies that have the potential to 

enter the marketplace and enable the U.S. to compete in international trade. USDA set a goal to approve 

five GE plant lines in FY 2010. It fell short of meeting the target and only approved three lines.

Annual Performance Goals, Indicators, 

and Trends 2006 2007 2008 2009 Fiscal Year 2010

Target Actual Result

3.2.1 Cumulative number of genetically engineered 

plant lines reviewed by USDA and found safe 

for use in the environment

70 741 762 783 85 81 Unmet

1,2,3USDA reviewed the calculation methodology for this performance measure and discovered that a previous deregulation of a plant line was accounted for in the wrong 

fiscal year – the data for 2007 was off by one and the following fiscal years were adjusted accordingly.

Data Source: Data regarding the cumulative number of approved petitions for deregulated status are available at http://www.aphis.usda.gov/biotechnology/not_reg.html.

Rationale for Met Range: The cumulative number of genetically engineered (GE) plant lines reviewed by USDA and found safe for use in the environment is an 

indicator of the GE technologies that can be commercialized by their developers. Some deregulated GE plant lines do not reach the market – this is a business decision 

made by the developer. USDA has established an ambitious target to increase the number of deregulation decisions by 5-8 from FY 2008 through FY 2012 because of 

the implications of deregulation decisions for GE developers, and ultimately, agricultural producers who may choose to use GE technology. The FY 2011 and FY 2012 

targets are a cumulative 92 and 100 deregulations of GE plant lines, respectively.

Data Assessment of Performance Measure 3.2.1

• Completeness of Data — USDA maintains the currency of its Web site – new petition requests are updated weekly. When a petition request 

is granted, the Web site is updated to reflect its decision.

• Reliability of Data — This performance measure serves as an indicator of the rate of the petition process. The data is used by both internal 

managers and external stakeholders as an authoritative source of information. The measure is currently included in the USDA High Priority 

Performance Goals and was validated by the Office of Management and Budget as an effective measure for the overall program.

• Quality of Data — USDA has a series of checks and balances to ensure that the information reported on its Web site accurately reflects the 

decisions made regarding the deregulation of genetically engineered plant lines. This information is also transmitted to the public via the 

Federal Register to ensure transparency of regulatory decision making. 

Descriptions of Actions for Unmet Measures

Many factors contributed to USDA not meeting the target. Several lawsuits have challenged USDA’s 

environmental documentation. These challenges have necessitated more extensive environmental 

analysis for each petition. The number and complexity of issues submitted during public comment 

periods have increased significantly. The Department reviewed 21 petitions for nonregulated status for 

GE plants. Historically, USDA reviewed approximately four to five petitions per year. The 

unprecedented volume of petitions has greatly affected the timeliness of the decision-making process. 

In addition, the steadily increasing number of permit and notification applications for field trials and 

other programmatic activities has affected the speed of decisions. The Department is taking steps to 

address the increasing workload and to improve the deregulation process.

Lawsuits involving Round-Up Ready alfalfa and sugar beets recently challenged the processes USDA 

had in place when considering petitions for deregulations. While the Department approved the 

deregulation of these plant lines based on sound science and regulatory authority, after examining the 

deregulation processes and procedures, it reviewed the petition process. Special attention was paid to 

steps hindering time to deregulate, enhancing quality assurance, and improving quality control 

methods. In FY 2011, USDA will finalize its project plan to undertake specific process improvement 

actions. These actions will establish new timeframes for intermediate process steps. They also will 
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revise tracking mechanisms from receipt of petition to publication of a decision and train staff to use 

consistent and thorough implementation of the step in the revised petition process.

The implications of the two court cases indicated a need to strengthen the Department’s internal 

National Environmental Policy Act (NEPA) processes and procedures. NEPA establishes national 

environmental policy and goals for the protection, maintenance, and enhancement of the environment. 

It also provides a process for implementing these goals within Federal agencies. USDA created a new 

unit to prepare and oversee the development of NEPA documents to better inform petition decisions. 

The Department established a system to assist in the development of environmental documentation 

while also allowing itself to focus on complex and controversial initiatives. This process is consistent 

with other Federal agencies and departments that oversee the development of environmental 

documents. To improve transparency and public involvement in the NEPA process, USDA will continue 

to improve outreach capacity through Web site improvements and direct communication to 

stakeholders and interested parties.

Challenges for the Future

Legal challenges over USDA decisions to deregulate GE crops emphasize their controversial nature.

Legal challenges require an enormous investment of resources—the same resources invested in petition 

review processes and procedures. Legal challenges will dramatically affect USDA’s ability to meet the 

targeted performance.

The public will continue its vigilance over the development of GE agricultural products. The 

Department will continue its commitment to ensure public participation in its regulatory decision 

making. USDA will post ample notice in the Federal Register, host public meetings when appropriate, 

organize stakeholder engagements, and update the Web site. Such engagement requires an investment 

in resources and impacts the rate at which USDA is able to undertake petition reviews.
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Strategic Goal 4: Ensure that All of America’s Children Have Access to Safe, Nutritious, and 

Balanced Meals

A plentiful supply of safe and nutritious food is essential to the well-being of every family and the 

healthy development of every child in America. USDA supports and protects the Nation’s agricultural 

system and the consumers it serves. The Department safeguards the quality and wholesomeness of 

meat, poultry, and egg products. USDA also provides nutrition assistance to children and low-income 

people who need it. It also addresses and prevents loss and damage from pests and disease outbreaks.

The Department works to improve the healthy eating habits of all Americans, especially children. 

Science has established strong links between diet, health, and productivity. Even small improvements 

in the average diet will yield large health and economic benefits. USDA’s programs provide an 

infrastructure that enables the natural abundance of U.S. lands in combination with the ingenuity and 

hard work of the Nation’s agricultural producers. This combination creates a food supply system 

unparalleled in its abundance, safety, and quality.

USDA helps put a healthy diet within reach of every American consumer by increasing access to 

nutritious food; promoting healthy diet and physical activity behaviors; protecting public health by 

ensuring food is safe; and protecting agricultural health by minimizing major diseases and pests to 

ensure access to safe, plentiful, and nutritious food.

OBJECTIVE 4.1 INCREASE ACCESS TO NUTRITIOUS FOODS

4.1.1 Participation levels for major Federal nutrition assistance programs SNAP (millions per month)

Overview

The Supplemental Nutrition Assistance Program (SNAP) is the foundation of America’s nutrition 

assistance program system. SNAP provides benefits that can be used to purchase food at authorized 

retailers for preparation and consumption at home. It makes resources that can be used for food 

available to most households with little income. Benefit levels are based on the Thrifty Food Plan, a 

representative healthful and minimal cost meal plan that shows how a nutritious diet may be achieved 

with limited resources. The benefit levels are adjusted based on the economic circumstances of 

participating households.

Analysis of Results

USDA met its performance target. In FY 2010, the Department and its program delivery partners 

sustained effective access to SNAP. Average monthly participation reached 39.2 million in 2010, within 

the range (37.5 million-43.5 million) for the 2010 target of 40.5 million.

Program participation increased almost 17 percent during FY 2010. USDA’s efforts to support and 

encourage SNAP participation included:

• Continued efforts with states to develop outreach strategies. Forty-four out of 53 State agencies — 

up from 40 in FY 2009 — now have formal outreach plans or other documented outreach activity;

• Supported innovative state practices to promote access by simplifying the application process. 

Twenty-six States use an Internet-based application filing system. Nearly 30 States allow telephone 

interviews. Twenty-seven States use call centers;

• Implemented the Defense Appropriations Act of 2010 to provide $400 million in administrative 

funding to states in further response to the economic downturn; and

• Provided numerous strategies to help States manage workloads because of increasing participation

and decreasing State resources due to the economic downturn. These strategies include policy 

waivers; a workload management matrix tool; a program access toolkit; and encouragement of 
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broad-based categorical eligibility to improve access to applicants and simplify policies for state 

administration.

USDA also estimates the number of people eligible for the program along with the rate at which eligible 

people are participating. The latest study shows that, in 2008, 67 percent of all persons eligible for 

SNAP participated. While the number of those eligible continued to grow rapidly in 2008, increasing by 

5.5 percent over the 2007 level, the number of participants increased by 7 percent. Also in 2008, 

participants received 84 percent of all benefits available if every eligible person participated. This 

number indicates that the program is effectively reaching those most in need.

Annual Performance Goals, Indicators, 

and Trends 2006 2007 2008 2009 Fiscal Year 2010

Target Actual Result

4.1.1 Participation levels for the major Federal 

nutrition assistance programs (millions per 

month): Supplemental Nutrition Assistance 

Program Avg.(Monthly) participation (millions)

26.7 26.5 28.2 33.5 40.5 39.2 Met

Rationale for Met Range: Thresholds for 4.1.1 reflect the margin of error in forecasts of future participation. For SNAP participation, results from 2 independent 

assessments suggest that predictions of the number of SNAP participants are accurate to within plus-or-minus 7.5 percent (on average). This reflects the pattern of 

variance between actual and target performance during the past 5 years.

• For 2010, this percentage thus allows for actual performance that meets the target in the range of 37.5-43.5 million for SNAP.

Data Assessment of Performance Measure 4.1.1 

SNAP participation data are drawn from USDA administrative records. State agency reports are certified accurate and submitted to regional offices. 

There, they are reviewed for completeness and consistency. If the data are acceptable, the regional analyst posts them to the National Data Bank 

(NDB) Preload System. NDB is a holding area for data review prior to release. Otherwise, regional-office personnel reject the report and the state 

agency is contacted. Data posted by regional personnel into NDB are reviewed at USDA. If data are reasonable and consistent with previous reports, 

they will be downloaded to NDB for public release. If not, the Department works with regional offices and states to resolve problems and 

inconsistencies. This process of review and revision ensures that the data are as accurate and reliable as possible. 

• Completeness of Data — Figures represent 12-month, fiscal year averages. Participation data are collected and validated monthly before 

being declared annual data. Reported estimates are based on data through April 30, 2010, as available July 1, 2010.

• Reliability of Data — The data are highly reliable. Participation-data reporting is used to support program financial operations. All of the data 

are used in published analyses, studies, and reports. They also are used to support dialogue with and information requests from the U.S. 

Government Accountability Office, the Office of Inspector General, and the Office of Management and Budget.

• Quality of Data — As described above, the data used to develop this measure are used widely for multiple purposes, both within and 

outside USDA. The measure itself is reported in stand-alone publications as an important, high-quality indicator of program performance. 

Challenges for the Future

Studies indicate that some SNAP-eligible people are not participating due to a lack of awareness of their 

eligibility. Efforts to improve access to and promote awareness of SNAP, and seeking improvements in 

policy and operations that make applying easier are ongoing challenges.

The quality of program delivery by third parties—hundreds of thousands of State and local government 

workers and their cooperators—is critical to USDA’s efforts to reduce hunger and improve nutrition. 

Proper program administration, including timely determination of eligibility, is of special concern.

4.1.2 Improve SNAP payment accuracy

Overview

Ensuring that SNAP and other Federal nutrition assistance programs are administered with integrity is 

central to USDA’s mission. Waste and abuse draw scarce resources away from the children who need 

them the most. Just as importantly, the programs are ultimately not sustainable without public 

confidence that benefits go to those who qualify, are used appropriately, and achieve their intended 

purposes. The Department seeks to increase food security and reduce hunger in a manner that inspires 

public confidence that taxpayer dollars are used wisely.
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65

Designed to respond to economic conditions, participation in the program has recently grown and 

benefits have increased, yet USDA remains strongly committed to program integrity. The Department 

takes its stewardship responsibilities for tax payer dollars seriously through an established Quality 

Control (QC) system and long-standing support for payment accuracy initiatives. The Department 

continuously works to improve payment accuracy through partnerships with States, and regulatory and 

statutory requirements for a system that rewards exemplary program performance while holding lowperforming states accountable. It also uses an early detection system to target states that may be 

experiencing a higher incidence of errors based on preliminary QC data. Actions then are taken by 

regional offices to address these situations in the individual states.

Analysis of Results

The FY 2010 result is deferred, and will be reported in the FY 2011 PAR. SNAP payment accuracy 

reached a record-high 95.64 percent in 2009, the latest for which data are available. The number 

reflects the excellent performance by State agencies in administering the program. This combined rate 

reflects 3.53 percent in overpayments and 0.83 percent in underpayments for a total of 4.36 in 

erroneous payments.

Forty-seven States had a payment accuracy rate greater than 94 percent, including 29 States with rates 

greater than 96 percent. These figures are up from the 35 States with 94 percent accuracy and 15 with 

96 percent accuracy the previous year.

Annual Performance Goals, Indicators, 

and Trends 2006 2007 2008 2009 Fiscal Year 2010

Target Actual Result

4.1.2 Improve SNAP Payment Accuracy Rate 94.2% 94.4% 94.3% 94.9%1 95.0% Not 

Available

Deferred

1Data reported for 2006 in the Annual Performance Report has been adjusted to its proper value. The 2009 figure is based on data available after the Annual 

Performance Report was released.

FY 2010 data will be available in 2011. USDA doesn’t tabulate data until states’ SNAP data are received.

Rationale for Met Range: The 95 percent confidence interval around the estimate of payment accuracy is plus-or-minus 33.

• For 2010, this confidence level allows for actual performance that meets the target in the range 94.7-95.3 percent.

Data Assessment of Performance Measure 4.1.2

SNAP, formerly the Food Stamp Program, uses annual payment accuracy data from the QC process to support SNAP management. The data are 

based upon statistically valid methodology. The QC process uses a systematic random sampling of SNAP participants to determine a combined 

payment error rate for each state. The combined error rate is composed of over-issuances and under-issuances of SNAP benefits. A regression 

formula is applied to the results of the reviews to calculate official error rates. State agencies review selected cases monthly to determine the accuracy 

of the eligibility and benefit-level determination. The process includes a client interview and verification of all elements of eligibility and the basis of 

issuance. Federal reviewers validate a sample of the state’s reviews by conducting a re-review. The process has proven to be a sound method of 

calculating reliable data.

• Completeness of Data — The most current data available for this measure are for FY 2009. The payment accuracy rate of 95.64 percent 

exceeded the performance goal/measure target. FY 2010 performance will be deferred until next year’s report.

• Reliability of Data — QC data are valid and accepted by state SNAP agencies as a basis for performance-incentive payments and 

penalties. The U.S. Government Accountability Office and the Office of Inspector General also use it regularly.

• Quality of Data — As described above, the data used to develop this measure are used widely for multiple purposes, both within and 

outside USDA. The measure itself is frequently cited as an important, high-quality indicator of program performance. 

Challenges for the Future

The most critical challenge impacting future success is continuing resource limitations for State 

agencies. State budgets have been and will continue to be extremely tight. This factor could hurt State 

performance in payment accuracy. USDA will continue to provide technical assistance and support to 

maintain payment accuracy in the context of this difficult program environment.
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4.1.3 Participation levels for the school meals programs (millions of children per school day)

Overview

The National School Lunch Program (NSLP) and the School Breakfast Program (SBP) support schools 

in ensuring access to nutritious food for the children they serve. The programs provide per-meal 

reimbursement to State and local governments for meals and snacks served. All meals must meet 

Federal nutrition standards to qualify for reimbursement.

NSLP serves lunches and snacks in more than 101,000 schools and residential child-care facilities. 

More than 60 percent of meals are served to low-income children for free or at a reduced price.

SBP helps school children start the day ready to learn by serving breakfast in more than 88,000 schools 

and residential child-care facilities. More than 80 percent of meals are served free or at reduced price to 

low-income children, with more than 75 percent of participating schools serving low-income areas.

Analysis of Results

USDA met its target for this performance measure. In FY 2010, USDA and its program delivery 

partners sustained effective access to school meals. The increased use of direct certification for free 

school meals for children enrolled in means-tested programs such as SNAP or the Temporary 

Assistance for Needy Families (TANF) Program has helped to provide easy access to school meal 

benefits. During the 2008-09 school year, 78 percent of school districts used direct certification, up 

from 67 percent in the prior year. TANF provides financial assistance for children and their parents or 

relatives who are living with them.

NSLP participation levels reached 31.8 million in FY 2010, within the met range (30.5 million-33.7 

million) for the 2010 target of 32.1 million. Participation increased slightly from FY 2009, continuing 

the trend of increases in recent years. SBP participation levels reached 11.6 million in FY 2010, within the 

met range (11.1 million-12.3 million) for the 2010 target of 11.7 million.

Annual Performance Goals, Indicators, 

and Trends 2006 2007 2008 2009

Fiscal Year 2010

Target Actual Result

4.1.3 Participation levels for the school meals 

programs (millions)

• National School Lunch Program Avg. 

(daily)

30.1 30.5 30.9 31.6 32.1 31.8 Met

• School Breakfast Program Avg. (daily) 9.8 10.1 10.6 11.0 11.7 11.6 Met

Historical figures for FY2006-FY2008 have been revised from those published in the Annual Performance Report to reflect more recent data.

Rationale for Met Range: Thresholds for 4.1.3 reflect the margin of error in forecasts of future participation, estimated at 5 percent for the school meals programs. This 

reflects the pattern of variance between actual and target performance for both programs during the past 5 years.

For 2010, this percentage range allows for actual performance that meets the targets in the range of 30.5- 33.7 million for the National School Lunch Program and 11.1-

12.3 million for the School Breakfast Program.

Data Assessment of Performance Measure 4.1.3

School meals participation data are drawn from USDA administrative records. State agency reports are certified accurate and submitted to regional 

offices. There, they are reviewed for completeness and consistency. If the data are acceptable, the regional analyst posts them to the National Data 

Bank (NDB) Preload System. NDB is a holding area for data review prior to release. Otherwise, regional-office personnel reject the report and the State 

agency is contacted. Data posted by regional personnel into NDB are reviewed at USDA. If data are reasonable and consistent with previous reports, 

they will be downloaded to NDB for public release. If not, USDA works with regional offices and States to resolve problems and inconsistencies. This 

process of review and revision ensures that the data are as accurate and reliable as possible.

• Completeness of Data — Figures for NSLP and SBP are based on 9-month (school year) averages. Participation data are collected and 

validated monthly before being declared annual data. Reported estimates are based on data through April 30, 2010, as available July 1, 

2010.

• Reliability of Data— The data are highly reliable. Participation-data reporting is used to support program financial operations. All of the data 

are used in published analyses, studies and reports. They also are used to support dialogue with and information requests from the U.S. 
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Annual Performance Goals, Indicators, 

and Trends 2006 2007 2008 2009

Fiscal Year 2010

Target Actual Result

Government Accountability Office, the Office of Inspector General, and the Office of Management and Budget.

• Quality of Data— As described above, the data used to develop this measure are used widely for multiple purposes, both within and outside 

USDA. The measure itself is reported in stand-alone publications as an important, high-quality indicator of program performance. 

Challenges for the Future

While almost all school children have access to Federally-subsidized school lunches, significantly fewer 

schools operate SBP. USDA will work to ensure that all students are able to start the day with a 

nutritious breakfast, at home or at school.

As with other nutrition assistance programs, the Department relies on its partnerships with third 

parties—hundreds of thousands of state and local government workers and their cooperators— to 

sustain effective school meals program delivery.

4.1.4 Participation levels for the WIC program (millions per month)

Overview

The Special Supplemental Nutrition Program for Women, Infants and Children (WIC) is a critical 

component of the nutrition assistance safety net. WIC’s major objective is to address the nutrition 

needs of low-income pregnant, breastfeeding, and postpartum women, infants, and children up to 5 

years of age who are found to be at nutritional risk.

Analysis of Results

The measure was met. In FY 2010, average monthly WIC participation was approximately 9.2 million 

participants, within range (9.2 million-9.8 million) for the 2010 target of 9.5 million. USDA continued 

to meet its ongoing commitment to provide sufficient program resources to support participation for all 

eligible people who apply for benefits.

The Department also estimates the number of people eligible for WIC and calculates the rate at which 

eligible people are participating. The latest study shows that, in 2007, WIC served an estimated 59 

percent of the population eligible for benefits. This figure reflects participation by more than 80 percent 

of eligible infants, 66 percent of eligible pregnant women, more than 85 percent of eligible 

breastfeeding women, and 71 percent of eligible postpartum women.

Annual Performance Goals, Indicators, 

and Trends 2006 2007 2008 2009 Fiscal Year 2010

Target Actual Result

4.1.4 WIC Program average monthly participation 

(millions)

8.1 8.3 8.7 9.1 9.5 9.2 Met

Rationale for Met Range: Thresholds for 4.1.4 reflect the margin of error in forecasts of future participation, estimated at 3 percent for the WIC program. This reflects the 

pattern of variance between actual and target performance for both programs over the past 5 years.

• For 2010, this percentage thus allows for actual performance that meets the target in the range of 9.2-9.8 million for WIC.

Data Assessment of Performance Measure 4.1.4

WIC participation data are drawn from USDA administrative records. State agency reports are certified accurate and submitted to regional offices. 

There, they are reviewed for completeness and consistency. If the data are acceptable, the regional analyst posts them to the National Data Bank 

(NDB) Preload System. NDB is a holding area for data review prior to release. Otherwise, regional-office personnel reject the report and the State 

agency is contacted. Data posted by regional personnel into NDB are reviewed at USDA. If data are reasonable and consistent with previous reports, 

they will be downloaded to NDB for public release. If not, USDA works with regional offices and States to resolve problems and inconsistencies. This 

process of review and revision ensures that the data are as accurate and reliable as possible.

• Completeness of Data — Figures represent 12-month, fiscal year averages. Participation data are collected and validated monthly before 
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Annual Performance Goals, Indicators, 

and Trends 2006 2007 2008 2009 Fiscal Year 2010

Target Actual Result

being declared annual data. Reported estimates are based on data through April 30, 2010, as available July 1, 2010.

• Reliability of Data — The data are highly reliable. Participation-data reporting is used to support program financial operations. All of the data 

are used in published analyses, studies and reports. They also are used to support dialogue with and information requests from the 

Government Accountability Office, the Office of Inspector General, and the Office of Management and Budget.

• Quality of Data — As described above, the data used to develop this measure are used widely for multiple purposes, both within and 

outside USDA. The measure itself is reported in stand-alone publications as an important, high-quality indicator of program performance. 

Challenges for the Future

Ensuring that adequate, timely funding is available to USDA’s program partners to support 

participation among all eligible applicants is an ongoing challenge. Scarce discretionary budget 

resources add to this challenge. The Department and its partners must continue to work together to 

manage funds carefully and maintain efficient operations to serve all those in need.

OBJECTIVE 4.2 PROMOTE HEALTHY DIET AND PHYSICAL ACTIVITY BEHAVIOR

4.2.1 Nutrition guidance, education and promotion materials distributed

Overview

Good nutrition and physical activity are important throughout the life cycle. Both, combined, are major

forces to be used to help reduce the rates of obesity among different segments of the U.S. population, 

especially among children. Good nutrition and physical activity will help reduce the obesity epidemic 

and help prevent the chronic diseases associated with unhealthful dietary practices, such as diabetes, 

cardiovascular disease, and high blood pressure. To encourage Americans to eat well and be more 

physically active, USDA uses Federal nutrition policy and nutrition education — both for the general 

public and those served by nutrition assistance programs. This work helps provide scientifically based 

information about healthful diets and lifestyles.

The Department values the trust the public has in the information it provides — information that is 

based on the most recent, credible science. In addition, during the past few decades, evidence-based 

systematic reviews have replaced expert opinion as the predominant basis for health-related treatment 

guidelines and policy. In response, USDA created the Nutrition Evidence Library to specialize in 

conducting systematic reviews to inform nutrition policy and programs. For the first time, the 

Department and the U.S. Department of Health and Human Services used the Nutrition Evidence 

Library to update the 2010 Dietary Guidelines for Americans.

USDA uses the Dietary Guidelines and the MyPyramid food guidance system, to advise people in the 

U.S. on how to improve their overall health through proper nutrition. MyPyramid, located at 

MyPyramid.gov, implements the guidelines through a network of educational tools. The Department 

will continue to use the Nutrition Evidence Library to conduct systematic reviews of the science that 

represents the foundation of its policy and nutrition education tools. It also will continue encouraging 

partners and “information multipliers” — such as healthcare providers, supermarkets, and school 

teachers — to maximize the reach and impact of nutrition education messages, both within Federal 

nutrition-assistance programs and with the general public.

Other key FY 2010 accomplishments include:

• Continuing the collaborative effort to increase all communication of dietary and physical activity 

guidance messages. Partnering with MyPyramid, with more than 230 members, showcases the role 

of various industries and others (e.g., youth groups) as Government partners to encourage healthier 
Annual Performance Report

69

eating and physical activity behaviors among families. The partnership is designed to empower 

nutrition gatekeepers by providing easy to apply guidance for modeling a healthy lifestyle. It also 

provides information to help them make healthy food choices for themselves and their families 

where they prepare food, work, play, and purchase food; and

• USDA released its newest educational tool: MyFood-A-Pedia, located at MyPyramid.gov, this mobile 

tool provides consumers quick access to nutrition information for more than a thousand foods. 

Consumers can check calorie amounts, the contribution of a food to the food groups, and the 

amount of extra calories from solid fats, added sugars, and alcohol in a food.

Analysis of Results

USDA did not meet the target for this performance measure. USDA continued its leadership role in 

promoting nutrition guidance through educational tools designed to motivate people to live healthier. 

The Department distributed more than 1.6 billion pieces of nutrition guidance materials via the Web 

and in print. Since the implementation of the 2005 Dietary Guidelines for Americans, USDA 

distributed more than 22 billion pieces of nutrition guidance materials. The 2010 distribution level, 

while substantial, fell short of USDA’s goal – a change from the years immediately following the release 

of the 2005 Dietary Guidelines for Americans. During that time, distribution performance typically 

exceeded goals.

Annual Performance Goals, Indicators, 

and Trends 2006 2007 2008 2009 Fiscal Year 2010

Target Actual Result

4.2.1 Nutrition guidance, education and promotion 

materials distributed (e-hits and print materials) (billions of pieces of information)

1.5 2.6 3.2 3.5 3.0 1.7 Unmet

This legacy performance goal, part of the 2010 Annual Performance Plan, will be dropped for FY 2011. A new measure has been developed for future planning and 

reporting.

Rationale for Met Range: The precision of USDA’s tracking systems and forecasting methods allow for actual figures to meet the 2010 target in the range 2.8-3.2 billion. 

Thresholds reflect trends of MyPyramid.gov “hits” and print materials distributed (MyPyramid and the Dietary Guidelines for Americans).

Data Assessment of Performance Measure 4.2.1

Data on the application and usage level of nutrition guidance tools are drawn from electronic records associated with 

http://www.mypyamid.gov/MyPyramid.gov, survey analysis, and from inventory records of print materials. 

• Completeness of Data — Data related to MyPyramid.gov are collected instantaneously, indicating the number of e-hits to the Web site and 

the number of registrations to MyPyramid Tracker. However, data for October-December 2009 were not available for all parts of the site due 

to system problems. Estimates based on prior year performance were used for this portion of the performance period. For print materials, 

data from national headquarters represent counts of what was distributed among divisions of Food, Nutrition, and Consumer Services. 

• Reliability of Data — The data are highly reliable. The number of hits is instantaneously recorded, the online survey is continual and welltested, and the number of distributed print materials is tracked.

• Quality of Data — The data are used to report on the success of the MyPyramid Food Guidance System. Because of the simultaneous 

recording of MyPyramid.gov usage, and the thoroughness and continual nature of the customer satisfaction survey, usage and customer 

satisfaction levels are a high-quality indicator of the degree to which USDA promotes, and customers respond to, interactive tools and print 

materials designed to help Americans personalize their diets. With a change in the system used to record MyPyramid.gov usage, the 

Department will again be able to rely on the quality of the data to report whether performance goals have been met. 

Descriptions of Actions for Unmet Measures

The number of nutrition education materials distributed via the Web and print materials is a direct 

measure of the degree to which people will seek information that will help them make prudent decisions 

about their diet and lifestyle. Typically, a drop in the numbers of requests is anticipated prior to the 

release of the next edition of the Dietary Guidelines (in this case, the 2010 Dietary Guidelines for 

Americans). In 2010, the tremendous public, press, and nutrition community interest in the concluding 

activities of the 2010 Dietary Guidelines Advisory Committee, and the release of its advisory report 

resulted in a larger drop in requests than expected with the view that new information was looming. 
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However, with the upcoming release of the 2010 Dietary Guidelines policy document, the publicized 

future release of a revamped food pyramid icon, and the pending updated educational materials and 

modernized on-line nutrition education tools in 2011, USDA expects to exceed its target for Webaccessed and print materials in 2011.

Challenges for the Future

USDA must craft actionable, understandable, science-based, and consistent nutrition messages and 

nutrition education programs. This communication should promote positive behavioral change to help 

people make better food choices requires understanding their current choices. There also must be an 

awareness of the relationships between these choices and their attitudes towards and knowledge of 

diet/health links. The data that can address this information gap, however, are limited.

The ability of existing nutrition guidance and promotional materials to achieve behavior change 

remains challenging. Limited resources are available for nutrition promotion relative to other messages, 

products and practices in the food marketplace. Physical activity and other lifestyle issues also 

significantly impact body weight and health.

USDA tracks its annual performance in promoting healthful eating and physical activity by monitoring 

its annual distribution of nutrition education materials. Over the longer term, the Department assesses 

the effect of these efforts with its Healthy Eating Index (HEI). HEI assesses the conformance to Federal 

dietary guidance and is based on nutrition surveillance data.

OBJECTIVE 4.3 PROTECT PUBLIC HEALTH BY ENSURING FOOD IS SAFE

4.3.1 Reduce overall public exposure to Salmonella from broiler carcasses

4.3.2 Reduce total illnesses from all FSIS-regulated products

4.3.3 Increase the percentage of establishments with a functional Food Defense Plan (large, small and very small 

establishments)

Overview

USDA is committed to ensuring Americans have access to safe, nutritious, and balanced meals. Today, 

as many as one in four Americans experience a foodborne illness annually.2

The Department protects public health by ensuring that meat, poultry, and processed egg products are 

safe, secure, wholesome, and correctly labeled and packaged. Currently, USDA is focused on protecting 

the food supply and preventing illnesses from Salmonella, Listeria monocytogenes (Lm), and E. coli

O157:H7. These three bacterial pathogens are known to cause human illness, hospitalization, and death. 

The Department takes a 

farm-to-table approach to reducing and preventing foodborne illness. USDA invests in its workforce 

and data infrastructure to prevent harm to consumers by reducing the incidence of food contaminants, 

and quickly identifying and preventing outbreaks. Effective food safety inspections and enforcement 

depend upon timely, quality data and analysis.

The Department is also working to better verify that effective food safety systems are being 

implemented in USDA-regulated slaughter and processing establishments. It trains inspection 

personnel and has developed an automated system to alert inspectors about potential food safety 

problems through effective inspection data analysis according to risk. These actions give inspectors 

greater and timelier access to establishment performance data.

 

2 Based upon the estimated 76 million annual number of domestically acquired foodborne illnesses, Mead et al. (1999). Mead PS, Slutsker L, Dietz V, McCaig LF, Bresee JS, 

Shapiro C, Griffin PM, and Tauxe RV. “Food-related illness and death in the United States”. Emer Infect Dis: 1999, 5(5):607-25.
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USDA uses three key measures to assess its performance to ensure that food is safe:

• Increase the percentage of federally inspected establishments in “Category 1,” reducing overall 

public exposure to generic Salmonella from broiler carcasses. Establishments are placed in 

Category 1 if they demonstrate consistent process control in USDA Salmonella verification testing.3

• Total Illnesses from all Food Safety Inspection Service (FSIS)-regulated products: Salmonella, Lm, 

and E. coli O157:H7 (All-Illness Measure). The All Illness Measure is aimed at reducing Salmonella, 

Lm, and E. coli O157:H7 illnesses from USDA-regulated products. Of the illnesses attributed to 

USDA-regulated products in 2009, 97 percent of illnesses came from Salmonella, .23 percent from 

Lm, and 2.8 percent from E. coli O157:H7. This is the equivalent of 1 illness for every 298,796

servings of meat and poultry products consumed annually.4

• Increase the percent of federally inspected establishments with a functional food defense plan 

(large, small and very small establishments).USDA measures the industry adoption of functional 

food defense plans. These plans assist industry in preventing intentional contamination of food 

products, thereby protecting public health and reducing the negative economic impact on the food 

infrastructure.

Analysis of Results

USDA did not meet its goals for 4.3.1 and 4.3.2, but exceeded its goal for 4.3.3.

4.3.1 Reduce overall public exposure to Salmonella from broiler carcasses

USDA employs a “category” system to measure the Salmonella performance of establishments 

producing raw products. Selection of the category system was partially based on the long-term evidence 

from USDA regulatory samples (collected between 1998 and 2004). These samples showed a 

statistically significant difference in the likelihood of serotypes of Salmonella in Category 2 

establishments compared to Category 1 establishments. USDA compares how many establishments are 

in Category 1 from one quarter to the next and from one year to the next. Category 1 represents 

establishments that have results from their two most recent completed sample sets that are at or below 

half of the performance standard. Category 1 represents the highest measure attainable by 

establishments. Category 2 represents establishments that have achieved greater than 50 percent on at 

least one of the two most recent test sets without exceeding the performance standard or baseline 

guidance. Category 3 represents establishments that have exceeded the performance standard or 

baseline guidance on the most recent USDA test set. As more establishments attain Category 1 status, 

USDA believes that fewer people will be exposed to Salmonella from raw classes of Departmentregulated products.

4.3.2 Reduce total illnesses from all FSIS-regulated products

The Department calculates a measure that estimates all foodborne illnesses for Salmonella, Lm, and E. 

coli O157:H7 from USDA-regulated products. Objectives for this measure are set using a combination of 

data from published case rates from the U.S. Centers for Disease Control’s (CDC) FoodNet data and 

National Outbreak Reporting System (NORS) outbreak data. These case rates are aligned with Healthy 

People 2010 goals and the HPPG for Salmonella. USDA will shift to using quarterly FoodNet pathogenspecific case rates to estimate the total number of foodborne illnesses from Salmonella, Lm, and E. coli

O157:H7.

 

3 USDA plans to tighten its Salmonella performance measure for broilers, which will require a downward adjustment to a lower percentage attained for the FY 2015 

performance goal for Salmonella broiler carcasses in the first quarter of FY 2011. 

4Data for this measurement is obtained using FSIS illness estimates and food availability data from ERS. ERS data are available at the following Web site: 

http://www.ers.usda.gov/Data/FoodConsumption/app/reports/displayCommodities.aspx?reportName=Total%20meat&id=39#startForm
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4.3.3 Increase the percentage of establishments with a functional Food Defense Plan (large, small and very small 

establishments)

The food defense measure was developed with the goal of increasing the number of establishments with 

a functional food defense plan. Such plans should be developed, written, implemented, assessed, and 

maintained by establishments if they are to be considered functional. The Department considers these 

plans to be important measures for preventing intentional product adulteration. It has developed 

guidance materials to assist in the development and understanding of what constitutes a food defense 

plan for establishments. This performance metric is measured by the annual USDA Food Defense Plan 

Survey. The survey gathers data about industry’s voluntary adoption of food defense plans. Results from 

the first survey, conducted in August 2006, established a baseline adoption rate of food defense plans 

by industry of 34 percent. USDA’s goal for the adoption of food defense plans by FY 2015 is that 90 

percent of all establishments (large, small, and very small) will voluntarily implement a plan.

Annual Performance Goals, Indicators, 

and Trends 20061 2007 2008 20092 Fiscal Year 2010

Target Actual Result

4.3.1 Reduce overall public exposure to Salmonella 

from broiler carcasses

45% 73% 83% 82% 90% 82% Unmet

4.3.2 Reduce total Illnesses for all FSIS Products — 598,087 656,702 615,014 577,262 640,362 Unmet

4.3.3 Increase percent of establishments with a 

food defense plan

34% 39% 46% 62% 67% 73.6% Exceeded

• Large Establishment 81% 91% 96% 97%9 90% 97.1%

• Small Establishment 48% 53% 64% 72% 75% 82.3%

• Very Small Establishment 18% 21% 25% 49% 56% 63.6%

Data from 2006-2008 represent the percentage of facilities with a written plan, while the data from 2009 and 2010 represents the percentage of facilities with a functional 

plan, as defined above. Variations from previous year figures and from Annual Performance Plan figures are due to recalculated, more accurate totals.

The FY 2009 baseline in the FY 2011 Budget of 96 percent, 64 percent, and 25 percent has been revised here and reflects actual data collected via the annual FY 2009 

FSIS Food Defense Survey as opposed to objectives that were set prior to the survey being conducted. 

USDA measures its Salmonella performance in terms of a percentage of broiler chicken processing establishments that are in Salmonella performance Category 1.

Establishments are placed in Category 1 if they demonstrate consistent process control in Department verification testing.

Rationale for Met Range: Up to April 2010, the performance standards were anchored to 1999 illness burden data and objectives were set for each pathogen using the 

Healthy People Goals for 2010. USDA shifted to using CDC FoodNet data, which are pathogen-specific case rates updated annually to calculate the burden of foodborne 

illnesses. These case rates are superior data from 1999 as they are an up-to-date, actual measure of the burden of foodborne illnesses. The final shift in methodology 

occurred in August 2010 where, at the request of the CDC, USDA shifted to using only simple foods when calculating pathogen-specific attribution fractions. The simple 

foods methodology only takes illnesses from simple foods, such as chicken or a steak, into account when calculating the pathogen-specific attribution fraction, rather than 

using complex plus simple foods.

Data Assessment of Performance Measure 4.3.1, 4.3.2, and 4.3.3

Through consultations with its stakeholders, USDA continuously examines the Nation’s changing food safety system and practices. The Department 

articulates a long-term view in regard to its performance and the benefits to public health. USDA also monitors its performance against the Healthy 

People 2010 goals for these three critical pathogens — Salmonella, Lm and E. coli O157:H7. The Department developed an attribution model to 

determine what percentage of all Salmonella, Lm, and E. coli illnesses result from USDA-regulated contaminated products.

• Completeness of Data — Results are based upon USDA’s laboratory results analyzed as of June 30, 2010. They are the best available 

indication of FY 2010 fourth-quarter results. Quarterly and annual data are based on sampling at a range of establishments, from very small 

to large.

• Reliability of Data — The data are reliable because they are based on testing and verification from the USDA’s field service laboratories for 

regulated establishments. Each sample is subjected to highly specific verification testing. The primary goal of these sampling programs is to 

monitor how well each establishment is maintaining control of food safety through its Hazard Analysis and Critical Control Point, sanitation 

and supporting programs. USDA recognizes that its verification testing samples for Salmonella in raw classes of product and for Lm in 

ready-to-eat foods are biased in favor of being collected at establishments with poor process controls and/or higher volume. This factor 

likely results in overestimates in public exposure to these two pathogens. This factor is not the case for E. coli O157:H7 because FSIS 

programs sample every establishment and take into account establishment production volume. USDA is working towards incorporating 

statistical design into its verification testing programs for Salmonella and Lm to have true measures of prevalence.

• Quality of Data — The volume adjusted data show that these measures historically correlated with the CDC and Prevention foodborne 

illness outbreak data. 
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Descriptions of Actions for Unmet Measures

A primary reason why USDA did not meet the goal of reducing overall public exposure to Salmonella 

from broiler carcasses was that the poultry industry (broiler and turkey carcass establishments) did not 

take the requisite steps to improve operational performance. (Second quarter results were 80.47 

percent and third quarter 82 percent, an improvement from the beginning of the year.) 

The poultry industry relies upon USDA for guidance on the actions needed to make poultry safer. New 

poultry standards will be announced in a Federal Register notice at the end of November, 2010. The 

standards will be implemented by January 1, 2011. Due to the fact that Salmonella accounts for the 

largest number of illnesses in proportion to the other pathogens in the “total illnesses” measure, USDA 

did not meet the target for that measure. The FY 2010 target for the total number of illnesses from 

Salmonella, Lm, and E. coli O157:H7 associated with USDA-regulated products was an estimated 

577,262 illnesses. The actual number was an estimated 640,362 illnesses. While USDA has not met the 

overall performance goal for the all-illness measure, it did meet the performance goal for two of the 

three pathogens.

Challenges for the Future

Ensuring the safety of the Nation’s food supply is a challenge and requires a strong and robust 

infrastructure coupled with sound science. USDA uses a data-driven, scientific approach to food safety, 

incorporating public health data critical to combating the ever-changing threats to public health. This is 

a challenge since the Department has minimal control of animals on the farm or food products once 

they leave federally inspected establishments. Educating producers about best practices on the farm, 

and retailers and the public on how to safely store and prepare meat and poultry products is an

important requirement for USDA.

While the Department firmly believes that its day-to-day activities directly impact the burden of 

foodborne illness in this country, it is often challenging to quantitatively relate such USDA activities as 

pathogen verification testing to reductions in foodborne illness. The Department measures its progress 

in meeting its public health performance measures quarterly. Consequently, it has also developed an 

Operational Performance Measures Report to supplement the three key measures reported by USDA. 

This report will allow the Department to assess whether it is carrying out its regular, routine activities to 

reduce or prevent contamination of the products it regulates, ensure import activities are carried out 

appropriately, and provide educational material to the public, amongst other activities. These 

operational performance measures allow USDA to prioritize activities, inform resource allocation, and 

identify program area gaps. As the operational performance measures report will be produced monthly, 

it will allow the Department to measure its progress towards meeting its key objectives before the end of 

a quarterly reporting period, and allow for mid-reporting adjustments in a more timely and effective 

manner. Currently, USDA is reviewing the Operational Performance Measure report. Upon completion 

of the review, the Department intends to include several key operational performance measures in each 

USDA Quarterly Report.

USDA is also a key partner in the President’s Food Safety Working Group (FSWG), which is co-chaired 

by Secretary of Agriculture Thomas Vilsack. In support of the FSWG recommendation to intensify 

USDA efforts to meet the performance goal of reducing overall public exposure to Salmonella from 

young chicken carcasses, the Department proposed tightening its performance standard. The proposal 

was based on results from the 2008 Nationwide Young Chicken Microbiological Baseline. The aim is to 

reduce the occurrence of Salmonella, thereby diminishing the public’s exposure to it in USDA-regulated 

products.

Another food safety challenge is small and very small establishments that often lack the technical 

knowledge to design and implement food safety systems. To assist establishments, USDA has released a 
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Compliance Guide for Poultry Slaughter to reduce Salmonella and Campylobacter. This guide includes 

the latest information about technologies to reduce those pathogens’ occurrence in Departmentregulated products. As consumers are increasingly purchasing raw poultry products in ‘parts’ rather 

than whole birds, USDA has also initiated a nationwide study of young chicken parts microbiological 

baseline to learn more about the public’s possible exposure to Salmonella.

In its work to contain Lm and meet future illness reduction goals, USDA is continually challenged as 

illnesses may occur due to re-contamination of product after it leaves the USDA establishment, for 

example in retail slicing operations or during the distribution process. The Department does not 

currently conduct inspection activities at the retail level.

Finally, the Department is working to improve its trace back positive E. coli O157:H7 test results. USDA 

is also working to ensure that its policies evolve to address a broader range of pathogens, beyond E. coli

O157:H7. This work will ensure that public health and food safety policy keeps pace with the 

demonstrated advances in science and data about foodborne illness to best protect consumers.

OBJECTIVE 4.4 PROTECT AGRICULTURAL HEALTH BY MINIMIZING MAJOR DISEASES AND PESTS ENSURING ACCESS TO SAFE, PLENTIFUL 

AND NUTRITIOUS FOOD

4.4.1 Value of damage prevented and mitigated annually as a result of selected plant and animal health 

monitoring and surveillance efforts ($ billions)

Overview

USDA ensures access to a diverse supply of fruits, vegetables, meat, and poultry. The Department 

protects the agriculture production system and defends against plant and animal pests and diseases. 

There are several programs that contribute towards the prevention and mitigation of economic and 

environmental damage to U.S. agricultural resources. USDA’s monitoring and surveillance programs 

assist with documenting the health status of U.S. agricultural products. This work results in the 

prevention and early detection of plant and animal pests and diseases. The Department also conducts 

various pest and disease programs to limit the damage caused by known pests and diseases. Together, 

these efforts contribute towards the Nation’s overall agricultural health. USDA monitors the health 

status of agricultural resources and quickly detects and responds to pests and diseases to prevent their 

spread.

Analysis of Results

USDA met the target for this performance measure. USDA reached the target of preventing and 

mitigating $1.07 billion in damage to agricultural resources. Several efforts contributed towards 

meeting the target. The Department enhanced the Nation’s capabilities of finding and responding to 

plant and animal diseases. This work pre-empted any potentially significant damage to the agricultural 

production system and food supply. USDA’s animal health monitoring and surveillance efforts are 

focused on finding diseases quickly, tracing them to their origin, and preventing their spread.

There were no significant outbreaks of animal diseases in FY 2010. As a result of the increasing 

diversity of livestock and poultry rearing facilities in the U.S., a more flexible animal disease traceability 

system is needed to effectively respond to animal disease concerns, and minimize harm to producers. 

To replace the original effort—the National Animal Identification System, which was perceived as being 

too intrusive—USDA announced a new approach to animal disease traceability. The Department 

gathered input from the public through a variety of mechanisms to develop a comprehensive 

understanding of how to design and deliver an animal disease traceability program. USDA held eight 

listening sessions with associated public comment periods. It has invited ongoing stakeholder input. 

These forums enabled the Department to provide details about the framework and learn from industry 
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representatives and producers about how to best support the states and tribes as they develop workable 

traceability systems. Additionally, USDA distributed informational packets to more than 560 federally 

recognized tribes. It has worked with the Indian Nations Conservation Alliance to reach out to tribes in 

nine States. The Department also maintained information systems developed under the previous 

system that assist with tracing animals potentially exposed to a disease.

USDA continues to develop a specific plan on traceability that is more flexible than the previous system. 

The new system allows States, tribes, territories, and producers to use their expertise to develop the 

animal disease traceability approach that works best for them. Detecting an animal disease before many 

animals have been exposed to it limits the spread of the disease. It allows for more timely eradication 

and management efforts. The Department estimates that a half week delay in intervention can increase 

total costs by $135 million, including production and trade losses related to a major disease event. 

Therefore, the monitoring and surveillance activities are crucial to minimizing and preventing damages 

to the U.S. livestock industry, and ensuring access to a variety of meat and poultry products.

USDA also prevented and mitigated economic and environmental damage to such other agricultural 

commodities as grapes. The European Grapevine Moth (EGVM), a significant pest of grapes and other 

specialty crops, was initially discovered in major grape production areas of northern California in 2009. 

The pest damages grape production when larvae feed on the flowers and berries; subsequent fungal 

infection causes further damage. High population densities of EGVM can destroy entire vineyards, 

resulting in a total loss of grapes at harvest. Other potential impacts include reduced availability of fresh 

and processed commodities, a decreased number of export markets for the grape and stone fruit 

industry, and increased costs to both the producers and consumers.

The Department believes that many of the impacts have been avoided due to the rapid response to the 

initial discovery of the pest. USDA, State, county, and university cooperators continue to conduct survey 

and regulatory activities, as well as education and outreach efforts. The Department and cooperators

have been conducting intense regulatory compliance activities to prevent the movement of infested 

products from quarantined areas. Growers in affected areas also are conducting treatments to suppress 

the moth.

Annual Performance Goals, Indicators, 

and Trends 2006 2007 2008 2009

Fiscal Year 2010

Target Actual Result

4.4.1 Value of damage prevented and mitigated 

annually as a result of selected plant and 

animal health monitoring and surveillance 

efforts ($ billions)

N/A $1.37 $1.38 $1.05 $1.07 $1.07 Met

Rationale for Met Range: The value of the agricultural resources protected can vary year to year and are disease and commodity specific. A threshold boundary equal to 

the economic assumptions for a given year are considered acceptable.

Data Assessment of Performance Measure 4.4.1

Data Source: Data for animal health programs are entered by state partners into a USDA database and verified by Department officials to document 

the results of surveillance efforts and the health status of the U.S. herd. Data for plant health programs are maintained in the Cooperative Agricultural 

Pest Survey program database. The estimated value of savings is a calculation of the costs associated with conducting monitoring and surveillance 

programs versus potential losses of not having these programs in place.

• Completeness of Data — USDA maintains the databases and results are entered directly into the system. Should a pest or disease be 

detected, the Department updates information on its detection and response efforts to plant and animal pests and diseases daily at 

http://www.aphis.usda.gov/. The pests and diseases of highest concern are easily identified from USDA’s Web site.

• Reliability of Data — The surveillance results are used by both internal managers and external partners and stakeholders as an 

authoritative source of information.

• Quality of Data — USDA ensures the information reported on its Web site accurately reflects the status of U.S. plant and animal health.
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Challenges for the Future

USDA is faced with prioritizing and determining an appropriate Federal response to an increasing 

number of agricultural health threats. The Department must continually prioritize the list of major pest 

and disease threats, since these threats are increasing domestically and internationally. In addition, 

USDA’s monitoring and surveillance efforts will need to be adjusted to respond to these threats to 

protect agricultural resources and ensure that America has access to nutritious foods.
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Selected Results in Research, Extension, and Statistics

USDA engages in scientific research and extension work that helps farmers and others involved in 

producing food and fiber, and statistical analysis designed to aid understanding of agricultural issues. 

This important facet of USDA’s role supports its mission through its strategic goals, as outlined below. 

The examples provided are a small selection from a large effort to further our understanding.

STRATEGIC GOAL 1: ASSIST RURAL COMMUNITIES TO CREATE PROSPERITY SO THEY ARE SELF-SUSTAINING, REPOPULATING, AND 

ECONOMICALLY THRIVING 

Objective 1.1 – Enhance Rural Prosperity

America’s Family Farms. Most U.S. farms—98 percent in 2007—are family-owned operations. While largescale family farms and nonfamily farms account for 12 percent of those in the U.S., they also comprise 

84 percent of the value of production. In contrast, small family farms make up most of the U.S. farm 

count while producing a modest share of farm output. Small farms are less profitable than large-scale 

farms, on average, and tend to rely on off-farm income for their livelihood. Generally speaking, farmoperator households cannot be characterized as low-income when both farm and off-farm income are 

considered. Nevertheless, limited-resource farms still exist and account for 3 to 12 percent of family 

farms. This research provides decision makers with an ongoing assessment of the economic status of 

family farms.

Small Farms in the United States: Persistence under Pressure. Ninety-one percent of U.S. farms are classified as 

small, with gross cash farm income (GCFI) of less than $250,000. About 60 percent of these small 

farms are very small, generating GCFI of less than $10,000. These very small noncommercial farms, in 

some respects, exist independently of the farm economy because their operators rely heavily on offfarm income. The remaining small farms—small commercial farms—account for most small-farm 

production. Overall farm production, however, continues to shift to larger operations, while the number 

of small commercial farms and their share of sales maintain a long-term decline. This research provides 

decision makers with an assessment of the current economic status of the Nation’s small farms.

Objective 1.2 – Create Thriving Communities

Promoting Local Community Sustainability. Because of the increased demand for local foods, especially by 

restaurants, USDA-funded extension programs now link growers to consumers. In Oregon, one town 

has 22 restaurants, 85 small farms/growers, 5 food markets, 3 fishing boats, and consumers 

participating in a food Web linkage project, in which participants share a wide range of food expertise 

using the Internet. It is estimated that more than $129,000 in local food trade occurred in 2009 within 

these groups. As a result of the demand generated by the project, four new farms began production. 

This production added between $80,000 and $320,000 annually in net income to an economically 

depressed community. The project can be a model of sustainability for other communities to emulate.

Objective 1.3 – Support a Sustainable and Competitive Agricultural System

Organic Production Survey. The Food, Conservation, and Energy Act of 2008 provided funding for USDA to 

develop statistics on organically produced agricultural products. The Organic Production Survey results 

were released in FY 2010 in response to this mandate. The one-time funding provided by the Farm Bill 

allowed the Department to develop baseline statistics about this quickly expanding and vital sector of 

U.S. agriculture. Information on this survey and on the Census of Agriculture can be found at 

http://www.agcensus.usda.gov/. 

Decoding the Swine Genome. An international team of scientists, funded with a grant from USDA, has 

completed the first draft sequence of the genome of a domesticated pig. A genome is the full 

complement of genetic material within an organism. This first draft sequence will spur advancements in 
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swine production and human medicine. Understanding the swine genome will lead to health 

advancements in the swine population. It will also accelerate the development of vaccinations for pigs.

This new insight into the genetic makeup of the swine population can help reduce disease and enable 

medical advancements in both pigs and humans.

Improving Sustainability in the Agricultural System. USDA funded the Western Sustainable Agriculture Research 

and Education (SARE) program to educate and help the agriculture industry become more profitable, 

protect natural resources and the environment, and improve the quality of life for producers and 

consumers. The number of separate SARE-impacted farms and ranches which increased profits and/or 

reduced costs was documented as at least 1,452. Adjacent farms and ranches totaled more than 3,000, 

impacting 4,178,000 acres. Of these farms and ranches, 82 percent reported the sustained use of the 

research-based idea or practices tested. Finally, across the 5-year life-span of this cooperative 

agreement, and across the entire western region, there was a positive economic impact of more than 

$500 million.

STRATEGIC GOAL 2: ENSURE OUR NATIONAL FORESTS AND PRIVATE WORKING LANDS ARE CONSERVED, RESTORED, AND MADE MORE 

RESILIENT TO CLIMATE CHANGE, WHILE ENHANCING OUR WATER RESOURCES

Objective 2.1 – Restore and Conserve the Nation’s Forests, Farms, Ranches, and Grasslands

Participation in Conservation Programs by Targeted Farmers: Beginning, Limited-Resource, and Socially Disadvantaged 

Operators' Enrollment Trends. Beginning, limited-resource, and socially disadvantaged farmers make up as 

much as 40 percent of all U.S. farms. Some Federal conservation programs contain provisions that 

encourage participation by such “targeted” farmers. A 2010 USDA report provided Departmental 

decision makers with a comparison of the natural resource characteristics, resource issues, and 

conservation treatment costs on targeted farmers against those of other participants in the largest U.S. 

conservation programs. Some evidence shows that targeted farmers tend to operate more 

environmentally sensitive land than other farmers, have different conservation priorities, and receive 

different levels of payments. The different conservation priorities among types of farmers suggest that, 

if a significantly larger proportion of targeted farmers participate in these programs, the programs’ 

economic and environmental outcomes could change.

‘Recovery’, a New Grass Cultivar to Improve Rangeland Restoration. Western wheatgrass is an important native 

grass in many range land ecosystems. Despite its importance, its low rate of seed production and poor 

seedling vigor limit its use when quick establishment is needed to stabilize and restore degraded range 

lands. USDA scientists in Logan, Utah, worked with the Army Corps of Engineers to develop and jointly 

release ‘Recovery’, a superior and more easily established western wheatgrass. Developed and tested for 

more than 10 years, ‘Recovery’ was designed for reseeding range lands following severe disturbance, 

frequent wildfires, and soil erosion. With a 20-48 percent increase in the rate of successful 

establishment, ‘Recovery’ enables land managers to use a native grass species to help limit weed 

infestation and soil erosion in systems where reestablishment of wheatgrass is inhibited by frequent 

disturbances. USDA and the Army Corps of Engineers recommend ‘Recovery’ for reseeding private, 

public, and military training lands throughout the northern plains and intermountain west. 

Objective 2.2 – Lead Efforts to Mitigate and Adapt to Climate Change

Reducing Greenhouse Gases. In Nebraska, proven technologies and management practices could reduce the 

pumping of irrigation water by at least 460 billion gallons per year, and energy use by at least 42 million 

gallons of fuel per year. In addition, for every acre-inch of water not pumped, the environment benefits 

from 55 pounds of reduced carbon dioxide emissions. This could result in a 490,000-ton reduction of 

carbon dioxide emissions. Participants in a USDA-funded University of Nebraska program estimated 

that the skills gained during the educational experiences would allow them to reduce water use between 
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1.4 and 2.6 inches of water per acre. Increased carbon storage has multiple environmental benefits, 

such as reduced soil erosion, increased water-holding capacity for plants, and a slower rise in 

atmospheric carbon dioxide concentrations.

Objective 2.3 – Protect and Enhance America’s Water Resources

Use of On-Farm Irrigation. The Farm and Ranch Irrigation Survey (FRIS), conducted every 5 years, provides 

the only complete, consistent data regarding on-farm irrigation activities in the Nation. The 2008 FRIS, 

released in FY 2010, provided information that will promote efficient irrigation practices, and ensure 

long-term sustainability of the Nation’s water resources. Statistics were provided on irrigation water 

use, including application methods, equipment, facilities, expenditures, crop acreage and yield, and 

many other areas. The survey results are used by industry, Government, and producers. FRIS aids in 

developing improved technology, more efficient water use practices, and sound programs and policies.

The survey can be found under “Census Highlights” at http://www.agcensus.usda.gov/.

Objective 2.4 – Reduce Risk from Catastrophic Wildfire and Restore Fire to its Appropriate Place on the Landscape

Prescribed Burning Reduces Emergence of Invasive Weeds. Common rangeland weed control methods rarely 

prevent weed seeds already on the ground from germinating and reestablishing the weed population.

USDA scientists in Miles City, Montana, evaluated how fire management could reduce seed viability. 

Seeds of Japanese brome, spotted knapweed, Russian knapweed, and leafy spurge were deposited on 

the soil surface. Scientists burned the seeds at six fuel loads common to grasslands. The results were 

compared with a non-burned control. At fuel loads common to the northwestern Great Plains, seedling 

emergence was reduced 79 to 88 percent. At fuel loads common to the north-central Great Plains, 

emergence was reduced at least 97 percent. At fuel loads typical of the northeastern Great Plains, 

emergence probabilities were less than 1 percent for all species except spotted knapweed. Results 

indicate the high potential for using fire to disrupt the life cycle of invasive species across the northern 

Great Plains. Reducing invasive weeds through proper fire management provides an affordable method 

to aid in weed control. It also increases livestock production and protects the ecosystem services of 

native rangelands.

STRATEGIC GOAL 3: HELP AMERICA PROMOTE AGRICULTURAL PRODUCTION AND BIOTECHNOLOGY EXPORTS AS AMERICA WORKS TO 

INCREASE FOOD SECURITY

Objective 3.1 – Ensure U.S. Agricultural Resources Contribute to Enhanced Global Food Security

Food Security Assessment, 2009-2010. USDA analysis finds that global food security improved between 2009 

and 2010. The improvement is the result of moderation of the global economic downturn. Department 

analysis warns of a long-term deterioration in food security in some regions, most notably sub-Saharan 

Africa.

Early-flowering genes identified that accelerate fruit tree breeding. Fruit tree breeding is a slow and expensive 

process because of the long delay between planting a seedling and the plant’s first flowering. Years of 

breeding and testing can be saved if that time is shortened. USDA scientists have identified and 

incorporated into breeding stock a gene that promotes early flowering and fruiting. This new gene

shortens the juvenile stage of plum trees from 4 years to less than 12 months. Once breeding results are 

achieved, the genetically engineered early-flowering trait can be removed, which creates a tree that can 

be categorized as non-genetically engineered. Early flowering and fruiting will allow for the rapid 

development of new and improved varieties of plum and other fruits, as well as forest and woody 

ornamental species.
Annual Performance Report

80

Objective 3.2 – Enhance America’s Ability to Develop and Trade Agricultural Products Derived from New 

Technologies

Trade Negotiations and Policy Analysis. USDA research on trade policy provides decision makers with analysis 

that evaluates the impact of changes in U.S. and other countries' agricultural trade policies. Department 

research in support of World Trade Organization (WTO) negotiations has helped to inform and 

strengthen U.S. negotiating positions on agriculture. WTO is the only international body dealing with 

the rules of trade between nations. Despite strong critics of WTO, membership continues to grow as 

countries seek the benefits of expanding trade. Within the organization, member countries trade 

concessions to gain access to foreign markets, benefiting foreign producers and consumers.

New value-added lentil products. Many people are allergic to gluten (Celiac disease). Gluten is a protein found

in cereal grains, especially wheat. The gluten-free market is valued at $700 million. Using extrusion 

technology, lentil-based snacks rich in gluten-free dietary fiber and protein were developed by USDA 

researchers in collaboration with the California Departments of Food Science and Human Nutrition and 

Biological Systems Engineering at Washington State University. The commercialization of lentil-based, 

gluten-free products will benefit a large number of consumers and increase demand for this commodity.

Objective 3.3 – Support Sustainable Agriculture Production in Food-Insecure Nations

Protecting Global Agricultural Markets. USDA-funded scientists in Arkansas have developed the Arkansas 

Global Rice Model (AGRM). This model generates a 10-year baseline projection of the global rice 

market. The baseline includes all major rice producing, consuming, and trading nations. During the 

past year, AGRM was used to evaluate bio-fuels policies in explaining the spikes in global rice prices in 

2008. The research on the global rice economy and analysis of trade protection has received 

considerable attention from the World Bank, the United Nations, Congress, and many policy decisionmakers in the U.S. and the rest of the world. The World Bank, the Organization for Economic 

Cooperation and Development, the Food and Agriculture Organization of the United Nations, and the 

Government of Japan have requested assistance from the Arkansas Global Rice Economics Team in 

developing rice market analysis.

Development of Ug99 Resistant Wheat for Production in Afghanistan and Pakistan. Ug99 causes stem rust, a 

significant disease of cereal crops. USDA, in partnership with the International Maize and Wheat 

Improvement Center and the International Center for Agriculture Research in Dry Areas, is working to 

bring Afghanistan and Pakistan into the Borlaug Global Rust Initiative. The initiative is designed to 

systematically reduce the world’s vulnerability to stem, yellow, and leaf rusts of wheat. It also advocates

the evolution of a sustainable international system to contain the threat of wheat rusts, and the 

continuation of the productivity enhancements required to withstand future global threats to wheat.

The partnership strives to help safeguard wheat production in the aforementioned countries. The Food 

and Agriculture Organization of the United Nations has determined that more than a quarter of the 

world’s wheat crop is vulnerable to Ug99. Both Afghani and Pakistani wheat lacks resistance to Ug99 

and are at extreme risk since the rust is advancing towards their wheat growing areas. The Department 

worked with the Egyptian Agricultural Research Center to provide resistant wheat seed to Afghanistan. 

They also organized a 3-year project with Pakistan to develop resistant wheat varieties for release in 

that country.

STRATEGIC GOAL 4: ENSURE THAT ALL OF AMERICA’S CHILDREN HAVE ACCESS TO SAFE, NUTRITIOUS, AND BALANCED MEALS

Objective 4.1 – Increase Access to Nutritious Food

Household Food Security in the United States. Food security for a household means that it can access, at all 

times, enough food for an active, healthy life. To inform policy makers and the public about the extent 

to which U.S. households consistently have economic access to enough food, USDA publishes an annual 
Annual Performance Report

81

statistical report on household food security in the U.S. The latest report, Household Food Security in 

the United States, 2008, based on data from the December 2008 Food Security Survey and published in 

FY 2010, provides the most recent statistics on the food security of U.S. households. It documents how 

much was spent for food, and the extent to which food-insecure households participated in Federal and 

community food assistance programs. Results show that 85 percent of American households were food 

secure throughout 2008. The remaining 15 percent of households were food insecure at least some time 

during that year.

The U.S. Food Environment Atlas. The Atlas is a Web-based mapping tool USDA developed to allow users to 

compare U.S. counties in terms of their “food environment,” the set of factors that help determine and 

reflect a community’s access to affordable, healthy food. The 90 indicators of the food environment 

currently included in the Atlas cover a wide range of demographic, health, and food access 

characteristics, most at the county level. The basis of the U.S. Food Environment Atlas is a recognition 

that factors such as store/restaurant proximity, food prices, food and nutrition assistance programs, 

and community characteristics, interact to influence food choices and diet quality.

New Dietary Supplement Ingredient Database. A partnership between USDA scientists in Beltsville, Maryland, 

and the National Institutes of Health, Office of Dietary Supplements, resulted in release of the Dietary 

Supplement Ingredient Database, Version 1. The database can be found at 

http://dietarysupplementdatabase.usda.nih.gov. This list of hundreds of multivitamin/mineral 

products is the first of several related goals to provide better dietary assessments of the American 

people. This database will be used by researchers who determine how much of various nutrients people 

consume. Because half the population takes dietary supplements, this new information will make 

estimates of intake more accurate. It will also lead to better dietary recommendations for health.

Objective 4.2 – Promote Healthy Diet and Physical Activity Behaviors

New Intervention Method Can Decrease Obesity. A USDA-funded integrated research/extension project at the

Children’s Nutrition Research Center, Baylor College of Medicine, investigated adding a new 

intervention to Expanded Food and Nutrition Education Program (EFNEP) classes in Texas. At issue 

was whether it would lead to improved dietary behaviors and lower body mass index (BMI) as 

compared with groups receiving standard EFNEP classes. BMI is the ratio of a person’s weight to 

height. While both the control and intervention groups’ improved dietary behaviors, the intervention 

group also experienced a significant decrease in BMI. This project demonstrates the potential for

EFNEP to significantly impact family dietary behaviors in populations at risk for obesity.

Golden Rice as an Effective Source of Vitamin A. Vitamin A deficiency leads to premature disability and millions 

of deaths worldwide each year. Scientists from USDA nutrition centers in Houston and Boston proved 

that golden rice provides enough beta-carotene (an organic compound that can easily be converted to 

vitamin A) to satisfy the requirements for this essential vitamin. Widespread consumption of golden 

rice would help eliminate this nutrient deficiency.

Objective 4.3 – Protect Public Health by Ensuring Food is Safe

Fighting Food Pathogens at the Source. Although cattle are important reservoirs of foodborne pathogens, no 

validated method exists to monitor them on farms. The goal of this project was to improve food safety 

by developing efficient, effective methods to determine the E. coli O157:H7 and Salmonella status of 

pens of feedlot cattle. It also looked to reduce the potential for these foodborne pathogens to be 

transmitted outside the feedlot. USDA-funded scientists in Nebraska developed and validated a pentesting protocol as a monitoring tool for feedlot production Hazard Analysis and Critical Control Points 

(HACCP) Programs. HACCP is a process that has been established for juice, meat, poultry, and seafood 

processing to prevent foodborne illness. Scientists also look to use the protocol. This work was 
Annual Performance Report

82

important to the understanding of when and where food safety pathogens occur in cattle feedlots and 

enable the development of control strategies.

Salmonella Serotyping. Definitively characterizing Salmonella species isolated from foods is a 

critical issue for USDA. Department scientists in Athens, Georgia, developed a multiplex polymerase 

chain reaction (PCR) Salmonella serotyping technique for high-throughput analysis. PCR is a scientific 

technique in molecular biology to amplify a single or a few copies of a piece of deoxyribonucleic acid 

(DNA) to generate thousands to millions of copies of a particular DNA sequence. DNA is a molecule 

that carries the genetic information of all living organisms. A serotype is a group of organisms, 

microorganisms, or cells distinguished by how they produce immune-defense molecules. The multiplex 

PCR assay can identify the top 50 serotypes isolated, which represent 85 percent of all clinically isolated 

Salmonella. It has been adapted to a high-throughput platform by incorporation of capillary analysis of 

the multiplex PCR products. The impact of the research will be immediate. The technique, which 

requires little training, could replace traditional serotyping for most Salmonella isolates. It facilitates 

the determination of up to 90 isolates in 24 hours with very little hands-on time at a cost of $1.50 per 

sample. This result compares to several days and about $40 for traditional serotyping. The technique is 

currently being tested and validated by several Federal and State public health laboratories in the U.S., 

and the Public Health Agency of Canada.

E-beam Technology for Developing Poultry Vaccines. Some microorganisms, particularly bacteria, cause serious 

disease in commercial poultry. They can also be of importance in causing food poisoning in poultry 

products reaching the consumer. New methods are needed to minimize the effects of such 

microorganisms. USDA scientists, in collaboration with Texas A&M University scientists, used high 

energy electron-beam (E-beam) irradiation to render Salmonella non-viable as an infectious agent, 

while retaining the necessary antigenic properties to stimulate a strong immunological response in 

poultry. The research established that broiler chickens exposed to E-beam-treated bacteria were much 

more efficient in fighting off subsequent infections by normal, viable bacteria. This finding suggests that 

the irradiated bacteria could serve as a vaccine. It also shows that, although vaccines against viruses are 

well known and relatively easy to create, developing effective ones against bacteria have historically 

been much more difficult.

X-ray Treatments to Improve Seafood Safety. USDA-funded scientists at Mississippi State University evaluated 

the use of X-ray technology on oysters and shrimp to reduce bacterial pathogen levels. In half- and 

whole-shell oysters and ready to eat shrimp, more than 1 million cells of the foodborne pathogens E. 

coli O157: H7, Salmonella, Shigella flexneri, and Vibrio parahaemolyticus could be killed with X-ray 

treatments of between 2 to 5 kGy (kGy, or KiloGray, is a unit of radiation measurement). More 

importantly, X-ray treatment did not kill the oysters even with the highest dose (5 kGy). This research 

will have a direct impact on producers, particularly in southern States, which are eager for an 

alternative pathogen intervention process that does not impact product quality.

Objective 4.4 – Protect Agricultural Health by Minimizing Major Diseases and Pests to Ensure Access to Safe, 

Plentiful, and Nutritious Food

National Network of Labs Detect Diseases Early. The National Plant Diagnostic Network (NPDN) developed 

links to laboratories in every State. NPDN provides a nationwide network of public agricultural 

institutions with a cohesive, distributed system to quickly detect high consequence pests and pathogens 

introduced into agricultural and natural ecosystems, identify them, and immediately report them to 

appropriate responders and decision makers. ISDA funding has enabled NPDN to increase the 

cumulative number of specific plant diseases labs within the network prepared to detect from 3 in 2004 

to 10 in 2010. Plant disease (and insect) detection criteria have been developed for soybean rust, 

sudden oak death, Ralstonia stem rot, plum pox virus, pink hibiscus mealybug, potato wart, 
Annual Performance Report

83

huanglongbing (citrus greening), Potato Cyst Nematode, Late Blight and Beet Curly Top. The 

Department also helped fund and provide leadership to establish the National Animal Health 

Laboratory Network (NAHLN), a multifaceted network comprised of sets of laboratories that focus on 

different diseases, using common testing methods and software platforms to process diagnostic 

requests and share information. USDA’s work helped enable NAHLN to increase the number of animal 

diseases that labs within the network can detect.

Genome of the Citrus Greening Bacterium Sequenced. USDA scientists in Fort Pierce, Florida, in collaboration 

with university researchers, have completely sequenced the genome of Candidatus Liberibacter 

asiaticus. This bacterium is the likely causative agent associated with citrus greening disease. 

Knowledge of the genome will be used to better understand the microbe’s genetic make-up and

nutritional requirements. Such knowledge can be exploited to interrupt disease transmission and find 

cures for the disease.
Annual Performance Report

84

Selected 2010 Program Evaluations

Perform.

Measure Title Findings and Recommendations/Actions Availability

2.4.1, 2.4.2, 

2.4.3

Managerial Cost Accounting 

Practices: Department of 

Agriculture, Forest Service 

(FY2007 study, action 

continued in FY2010)

Findings: FS should continue to place a high priority 

on addressing its remaining financial management and 

reporting problems. At the same time, the Secretary of 

Agriculture should direct appropriate FS officials to 

assess FS managerial cost accounting (MCA) needs 

and require that they are appropriately addressed in 

any new systems that are implemented.

Actions: In 2010, the USDA Office of the Chief 

Financial Officer (OCFO) and FS officials assessed and 

defined its managerial cost accounting needs and 

requirements. FS assessed its managerial cost 

accounting needs through participation in the USDA 

Managerial Cost Accounting Workgroup ongoing 

discussions led by the OCFO, including discussions in 

FY 2008-2010 of a strategic framework for MCA 

practices across the Department. Additionally, at that 

time, FS, along with USDA's OCFO, was charged with 

responsibility for identifying and ensuring MCA 

requirements are incorporated in the cost accounting 

module of USDA's Financial Management 

Modernization Initiative (FMMI). The MCA requirements 

identified included 34 mandatory Financial Systems 

Integration Office (FSIO) cost management 

requirements and 12 additional USDA-mandatory 

requirements. These requirements are to enable 

USDA-wide cost management, including recording and 

accumulating financial data, cost distribution and full 

cost reporting. If fully and effectively implemented, 

USDA's actions to identify and establish MCA 

requirements for the FMMI cost accounting module, 

should enable FS obtain more relevant MCA 

information to help support decision making at USDA 

and its components, including FS.

http://www.gao.gov/products/GAO-06-

1002R

3.2.1 Managerial Cost Accounting 

Practices: Department of 

Agriculture, Animal and Plant 

Health Inspection Service 

(APHIS) (FY2007 study, action 

continued in FY2010)

Findings: To promote the implementation and use of 

MCA methodologies at APHIS, the Secretary of 

Agriculture should direct appropriate APHIS officials to

finalize and document procedures for using APHIS 

Cost Management System (ACMS) data fields for MCA 

as a step toward better informed managerial decision 

making.

Actions: In FY2010, APHIS issued an ACMS User 

Guide that provided instructions on recording and

accumulating cost data into appropriate ACMS data 

fields in the system's spending and collections module 

to track costs associated with APHIS information and 

technology investments. The spending and collections 

module is to provide important information, such as 

planned and committed costs related to APHIS 

program agreements and cost centers. At the same 

time, APHIS also expanded reporting capabilities in 

ACMS to include managerial reports for tracking costs 

for component organizations and programs to include 

http://www.gao.gov/products/GAO-06-

1002R

reporting on allocations, agreements, strategic funds, 
Annual Performance Report

85

Perform.

Measure Title Findings and Recommendations/Actions Availability

forecasting and performance. Further, in March 2010, 

APHIS conducted three training sessions on using 

ACMS specifically for APHIS managers who have 

responsibility for managing agency funding and making 

spending decisions. Based on these collective APHIS 

actions, if fully and effectively implemented, APHIS will 

have greater assurance that relevant managerial cost 

accounting data is available to support APHIS program 

decision making.

4.1.1 Enhancing Supplemental 

Nutrition Assistance Program

Certification: SNAP 

Modernization Efforts -- Final 

Report (released first quarter 

FY2010)

This report uses information from case studies 

conducted in 14 SNAP agencies in 2009 to describe 

states’ goals for modernization, factors that led to shifts 

in business practices, and types of changes. These 

changes include efforts to improve customer service in 

the local offices, and manage workload, technological 

innovations, and partnering arrangements.

Actions: No recommendations for action.

http://www.fns.usda.gov/ora/MENU/Publ

ished/snap/FILES/ProgramOperations/E

nhancedCertification_FinalSummary.pdf

4.1.1 Low Income Household 

Spending Patterns and 

Measures of Poverty (April, 

2010)

This study uses information from the Consumer 

Expenditure Survey to compare spending patterns 

across major consumption categories for SNAP 

households, income-eligible non participating 

households, and ineligible households with incomes 

between 130 and 300 percent of poverty.

Findings: All three categories spent less than onequarter of their household income on food, with SNAP 

participants spending slightly higher percentages than 

other low-income people. SNAP participants are less 

likely to have checking and savings accounts than nonparticipants, and tend to carry much lower account 

balances.

Actions: No recommendations for action.

http://www.fns.usda.gov/ora/MENU/Publ

ished/snap/FILES/Participation/Spendin

gPatterns.pdf

4.1.1 Implementing Supplemental 

Nutrition Assistance Program 

in Puerto Rico: A Feasibility 

Study (June, 2010)

This study assesses the feasibility and effects of adding 

the Commonwealth to SNAP in place of its current 

block grant for nutrition assistance to low-income 

families.

Findings: Changing the current SNAP block grant to 

SNAP in the Commonwealth would increase 

participation by about 85,000 households, with 220,000 

people in an average month, and increase annual costs 

by roughly $500 million. However, these estimates are 

highly sensitive to economic conditions and policy 

choices.

Actions: No recommendations for action.

http://www.fns.usda.gov/ora/MENU/Publ

ished/snap/FILES/ProgramDesign/Puert

oRico.pdf

4.1.1 Summary of Nationwide 

Electronic Benefits Transfer 

(EBT) Operations (January, 

2010)

Findings: The Office of Inspector General (OIG)

concluded that, while FNS generally had adequate 

controls over EBT processing, there were a small 

number of instances in which retailers redeemed SNAP 

benefits using incorrect store authorization numbers.

Actions: While OIG made no formal recommendations, 

FNS agreed to take action to validate and cross-check 

retailer authorization numbers.

http://www.usda.gov/oig/webdocs/27099

-71-Hy.pdf
Annual Performance Report

86

Perform.

Measure Title Findings and Recommendations/Actions Availability

4.1.3 Direct Certification in the 

National School Lunch 

Program (NSLP): State 

Implementation Progress 

Report to Congress 2009

(released first quarter FY2010)

Presents information on the effectiveness of State and 

local efforts to directly certify children for free school 

meals in School Year (SY) 2008-09.

Findings: Seventy-eight percent of local education 

agencies directly certified SNAP-participating students 

in SY 2008-09. These LEAs enroll 96 percent of all 

students in NSLP-participating schools. The median 

direct certification rate was 72 percent in SY 2008-

2009. This is up from 69 percent in SY 2007-08.

Actions: No recommendations for action.

http://www.fns.usda.gov/ora/MENU/Publ

ished/CNP/FILES/NSLPDirectCertificati

on2009.pdf

4.1.3 Child and Adult Care Food 

Program (CACFP) – 

Assessment of Sponsor Tiering 

Determinations – 2008

(released March 2010)

Estimates the accuracy level of CACFP meal 

reimbursement levels (“tiering”), and related improper 

payments in 2008.

Findings: The level of improper payments was 

comparable to the estimates from previous years at 

about 2 percent of total CACFP meal reimbursements. 

Actions: No recommendations for action.

http://www.fns.usda.gov/ora/MENU/Publ

ished/CNP/FILES/CACFPTiering08.pdf

4.1.3 Regional Office Review of 

Applications (RORA) for 

School Meals 2008 (released 

February 2010)

Assesses administrative error associated with the local 

educational agency’s approval of applications for free 

and reduced-price school meals.

Findings: The percent of all students with 

administrative errors in the processing of their 

applications for meal benefits has remained relatively 

stable during the 4-year period, with administrative 

errors ranging between 3 and 4 percent.

Actions: No recommendations for action.

http://www.fns.usda.gov/ora/MENU/Publ

ished/CNP/FILES/rora2008.pdf

4.1.3 Analysis of Verification 

Summary Data School Year 

2007-08 (released first quarter 

FY2010)

Presents results of an analysis of the data on the 

application verification process reported by States for 

SY 2007-08.

Findings: Of the almost 300,000 applications selected 

for verification by local education agencies, about half 

(48 percent) were confirmed at the initial free or 

reduced price status, 9 percent changed from free to 

reduced price, 9 percent changed from free or reduced 

price to paid, 2 percent changed from reduced price to 

free, and about a third (32 percent) resulted in non 

response.

Actions: No recommendations for action.

http://www.fns.usda.gov/ora/MENU/Publ

ished/CNP/FILES/CNVerification2007-

08.pdf

4.1.1, 4.1.2, 

4.1.3. 4.1.4

Food and Nutrition Service 

Financial Statements for Fiscal 

Years 2009 and 2008 

(released first quarter FY2010)

Findings: OIG reviewed FNS financial statements for 

fiscal years 2008 and 2009. FNS’ statements received 

an unqualified opinion. The agency’s core financial 

management system was found to be in substantial 

compliance with the Federal Financial Management 

Improvement Act of 1996.

Actions: The report contains no recommendations.

http://www.usda.gov/oig/webdocs/27401

-34-HY.pdf
Annual Performance Report

87

Perform.

Measure Title Findings and Recommendations/Actions Availability

4.1.1, 4.1.3. 

4.1.4

Domestic Food Assistance: 

Complex System Benefits 

Millions, but Additional Efforts 

Could Address Potential 

Inefficiency and Overlap 

among Smaller Programs

(April, 2010)

Findings: GAO found research suggesting that, while 

participation in the Special Supplemental Nutrition 

Program for Women, Infants and Children (WIC), the 

National School Lunch Program, the School Breakfast 

Program, and SNAP is associated with positive health 

and nutrition outcomes, little is known about the 

effectiveness of the remaining 11 programs because 

they have not been well studied. GAO also found that, 

while the existing range of multiple programs may help 

to increase access to food for vulnerable or target 

populations, it shows signs of program overlap. This 

overlap can create unnecessary work and lead to 

inefficient use of resources.

Actions: GAO recommended that USDA identify and 

develop methods for addressing potential inefficiencies 

and reducing unnecessary overlap among smaller 

programs, while ensuring access to the programs for 

those who are eligible. FNS agreed to consider a study 

to examine potential inefficiencies and overlap among 

smaller programs.

http://www.gao.gov/new.items/d10346.

pdf

Review of the Emergency 

Food Assistance Program

(March 2010)

Findings: OIG found that the agency was not 

frequently and consistently reviewing State operations 

of the Emergency Food Assistance Program (TEFAP).

It also found that the evaluations performed did not 

necessarily focus on States and territories that were at 

the greatest risk of fraud, waste, and abuse.

Actions: OIG recommended setting policies and 

timeframes for TEFAP reviews. FNS will explore the 

use of a standard, risk-based approach to identifying 

TEFAP agencies that should receive priority reviews. It 

also will develop guidance to improve consistency in 

the review process.

http://www.usda.gov/oig/webdocs/27703

-01-AT.pdf

4.2.1 Food Expenditures and Diet 

Quality among Low-Income 

Households and Individuals

(July 2010)

Uses data from several national surveys to compare 

food spending and household diet quality of SNAP 

participants with other low-income households. 

Findings: Ten-percent higher food spending is 

associated with a small but, for some groups, 

statistically significant positive difference in diet quality.

Actions: No recommendations for action.

http://www.fns.usda.gov/ora/MENU/Publ

ished/snap/FILES/Other/FoodExpendDi

etQuality.pdf

4.2.1 WIC Breastfeeding Peer 

Counseling Study Final 

Implementation Report (June 

2010)

Provides a comprehensive and systematic picture of 

the implementation of the Loving Support Peer 

Counseling Program. (A second phase of the project, 

now underway, will assess the impact of enhancing 

Loving Support on breastfeeding outcomes for WIC 

participants.)

Findings:

• More than half of pregnant WIC participants 

were enrolled at local WIC agencies that 

offered the Loving Support Program ; 

• The dollar amount of FNS Loving Support

grants per pregnant WIC participant varies 

widely ; and

• Breastfeeding peer counseling contacts 

http://www.fns.usda.gov/ora/MENU/Publ

ished/WIC/FILES/WICPeerCounseling_

Summary.pdf
Annual Performance Report

88

Perform.

Measure Title Findings and Recommendations/Actions Availability

occur both in WIC offices and on the 

telephone. 

Actions: No recommendations for action.
Financial Statements, Notes, Supplemental , and Other Accompanying Information

89

3. Financial Statements, Notes, Supplemental and Other Accompanying Information

Message from the Chief Financial Officer

The Office of the Chief Financial Officer leads the U.S. Department of Agriculture (USDA) with fiscally 

sound, cost-effective program delivery. Our efforts are supported by reliable financial management 

information and infrastructure. Because we are accountable to the American taxpayer, we strive for 

peak performance in all facets of the Department. We continually adjust our operations to improve the 

quality of services we provide to the American people.

The purpose of Sections 3 and 4 of this Fiscal Year 2010 Performance Accountability Report is to 

provide factual data that clearly characterize our accomplishments in managing USDA resources with 

maximum efficiency. Sections 3 and 4 include detailed information regarding:

• Financial Statements;

• Audit Reports;

• Findings and Recommendations;

• Balance Sheets;

• Supplemental Notes; and 

• Other Accompanying Information.

Through the leadership and collaborative efforts of USDA managers, employees, business partners, and 

stakeholders, we have made significant strides in fiscal year 2010, advancing the Department’s 

impressive record of excellence in financial management.

• Highlights of USDA’s significant progress in financial management during FY 2010 include:

• Received another clean financial audit opinion;

• Continued implementation of a core financial system to replace USDA’s 9 general ledger systems; 

• of the 29 agencies and offices that form the Department, 21 have implemented the Financial 

Management Modernization Initiative System;

• Completed the assessment of internal control over financial reporting as required by Office of 

Management and Budget Circular A-123, Appendix A, “Internal Control over Financial Reporting.” 

As a result of testing, USDA identified 182 new control deficiencies. The Department also closed 32 

business-process corrective action plans and 182 general-computer-control plans of action and 

milestones from prior years’ assessments;

• Reduced USDA’s inventory of audits open 1 or more years without final action by 39 percent;

• Reduced improper payments from 5.92 percent to 5.37 percent;

• Exceeded USDA’s recovery target of $54.1 million with total improper payment recoveries of $310.3

million; and

Section 3. 

Financial Statements, Notes, Supplemental 

and Other Accompanying Information
Financial Statements, Notes, Supplemental , and Other Accompanying Information

90

• Provided cost-effective and secure payroll, and other administrative services reliably and accurately 

Government-wide through our National Finance Center.

Though we are continually making progress in financial management, we cannot yet give unqualified 

assurance of compliance with the Federal Managers’ Financial Integrity Act, nor with the financial 

systems requirements of the Federal Financial Management Improvement Act. We will continue to 

focus on these efforts in the coming year.

We remain proud of the accomplishments of our hard working employees at USDA. All of us are 

committed to the sound management of resources under our stewardship. We look forward to more 

financial management improvements in fiscal year 2011.

November 15, 2010
Financial Statements, Notes, Supplemental , and Other Accompanying Information

91

Report of the Office of Inspector General

U.S. Department of Agriculture

Office of Inspector General

Financial Audit Operations

AUDIT REPORT

Department of Agriculture’s

Consolidated Financial Statements for

Fiscal Years 2010 and 2009

Audit Report 50401-70-FM

November 2010 
Financial Statements, Notes, Supplemental , and Other Accompanying Information

92

United States Department of Agriculture

Office of Inspector General

Washington, D.C. 20250

DATE: 

AUDIT 

NUMBER: 50401-70-FM

TO: Jon M. Holladay 

Acting Chief Financial Officer

Office of the Chief Financial Officer

ATTN: Kathy Donaldson

Audit Liaison Officer

Office of the Chief Financial Officer

FROM: Phyllis K. Fong

Inspector General

SUBJECT: Department of Agriculture’s Consolidated Financial Statements for 

Fiscal Years 2010 and 2009 

This report represents the results of our audits of the Department of Agriculture’s consolidated financial 

statements for the fiscal years ending September 30, 2010 and 2009. The report contains an unqualified 

opinion on the financial statements as well as the results of our assessment of the Department’s internal 

control over financial reporting and compliance with laws and regulations. Your response is included in 

its entirety as exhibit D.

In accordance with Departmental Regulation 1720-1, please furnish a reply within 60 days describing 

the corrective actions taken or planned, and timeframes for implementing the recommendations for 

which management decisions have not been reached. Please note that the regulation requires 

management decision to be reached on all recommendations within 6 months from report issuance. 

We appreciate the courtesies and cooperation extended to us by members of your staff during the audit. 
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Department of Agriculture’s Consolidated Financial Statements for

Fiscal Years 2010 and 2009 (Audit Report 50401-70-FM)

Executive Summary

Purpose

Our audit objectives were to determine whether (1) the consolidated financial statements present fairly, 

in all material respects, in accordance with accounting principles generally accepted in the United States 

of America, the assets, liabilities, and net position, net costs, changes in net position, and budgetary 

resources; (2) the internal control objectives over financial reporting were met; (3) the Department 

complied with laws and regulations for those transactions and events that could have a direct and 

material effect on the consolidated financial statements; and (4) the information in the Performance and 

Accountability Report was materially consistent with the information in the consolidated financial 

statements.

We conducted our audits at the financial offices of various Department of Agriculture (USDA) agencies 

and the Office of the Chief Financial Officer located in Washington, D.C., and its National Finance 

Center located in New Orleans, Louisiana. We also performed site visits to selected agencies’ field 

offices. 

Results in Brief

In our opinion, the consolidated financial statements referred to above present fairly, in all material 

respects, the financial position of USDA, as of September 30, 2010 and 2009, and its net costs, changes 

in net position, and budgetary resources for the years then ended, in conformity with accounting 

principles generally accepted in the United States of America.

Our consideration of internal controls over financial reporting identified two significant deficiencies. 

Specifically, we identified weaknesses in USDA’s:

• overall financial management, and

• information technology (IT) security and controls. 

We believe that these two significant deficiencies are material weaknesses.

Our consideration of compliance with laws and regulations discusses two instances of noncompliance 

relating to the Federal Financial Management Improvement Act of 1996, and the Anti-Deficiency Act. 

Key Recommendations

As discussed in its Federal Managers’ Financial Integrity Act Report on Management Control, the 

Department has plans to address the majority of the weaknesses discussed in the report. The 

recommendation in this report is limited to additional improvements needed in financial management 

with respect to abnormal balances.

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Agency Response

The Department concurs with the two material weaknesses and findings related to compliance with laws 

and regulations in the report. It generally agrees with the recommendation and will develop corrective 

action plans with milestones by January 15, 2011. 

OIG Position

Management decision should be achievable upon review of the plans for corrective action. 

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Independent Auditor’s Report

Jon M. Holladay 

Acting Chief Financial Officer

Office of the Chief Financial Officer

We have audited the accompanying consolidated balance sheets of the Department of Agriculture 

(USDA), as of September 30, 2010 and 2009, and the related consolidated statements of net costs; 

changes in net position; and the combined statements of budgetary resources (hereinafter referred to as 

the “consolidated financial statements”) for the fiscal years then ended. The objective of our audits was 

to express an opinion on the fair presentation of these consolidated financial statements. In connection 

with our fiscal year 2010 audit, we also considered USDA’s internal control over financial reporting and 

tested USDA’s compliance with certain provisions of applicable laws, regulations, contracts, and grant 

agreements that could have a direct and material effect on these consolidated financial statements.

The following sections discuss our opinion on USDA’s consolidated financial statements; our 

consideration of USDA’s internal control over financial reporting; our tests of USDA’s compliance with 

certain provisions of applicable laws, regulations, contracts, and grant agreements; and management’s, 

as well as our, responsibilities.

The Findings and Recommendations section presents the material weaknesses in internal control and 

instances of noncompliance with laws and regulations, as of and for the year ended September 30, 2010. 

Exhibit A of this report presents the audit reports related to the fiscal year 2010 statements. Exhibit B 

summarizes the current year status of prior year audit recommendations. Exhibit C provides an update 

to previously reported instances of noncompliance with laws and regulations. USDA’s response is 

presented in its entirety in exhibit D.

Opinion on the Consolidated Financial Statements

In our opinion, the consolidated financial statements referred to above present fairly, in all material 

respects, the financial position of USDA, as of September 30, 2010 and 2009, and its net costs, changes 

in net position, and budgetary resources for the years then ended, in conformity with accounting 

principles generally accepted in the United States of America.

As discussed in Notes 1 and 19 to the consolidated financial statements, in fiscal year 2010, 

USDA made certain reclassifications to prior year amounts to conform to the current year 

presentation on the Statement of Net Cost. As discussed in Note 24, in fiscal year 2010 USDA 

also changed its treatment of unobligated balances for an indefinite appropriation for one of its 

reporting components, the Federal Crop Insurance Corporation, due to a change in accounting 

principle. In addition, as discussed in Note 32, in fiscal year 2010 the Department disclosed a 

subsequent legal settlement that occurred on October 19, 2010. Furthermore, as discussed in 

Notes 1 and 10, in fiscal year 2009 the Department completed the implementation of Statement 

of Federal Financial Accounting Standards (SFFAS) 29, Heritage Assets and Stewardship 

Land, by reclassifying appropriate heritage assets and stewardship land information. Lastly, 

as discussed in Notes 1 and 30, in fiscal year 2009 the Department implemented SFFAS 31, 

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Accounting for Fiduciary Activity, and no longer recognizes fiduciary assets on the balance 

sheet.

USDA’s Management’s Discussion and Analysis (MD&A), and required supplementary information 

(including stewardship information) contains a wide range of information, some of which is not directly 

related to the financial statements. This information is not a required part of the consolidated financial 

statements, but is supplementary information required by accounting principles generally accepted in the 

United States of America and the Office of Management and Budget (OMB) Circular A-136. We have 

applied certain limited procedures, consisting principally of comparing this information for consistency 

with the financial statements and making inquiries of management regarding the methods of 

measurement and presentation of this information. However, we did not audit this information and, 

accordingly, we express no opinion on it. As a result of such limited procedures, we believe that the 

controls over required supplementary information related to deferred maintenance are not sufficient to 

ensure the accuracy and completeness of the reported information. 

The information in the Other Accompanying Information section is presented for purposes of additional 

analysis, as required by OMB Circular A-136, and is not required as part of the financial statements. 

This information has not been subjected to auditing procedures and, accordingly, we express no opinion 

on it. 

Internal Control Over Financial Reporting

Our consideration of the internal control over financial reporting was for the limited purposes described 

in the Responsibilities section of this report and would not necessarily identify all deficiencies in the 

internal control over financial reporting that might be significant deficiencies or material weaknesses.

Significant deficiencies are deficiencies, or a combination of deficiencies, in internal control that are less 

severe than a material weakness, yet important enough to merit attention by those charged with 

governance. Material weaknesses are deficiencies or a combination of deficiencies in internal control, 

such that there is a reasonable possibility that a material misstatement of the consolidated financial 

statements being audited will not be prevented, or detected and corrected on a timely basis. Because of 

inherent limitations in any internal control, misstatements due to error or fraud may occur and not be 

detected.

In our fiscal year 2010 audit, we noted certain matters described in this report’s findings and 

recommendations, involving the internal control over financial reporting and its operation that we 

consider to be significant deficiencies. Specifically, we identified weaknesses in USDA’s:

• overall financial management, and

• information technology (IT) security and controls.

We believe these two deficiencies are also material weaknesses. These weaknesses are discussed in this 

report in Findings and Recommendations, Section 1, Material Weaknesses in Internal 

Control Over Financial Reporting. 

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We did not identify any material weaknesses that were not disclosed in USDA’s Federal Managers’ 

Financial Integrity Act (FMFIA) Report on Management Control.

Compliance and Other Matters

We performed tests of USDA’s compliance, as described in the Responsibilities section of this report. 

Our tests disclosed two instances of noncompliance with laws and regulations that are required to be 

reported under Government Auditing Standards and OMB Bulletin 07-04, as amended. Specifically, the 

results of our tests of the Federal Financial Management Improvement Act of 1996 (FFMIA) disclosed 

instances, described in more detail in Finding 3 in the Findings and Recommendations section of this 

report, where USDA’s financial management systems did not substantially comply with Federal 

financial management system requirements, applicable Federal Accounting Standards, and the U. S. 

Standard General Ledger (SGL) at the transaction level. Additionally, we reported noncompliance with 

the Anti-Deficiency Act (ADA), as described in more detail in Finding 4 of the Findings and 

Recommendations section of this report. 

Responsibilities

Management’s Responsibilities

USDA’s management is responsible for (1) preparing the consolidated financial statements in 

conformity with accounting principles generally accepted in the United States of America; 

(2) establishing, maintaining, and assessing internal control to provide reasonable assurance that the 

broad control objectives of the FMFIA are met; (3) ensuring that USDA’s financial management 

systems substantially comply with FFMIA requirements; and (4) complying with applicable laws and 

regulations.

Auditor’s Responsibilities 

Our responsibility is to express an opinion on the fiscal years 2010 and 2009 consolidated financial 

statements of the USDA based on our audits. We conducted our audits in accordance with auditing 

standards generally accepted in the United States of America; the standards applicable to financial audits 

contained in Government Auditing Standards, issued by the Comptroller General of the United States; 

and OMB Bulletin 07-04, Audit Requirements for Federal Financial Statements, as amended. Those 

standards and OMB 07-04, as amended, require that we plan and perform the audit to obtain reasonable 

assurance about whether the financial statements are free of material misstatement. An audit includes 

consideration of internal control over financial reporting as a basis for designing audit procedures that 

are appropriate in the circumstances, but not for the purpose of expressing an opinion on the 

effectiveness of USDA’s internal control over financial reporting. An audit also includes examining, on 

a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the 

accounting principles used and significant estimates made by management, and evaluating the overall 

financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. 

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In planning and performing our audits, we considered USDA’s internal control over financial reporting 

by obtaining an understanding of the design effectiveness of internal controls, determining whether the 

internal controls had been placed in operation, assessing control risk, and performing tests of controls in 

order to determine our auditing procedures for the purpose of expressing our opinion on the consolidated 

financial statements. We limited our internal control testing to those controls necessary to achieve the 

objectives described in OMB Bulletin 07-04, as amended and Government Auditing Standards. We did 

not test all internal controls as defined by the FMFIA. The objective of our audit was not to provide an 

opinion on USDA’s internal control. Consequently, we do not provide an opinion on internal control 

over financial reporting, nor on USDA’s assertion on internal control included in its MD&A. 

As part of obtaining reasonable assurance about whether the consolidated financial statements are free of 

material misstatement, we performed tests of USDA’s compliance with certain provisions of laws and 

regulations, contracts and agreements, and Governmentwide policy requirements, noncompliance with 

which could have a direct and material effect on the determination of the consolidated financial 

statement amounts. We also obtained reasonable assurance that USDA complied with certain provisions 

of other laws and regulations specified in OMB Bulletin 07-04, as amended, including requirements 

referred to in the FFMIA, except for those that, in our judgment, were clearly inconsequential. We 

limited our tests of compliance to the provisions described in the preceding sentences and did not test 

compliance with all laws and regulations applicable to USDA. However, providing an opinion on 

compliance with laws and regulations was not an objective of our audit and, accordingly, we do not 

express such an opinion. 

USDA’s response to the findings in our audit is included in its entirety in exhibit D. We did not audit 

the response and, accordingly, express no opinion on it. 

This report is intended solely for the information of the management of USDA, OMB, the 

U.S. Government Accountability Office and the U.S. Congress, and is not intended to be, and should not 

be, used by anyone other than these specified parties.

Phyllis K. Fong

Inspector General

November 12, 2010 

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Findings and Recommendations

Section 1: Material Weaknesses in Internal Control Over Financial 

Reporting 

Finding 1: Improvements are Needed in Overall Financial 

Management

During fiscal year 2010, USDA continued to make improvements in its financial management. For 

example, exhibit B describes actions taken by the Department relating to obligations. Additionally, the 

Department initiated implementation of its Financial Management Modernization Initiative to improve 

financial performance through a modern financial system that provides maximum support to the 

Department and its agencies. However, we noted areas where further improvements are needed.

• We again noted that obligations1 were not always valid because agencies did not effectively monitor 

and review unliquidated obligations (ULO). We selected a nonstatistical sample of 66 ULOs from 10 

agencies for which no activity had occurred for over 2 years.2

 We determined that 27 (41 percent) ULOs 

were invalid because no future expenditures were expected. We also found that 17 (26 percent) ULO 

balances were valid obligations but should have been paid off in prior fiscal years if they had been 

properly monitored. These obligations inappropriately remained open, in part because USDA agencies 

failed to submit final payments to other USDA agencies. Additionally, agencies did not always timely 

research or respond to requests for additional information to close obligations from other USDA 

agencies.

The U.S. Department of Treasury’s (Treasury) annual closing guidance (Treasury Bulletin 2010- 

07, Yearend Closing, dated June 16, 2010) requires an annual review of ULOs. Departmental 

Regulation 2230-1, Reviews of Unliquidated Obligations, dated April 21, 2009, further requires 

quarterly reviews and certifications as to the validity of ULO balances from agency Chief 

Financial Officers (CFO).

Ineffective monitoring and reviewing of obligation balances resulted in invalid obligations 

remaining open. Invalid obligations improperly restrict the availability of funding authority. 

This also increases the risk of misstating obligations as of yearend.

In its FMFIA Report on Management Control for 2010, USDA continued to report a material 

weakness relating to the lack of consistent review and follow-up on ULOs. The Department 

indicated that several corrective actions have already been taken, such as developing an 

Executive scorecard for inactive obligations, and initiating fast-track action to deobligate 

balances with no activity in 2 years through the ULO workgroup. The Department plans 

additional corrective actions, such as revising policies, procedures, and processes to improve the 

management, review, and closeout of ULOs, as well as conducting training on these new 

1

An obligation is a binding agreement that will result in outlays, immediately or in the future. Budgetary resources must be available before obligations can 

be incurred legally.

2

Nonstatistical sample selected from activity as of June 30, 2010.

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processes. The Department estimates that all corrective actions will be completed in fiscal year 

2011. 

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• We continued to identify abnormal balances3 in the USDA fiscal yearend trial balance that were not 

fully researched and corrected. For fiscal year 2010, we noted 30 abnormal account balances, totaling 

about $760 million (absolute) at yearend. According to the Department, the existence of an abnormal 

balance indicates that transactions or adjustments may have been posted in error. In addition, abnormal 

balances increase the risk of material misstatement on the financial statements.

• In fiscal year 2010, we again attempted to perform an audit of the Natural Resources Conservation 

Service’s (NRCS) Financial Statements (Audit Report 10401-4-FM, NRCS’ Financial Statements for 

Fiscal Year 2010, dated November 8, 2010). NRCS was once more unable to provide sufficient 

evidential matter in support of certain transactions and account balances, as presented in the NRCS 

consolidated financial statements, as of and for the year ended September 30, 2010, particularly with 

respect to beginning net position balances and current year activity; recoveries of prior year obligations; 

obligations incurred, including accrued expenses and undelivered orders; leases; accounts receivable, 

unfilled customer orders; stewardship land; and the allocation of costs in the Statement of Net Cost. 

NRCS was unable to complete corrective actions and make adjustments as necessary to financial 

statement amounts, prior to the completion of its audit. 

• In fiscal year 2010, we identified improper payments4 made by the Farm Service Agency (FSA) 

through its various farm assistance programs. A separate report will be issued with further detail and 

recommendations regarding these improper payments. 

Because of actions planned by the Department for ULOs and recommendations in other audit reports, 

the only recommendation made herein relates to abnormal balances.

Recommendation 1

Provide additional oversight to ensure that agencies are properly reviewing, researching, and timely 

implementing action to correct abnormal balances.

3

A balance that deviates from the standard balance as defined by Treasury’s SGL.

4 An improper payment is any payment that should not have been made or that was made in an incorrect amount under statutory, contractual, administrative, 

or other legally applicable requirements. Incorrect amounts are overpayments and underpayments.

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Finding 2: Improvements are Needed in Information Technology Security 

and Controls

We performed an independent evaluation of the Department’s IT security program and practices, as 

required by the Federal Information Security Management Act of 2002 (FISMA). We also performed 

reviews of the control structure of the Office of the Chief Information Officer/National Information 

Technology Center (OCIO/NITC) and the Office of the Chief Financial Officer/National Finance Center 

(OCFO/NFC), located in Kansas City, Missouri, and New Orleans, Louisiana, respectively.5 

In fiscal year 2010, both OCIO/NITC and OCFO/NFC sustained unqualified opinions on their control 

environments. Additionally, in fiscal year 2010, the Department began implementing some very 

significant security projects, that, once completed, will provide real-time, continuous visibility and 

control over workstations and servers on the network, as well as provide a foundation for enterprisewide 

security monitoring detection and protection. 

Although improvements continue to be made in the Department’s IT security, our FISMA report notes 

that many long-standing weaknesses remain. Since 2001, the Office of Inspector General has reported 

material weaknesses in the design and effectiveness of the Department’s overall IT security program. 

Our fiscal year 2010 FISMA report provides details on the weaknesses we continued to note in the 

design and effectiveness of the Department’s overall IT security program.6

 

In its FMFIA Report on Management Control for 2010, USDA continued to report an overall IT 

material weakness relating to deficiencies in the internal control design and operating effectiveness for 

logical access controls, configuration management, physical access and environmental protection, and 

disaster recovery. As noted in its FMFIA report, the Department indicated that corrective actions have 

been taken, such as final deployment of a Departmentwide end-point management tool and 

standardization of the configuration management and change control processes. The Department has 

additional corrective actions planned in fiscal year 2011. 

Because of actions planned by the Department and recommendations made in other audits, we are 

making no further recommendations in this report. 

6

See exhibit A for information regarding the cited reports. 7

Audit Report 50501-2-IT, Department of Agriculture, Office of the Chief Information Officer, Fiscal Year 2010 Federal Information Security Management 

Act, issued November 2010.

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Section 2: Noncompliance with Laws and Regulations 

Finding 3: Lack of Substantial Compliance with FFMIA Requirements

FFMIA requires agencies to annually assess whether their financial management systems comply 

substantially with (1) Federal Financial Management Systems Requirements (FFMSR), (2) applicable 

Federal accounting standards, and (3) the SGL at the transaction level. In addition, FISMA requires 

each agency to report significant information security deficiencies, relating to financial management 

systems, as a lack of substantial compliance under FFMIA. FFMIA also requires auditors to report in 

their CFO Act financial statement audit reports whether financial management systems substantially 

comply with FFMIA’s system requirements.

During fiscal year 2010, USDA evaluated its financial management systems to assess compliance with 

FFMIA. The Department reported that it was not substantially compliant with FFMSR, applicable 

accounting standards, SGL at the transaction level, and FISMA requirements. 

As noted in its MD&A, USDA plans to continue efforts to achieve compliance with the FFMIA and 

FISMA objectives. Improving Federal financial management systems is critical to increasing the 

accountability of financial program managers, providing better information for decision making, and 

increasing the efficiency and effectiveness of services provided by the Federal Government.

In its FFMIA report, the Department reported noncompliance with FFMSR and FISMA for multiple 

agencies relating to logical access controls, configuration management, physical access and 

environmental protection, and disaster recovery. 

Additionally, in its FFMIA report, the Department noted noncompliances for two of its component 

agencies, described below. 

1. The Commodity Credit Corporation’s (CCC) funds control management system is not integrated 

with its financial management system. Thus, CCC is not able to comply with FFMSR. CCC is 

working towards integration and is modernizing its financial systems. Corrective action is 

scheduled for completion by December 30, 2012. 

2. NRCS did not comply with FFMSR, Federal accounting standards, and the SGL at the 

transaction level. Corrective actions are scheduled for completion by April 15, 2011. 

Because of actions planned by the Department, we are making no further recommendations in this 

report.

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In fiscal year 2010, the Department reported ADA violations in its fiscal year 2010 Statement of 

Assurance, included in the Performance and Accountability Report, relating to Rural Development, 

CCC, and FSA. Details follow:

• During fiscal year 2010, Rural Development identified ADA violations regarding its Rural Utility 

Services’ Broadband Program. According to Rural Development officials, the violations involved eight 

broadband loans from fiscal year 2004, with an aggregate loan amount of $170 million. The 

appropriation for this program in fiscal year 2004 was available for 1 year. Loan subsidies obligated for 

fiscal year 2004 broadband loans ceased to be available for disbursement on October 1, 2009. Using the 

fiscal year 2010 subsidy rate, the budget authority associated with the undisbursed balance of these loans 

was approximately $7 million, as of October 1, 2009. 

• During fiscal year 2010, CCC and FSA became aware that some contracts under the Biomass Crop 

Assistance Program (BCAP) were in violation of the ADA. The basis for the ADA violations was that 

the performance of the contracts either explicitly or implicitly continued past the March 31, 2010 period 

of performance deadline imposed by OMB under the terms of the apportionment for the BCAP. 

The letters reporting these violations are pending clearance by Department officials.

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Abbreviations 

ADA Anti-Deficiency Act

BCAP Biomass Crop Assistance Program 

CCC Commodity Credit Corporation 

CDRP Contingency and Disaster Recovery Plans 

CFO Chief Financial Officer

CSAM Cyber Security Assessment and Management

FFMIA Federal Financial Management Improvement Act of 1996

FFMSR Federal Financial Management Systems Requirements

FISMA Federal Information Security Management Act of 2002

FMFIA Federal Managers’ Financial Integrity Act of 2002

FSA Farm Service Agency

ISA Interconnection Security Agreements

IT information technology 

MD&A Management’s Discussion and Analysis 

NFC National Finance Center

NITC National Information Technology Center 

NRCS Natural Resources Conservation Service 

OCFO Office of the Chief Financial Officer

OCIO Office of the Chief Information Officer

OIG Office of Inspector General

OMB Office of Management and Budget 

POA&M plan of action & milestones 

SFFAS Statement of Federal Financial Accounting Standards

SGL U.S. Government Standard General Ledger 

SSP System Security Plans

Treasury U.S. Department of Treasury 

ULO Unliquidated Obligations 

USDA Department of Agriculture

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Exhibit A: Audit Reports Related to the Fiscal Year 2010

Financial Statements 

The following is a list of reports which are related to the Office of Inspector General’s audit of the 

Department of Agriculture’s fiscal year 2010 financial statements.

AUDIT NUMBER AUDIT TITLE RELEASE DATE

05401-19-FM

Federal Crop Insurance 

Corporation/Risk Management 

Agency’s Financial Statements for 

Fiscal Years 2010 and 2009

November 2010 

06401-25-FM

Commodity Credit Corporation’s 

Financial Statements for Fiscal Years 

2010 and 2009

November 2010 

08401-11-FM Forest Service’s Financial Statements 

for Fiscal Years 2010 and 2009 November 2010 

10401-4-FM Natural Resources and Conservation 

Service’s Financial Statements for 2010 November 2010 

11401-33-FM

Statement on Auditing Standards No. 

70, Report on the National Finance 

Center General Controls Review

September 2010 

27401-35-HY

Food and Nutrition Service Financial 

Statements for Fiscal Years 

2010 and 2009

November 2010 

50501-2-IT Fiscal Year 2010 Federal Information 

Security Management Act Report November 2010 

85401-18-FM

Rural Development’s Financial 

Statements for 

Fiscal Years 2010 and 2009 

November 2010 

88501-14-FM

Statement on Auditing Standards No. 

70, Report on the National Information 

Technology Center General Controls 

Review

September 2010 

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Exhibit B: Summary of Prior Year Recommendations

Audit Report 50401-67-FM, U.S. Department of Agriculture’s Consolidated Financial Statements 

for Fiscal Years 2009 and 2008, dated November 16, 2009. 

Finding 1

Recommendation 1 

Provide additional oversight to ensure agencies (1) properly monitor and review obligation balances, (2) 

provide valid certifications based on complete and accurate reviews as required by Departmental 

Regulation 2230-001, and (3) understand the importance of responding to requests for bills or additional 

information in a timely manner.

Departmental Status

During fiscal year 2010, the Department continued to monitor obligations via ULO working group 

meetings as well as through monthly corrective action status reports and quarterly Chief Financial 

Officer certifications. In addition, balances over 2 years old were fast tracked for deobligation. 

OIG Results

The Material Weakness continues to exist, as discussed in Finding 1. 

Finding 2 

Recommendation 2

Create a plan of actions & milestones (POA&M) to correct deficiencies noted in both System Security 

Plans (SSP) and Contingency and Disaster Recovery Plans (CDRP), (2) revise Cyber Security 

Assessment and Management (CSAM) and/or system documentation to reflect consistent and accurate 

information, and (3) institute policy and procedures to ensure review and signature of all parties bound 

by Interconnection Security Agreements (ISA).

Departmental Status

During fiscal year 2010, the Department created POA&Ms for the deficiencies noted in the SSPs and 

CDRPs. System documentation was revised and loaded to CSAM to reflect consistent and accurate 

information. In addition, re-signed ISAs were included in the appropriate system documentation. 

OIG Results

Our audit disclosed that the Department has completed actions to the extent that this is no longer 

a reportable condition. 

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Exhibit B: Summary of Prior Year Recommendations

Audit Report 50401-65-FM, U.S. Department of Agriculture’s Consolidated Financial Statements 

for Fiscal Years 2008 and 2007, dated November 14, 2008. 

Finding 1

Recommendation 1 

Provide additional oversight to ensure that general ledgers reflect valid obligations and that agencies 

perform the required reviews timely and effectively.

Departmental Status

See Departmental status for Recommendation 1 of Audit Report 50401-67-FM, U.S. Department of 

Agriculture’s Consolidated Financial Statements for Fiscal Years 2009 and 2008, dated November 16, 

2009. 

OIG Results

The Material Weakness continues to exist, as discussed in Finding 1. 

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Exhibit C: Status of Prior Year Noncompliance Findings

Audit Report 50401-67-FM, U.S. Department of Agriculture’s Consolidated Financial Statements 

for Fiscal Years 2009 and 2008, dated November 16, 2009. 

Finding 3

Reported Noncompliance

The Department reported a lack of substantial compliance with the Federal Financial Management 

Improvement Act of 1996 requirements. The Department reported that it was not substantially 

compliant with the Federal Financial Management Systems Requirements (FFMSR), applicable 

accounting standards, the U.S. Government Standard General Ledger (SGL) at the transactions level, 

and the Federal Information Security Management Act (FISMA) of 2002 requirements. 

Status

In fiscal year 2010, the Department continued to report substantial noncompliance with FFMSR, 

applicable standards, SGL at the transactions level, and FISMA requirements, as discussed in Finding 3. 

Finding 4

Reported Noncompliance

The Natural Resources Conservation Service (NRCS) did not always obligate transactions in accordance 

with appropriations law. NRCS did not obligate leases, training, and various other transactions prior to 

payment. 

Status 

In fiscal year 2010, the NRCS audit disclosed that corrective actions were completed and this was no 

longer a reportable condition.

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Exhibit E: Performance and Accountability Report

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Consolidated Balance Sheet

As of September 30, 2010 and 2009 

(In Millions)

2010 2009

Assets (Note 2):

Intragovernmental:

Fund Balance with Treasury (Note 3) $ 75,805 $ 72,334

Investments (Note 5) 154 165

Accounts Receivable, Net (Note 6) 288 270

Other (Note 11) 83 4

Total Intragovernmental 76,330 72,773

Cash and Other Monetary Assets (Note 4) 161 248

Investments (Note 5) 3 3

Accounts Receivable, Net (Note 6) 7,320 8,596

Direct Loan and Loan Guarantees, Net (Note 7) 89,405 85,657

Inventory and Related Property, Net (Note 8) 47 205

General Property, Plant, and Equipment, Net (Note 9) 2,964 2,972

Other (Note 11) 178 185

Total Assets 176,408 170,639

Stewardship PP&E (Note 10)

Liabilities (Note 12):

Intragovernmental:

Accounts Payable 7 5

Debt (Note 13) 87,915 84,119

Other (Note 15) 11,735 11,774

Total Intragovernmental 99,657 95,898

Accounts Payable 580 734

Loan Guarantee Liability (Note 7) 2,857 1,844

Federal Employee and Veteran Benefits 881 846

Environmental and Disposal Liabilities (Note 14) 9 9

Benefits Due and Payable 3,356 3,119

Other (Notes 15 & 16) 21,584 23,274

Total Liabilities 128,924 125,724

Commitments and Contingencies (Note 17)

Net Position:

Unexpended Appropriations - Earmarked Funds (Note 18) (302) 1,263

Unexpended Appropriations - Other Funds 36,563 37,039

Cumulative Results of Operations - Earmarked Funds (Note 18) 429 (349)

Cumulative Results of Operations - Other Funds 10,794 6,962

Total Net Position 47,484 44,915

Total Liabilities and Net Position $ 176,408 $ 170,639

Consolidated Financial Statements

The accompanying notes are an integral part of these statements.
Financial Statements, Notes, Supplemental , and Other Accompanying Information

112

Consolidated Statement of Net Cost

For the Years Ended September 30, 2010 and 2009

(In Millions)

2010 2009

Assist Rural Communities to Create Prosperity so They Are

Self-Sustaining, Repopulating, and Economically Thriving:

Gross Costs $ 25,912 $ 36,036

Less: Earned Revenue 5,301 9,843

Net Costs 20,611 26,193

Ensure Our National Forests and Private Working Lands Are

Conserved, Restored, and Made More Resilient to Climate Change,

While Enhancing Our Water Resources:

Gross Costs 11,804 10,529

Less: Earned Revenue 670 665

Net Costs 11,134 9,864

Help America Promote Agricultural Production and 

Biotechnology Exports as America Works to Increase Food Security:

Gross Costs 3,231 1,890

Less: Earned Revenue 375 380

Net Costs 2,856 1,510

Ensure that All of America's Children Have Access

to Safe, Nutritious, and Balanced Meals:

Gross Costs 98,684 82,296

Less: Earned Revenue 847 795

Net Costs 97,837 81,501

Total Gross Costs 139,631 130,751

Less: Total Earned Revenue 7,193 11,683

Net Cost of Operations (Note 19) $ 132,438 $ 119,068

The accompanying notes are an integral part of these statements.
Financial Statements, Notes, Supplemental , and Other Accompanying Information

113

Consolidated Statement of Changes in Net Position

For The Year Ended September 30, 2010

(In Millions)

Earmarked

Funds All Other Consolidated

(Note 18) Funds Eliminations Total

Cumulative Results of Operations:

Beginning Balances $ (349) $ 6,962 $ - $ 6,613

 Budgetary Financing Sources:

Other Adjustments (recissions, etc.) - (44) - (44)

Appropriations Used 5,673 124,330 - 130,003

Non-exchange Revenue - 5 - 5

Donations and Forfeitures of Cash and Equivalents 1 - - 1

Transfers In (Out) without Reimbursement 1,444 5,812 - 7,256

 Other Financing Sources (Non-Exchange):

Transfers In (Out) without Reimbursement (60) (30) - (90)

Imputed Financing 57 3,982 (2,949) 1,090

Other 44 (1,217) - (1,173)

Total Financing Sources 7,159 132,838 (2,949) 137,048

Net Cost of Operations (6,381) (129,006) 2,949 (132,438)

Net Change 778 3,832 - 4,610

 Cumulative Results of Operations 429 10,794 - 11,223

Unexpended Appropriations:

Beginning Balances 1,263 37,039 - 38,302

Adjustments:

Changes in Accounting Principles (Note 24) (444) - - (444)

 Beginning Balance, as Adjusted 819 37,039 - 37,858

 Budgetary Financing Sources:

 Appropriations Received 6,909 124,360 - 131,269

 Appropriations Transferred In (Out) (5) 177 - 172

 Other Adjustments (2,352) (683) - (3,035)

 Appropriations Used (5,673) (124,330) - (130,003)

Total Budgetary Financing Sources (1,121) (476) - (1,597)

Unexpended Appropriations (302) 36,563 - 36,261

Net Position $ 127 $ 47,357 $ - $ 47,484

The accompanying notes are an integral part of these statements.
Financial Statements, Notes, Supplemental , and Other Accompanying Information

114

Consolidated Statement of Changes in Net Position

For The Year Ended September 30, 2009

(In Millions)

Earmarked

Funds All Other Consolidated

(Note 18) Funds Eliminations Total

Cumulative Results of Operations:

Beginning Balances $ (490) $ 9,108 $ - $ 8,618

 Budgetary Financing Sources:

Appropriations Used 6,986 104,227 - 111,213

Non-exchange Revenue - 10 - 10

Donations and Forfeitures of Cash and Equivalents 1 - - 1

Transfers In (Out) without Reimbursement 1,639 4,592 - 6,231

 Other Financing Sources (Non-Exchange):

Transfers In (Out) without Reimbursement (70) (492) - (562)

Imputed Financing 48 3,785 (2,800) 1,033

Other 48 (911) - (863)

Total Financing Sources 8,652 111,211 (2,800) 117,063

Net Cost of Operations (8,511) (113,357) 2,800 (119,068)

Net Change 141 (2,146) - (2,005)

 Cumulative Results of Operations (349) 6,962 - 6,613

Unexpended Appropriations:

Beginning Balances 1,428 29,355 - 30,783

 Budgetary Financing Sources:

 Appropriations Received 6,778 114,209 - 120,987

 Appropriations Transferred In (Out) (5) 22 - 17

 Other Adjustments 48 (2,320) - (2,272)

 Appropriations Used (6,986) (104,227) - (111,213)

Total Budgetary Financing Sources (165) 7,684 - 7,519

Unexpended Appropriations 1,263 37,039 - 38,302

Net Position $ 914 $ 44,001 $ - $ 44,915

The accompanying notes are an integral part of these statements.
Financial Statements, Notes, Supplemental , and Other Accompanying Information

115

Combined Statement of Budgetary Resources

For The Years Ended September 30, 2010 and 2009

(In Millions)

Non-Budgetary Non-Budgetary

Credit Reform Credit Reform

Budgetary Financing Accounts Budgetary Financing Accounts

Budgetary Resources:

Unobligated balance, brought forward, October 1 (Note 24) $ 33,120 $ 4,689 $ 28,078 $ 5,314

Recoveries of prior year unpaid obligations 3,721 1,106 3,934 754

Budget Authority -

Appropriation 144,701 - 132,335 -

Borrowing Authority 39,063 21,852 28,870 14,905

Earned -

Collected 21,285 10,988 22,678 9,496

Change in receivables from Federal Sources 189 1 (60) -

Change in unfilled customer orders -

Advances received 426 - 140 -

Without advance from Federal Sources 309 (34) (47) 220

Expenditure transfers from trust funds 937 - 1,130 -

Nonexpenditure transfers, net, anticipated and actual (253) - (431) -

Temporarily not available pursuant to Public Law (134) - (12) -

Permanently not available (50,335) (6,246) (32,938) (5,605)

Total Budgetary Resources 193,029 32,356 183,677 25,084

Status of Budgetary Resources:

Obligations Incurred -

Direct 138,924 24,059 122,471 20,395

 Reimbursable 25,685 - 27,642 -

Unobligated Balance -

 Apportioned 10,349 4,233 13,786 2,324

Exempt from Apportionment 1,392 5 873 4

Unobligated balance not available 16,679 4,059 18,905 2,361

Total Status of Budgetary Resources 193,029 32,356 183,677 25,084

Change in Obligated Balances:

Obligated balance, net, brought forward October 1 29,604 23,298 25,277 20,694

Obligations incurred 164,609 24,059 150,113 20,395

Gross outlays (154,185) (17,174) (141,959) (16,818)

Recoveries of prior year unpaid obligations, actual (3,721) (1,106) (3,934) (754)

Change in uncollected payments from Federal Sources (498) 34 107 (220)

Obligated balance, net, end of period -

Unpaid obligations 37,540 30,193 30,836 24,414

Uncollected customer payments from Federal Sources (1,730) (1,082) (1,232) (1,116)

Obligated Balance, net, end of period 35,810 29,111 29,604 23,298

Net Outlays:

Gross outlays 154,185 17,174 141,959 16,818

Offsetting collections (22,648) (10,989) (23,948) (9,496)

Distributed offsetting receipts (1,512) (576) (3,100) (474)

Net Outlays $ 130,025 $ 5,609 $ 114,911 $ 6,848

2010 2009

The accompanying notes are an integral part of these statements.
Financial Statements, Notes, Supplemental , and Other Accompanying Information

116

Notes to the Consolidated Financial Statements

As of September 30, 2010 and 2009

(In Millions)

NOTE 1. SIGNIFICANT ACCOUNTING POLICIES

Organization

The Department of Agriculture (USDA) provides a wide variety of services in the United States and 

around the world. USDA is organized into seven distinct mission areas and their agencies that execute 

these missions. 

Listed below are the missions and the agencies within each mission including four Government 

corporations:

Farm and Foreign Agricultural Services (FFAS)

• Farm Service Agency (FSA)

− Commodity Credit Corporation (CCC)

• Foreign Agricultural Service (FAS)

• Risk Management Agency (RMA)

− Federal Crop Insurance Corporation (FCIC)

Food, Nutrition, and Consumer Services (FNCS)

• Food and Nutrition Service (FNS)

Food Safety

• Food Safety and Inspection Service (FSIS)

Marketing and Regulatory Programs (MRP)

• Agricultural Marketing Service (AMS)

• Animal and Plant Health Inspection Service (APHIS)

• Grain Inspection, Packers and Stockyards Administration (GIPSA)

Natural Resources and Environment (NRE)

• Forest Service (FS)

• Natural Resources Conservation Service (NRCS)

Research, Education, and Economics (REE)

• Agricultural Research Service (ARS)

• National Institute of Food and Agriculture (NIFA) 

• Economic Research Service (ERS)

• National Agricultural Statistics Service (NASS)

Rural Development

• Rural Development (RD)

− Alternative Agricultural Research and Commercialization Corporation (AARC)

Effective October 1, 2009, Section 7511(f) (2) of the Food, Conservation, and Energy Act of 2008 

transferred all authorities administered by the Cooperative State Research, Education, and Extension 

Service (CSREES) to the newly established National Institute of Food and Agriculture (NIFA). 
Financial Statements, Notes, Supplemental , and Other Accompanying Information

117

Consolidation

The financial statements consolidate all the agencies’ results. The effects of intradepartmental activity 

and balances are eliminated, except for the Statement of Budgetary Resources that is presented on a 

combined basis. The financial statements are prepared in accordance with generally accepted 

accounting principles for the Federal Government.

Reclassifications

Certain reclassifications have been made to prior year amounts to conform to the current year 

presentation. The FY 2009 Statement of Net Cost and related note was reclassified to align with the 

strategic goals presented in the USDA Strategic Plan for 2010 – 2015. 

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, sales price is fixed or determinable, and collection 

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 non-marketable 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.

Accounts Receivable

Accounts receivable 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 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.
Financial Statements, Notes, Supplemental , and Other Accompanying Information

118

Direct loans obligated and loan guarantees committed before fiscal 1992 are valued using the presentvalue 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

Inventories to be consumed in the production of goods for sale or in the provision of services for a fee 

are valued on the basis of historical cost using a first-in, first-out 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 (PP&E) 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 

PP&E are disclosed in Note 9. Capitalization thresholds for personal property and real property are 

$25,000 and $100,000 for internal use software. There are no restrictions on the use or convertibility 

of PP&E.

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 Post-employment Benefits

Other post-employment 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.

Earmarked Funds

In accordance with SFFAS 27, Identifying and Reporting Earmarked Funds, the Department has 

reported the earmarked funds for which it has program management responsibility when the following 

three criteria are met: (1) a statute committing the Federal Government to use specifically identified 

revenues and other financing sources only for designated activities, benefits or purposes; (2) explicit 

authority for the earmarked fund to retain revenues and other financing sources not used in the current 

period for future use to finance the designated activities, benefits or purposes; and (3) a requirement to 

account for and report on the receipt, use, and retention of the revenues and other financing sources 

that distinguishes the earmarked fund from the Government’s general revenues. 

Stewardship PP&E

SFFAS 29, Heritage Assets and Stewardship Land, reclassified all heritage assets and stewardship land 

information as basic except for condition information, which is classified as RSI. The reclassification as 

basic information was phased in per SFFAS 29. Heritage assets and stewardship land information that 

was previously reported in RSSI temporarily shifted to RSI until it moved to a note on the balance sheet 

as basic information. The phase-in of disclosure requirements being reported as basic information 

provided that SFFAS 29 was fully implemented for reporting periods beginning after September 30, 

2008. See Note 10, Stewardship PP&E.
Financial Statements, Notes, Supplemental , and Other Accompanying Information

119

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.

Allocation Transfers

The Department is a party to allocation transfers with other federal agencies as both a transferring 

(parent) entity and/or a receiving (child) entity. Allocation transfers are legal delegations by one 

department of its authority to obligate budget authority and outlay funds to another department. A 

separate fund account (allocation account) is created in the U.S. Treasury as a subset of the parent fund 

account for tracking and reporting purposes. All allocation transfers of balances are credited to this 

account, and subsequent obligations and outlays incurred by the child entity are charged to this 

allocation account as they execute the delegated activity on behalf of the parent entity.

The Department allocates funds, as the parent, to the Department of Transportation, Department of the 

Interior, Department of Defense, Department of Housing and Urban Development, U.S. Agency for 

International Development and the Small Business Administration. The Department receives allocation 

transfers, as the child, from the Department of Labor, Department of Transportation, Department of 

the Interior, Economic Development Administration, Appalachian Regional Commission and the Delta 

Regional Authority.

Inter-Entity Cost Implementation

Beginning in FY 2009, SFFAS 30, Inter-Entity Cost Implementation became effective. This standard 

requires full implementation of the inter-entity cost provision in SFFAS 4, Managerial Cost Accounting 

Standards and Concepts. Each entity’s full cost should incorporate the full cost of goods and services 

that it receives from other entities. The entity providing the goods or services has the responsibility to 

provide the receiving entity with information on the full cost of such goods or services either through 

billing or other advice.

Recognition of inter-entity costs that are not fully reimbursed is limited to material items that (1) are 

significant to the receiving entity, (2) form an integral or necessary part of the receiving entity’s output, 

and (3) can be identified or matched to the receiving entity with reasonable precision. Broad and 

general support services provided by an entity to all or most other entities should not be recognized 

unless such services form a vital and integral part of the operations or output of the receiving entity.

Fiduciary Activities

Beginning in FY 2009, SFFAS 31, Accounting for Fiduciary Activities became effective. Fiduciary 

activities are the collection or receipt, and the management, protection, accounting, investment and 

disposition by the Federal Government of cash or other assets in which non-Federal individuals or 

entities have an ownership interest that the Federal Government must uphold. Fiduciary assets are not 

assets of the Federal Government and are not recognized on the balance sheet. Prior period amounts 

presented in the basic financial statements and notes were not restated. See Note 29, Fiduciary 

Activities.
Financial Statements, Notes, Supplemental , and Other Accompanying Information

120

NOTE 2. NON-ENTITY ASSETS

Non-entity assets include proceeds from the sale of timber payable to Treasury, timber contract 

performance bonds, employer contributions and payroll taxes withheld for agencies serviced by the 

National Finance Center, interest, fines and penalties. 

FY 2010 FY 2009

Intragovernmental:

Fund balance with Treasury $ 121 $ 152

Accounts Receivable 25 24

Subtotal Intragovernmental 146 176

With the Public:

Cash and other monetary assets - -

Accounts receivable 89 97

Subtotal With the Public 89 97

Total non-entity assets 235 273

Total entity assets 176,173 170,366

Total Assets $ 176,408 $ 170,639

NOTE 3.FUND BALANCE WITH TREASURY

Other Fund Types include deposit and clearing accounts. Borrowing Authority not yet Converted to 

Fund Balance represents un-obligated and obligated amounts recorded at year-end that will be funded 

by future borrowings. Non-Budgetary Fund Balance with Treasury includes special fund receipt 

accounts; and clearing and suspense account balances awaiting disposition or reclassification. 

Unprocessed Intragovernmental Payment and Collection (IPAC) transactions were not reported to 

Treasury at the end of FY 2010 and FY 2009 because the proper Treasury Account Symbol was 

unknown which reduced Fund Balance with Treasury by $48 million and $35 million, respectively.

FY 2010 FY 2009

Fund Balances:

 Trust Funds $ 472 $ 519

 Special Funds 15,230 16,977

 Revolving Funds 11,270 8,003

 General Funds 48,735 46,761

 Other Fund Types 98 74

Total 75,805 72,334

Status of Fund Balance with Treasury:

Unobligated Balance:

 Available 15,979 16,987

 Unavailable 20,738 21,266

Obligated Balance not yet Disbursed 64,797 52,748

Borrowing Authority not yet Converted to Fund Balance (39,613) (32,803)

Non-Budgetary Fund Balance with Treasury 13,904 14,136

Total $ 75,805 $ 72,334
Financial Statements, Notes, Supplemental , and Other Accompanying Information

121

NOTE 4. CASH AND OTHER MONETARY ASSETS

In FY 2010 and FY 2009, cash includes Federal crop insurance escrow amounts of $123 million and 

$154, respectively. In FY 2010, cash includes certificates of deposit of $37 million. In FY 2009, cash 

includes price support transfers in transit of $93 million. 

FY 2010 FY 2009

Cash $ 161 $ 248

NOTE 5. INVESTMENTS

FY 2010 Amortized Market

Amortization (Premium) Interest Investments, Value

Method Cost Discount Receivable Net Disclosure

Intragovernmental:

Non-marketable

Par value $ - $ - $ - $ - $ -

Market-based Straight Line 152 (1) 3 154 154

Total $ 152 $ (1) $ 3 $ 154 $ 154

With the Public:

AARC $ 3 $ - $ - $ 3 $ 3

Total $ 3 $ - $ - $ 3 $ 3

FY 2009 Amortized Market

Amortization (Premium) Interest Investments, Value

Method Cost Discount Receivable Net Disclosure

Intragovernmental:

Non-marketable

Par value $ - $ - $ - $ - $ -

Market-based Straight Line 165 (1) 1 165 165

Total $ 165 $ (1) $ 1 $ 165 $ 165

With the Public:

AARC $ 3 $ - $ - $ 3 $ 3

Total $ 3 $ - $ - $ 3 $ 3
Financial Statements, Notes, Supplemental , and Other Accompanying Information

122

NOTE 6. ACCOUNTS RECEIVABLE, NET

FY 2010

Accounts 

Receivable, 

Gross

Allowance for 

Uncollectible 

Accounts

Accounts 

Receivable, 

Net

Intragovernmental $ 288 $ - $ 288

With the Public 7,354 (34) 7,320

Total $ 7,642 $ (34) $ 7,608

FY 2009

Accounts 

Receivable, 

Gross

Allowance for 

Uncollectible 

Accounts

Accounts 

Receivable, 

Net

Intragovernmental $ 270 $ - $ 270

With the Public 8,621 (25) 8,596

Total $ 8,891 $ (25) $ 8,866

NOTE 7. DIRECT LOANS AND GUARANTEES, NON-FEDERAL BORROWERS

Direct Loans

Direct loan obligations 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 Federal Credit Reform 

Act of 1990 as amended governs the resulting direct loan or loan guarantees. 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 Direct Loan and Loan Guarantees, Net is not necessarily representative of the 

proceeds that might be expected if these loans were sold on the open market.

Direct Loan and Loan Guarantees, Net at the end of FY 2010 was $89,405 million compared to $85,657 

million at the end of FY 2009. Loans exempt from the Federal Credit Reform Act of 1990 represent 

$673 million of the total compared to $414 million in FY 2009. Table 1 illustrates the overall 

composition of the Department’s credit program balance sheet portfolio by mission area and credit 

program for FY 2010 and FY 2009.

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 throughout the 

year. The subsidy cost allowance moved from $5,284 million to $5,576 million during FY 2010, an 

increase of $292 million. Table 2 shows the reconciliation of subsidy cost allowance balances from FY 

2009 to FY 2010.

Total direct loan subsidy expense 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 
Financial Statements, Notes, Supplemental , and Other Accompanying Information

123

loans. Total direct loan subsidy expense in FY 2010 was $429 million compared to $977 million in FY 

2009. Table 3 illustrates the breakdown of total subsidy expense for FY 2010 and FY 2009 by program.

Direct loan volume increased from $9,715 million in FY 2009 to $11,144 million in FY 2010. Volume 

distribution between mission area and program is shown in Table 4.

Guaranteed Loans 

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 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. Estimated losses on loan and foreign credit 

guarantees are reported at net present value as Loan Guarantee Liability. Defaulted guaranteed loans 

are reported at net present value as Loans Receivable and Related Foreclosed Property, net.

Guaranteed loans outstanding at the end of FY 2010 were $75,688 million in outstanding principal and 

$67,793 million in outstanding principal guaranteed, compared to $57,367 and $51,527 million, 

respectively, at the end of FY 2009. 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. Table 6 shows 

that total liability moved from $1,844 million to $2,857 million during FY 2010, an increase of $1,013 

million. Table 7 shows the reconciliation of total loan guarantee liability.

Total guaranteed loan subsidy expense 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 2010 was $702 million 

compared to $409 million in FY 2009. Table 8 illustrates the breakdown of total subsidy expense for FY 

2010 and FY 2009 by program.

Guaranteed loan volume increased from $23,126 million in FY 2009 to $26,892 million in FY 2010. 

Volume distribution between mission area and program is shown in Table 9.

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 2010 and FY 2009 are shown in Table 

10. 

Subsidy Rates

Subsidy rates are used to compute each year’s subsidy expenses. The subsidy rates disclosed in Tables 11 

and 12 pertain only to the FY 2010 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. 

Credit Program Discussion and Descriptions

The Department offers direct and guaranteed loans through credit programs in the FFAS mission area 

through the FSA and the CCC, and in the RD mission area. 
Financial Statements, Notes, Supplemental , and Other Accompanying Information

124

The Farm and Foreign Agricultural Services 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 strengthen and stabilize 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. 

FSA offers direct and guaranteed loans to farmers who 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 due to insufficient financial resources. Additionally, the agency helps established 

farmers who have suffered financial setbacks from natural disasters, or have limited resources to 

maintain profitable farming operations. FSA officials also provide borrowers with supervision and 

credit counseling.

FSA’s mission is to provide supervised credit. FSA works with each borrower to identify specific 

strengths and weaknesses in farm production and management, and provides alternatives to address 

weaknesses. FSA is able to provide certain loan servicing options to assist 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 credit 

guarantee 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 under the leadership of the French Ministry of Economics 

and Finance. Its sole purpose is to assess, on a case-by-case basis, liquidity problems faced by 

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.

CCC also provides loans for Farm and Sugar Storage Facilities (FSFL). FSFL provides low-interest 

financing for producers to build or upgrade farm storage and handling facilities. The 2008 Farm Bill 

added hay and renewable biomass as eligible FSFL commodities, extended the maximum loan term to 

12 years and increased the maximum loan amount to $500,000.

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

Direct Conservation

Guaranteed Farm Operating 

Subsidized/Unsubsidized

General Sales Manager Guarantee Credit

Program

Facility Program Guarantee

P.L. 480 Title 1 Program

Direct Farm Storage Facility

Direct Sugar Storage Facilities
Financial Statements, Notes, Supplemental , and Other Accompanying Information

125

Farm Service Agency Commodity Credit Corporation

Agricultural Resource Demonstration Fund 

Bureau of Reclamation Loan Fund

Guaranteed Farm Ownership 

Unsubsidized

Guaranteed Conservation

American Recovery and Reinvestment 

Fund

The Rural Development Mission Area

Each year, 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 not-for-profit organizations and user-owned 

cooperatives.

Through its rural housing loan and grant programs, RD provides affordable housing and essential 

community facilities to rural communities. Rural housing programs help finance new or improved 

housing for moderate, low, and very low-income families each year. The programs also help rural 

communities finance, construct, enlarge or improve fire stations, libraries, hospitals and medical 

clinics, industrial parks, and other community facilities.

The Rural Business Program goal is to promote a dynamic business environment in rural America. RD 

partners 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.

The Rural Utilities Program 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. This 

program leverages scarce Federal funds with private capital for investing in rural infrastructure, 

technology and development of human resources.

RD programs 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 Program Rural Business Program Rural Utilities Program

Single Family Housing Direct Loans

Single Family Housing Guaranteed Loans

Self Help Housing Direct Loans

Single Family Housing Credit Sales

Site Development Loans

Farm Labor Housing Direct Loans

Multi-Family Housing Direct Loans

Multi-Family Housing Guaranteed Loans

Multi-Family Housing-Credit Sales

Multi-Family Housing Relending Program

Business and Industry Direct Loans

Business and Industry Guaranteed 

Loans

Intermediary Relending Program Direct 

Loans

Rural Economic Development Direct 

Loans

Biorefinery Guaranteed Loans

Renewable Energy Guaranteed Loans

Rural Microenterprise Direct Loans

Water and Environmental Direct Loans

Water and Environmental Guaranteed Loans

Electric Direct Loans

Electric Guaranteed Loans

Telecommunications Direct Loans

Federal Financing Bank-Electric

Federal Financing Bank-Telephone

Distance Learning and Telemedicine Direct

Broadband Telecommunications Services
Financial Statements, Notes, Supplemental , and Other Accompanying Information

126

Rural Housing Program Rural Business Program Rural Utilities Program

Multi-Family Housing Revitalization Program

Community Facilities Direct Loans

Community Facilities Guaranteed Loans

Events and Changes Having a Significant and Measurable Effect on Subsidy Rates, Subsidy Expense, and Subsidy 

Reestimates

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.

The annual reestimate process updates the budget assumptions with actual portfolio performance, 

interest rates. and updated estimates for future loan performance. The FY 2010 reestimate process 

resulted in an $52 million increase in the post 1991 estimated cost of the direct loan portfolio and a

$207 million increase in the post 1991 estimated cost of the guaranteed loan portfolio.

The net upward reestimate for direct loans was mostly due to an upward reestimate for Housing less a 

downward reestimate for Farm:

For the direct loan programs under the Agricultural Credit Insurance Fund (ACIF), there was a large 

downward technical reestimate of $254 million, of which ownership and operating comprised 96

percent of the total. Cohorts 2009 and 2010 accounted for 70 percent of the totals for those 2 programs.

The largest change in direct operating was in the 2009 cohort and is due to approximately $70 million 

more in actual cash receipts in the first 2 years than was reported/projected at the end of FY 2009. For 

direct ownership, the downward reestimate reflects the effect of revisions to the econometric 

predictions of default. The single largest contributing factor to default predictions for direct ownership 

is the interest rate spread between the borrower interest rate and the Treasury interest rate. Previously, 

this relationship did not take into account the effect of the very low borrower interest rate on down 

payment loans that was authorized in the 2008 Farm Bill. Therefore a change to the econometrics was 

necessary and was made during FY 2010. This change revised the default predictions to include the 

effect of the lower weighted average borrower interest rate. 

The Housing Programs had an overall upward reestimate of $315 million. The Single Family Housing 

Program accounted for the largest portion of this reestimate. Due to the current decline of the housing 

market, combined with the poor labor market, the forecasting method for projecting cash flows was 

revised. This revision shifted more weight to current cash flows trends and less to historical trends 

when forecasting out years. Consequently, the prepayments, recoveries, and recapture repayments 

(other inflows) curves were impacted. The effect of home values declining, along with the tightening of 

credit requirements, also resulted in fewer prepayments than forecasted. As borrowers were unable to 

obtain credit from commercial organizations, and others required additional payment assistance, the 

costs associated with loans are anticipated to increase in comparison to previous years. These 

assumptions were factored into the FY 2011 forecasts. The FY 2010 upward reestimate for the Single 

Family Housing Program was $270 million, while the loan cohort for the acquired properties had an 

upward reestimate of $48 million. This was due to recognizing the current impact of short sales and a 

model change.
Financial Statements, Notes, Supplemental , and Other Accompanying Information

127

The net upward reestimate for loan guarantees was mostly due to an upward reestimate for Housing: 

The Guaranteed Housing Programs had an overall upward reestimate of $265 million. The model for 

the guaranteed programs was revised in FY 2010. Prepayment and default curves were added in order 

to model unpaid principal balance (UPB) projections more accurately. The model was also adjusted to 

include purchased unpaid principal balances separately. Finally, the model was modified to use actual 

cohort-specific UPB amounts, subject to interest assistance, as an input. The changes impacted the 

current year reestimates.

These changes and the rise in unemployment rates were also reflective in the increase of actual default 

payments for FY 2010. Due to increased default payments, the total default payments rate assumption 

increased from 3.94 percent in FY 2009 to 4.14 percent in FY 2010. As a result of this payment rate 

assumption increase, an upward reestimate of $151 million occurred in the Guaranteed Single Family 

Housing Program.

Changes to the model also impacted Multi-Family Housing program’s reestimate. The interest 

assistance percentages for historical periods were included for the reestimates. This program was also 

impacted by increased default assumptions. The combination of model changes and economic 

conditions resulted in an overall reestimate of $103 million for the Multi-Family Housing Program.

During FY 2010, the Guaranteed Single Family Housing portfolio increased due to the public’s interest 

in the program. Growth in this program was achieved through several initiatives. Guaranteed loans 

were funded by ARRA, regular appropriations, and from an amendment to the Housing Act of 1949.

This amendment permitted a negative subsidy rate while increasing the upfront fee to 3.5 percent.

The loan guaranteed liability also increased substantially due to the upward reestimates, increased fees, 

and subsidy expense associated with the volume increase. The housing allowance increased $714 

million in FY 2010. The liability covers future costs of the program.

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 

Governmentwide interest rate projections provided by OMB to do its calculations and analysis.

The Inter-agency Country Risk Assessment System (ICRAS) is a Federal interagency effort chaired by 

OMB 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. ICRAS identification for each country is still the 

basis for a given country’s risk rating, but a set of program specific default and recovery rates by ICRAS 

grade has been established for each program. Domestic programs have always utilized program-specific 

default and recovery assumptions. 

In accordance with the General Fund Receipt Account Guide, a liability for nonentity assets is accrued 

for downward reestimate of subsidy. When more subsidy is collected than is necessary to fund future 

net cash outflows, the financing fund must transfer the excess subsidy, with interest, to a designated 

general fund receipt account in the following year. 

Loan Modifications

A modification is any Government action different from the baseline assumptions that affects the 

subsidy cost, such as a change in the terms of the loan contract. The cost of a modification is the 

difference between the present value of the cash flows before and after the modification. 

Multiple-family housing direct loan program modifications related to the revitalization project, which 

began in FY 2006, continued throughout FY 2010. The revitalization project is used to rehabilitate 
Financial Statements, Notes, Supplemental , and Other Accompanying Information

128

ailing housing developments. In this program, RD determines whether the development owner should 

be offered a financial restructuring plan and what type of incentives, if any, should be offered to the 

owner to rehabilitate an ailing housing development and to provide affordable rents for tenants.

In FY 2009, loan extension modifications were granted for three borrowers in the FFB electric program. 

The maturity dates were extended up to 20 years on selected advances. Interest rates on the advances 

did not change. At the time of the modification, the liquidating fund was paid off and the advances were 

moved to the financing fund. The post-modification cash flows were discounted at the first quarter net 

present value discount factor from the FY 2009 President’s Budget relative to the effective date of the 

loan extension 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. With one exception, 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.

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, 2010 and September 30, 2009, foreclosed property consisted of 1,209 and 1,082 

rural single-family housing dwellings, with an average holding period of 16 and 15 months, respectively. 

As of September 30, 2010 and September 30, 2009, FSA/Farm Loan Program properties consist 

primarily of 59 and 64 farms, respectively. The average holding period for these properties in inventory 

for FY 2010 and FY 2009 was 61 and 58 months, respectively. Certain properties can be leased to 

eligible individuals. 

Other Information

Non-performing loans are defined as receivables that are in arrears by 90 or more days, or are on 

rescheduling agreements until such time two consecutive payments have been made following the 

rescheduling. When RD, FSA, and CCC calculate loan interest income, however, the recognition of 

revenue is deferred. Late interest is accrued on arrears. 

Approximately $19,000 million and $18,100 million of Rural Housing Service (RHS) unpaid loan 

principal as of September 30, 2010, and September 30, 2009, respectively, were receiving interest 

credit. If those loans receiving interest credit had accrued interest at the full-unreduced rate, interest 

income would have been approximately $966 million and $961 million higher for FY 2010 and FY 

2009, respectively. 

At the end of FY 2010 and FY 2009, the RD portfolio contained approximately 70,100 and 71,400

restructured loans with an outstanding unpaid principal balance of $2,500 million. At the end of FY 

2010 and FY 2009, the farm loan portfolio contained approximately 20,683 and 20,500 restructured 

loans with an outstanding unpaid principal balance of $1,189 million and $1,126 million, respectively.

Direct credit and credit guarantee principal receivables in the food aid and export programs under 

rescheduling agreements as of September 30, 2010 and September 30, 2009, were $2,819 million and 

$2,887 million, respectively. 
Financial Statements, Notes, Supplemental , and Other Accompanying Information

129

Table 1. Direct Loan and Loan Guarantees, Net

FY 2010 Loans Present Value of Assets

Direct Loans Receivable, Interest Foreclosed Value Related to

Gross Receivable Property Allowance Loans

Obligated Pre-1992

Farm $ 1,040 $ 70 $ 11 $ (108) $ 1,013

Export - - - - -

Food Aid 4,150 43 - (1,517) 2,676

Housing 9,505 76 36 (4,462) 5,155

Electric 3,994 7 - (1,457) 2,544

Telecommunications 565 2 - (27) 540

Water and Environmental 1,122 10 - (123) 1,009

Business and Industry - - - - -

Economic Development 30 - - (14) 16

Pre-1992 Total 20,406 208 47 (7,708) 12,953

Obligated Post-1991

Farm 7,070 181 8 (344) 6,915

Export - - - - -

Food Aid 1,473 18 - (511) 980

Housing 20,143 120 53 (2,671) 17,645

Electric 36,723 32 - (751) 36,004

Telecommunications 3,732 1 - 56 3,789

Water and Environmental 9,891 95 - (740) 9,246

Business and Industry 28 - - (3) 25

Economic Development 551 1 - (168) 384

Post-1991 Total 79,611 448 61 (5,132) 74,988

Total Direct Loan Program Receivables 100,017 656 108 (12,840) 87,941

Defaulted Guarantee Loans

Pre-1992

Farm - - - - -

Export 134 1 - (70) 65

Food Aid - - - - -

Housing - - - - -

Electric - - - - -

Telecommunications - - - - - Water and Environmental - - - - -

Business and Industry 4 - - - 4

Economic Development - - - - -

Pre-1992 Total 138 1 - (70) 69

Post-1991

Farm 85 - - (83) 2

Export 731 10 - (226) 515

Food Aid - - - - -

Housing 130 1 - (108) 23

Electric - - - - -

Telecommunications - - - - - Water and Environmental - - - - -

Business and Industry 206 2 - (26) 182

Economic Development - - - - -

Post-1991 Total 1,152 13 - (443) 722

Total Defaulted Guarantee Loans 1,290 14 - (513) 791

Loans Exempt from Credit Reform Act:

Commodity Loans 671 2 - - 673

Other Foreign Receivables - - - - -

Total Loans Exempt 671 2 - - 673

Total Direct Loan and Loan Guarantees, Net $ 89,405
Financial Statements, Notes, Supplemental , and Other Accompanying Information

130

Table 1. Direct Loan and Loan Guarantees, Net (cont’d)

FY 2009 Loans Present Value of Assets

Direct Loans Receivable, Interest Foreclosed Value Related to

Gross Receivable Property Allowance Loans

Obligated Pre-1992

Farm $ 1,219 $ 83 $ 14 $ (43) $ 1,273

Export - - - - -

Food Aid 4,470 48 - (1,408) 3,110

Housing 9,984 83 33 (4,667) 5,433

Electric 6,877 1 - (1,675) 5,203

Telecommunications 706 2 - (44) 664

Water and Environmental 1,224 12 - (142) 1,094

Business and Industry - - - - -

Economic Development 34 - - (16) 18

Pre-1992 Total 24,514 229 47 (7,995) 16,795

Obligated Post-1991

Farm 6,057 169 5 (500) 5,731

Export - - - - -

Food Aid 1,615 20 - (518) 1,117

Housing 18,301 103 46 (2,410) 16,040

Electric 33,119 32 - (652) 32,499

Telecommunications 3,409 2 - 43 3,454

Water and Environmental 9,218 94 - (728) 8,584

Business and Industry 30 (1) - (10) 19

Economic Development 543 2 - (174) 371

Post-1991 Total 72,292 421 51 (4,949) 67,815

Total Direct Loan Program Receivables 96,806 650 98 (12,944) 84,610

Defaulted Guarantee Loans

Pre-1992

Farm 1 - - - 1

Export 135 1 - (82) 54

Food Aid - - - - -

Housing - - - - - Electric - - - - -

Telecommunications - - - - -

Water and Environmental - - - - -

Business and Industry 4 - - - 4

Economic Development - - - - - Pre-1992 Total 140 1 - (82) 59

Post-1991

Farm 54 - - (52) 2

Export 619 7 - (203) 423

Food Aid - - - - -

Housing 98 - - (65) 33

Electric - - - - - Telecommunications - - - - -

Water and Environmental - - - - - Business and Industry 127 3 - (14) 116

Economic Development - - - - - Post-1991 Total 898 10 - (334) 574

Total Defaulted Guarantee Loans 1,038 11 - (416) 633

Loans Exempt from Credit Reform Act:

Commodity Loans 414 3 - (3) 414

Other Foreign Receivables - - - - -

Total Loans Exempt 414 3 - (3) 414

Total Direct Loan and Loan Guarantees, Net $ 85,657
Financial Statements, Notes, Supplemental , and Other Accompanying Information

131

Table 2. Schedule for Reconciling Subsidy Cost Allowance Balances (Post-1991) Direct Loans

FY 2010 FY 2009

Beginning balance of the subsidy cost allowance $ 5,284 $ 4,661

Add: Subsidy expense for direct loans disbursed during the year by component

Interest rate differential costs (216) 73

Default costs (net of recoveries) 234 253

Fees and other collections (1) (1)

Other subsidy costs 319 79

Total subsidy expense prior to adjustments and reestimates 336 404

Adjustments

Loan modifications 41 9

Fees received 49 39

Loans written off (498) (335)

Subsidy allowance amortization (56) (264)

Other 368 206

Total subsidy cost allowance before reestimates 5,524 4,720

Add or subtract subsidy reestimates by component

Interest rate reestimate 284 383

Technical/default reestimate (232) 181

Total reestimates 52 564

Ending balance of the subsidy cost allowance $ 5,576 $ 5,284
Financial Statements, Notes, Supplemental and Other Accompanying Information

132

Table 3. Subsidy Expense for Direct Loans by Program and Component

FY 2010

Interest Fees and Other Subtotal Total Interest Rate Technical Total Total Subsidy

Differential Defaults Collections Other Subsidy Modifications Reestimates Reestimates Reestimates Expense

Direct Loan Programs

Farm $ (16) $ 121 $ - - $ $ 105 $ - $ 41 $ (272) $ (231) $ (126)

Export - - - - - 34 23 17 40 74

Food Aid - - - - - - - - - -

Housing (237) 74 (1) 326 162 7 42 262 304 473

Electric (75) 24 - (2) (53) - 205 (202) 3 (50)

Telecommunications (5) 11 - (1) 5 - (2) 1 (1) 4

Water and Environmental 101 4 - (4) 101 - (18) (32) (50) 51

Business and Industry - - - - - - (2) (5) (7) (7)

Economic Development 16 - - - 16 - (5) (1) (6) 10

Total Direct Loan Subsidy Expense $ (216) $ 234 $ (1) $ 319 $ 336 $ 41 $ 284 $ (232) $ 52 $ 429

.

FY 2009

Interest Fees and Other Subtotal Total Interest Rate Technical Total Total Subsidy

Differential Defaults Collections Other Subsidy Modifications Reestimates Reestimates Reestimates Expense

Direct Loan Programs

Farm $ 2 $ 160 $ - 1 $ $ 163 $ - $ 204 $ 424 $ 628 $ 791

Export - - - - - - - - - -

Food Aid - - - - - 19 (244) (172) (416) (397)

Housing 24 75 (1) 85 183 6 (41) 129 88 277

Electric (45) 13 - (4) (36) (16) 600 (324) 276 224

Telecommunications (1) 4 - - 3 - 29 120 149 152

Water and Environmental 75 1 - (3) 73 - (164) 19 (145) (72)

Business and Industry - - - - - - (6) (5) (11) (11)

Economic Development 18 - - - 18 - 5 (10) (5) 13

Total Direct Loan Subsidy Expense $ 73 $ 253 $ (1) $ 79 $ 404 $ 9 $ 383 $ 181 $ 564 $ 977

.
Financial Statements, Notes, Supplemental and Other Accompanying Information

133

Table 4. Total Amount of Direct Loans Disbursed (Post-1991) 

FY 2010 FY 2009

Direct Loan Programs

Farm $ 2,106 $ 1,823

Export - -

Food Aid - -

Housing 2,622 1,971

Electric 4,745 4,462

Telecommunications 675 565

Water and Environmental 949 842

Business and Industry - -

Economic Development 47 52

Total Direct Loans Disbursed 11,144$ $ 9,715
Financial Statements, Notes, Supplemental and Other Accompanying Information

134

Table 5. Guaranteed Loans Outstanding

Pre - 1992 Post - 1991 Total Pre - 1992 Post - 1991 Total

FY 2010 Outstanding 

Principal,

Outstanding 

Principal,

Outstanding 

Principal,

Outstanding 

Principal,

Outstanding 

Principal,

Outstanding 

Principal,

Face Value Face Value Face Value Guaranteed Guaranteed Guaranteed

Loan Guarantee Programs

Farm $ 24 $ 11,771 $ 11,795 $ 21 $ 10,585 $ 10,606 

Export - 6,645 6,645 - 6,513 6,513 

Food Aid - - - - - - 

Housing 3 50,947 50,950 3 45,833 45,836 

Electric 148 202 350 147 202 349 

Telecommunications - - - - - - 

Water and Environmental - 64 64 - 55 55 

Business and Industry 5 5,879 5,884 1 4,433 4,434 

Economic Development - - - - - - 

Total Guarantees Disbursed $ 180 $ 75,508 $ 75,688 $ 172 $ 67,621 $ 67,793 

Pre - 1992 Post - 1991 Total Pre - 1992 Post - 1991 Total

FY 2009 Outstanding 

Principal,

Outstanding 

Principal,

Outstanding 

Principal,

Outstanding 

Principal,

Outstanding 

Principal,

Outstanding 

Principal,

Face Value Face Value Face Value Guaranteed Guaranteed Guaranteed

Loan Guarantee Programs

Farm $ 32 $ 10,675 $ 10,707 $ 29 $ 9,598 $ 9,627 

Export - 7,039 7,039 - 6,898 6,898 

Food Aid - - - - - - 

Housing 4 34,781 34,785 3 31,293 31,296 

Electric 161 210 371 161 210 371 

Telecommunications - - - - - - 

Water and Environmental - 69 69 - 60 60 

Business and Industry 13 4,383 4,396 8 3,267 3,275 

Economic Development - - - - - - 

Total Guarantees Disbursed $ 210 $ 57,157 $ 57,367 $ 201 $ 51,326 $ 51,527 
Financial Statements, Notes, Supplemental and Other Accompanying Information

135

Table 6. Liability for Loan Guarantees (Present Value Method for Pre-1992 Guarantees)

FY 2010

Liabilities for 

Losses on 

Pre-1992 

Guarantees 

Present Value

Liabilities for Loan 

Guarantees on 

Post-1991 

Guarantees 

Present Value

Total Liabilities for 

Loan Guarantees

Loan Guarantee Programs

Farm $ - $ 283 $ 283

Export - 184 184

Food Aid - - -

Housing - 1,833 1,833

Electric - - -

Telecommunications - - -

Water and Environmental - - -

Business and Industry - 557 557

Economic Development - - -

Total Liability for Loan Guarantees $ - $ 2,857 $ 2,857

FY 2009

Liabilities for 

Losses on 

Pre-1992 

Guarantees 

Present Value

Liabilities for Loan 

Guarantees on 

Post-1991 

Guarantees 

Present Value

Total Liabilities for 

Loan Guarantees

Loan Guarantee Programs

Farm $ - $ 170 $ 170

Export - 221 221

Food Aid - - -

Housing - 1,102 1,102

Electric - - -

Telecommunications - - -

Water and Environmental - (1) (1)

Business and Industry 1 351 352

Economic Development - - -

Total Liability for Loan Guarantees $ 1 $ 1,843 $ 1,844
Financial Statements, Notes, Supplemental and Other Accompanying Information

136

Table 7. Schedule for Reconciling Loan Guarantee Liability

FY 2010 FY 2009

Beginning balance of the loan guarantee liability $ 1,842 $ 1,332

Add:Subsidy expense for guaranteed loans disbursed during the year by component

Interest supplement costs 19 25

Default costs (net of recoveries) 876 661

Fees and other collections (402) (349)

Other subsidy costs 2 -

Total of the above subsidy expense components 495 337

Adjustments

Loan guarantee modifications - -

Fees received 458 344

Interest supplements paid 132 5

Claim payments to lenders (301) (144)

Interest accumulation on the liability balance 64 48

Other (40) (152)

Ending balance of the subsidy cost allowance before reestimates 2,650 1,770

Add or subtract subsidy reestimates by component:

Interest rate reestimate 42 (45)

Technical/default reestimate 165 117

Total of the above reestimate components 207 72

Ending balance of the loan guarantee liability $ 2,857 $ 1,842
Financial Statements, Notes, Supplemental and Other Accompanying Information

137

Table 8. Subsidy Expense for Loan Guarantees by Program and Component

FY 2010

Total

Interest Fees and Other Total Interest Rate Technical Total Subsidy

Loan Guarantee Programs Supplement Defaults Collections Other Subtotal Modifications Reestimates Reestimates Reestimates Expense

Farm $ 21 $ 72 $ (27) - $ $ 66 $ - $ (13) $ (60) $ (73) $ (7)

Export - 11 (5) - 6 - (41) (22) (63) (57)

Food Aid - - - - - - - - - -

Housing (2) 569 (325) - 242 - 80 193 273 515

Electric - - - - - - - - - -

Telecommunications - - - - - - - - - -

Water and Environmental - - - - - - - 1 1 1

Business and Industry - 224 (45) 2 181 - 16 53 69 250

Economic Development - - - - - - - - - -

Total Loan Guarantee Subsidy Expense $ 19 $ 876 $ (402) $ 2 $ 495 $ - $ 42 $ 165 $ 207 $ 702 

FY 2009

Total

Interest Fees and Other Total Interest Rate Technical Total Subsidy

Loan Guarantee Programs Supplement Defaults Collections Other Subtotal Modifications Reestimates Reestimates Reestimates Expense

Farm $ 17 $ 63 $ (25) - $ $ 55 $ - $ 5 $ (10) $ (5) $ 50

Export - 76 (22) - 54 - (45) 9 (36) 18

Food Aid - - - - - - - - - -

Housing 8 445 (267) - 186 - (15) 72 57 243

Electric - - - - - - - - - -

Telecommunications - - - - - - - - - -

Water and Environmental - - - - - - (1) 1 - -

Business and Industry - 77 (35) - 42 - 11 45 56 98

Economic Development - - - - - - - - - -

Total Loan Guarantee Subsidy Expense $ 25 $ 661 $ (349) $ - $ 337 $ - $ (45) $ 117 $ 72 $ 409 
Financial Statements, Notes, Supplemental and Other Accompanying Information

138

Table 9. Guaranteed Loans Disbursed

Principal, 

Face Value 

Disbursed

Principal, 

Guaranteed 

Disbursed

Principal, 

Face Value 

Disbursed

Principal, 

Guaranteed 

Disbursed

Loan Guarantee Programs

Farm $ 3,117 $ 2,803 $ 2,594 $ 2,332

Export 2,891 2,835 5,250 5,145

Food Aid - - - -

Housing 18,711 16,834 14,165 12,745

Electric - - - -

Telecommunications - - - -

Water and Environmental 1 1 5 4

Business and Industry 2,172 1,768 1,112 865

Economic Development - - - -

Total Guaranteed Loans Disbursed $ 26,892 $ 24,241 $ 23,126 $ 21,091

FY 2010 FY 2009

Table 10. Administrative Expenses

FY 2010 FY 2009

Direct Loan Programs $ 533 $ 594

Guaranteed Loan Programs 485 375

Total Administrative Expenses $ 1,018 $ 969
Financial Statements, Notes, Supplemental and Other Accompanying Information

139

Table 11. Subsidy Rates for Direct Loans (percentage)

FY 2010 Interest 

Differential Defaults

Fees and 

Other 

Collections Other Total

Direct Loan Programs

Farm Ownership (0.20) 4.82 - (0.54) 4.08

Farm Operating (1.26) 5.74 - 0.25 4.73

Farm Operating—ARRA (1.26) 5.74 - 0.25 4.73

Indian Tribe Land Acquisition (37.37) - - - (37.37)

Emergency Disaster (6.92) 9.92 - 0.68 3.68

Boll Weevil Eradication (0.88) - - (0.26) (1.14)

Indian Highly Fractionated Land (8.18) 13.80 - 2.30 7.92

Conservation—Direct (6.60) 6.58 - 1.44 1.42

Farm Storage Facility Loan Program (0.88) 0.02 (0.14) (0.01) (1.01)

Sugar Storage Facility Loan Program (0.22) 0.83 - - 0.61

Water and Waste Disposal Loans 7.76 0.05 - (0.27) 7.54

Distance Learning and Telemedicine Loans - 3.18 - (0.40) 2.78

Broadband Treasury Loans (0.02) 7.54 - (0.27) 7.25

Electric Hardship Loans (31.86) 0.02 - 4.11 (27.73)

FFB Electric Loans 0.07 0.12 - (0.66) (0.47)

FFB Guaranteed Underwriting 0.87 0.96 (3.68) - (1.85)

Telecommunication Hardship Loans (18.59) 0.04 - (0.04) (18.59)

FFB Telecommunications Loans 3.94 0.09 - (4.68) (0.65)

Treasury Telecommunication Loans - 0.03 - (0.46) (0.43)

Community Facility Loans 0.46 0.88 - (0.03) 1.31

Single-Family Housing Credit Sales (29.41) 2.64 - 11.14 (15.63)

Multi-Family Housing Credit Sales (39.19) 18.89 - 58.70 38.40

Section 502 Single-Family Housing (15.69) 2.69 - 16.63 3.63

Section 504 Housing Repair 14.25 2.00 - (3.39) 12.86

Section 515 Multi-Family Housing (38.61) 9.74 - 56.11 27.24

Section 523 Self-Help Housing (2.21) - - - (2.21)

Section 524 Site Development (5.18) 0.96 - - (4.22)

Section 514 Farm Labor Housing 25.48 11.45 - (0.80) 36.13

Multi-Family Housing Relending Program 27.89 - - - 27.89

Multi-Family Housing Revitalization Seconds 49.03 23.83 - - 72.86

Multi-Family Housing Revitalization Zero 28.81 9.53 - (0.18) 38.16

Intermediary Relending Program 25.33 0.25 - (0.33) 25.25

Rural Economic Development Loans 13.09 0.01 - (0.05) 13.05

Rural Microenterprise Loans 8.27 3.05 - - 11.32
Financial Statements, Notes, Supplemental and Other Accompanying Information

140

Table 12. Subsidy Rates for Loan Guarantees (percentage)

FY 2010 Interest 

Differential Defaults

Fees and 

Other 

Collections Other Total

Guaranteed Loan Programs

CCC Export Loan Guarantees Program - 11.32 (1.40) - 9.92

Farm Operating—Unsubsidized - 3.24 (0.90) - 2.34

Farm Operating—Subsidized 11.86 2.20 - - 14.06

Farm Ownership—Unsubsidized - 1.26 (0.89) - 0.37

Conservation—Guaranteed - 1.26 (0.89) - 0.37

Water and Waste Disposal Loans - - (0.82) - (0.82)

Community Facility Loans - 4.07 (0.87) - 3.20

Section 502 Single-Family Housing Purchase - 3.44 (2.00) - 1.44

Section 502 Single-Family Housing Refinance - 2.22 (0.50) - 1.72

Guaranteed 538 Multi-Family Housing - 1.15 - - 1.15

Guaranteed 538 Tornado Supplemental 26.66 0.79 (8.18) - 19.27

Business and Industry Loans Loan Guarantees - 8.42 (3.09) - 5.33

North American Development Bank Loan Guarantees - 11.23 (3.27) - 7.96

Renewable Energy Loan Guarantees - 15.62 (1.98) - 13.64

Section 9003 Loan Guarantees - 39.13 (6.30) 2.65 35.48

NOTE 8. INVENTORY AND RELATED PROPERTY, NET

Commodity inventory is restricted for the purpose of alleviating distress caused by natural disasters, 

providing emergency food assistance in developing countries and providing price support and 

stabilization. Commodity loan forfeitures during the fiscal years ended September 30, 2010 and 2009

were $3 million and $47 million, respectively.
Financial Statements, Notes, Supplemental and Other Accompanying Information

141

Inventories $ 1 $ -

Commodities:

 Volume 

(in millions) Amount

 Volume 

(in millions) Amount

Corn (In Bushels):

On hand at the beginning of the year - - - -

Acquired during the year - - 2 11

Disposed of during the year

Sales - - - (2)

Donations - - (2) (9)

Other - - - -

On hand at the end of the year - - - -

Wheat (In Bushels):

On hand at the beginning of the year - - - -

Acquired during the year 36 208 32 217

Disposed of during the year

Sales (33) (187) (25) (176)

Donations (3) (21) (7) (44)

Other - - - 3

On hand at the end of the year - - - -

Nonfat Dry Milk (In Pounds):

On hand at the beginning of the year 224 184 - -

Acquired during the year - - 270 220

Disposed of during the year

Sales (1) (1) (1) (1)

Donations (52) (59) (23) (27)

Other (165) (118) (22) (8)

On hand at the end of the year 6 6 224 184

Other:

On hand at the beginning of the year 21 15

Acquired during the year 738 3,653

Disposed of during the year

Sales 141 (2,625)

Donations (978) (1,031)

Other 120 10

On hand at the end of the year 42 22

Allowance for losses (2) (1)

Total Commodities 46 205

Total Inventory and Related Property, Net $ 47 $ 205

FY 2010 FY 2009
Financial Statements, Notes, Supplemental and Other Accompanying Information

142

NOTE 9. GENERAL PROPERTY, PLANT, AND EQUIPMENT, NET

FY 2010 Useful Net

Life Accumulated Book

Category (Years) Cost Depreciation Value

Land and Land Rights $ 76 $ - $ 76

Improvements to Land 10 - 50 721 (631) 90

Construction-in-Progress 988 - 988

Buildings, Improvements and Renovations 15 - 30 2,023 (1,322) 701

Other Structures and Facilities 15 - 50 1,795 (1,390) 405

Equipment 5 - 20 1,602 (1,247) 355

Assets Under Capital Lease 3 - 20 74 (44) 30

Leasehold Improvements 10 75 (48) 27

Internal-Use Software 5 - 8 521 (338) 183

Internal-Use Software in Development 170 (61) 109

Other General Property, Plant and Equipment 5 - 15 - - -

Total $ 8,045 $ (5,081) $ 2,964

FY 2009 Useful Net

Life Accumulated Book

Category (Years) Cost Depreciation Value

Land and Land Rights $ 76 $ - $ 76

Improvements to Land 10 - 50 707 (611) 96

Construction-in-Progress 983 - 983

Buildings, Improvements and Renovations 15 - 30 1,991 (1,269) 722

Other Structures and Facilities 15 - 50 1,776 (1,346) 430

Equipment 5 - 20 1,661 (1,330) 331

Assets Under Capital Lease 3 - 20 76 (42) 34

Leasehold Improvements 10 66 (44) 22

Internal-Use Software 5 - 8 579 (441) 138

Internal-Use Software in Development 137 (1) 136

Other General Property, Plant and Equipment 5 - 15 4 - 4

Total $ 8,056 $ (5,084) $ 2,972

NOTE 10. STEWARDSHIP PP&E

Stewardship PP&E consist of assets whose physical properties resemble those of General PP&E that are 

traditionally capitalized in the financial statements. Due to the nature of these assets however, valuation 

would be difficult and matching costs with specific periods would not be meaningful. Stewardship PP&E 

include heritage assets and stewardship land.

Heritage Assets

Heritage assets are unique and are generally expected to be preserved indefinitely. Heritage assets may 

be unique because they have historical or natural significance, are of cultural, educational or artistic 

importance, or have significant architectural characteristics. The assets are reported in terms of

physical units rather than cost, fair value, or other monetary values. No amounts are shown on the 

balance sheet for heritage assets, except for multi-use heritage assets in which the predominant use of 

the asset is in general government operations. The costs of acquisition, betterment, or reconstruction of 

multi-use heritage assets is capitalized as general PP&E and depreciated. The costs of acquiring, 

constructing, improving, reconstructing, or renovating heritage assets, other than multi-use is 

considered an expense in the period incurred when determining the net cost of operations. Heritage 

assets consist of collection type, such as objects gathered and maintained for exhibition, for example 

library collections; and non-collection-type, such as memorials, monuments and buildings.
Financial Statements, Notes, Supplemental and Other Accompanying Information

143

National Forests, National Grasslands and Other Sites—FS manages its heritage assets by site. Sites include 

National Forests, National Grasslands, other Forest Service-managed sites, and non Forest Servicemanaged sites such as museums and university laboratories. The mission of the FS is to sustain the 

health, diversity, and productivity of the Nation’s forests and grasslands to meet the needs of present 

and future generations. The FS strives to achieve quality land management under the sustainable 

multiple-use management concept to deliver the necessary products and services that are essential for 

enhancing natural resource stewardship and to meet the diverse needs of people. 

Heritage Asset categories can include the following: 

Priority Heritage Assets (PHA): Heritage assets of distinct public value that are, or should be, actively 

maintained, and meet one or more of the following criteria:

• The property is recognized through an official designation; such as a listing on the National Register 

of Historic Places, State register, etc.

• The property is recognized through prior investment in preservation, interpretation, and use. Any 

improvement to a PHA that meets real property designation criteria is considered real property.

• The property is recognized in an agency-approved management plan.

• The property exhibits critical deferred maintenance needs, and those needs have been documented. 

Other Heritage Assets: Assets that may have potential important historical or cultural significance, but 

lack formal listing and the demonstrated need for active maintenance.

Assemblage Assets: Any grouping of artifacts or archival materials aggregated through donation, agency 

events, site-specific or other field collection, other acquisition method, or combination therein. This 

would include materials donated to the FS; artifact or archival materials collected from a single site, FS

administrative unit, or event; or any combination thereof.

Research Centers—ARS conducts research at centers nationwide to develop and transfer solutions to 

agricultural problems of high national priority and provides information access and dissemination to 

ensure high-quality, safe food and other agricultural products; assess the nutritional needs of 

Americans; sustain a competitive agricultural economy; enhance the natural resource base and the 

environment; and provide economic opportunities for rural citizens, communities, and society as a 

whole. NRCS owns one research center, the Tucson Plant Material Center (TPMC). The TPMC develops 

and evaluates native plants and addresses an array of resource issues in the areas of rangeland, mined 

land, urban lands, cropland riparian areas and desert lands. Research centers are considered heritage 

assets because one or more buildings or structures at these centers is on the National Register of 

Historic Places or have been identified as eligible for inclusion on the National Register. 

Library Collections—The National Agricultural Library (NAL) as a whole is the largest collection of 

materials devoted to agriculture in the world. The collections are in constant use to support the research 

activities of USDA, departmental operations and to answer citizen inquiries. NAL houses and provides 

access to millions of books and periodicals. The overwhelming number of these items were published 

more than 25 years ago and almost all of them are out-of-print and unavailable for purchase. By statute, 

NAL is the primary depository of publications and information concerning the research and other 

activities of USDA. Included in the collection are government documents and many items that are 

unique and irreplaceable. NAL collects, preserves and provides access to manuscripts, rare books, 

photographs, posters, oral histories and other unique materials. Collection concentrations include the 

fields of agriculture, horticulture, entomology, poultry sciences, botany, natural history and agricultural 

history. Although focused primarily on American agriculture and related sciences, NAL holds numerous 

items of international origin.
Financial Statements, Notes, Supplemental and Other Accompanying Information

144

Acquisition and Withdrawal of Heritage Assets — The FS generally does not construct heritage assets, 

although in some circumstances important site-structural components may be rehabilitated or 

reconstructed into viable historic properties to provide forest visitors with use and interpretation. 

Heritage assets may be acquired through the procurement process, but this rarely occurs. Normally, 

heritage assets are part of the land acquisition and inventory process. Withdrawal occurs through land 

exchange or natural disasters. Most additions occur through inventory activities where previously 

undocumented sites are discovered and added to the total. Although not technically additions—they 

already existed on NFS lands—they do represent an increased management responsibility 

commensurate with the spirit of “additions.”

Stewardship Land

Stewardship land is land and land rights not acquired for or in connection with items of general PP&E. 

Land is defined as the solid surface of the earth, excluding natural resources. Stewardship land is valued 

for its environmental resources, recreational and scenic value, cultural and paleontological resources, 

vast open spaces, and resource commodities and revenue provided to the Federal government, States, 

and counties. These assets are reported in terms of physical units rather than cost, fair value, or other 

monetary values. No asset amount is shown on the balance sheet for stewardship land. The acquisition 

cost of stewardship land is considered an expense in the period acquired when determining the net cost 

of operations. Stewardship land consists primarily of the national forests and grasslands owned by the 

FS and conservation easements purchased by NRCS.

National Forests—National forests are formally established and permanently set aside and reserved for 

national forest purposes, including National Wilderness, National Primitive, National Wild and Scenic 

River, National Recreation, National Scenic Research, National Game Refuges and Wildlife Preserve, 

and National Monument areas.

National Grasslands—National grasslands are designated by the Secretary of Agriculture and 

permanently held by USDA under Title III of the Bankhead-Jones Farm Tenant Act.

Research and Experimental Areas—Research and experimental areas are reserved and dedicated by the 

Secretary of Agriculture for forest and range research experimentation. Areas reported are located 

outside the exterior boundaries of a national forest or national grassland.

National Preserves and Other Areas—National preserves are units established to protect and preserve 

scientific, scenic, geologic, watershed, fish, wildlife, historic, cultural, and recreational values, and 

provide for multiple use and sustained yield of its renewable resources. Other areas include areas 

administered by the FS that are not included in one of the above groups.

Conservation Easements— NRCS’ objective in administering the conservation easement programs are to 

provide landowners financial and technical assistance in return for maintaining and improving highquality productive soils, clean and abundant water, healthy plant and animals communities, clean air , 

an adequate energy supply, and working farm and ranch land. NRCS’ objective in managing, 

monitoring, and enforcing the terms and conditions of the easement deed is to ensure that the 

taxpayers investments are properly used in accordance with the intent of the program, to ensure that 

the agency is a good steward of the land, and to be a good neighbor to adjacent landowners. The uses for 

the land are identified under each program. Withdrawals from the program are not allowed.

Stewardship resources involve a substantial investment by the NRCS for long-term benefits for the 

American public to help people help the land. The purchase of easements is to restore or enhance 

wetlands, protect farmland, restore and protect grassland, restore and protect forest ecosystems, and to 

restore, protect, maintain, and enhance the functions of the floodplain. 
Financial Statements, Notes, Supplemental and Other Accompanying Information

145

Acquisition and Withdrawal of Stewardship Lands— The Land and Water Conservation Fund (L&WCF) Land 

Acquisition Program acquires land for the FS NFS. The program coordinates with a variety of partners, 

including State, local, and tribal governments and private landowners through statewide planning for 

development of a land-adjustment strategy.

The Land Acquisition Program preserves, develops, and maintains access to NFS lands and waters for 

the public and provides permanent access to public lands for recreation, commodity production, 

resource management, public safety, and community economic viability. 

The L&WCF statutory authority specifically defines the purpose to also include protecting the quality of 

scientific, scenic, historical, ecological, environmental, air and atmospheric, water resource, and 

archeological values, as well as food and habitat for fish and wildlife, and managing the public lands for 

minerals, food, timber, and fiber. 

From these several allowable uses of program funding, the program concentrates on protecting habitat 

for priority species identified in the national forest and grassland’s Land Management Plans (LMPs) 

and enhancing recreational opportunities for areas with high demand for recreation. The program 

focuses acquisitions on inholdings and areas adjacent to existing NFS lands.

FY 2010 Additions Withdrawals FY 2009

Heritage Assets

National Forests 155 - - 155

National Grasslands 20 - - 20

Other Sites 155 20 - 135

Research Centers 36 - (1) 37

Library Collections 1 - - 1

Total 367 20 (1) 348

Stewardship Land

National Forests 155 - - 155

National Grasslands 20 - - 20

Research and Experimental Areas 3 - - 3

National Preserves and Other Areas 3 - - 3

Conservation Easements 11,085 251 - 10,834

Total 11,266 251 - 11,015

NOTE 11. OTHER ASSETS

In FY 2010 and FY 2009, other assets include investments in trust for loan asset sales of $35 million 

and $35 million, respectively.

FY 2010 FY 2009

Intragovernmental:

Advances to Others $ 70 $ 4

Other Assets 13 -

Subtotal Intragovernmental 83 4

With the Public:

Advances to Others 142 148

Other Assets 36 37

Total Other Assets $ 261 $ 189
Financial Statements, Notes, Supplemental and Other Accompanying Information

146

NOTE 12. LIABILITIES NOT COVERED BY BUDGETARY RESOURCES

In FY 2010 and FY 2009, other intragovernmental liabilities not covered by budgetary resources 

include accruals for the Federal Employee Compensation Act (FECA) of $169 million and $169 million, 

contract disputes claims payable to Treasury’s Judgment Fund of $19 million and $18 million, deposit 

funds and clearing accounts of $40 million and $38 million, and custodial of $5 million and $4 million, 

respectively. In FY 2010, unemployment compensation was $16 million. 

In FY 2010 and FY 2009, other liabilities with the public not covered by budgetary resources include 

Tobacco Transition Payment Program of $3,797 million and $4,705million, future funded indemnity 

costs of $724 million and $339 million, unfunded leave of $647 million and $629 million, Payments to 

States $409 million and $443 million, contingent liabilities of $1,157 million and $20 million, and 

deposit funds and clearing accounts of $25 million and $17 million, respectively. In FY 2010, custodial 

was $1 million. In FY 2009, rental payments under the Conservation Reserve Program (CRP) were 

$1,735 million. 

FY 2010 FY 2009

Intragovernmental:

Other $ 249 $ 229

Subtotal Intragovernmental 249 229

With the Public:

Accounts Payable 1 -

Federal employee and veterans' benefits 881 846

Environmental and disposal liabilities 8 9

Other 6,761 7,887

Subtotal With the Public 7,651 8,742

Total liabilities not covered by budgetary resources 7,900 8,971

Total liabilities covered by budgetary resources 121,024 116,753

Total Liabilities $ 128,924 $ 125,724
Financial Statements, Notes, Supplemental and Other Accompanying Information

147

NOTE 13. DEBT

FY 2010 Beginning 

Balance Net Borrowing

Ending 

Balance

Intragovernmental

Debt to the Treasury $ 55,629 $ 970 $ 56,599

Debt to the Federal Financing Bank 28,490 2,826 31,316

Total Intragovernmental 84,119 3,796 87,915

Agency Debt:

Held by the Public - - -

Total Debt $ 84,119 $ 3,796 $ 87,915

FY 2009 Beginning 

Balance Net Borrowing

Ending 

Balance

Intragovernmental

Debt to the Treasury $ 51,201 $ 4,427 $ 55,628

Debt to the Federal Financing Bank 26,376 2,115 28,491

Total Intragovernmental 77,577 6,542 84,119

Agency Debt:

Held by the Public - - -

Total Debt $ 77,577 $ 6,542 $ 84,119

NOTE 14.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. In FY 2010 and FY 2009 the CCC and FS estimate the liability for total cleanup costs 

for sites known to contain hazardous waste to be $8 million and $1 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.

NOTE 15. OTHER LIABILITIES

In FY 2010, other liabilities with the public include estimated losses on crop insurance claims of 

$1,575 million, estimated underwriting gains on crop insurance of $2,334 million, crop insurance 

premium subsidy deficiency reserve of $724 million, Payments to States of $409 million, Brazilian 

Cotton Industry of $286 million, estimated program delivery cost to reinsurer of $11 million, loans paid 

in advance for multi-family housing of $11 million, undistributed credits for insured loans of $10 

million, credit reform programs of $8 million, and purchaser road credits of $1 million.

In FY 2009, other liabilities with the public include estimated losses on crop insurance claims of 

$2,865 million, estimated underwriting gains on crop insurance of $2,194 million, crop insurance 

premium subsidy deficiency reserve of $839 million, Payments to States of $443 million, estimated 

program delivery cost to reinsurer of $13 million, loans paid in advance for multi-family housing of $9 

million, undistributed credits for insured loans of $4 million, credit reform programs of $7 million, and 

purchaser road credits of $1 million.
Financial Statements, Notes, Supplemental and Other Accompanying Information

148

FY 2010 Non-Current Current Total

Intragovernmental:

Other Accrued Liabilities $ 19 $ 22 $ 41

Employer Contributions and Payroll Taxes - 96 96

Unfunded FECA Liability - 169 169

Other Unfunded Employment Related Liability - 17 17

Advances from Others - 69 69

Liability for Deposit Funds, Clearing Accounts - 29 29

Liability for Subsidy Related to Undisbursed Loans - 179 179

Resources Payable to Treasury - 11,084 11,084

Custodial Liability - 37 37

Other Liabilities - 14 14

Subtotal Intragovernmental 19 11,716 11,735

With the Public:

Other Accrued Liabilities - 13,154 13,154

Accrued Funded Payroll and Leave - 437 437

Unfunded Leave - 647 647

Advances from Others - 63 63

Deferred Credits - 505 505

Liability for Deposit Funds, Clearing Accounts - 112 112

Contingent Liabilities - 1,257 1,257

Capital Lease Liability 22 11 33

Custodial Liability 3 1 4

Other Liabilities 21 5,351 5,372

Subtotal With the Public 46 21,538 21,584

Total Other Liabilities $ 65 $ 33,254 $ 33,319

FY 2009 Non-Current Current Total

Intragovernmental:

Other Accrued Liabilities $ 18 $ 31 $ 49

Employer Contributions and Payroll Taxes - 86 86

Unfunded FECA Liability - 169 169

Other Unfunded Employment Related Liability - 17 17

Advances from Others - 37 37

Liability for Deposit Funds, Clearing Accounts - 9 9

Liability for Subsidy Related to Undisbursed Loans - 564 564

Resources Payable to Treasury - 10,799 10,799

Custodial Liability - 44 44

Subtotal Intragovernmental 18 11,756 11,774

With the Public:

Other Accrued Liabilities - 13,930 13,930

Accrued Funded Payroll and Leave - 239 239

Unfunded Leave - 629 629

Advances from Others - 51 51

Deferred Credits - 613 613

Liability for Deposit Funds, Clearing Accounts - 127 127

Contingent Liabilities 16 1,254 1,270

Capital Lease Liability 25 15 40

Custodial Liability - (1) (1)

Other Liabilities 21 6,355 6,376

Subtotal With the Public 62 23,212 23,274

Total Other Liabilities $ 80 $ 34,968 $ 35,048
Financial Statements, Notes, Supplemental and Other Accompanying Information

149

NOTE 16. LEASES

USDA activities based in the Washington D.C. area are located in General Services Administration 

(GSA) leased facilities, and USDA owned buildings. The USDA Headquarter complex (Whitten Building 

and South Building) is a government owned facility, which is part of the GSA Federal Buildings 

Inventory. As the result of a 1998 Agreement between GSA and USDA, a moratorium was placed on the 

rental billings for the Headquarters complex beginning in FY 1999.

At current market rate, the estimated yearly rental payment for the above mentioned space would be 

$63 million. This agreement is still in effect and as a result, USDA activities located in the Headquarters 

complex are not billed for rental costs.

FY 2010

Capital Leases:

Summary of Assets Under Capital Leases

Land and Building $ 73

Machinery and Equipment -

Accumulated Amortization (44)

Future Payments Due:

Land & Buildings Machinery & 

Equipment Other Totals

Fiscal Year

2011 13 - - 13

2012 12 - - 12

2013 11 - - 11

2014 10 - - 10

2015 9 - - 9

After 5 Years 35 - - 35

Total Future Lease Payments 90 - - 90

Less: Imputed Interest 39 - - 39

Less: Executory Costs 18 - - 18

Less: Lease Renewal Options - - - -

Net Capital Lease Liability 33 - $ - 33

Lease liabilities covered by budgetary resources 33

Operating Leases:

Future Payments Due:

Fiscal Year Land & Buildings Machinery & 

Equipment Other Totals

2011 126 1 1 128

2012 111 - 1 112

2013 97 - 1 98

2014 89 - - 89

2015 80 - 1 81

After 5 Years 468 - 2 470

Total Future Lease Payments $ 971 $ 1 $ 6 $ 978
Financial Statements, Notes, Supplemental and Other Accompanying Information

150

FY 2009

Capital Leases:

Summary of Assets Under Capital Leases

Land and Building $ 76

Machinery and Equipment -

Accumulated Amortization (42)

Future Payments Due:

Land & Buildings Machinery & 

Equipment Other Totals

Fiscal Year

2010 14 - - 14

2011 13 - - 13

2012 12 - - 12

2013 11 - - 11

2014 11 - - 11

After 5 Years 44 - - 44

Total Future Lease Payments 105 - - 105

Less: Imputed Interest 44 - - 44

Less: Executory Costs 21 - - 21

Less: Lease Renewal Options - - - -

Net Capital Lease Liability 40 - $ - 40

Lease liabilities covered by budgetary resources 40

Operating Leases:

Future Payments Due:

Fiscal Year Land & Buildings Machinery & 

Equipment Other Totals

2010 117 1 - 118

2011 104 1 1 106

2012 93 - 1 94

2013 82 - 1 83

2014 76 - 1 77

After 5 Years 462 - 2 464

Total Future Lease Payments $ 934 $ 2 $ 6 $ 942
Financial Statements, Notes, Supplemental and Other Accompanying Information

151

NOTE 17. 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, $1,257 million and $1,270 million have been accrued in the financial statements as 

of September 30, 2010 and September 30, 2009, respectively.

No amounts have been accrued in the financial statements for claims where the amount is uncertain or 

where the probability of judgment against USDA is remote. The Department’s potential liability for 

claims where a judgment against the Department is reasonably possible ranges from $2,136 million to 

$3,663 million as of September 30, 2010, compared to $547 million to $741 million as of September 30, 

2009.

CRP rental payments are estimated to be $1,800 million annually through FY 2016. Commitments to 

extend loan guarantees are estimated to be $4,802 million and $6,066 million in FY 2010 and FY 2009, 

respectively.

NOTE 18.EARMARKED FUNDS

Earmarked funds are financed by specifically identified revenues, often supplemented by other 

financing sources, which remain available over time. These specifically identified revenues and other 

financing sources are required by statute to be used for designated activities, benefits, or purposes and 

must be accounted for separately from the Government’s general revenues. 

Financial information for all significant earmarked funds follows the descriptions of each fund’s 

purpose shown below.

Risk Management Agency

Federal Crop Insurance Corporation Fund (FCIC)

Resources for the FCIC Fund include funds collected from the public for insurance premiums and other 

insurance related fees that are used with appropriations from Congress and unobligated balances from 

previous years to fund the Federal Crop Insurance Program. Funds are available under 7 U.S.C. 1501-

1519.

Agricultural Marketing Service

Funds for Strengthening Markets, Income, and Supply 

This fund is used to purchase commodities for schools and elderly feeding programs, to provide goods 

and other necessities in emergencies and disasters, and to purchase agricultural commodities to 

stabilize markets. The fund is permanently financed by statutory transfer of an amount equal to 30 

percent of customs receipts collected during each calendar year and is automatically appropriated for 

expanding outlets for perishable, non-price supported commodities. An amount equal to 30 percent of 

receipts collected on fishery products is transferred to the Food and Nutrition Service and is used to 

purchase commodities under section 6 of the National School Lunch Act and other authorities specified 

in the child nutrition appropriation. Funds are available under section 32 of the Act of August 24, 1935, 

as amended (7 U.S.C. 612c).

Expenses and Refunds, Inspection and Grading of Farm Products

The commodity grading programs provide grading, examination, and certification services for a wide 

variety of fresh and processed food commodities using federally approved grade standards and 

purchase specifications. This fund is financed by the collection of fees charged to producers of various 
Financial Statements, Notes, Supplemental and Other Accompanying Information

152

food commodities who request, on a voluntary basis, inspection and grading of agricultural food 

commodities. This program is authorized by the Agricultural Marketing Act of 1946 (7 U.S.C. 1621-

1627).

Animal Plant Health Inspection Service

Agricultural Quarantine Inspection User Fee Account 

This fund is used to record and report expenditures and revenue associated with operating Agricultural 

Quarantine Inspection (AQI) activities at ports of entry. The 1990 Farm Bill, as amended by the Federal 

Agriculture Improvement and Reform Act of 1996, gave the Animal and Plant Health Inspection Service 

(APHIS) the authority to charge user fees for AQI services, and use the revenue to fund AQI activities.

In March of 2003, a portion of the AQI program was transferred to the Department of Homeland 

Security (DHS); however, APHIS retained the authority to collect AQI revenue. APHIS transfers a 

portion of the revenue to DHS periodically throughout the year to fund their expenditures. The revenue 

in the fund is collected from airlines, air passengers, vessels, trucks, and railroad cars that are subject to 

AQI inspection at ports of entry. These user fees are an inflow of revenue from the public that is used to 

fund AQI inspections that are required by APHIS and DHS. The authority is codified in 21 U.S.C. 

136(a). 

Forest Service

Cooperative Work

Cooperative contributions are deposited for disbursement in compliance with the terms and provisions 

of the agreement between the cooperator and the Forest Service. Cooperators include timber 

purchasers, not-for-profit organizations, and local hunting and fishing clubs. The governing authorities 

are the Cooperative Funds Act of June 30, 1914 (16 U.S.C. 498), and the Knutson-Vandenberg Act.

Land Acquisition

Each fiscal year this fund receives a transfer of recreation user fees from the Department of the 

Interior’s Land and Water Conservation Fund to be used for the acquisition of land or waters, or 

interest therein, including administrative expenses, to carry out the provisions of the Land and Water 

Conservation Fund Act of 1965, as amended (16 U.S.C. 460l-4-11), pertaining to the preservation of 

watersheds. The Land Acquisition program is authorized by the Interior and Related Agencies 

Appropriations Act of December 30, 1982 (96 Stat. 1983, Public Law 97-394).

Payments to States, National Forest Fund 

The Act of May 23, 1908, as amended (16 U.S.C. 500), commonly known as “Payments to States”, 

requires with a few exceptions, that 25 percent of all monies received from the national forests and 

deposited into the National Forest Fund during a fiscal year from timber, grazing, special-use permits, 

power and mineral leases, and admission and user fees be paid to the States in which the national 

forests are located for public schools and public roads in the county or counties in which the national 

forests are situated. The Secure Rural Schools and Community Self-Determination Act of 2000 (P.L. 

106-393), as amended by § 601 of The Emergency Economic Stabilization Act of 2008, (H.R. 1424) 

(P.L. 110-343), provides stabilized education and road maintenance funding through predictable 

payments to counties, job creation in those counties, and other opportunities associated with the 

restoration, maintenance, and stewardship of Federal lands.

Timber Salvage Sales

The Timber Salvage Sale Fund was established to facilitate the timely removal of timber damaged by 

fire, wind, insects, disease, or other events. Amounts collected from the sale of salvaged timber are used 
Financial Statements, Notes, Supplemental and Other Accompanying Information

153

on other qualifying salvage sales to cover the cost of preparing and administering the sales. The Timber 

Salvage Sales Program is authorized by 16 USC 472(a).

State, Private, and International Forestry Land and Water Conservation Fund

The Fiscal Year 2004 Department of the Interior and Related Agencies Appropriation Act (Public Law 

108-108) authorizes the Forest Service to receive a transfer of receipts from the Department of the 

Interior’s Land and Water Conservation Fund to finance the existing Forest Legacy Program, funded 

previously by State and Private Forestry general appropriation. To accommodate the new financing 

arrangement and at OMB’s request, the U.S. Department of Treasury established a new special fund, 

“State, Private and International Forestry Land and Water Conservation Fund”. The program 

expenditures include grants and an occasional land purchase, but no real property will be procured or 

constructed.

Recreation Fee Demonstration Program 

The Recreation Fee Demonstration Program fund receives deposits of recreation fees collected from 

projects that are part of the Recreation Fee Demonstration Program. These monies are retained and 

used for backlog repair and maintenance of recreation areas, sites, or projects. These funds are also 

used for interpretation, signage, habitat or facility enhancement, resource preservation, annual 

operation, maintenance, and law enforcement related to public use of recreation areas, and sites. The 

Recreation Fee Demonstration Program is authorized by 16 U.S.C. 4601-6(a).

Restoration of Forest Lands and Improvements

The Restoration of Forest Lands and Improvements Acts (16 U.S.C. 579(c)) states any monies received 

by the United States with respect to lands under the administration of the Forest Service (a) as a result 

of the forfeiture of a bond or deposit by a permittee or timber purchaser for failure to complete 

performance of improvement, protection, or rehabilitation work required under the permit or timber 

sale contract or (b) as a result of a judgment, compromise, or settlement of any claim, involving present 

or potential damage to lands or improvements, shall be deposited into the United States Treasury and 

are appropriated and made available until expended to cover the cost to the United States of any 

improvement, protection, or rehabilitation work on lands under the administration of the Forest 

Service rendered necessary by the action which led to the forfeiture, judgment, compromise, or 

settlement – provided that any portion of the monies received in excess of the amount expended in 

performing the work necessitated by the action which led to their receipt shall be transferred to 

miscellaneous receipts.

Acquisition of Lands to Complete Land Exchanges

As authorized by seven statutes, this program is funded annually by congressional appropriation action, 

with forest revenues generated by the occupancy of public land or from the sale of natural resources 

other than minerals. All funds appropriated that remain unobligated at the end of the fiscal year are 

returned to the receipts of the affected national forests. These funds are used to purchase land and are 

for related expenditures such as title search, escrow, recording, and personnel costs when the purchase 

is considered necessary to minimize soil erosion and flood damage. This appropriation is available for 

land acquisition within the exterior boundaries of the national forests.

National Institute of Food and Agriculture (NIFA)

Native American Institutions Endowment Fund

The Native American Institutions Endowment Fund was authorized by Public Law 103-382 and 

provided an initial installment to establish an endowment to benefit the 1994 land grant institutions.

The public law states that, “This program will enhance educational opportunities for Native Americans 

by building educational capacity at these institutions in the areas of student recruitment and retention, 
Financial Statements, Notes, Supplemental and Other Accompanying Information

154

curricula development, faculty preparation, instruction delivery systems, and scientific instrumentation 

for teaching.” While the principal (corpus) of the fund cannot be used, the interest that is earned on the 

endowment fund investments in Treasury instruments can be used for the purposes described above.

After the close of the fiscal year, the income is distributed after making adjustments for the cost of 

administering the fund.

Farm Service Agency

Agricultural Disaster Assistance Transition – Recovery Act and Agricultural Disaster Relief Trust Fund

The Agricultural Disaster Assistance Transition – Recovery Act and the Agricultural Disaster Relief 

Trust Fund shall make amounts available for the purpose of expenditures to meet the obligations of the 

United States incurred under section 901 or section 531 of the Federal Crop Insurance Act. The trust 

funds will be used to make payments to farmers and ranchers under seven disaster assistance 

programs: (1) Supplemental Revenue Assistance Payments (SURE) Program, (2) Livestock Feed 

Program (LFP), (3) Livestock Indemnity Program (LIP), (4) Tree Assistance Program (TAP), (5) 

Emergency Assistance for Livestock, Honey Bees, and Farm-Raised Fish Program (ELAP), (6) Recovery 

Act for the Supplemental Revenue Assistance Payments Program, and (7) Recovery Act for the Tree 

Assistance Program. The funds are appropriated an amount equivalent to 3.08 percent of the amounts 

received in the general fund of the Treasury of the United States during fiscal years 2008 through 2011 

attributable to the duties collected on articles entered, or withdrawn from warehouse, for consumption 

under the Harmonized Tariff Schedule of the United States.

Other

Financial information is summarized for all other earmarked funds with total assets less than 

$50 million listed below.

Agricultural Marketing Service

Perishable Agricultural Commodities Act 

Wool Research, Development and Promotion Trust Fund

Animal Plant Health Inspection Service

Miscellaneous Contributed Funds

Forest Service

National Forest Fund Receipts 

Roads and Trails for States, National Forest Fund

Reforestation Trust Fund

Payments to Counties, National Grasslands 

Timber Sales Pipeline Restoration Fund 

Operation and Maintenance of Forest Service Quarters

Timber Roads, Purchaser Elections

Expenses, Brush Disposal

Range Betterment Fund

Acquisition of Lands for National Forests, Special Acts

Construction of Facilities or Land Acquisition

Recreation Fees for Collection Costs

Payment to Minnesota (Cook, Lake, and Saint Louis Counties)

Licensee Program

Tongass Timber Supply Fund
Financial Statements, Notes, Supplemental and Other Accompanying Information

155

Resource Management Timber Receipts

Quinault Special Management Area

MNP Rental Fee Account

Midewin National Tallgrass Prairie Restoration Fund

Land Between the Lakes Management Fund

Administration of Rights-of-Way and Other Land Uses Fund

Valles Caldera Fund

Hardwood Technology Transfer and Applied Research Fund

Stewardship Contracting Product Sales

Mount Saint Helens Highway

Gifts, Donations, and Bequests for Forest and Rangeland Research

Land Between the Lakes Trust Fund

Gifts and Bequests

Natural Resources Conservation Service

Miscellaneous Contributed Funds 

Agricultural Research Service

Concessions Fees and Volunteer Services

Gifts and Bequests

Miscellaneous Contributed Funds 

Rural Development

Alternative Agricultural Research and Commercialization Revolving Fund 

Foreign Agricultural Service

Miscellaneous Contributed Funds

Gifts and Bequests

Grain Inspection, Packers and Stockyards Administration

Inspection and Weighing Services

Food Safety and Inspection Service

Expenses and Refunds, Inspection of Farm Products

Office of Inspector General

Inspector General Assets Forfeiture, Department of Justice

Inspector General Assets Forfeiture, Department of Treasury

National Agricultural Statistics Service

Miscellaneous Contributed Funds

Economic Research Service

Miscellaneous Contributed Funds

Departmental Offices

Gifts and Bequests
Financial Statements, Notes, Supplemental and Other Accompanying Information

156

Earmarked Funds

RMA AMS AMS APHIS FS FS FS FS

Balance Sheet As of September 30, 2010

Federal Crop 

Insurance 

Corporation Fund

Funds for 

Strengthening 

Markets, Income, 

and Supply

Expenses and 

Refunds, 

Inspection and 

Grading of Farm 

Products

Agricultural 

Quarantine 

Inspection User 

Fee Account Cooperative Work Land Acquisition

Payments to 

States, National 

Forests Fund

Timber Salvage 

Sales

12X4085 12X5209 12X8015 12X5161 12X8028 12X5004 12X5201 12X5204

Fund Balance with Treasury $ 646 $ 141 $ 52 $ 91 $ 357 $ 35 $ 197 $ 49

Investments - - 20 - - - - -

Other Assets 2,557 486 46 117 21 46 4 3

Total Assets 3,203 627 118 208 378 81 201 52

Other Liabilities 5,246 4 65 74 52 1 392 5

Total Liabilities 5,246 4 65 74 52 1 392 5

Unexpended Appropriations (677) 302 - - - - - -

Cumulative Results of Operations (1,366) 321 53 134 326 80 (191) 47

Total Liabilities and Net Position 3,203 627 118 208 378 81 201 52

Statement of Net Cost For the Period

Ended September 30, 2010

Gross program costs 4,171 854 195 192 111 54 38 27

Less Earned Revenue 602 1 151 504 79 - 119 21

Net Cost of Operations 3,569 853 44 (312) 32 54 (81) 6

Statement of Changes in Net Position

For the period Ended September 30, 2010

Net Position Beginning of Period (2,577) 677 54 129 359 71 (272) 54

Changes in Accounting Principles (Note 24) (444) - - - - - - -

Beginning Balance, as Adjusted (3,021) 677 54 129 359 71 (272) 54

Non-Exchange Revenue 4,547 799 1 (307) - 63 - -

Other Financing Sources - - 42 - (1) - - (1)

Net Cost of Operations (3,569) (853) (44) 312 (32) (54) 81 (6)

Change in net Position 978 (54) (1) 5 (33) 9 81 (7)

Net Position End of Period $ (2,043) $ 623 $ 53 $ 134 $ 326 $ 80 $ (191) $ 47
Financial Statements, Notes, Supplemental and Other Accompanying Information

157

Earmarked Funds

FS FS FS FS NIFA FSA FSA

Balance Sheet As of September 30, 2010

State, Private, 

and International 

Forestry, Land 

and Water 

Conservation 

Fund

Recreation Fee 

Demonstration 

Program

Restoration of 

Forest Lands 

and 

Improvements

Acquisition of 

Lands to 

Complete Land 

Exchanges

Native American 

Institutions 

Endowment 

Fund

Agricultural 

Disaster 

Assistance 

Transition - 

Recovery Act

Agricultural 

Disaster Relief 

Trust Fund Other Total

12X5367 12X5268 12X5215 12X5216 12X5205 129/05591 12X5531

Fund Balance with Treasury $ 124 $ 98 $ 169 $ 38 $ 14 $ 287 $ 87 $ 319 $ 2,704

Investments - - - - 126 - - 9 155

Other Assets 8 4 3 37 - 1 5 34 3,372

Total Assets 132 102 172 75 140 288 92 362 6,231

Other Liabilities 49 5 1 - - 47 108 55 6,104

Total Liabilities 49 5 1 - - 47 108 55 6,104

Unexpended Appropriations - - - - 69 - - 4 (302)

Cumulative Results of Operations 83 97 171 75 71 241 (16) 303 429

Total Liabilities and Net Position 132 102 172 75 140 288 92 362 6,231

Statement of Net Cost For the Period

Ended September 30, 2010

Gross program costs 73 96 37 6 3 624 1,459 220 8,160

Less Earned Revenue - 65 33 6 6 - - 192 1,779

Net Cost of Operations 73 31 4 - (3) 624 1,459 28 6,381

Statement of Changes in Net Position

For the period Ended September 30, 2010

Net Position Beginning of Period 80 128 175 75 125 - 1,531 305 914

Changes in Accounting Principles (Note 24) - - - - - - - - (444)

Beginning Balance, as Adjusted 80 128 175 75 125 - 1,531 305 470

Non-Exchange Revenue 76 - - - 12 865 (88) 29 5,997

Other Financing Sources - - - - - - - 1 41

Net Cost of Operations (73) (31) (4) - 3 (624) (1,459) (28) (6,381)

Change in net Position 3 (31) (4) - 15 241 (1,547) 2 (343)

Net Position End of Period $ 83 $ 97 $ 171 $ 75 $ 140 $ 241 $ (16) $ 307 $ 127
Financial Statements, Notes, Supplemental and Other Accompanying Information

158

Earmarked Funds

RMA AMS AMS APHIS FS FS FS FS

Balance Sheet As of September 30, 2009

Federal Crop 

Insurance 

Corporation Fund

Funds for 

Strengthening 

Markets, Income, 

and Supply

Expenses and 

Refunds, 

Inspection and 

Grading of Farm 

Products

Agricultural 

Quarantine 

Inspection User 

Fee Account Cooperative Work Land Acquisition

Payments to 

States, National 

Forests Fund

Timber Salvage 

Sales

12X4085 12X5209 12X8015 12X5161 12X8028 12X5004 12X5201 12X5204

Fund Balance with Treasury $ 1,218 $ 427 $ 61 $ 79 $ 388 $ 23 $ 150 $ 55

Investments - - 40 - - - - -

Other Assets 2,981 253 17 127 22 49 3 4

Total Assets 4,199 680 118 206 410 72 153 59

Other Liabilities 6,776 3 64 77 51 1 425 5

Total Liabilities 6,776 3 64 77 51 1 425 5

Unexpended Appropriations 897 302 - - - - - -

Cumulative Results of Operations (3,474) 375 54 129 359 71 (272) 54

Total Liabilities and Net Position 4,199 680 118 206 410 72 153 59

Statement of Net Cost For the Period

Ended September 30, 2009

Gross program costs 10,060 1,017 183 230 126 59 400 36

Less Earned Revenue 2,878 1 148 486 91 - 163 24

Net Cost of Operations 7,182 1,016 35 (256) 35 59 237 12

Statement of Changes in Net Position

For the period Ended September 30, 2009

Net Position Beginning of Period (2,210) 680 53 220 263 80 (35) 66

Non-Exchange Revenue 6,815 1,013 1 (347) 131 50 - -

Other Financing Sources - - 35 - - - - -

Net Cost of Operations (7,182) (1,016) (35) 256 (35) (59) (237) (12)

Change in net Position (367) (3) 1 (91) 96 (9) (237) (12)

Net Position End of Period $ (2,577) $ 677 $ 54 $ 129 $ 359 $ 71 $ (272) $ 54
Financial Statements, Notes, Supplemental and Other Accompanying Information

159

Earmarked Funds

FS FS FS FS NIFA FSA

Balance Sheet As of September 30, 2009

State, Private, 

and International 

Forestry, Land 

and Water 

Conservation 

Fund

Recreation Fee 

Demonstration 

Program

Restoration of 

Forest Lands 

and 

Improvements

Acquisition of 

Lands to 

Complete Land 

Exchanges

Native American 

Institutions 

Endowment 

Fund

Agricultural 

Disaster Relief 

Trust Fund Other Total

12X5367 12X5268 12X5215 12X5216 12X5205 12X5531

Fund Balance with Treasury $ 106 $ 129 $ 150 $ 43 $ 20 $ 1,533 $ 314 $ 4,696

Investments - - - - 105 - 10 155

Other Assets 6 4 26 33 - - 32 3,557

Total Assets 112 133 176 76 125 1,533 356 8,408

Other Liabilities 32 5 1 1 - 2 51 7,494

Total Liabilities 32 5 1 1 - 2 51 7,494

Unexpended Appropriations - - - - 60 - 4 1,263

Cumulative Results of Operations 80 128 175 75 65 1,531 301 (349)

Total Liabilities and Net Position 112 133 176 76 125 1,533 356 8,408

Statement of Net Cost For the Period

Ended September 30, 2009

Gross program costs 76 86 10 8 3 5 219 12,518

Less Earned Revenue - 67 30 9 4 - 106 4,007

Net Cost of Operations 76 19 (20) (1) (1) 5 113 8,511

Statement of Changes in Net Position

For the period Ended September 30, 2009

Net Position Beginning of Period 107 147 154 74 112 833 394 938

Non-Exchange Revenue 49 - 1 - 12 703 33 8,461

Other Financing Sources - - - - - - (9) 26

Net Cost of Operations (76) (19) 20 1 1 (5) (113) (8,511)

Change in net Position (27) (19) 21 1 13 698 (89) (24)

Net Position End of Period $ 80 $ 128 $ 175 $ 75 $ 125 $ 1,531 $ 305 $ 914
Financial Statements, Notes, Supplemental and Other Accompanying Information

160

NOTE 19. SUBORGANIZATION PROGRAM COSTS/PROGRAM COSTS BY SEGMENT

FY 2010

Intragovernmental With the Public Intragovernmental With the Public Intragovernmental With the Public

Assist Rural Communities to Create Prosperity so They Are

Self-Sustaining, Repopulating, and Economically Thriving:

Gross Costs $ 998 $ 4,253 $ 1,077 $ 5,342 $ 102 $ 144

Less: Earned Revenue 240 200 21 174 44 3

Net Costs 758 4,053 1,056 5,168 58 141

Ensure Our National Forests and Private Working Lands Are

Conserved, Restored, and Made More Resilient to Climate Change,

While Enhancing Our Water Resources:

Gross Costs 111 471 415 2,012 - -

Less: Earned Revenue 27 22 - 1 - -

Net Costs 84 449 415 2,011 - -

Help America Promote Agricultural Production and 

Biotechnology Exports as America Works to Increase Food Security:

Gross Costs - - 161 2,566 50 70

Less: Earned Revenue - - 137 188 21 2

Net Costs - - 24 2,378 29 68

Ensure that All of America's Children Have Access

to Safe, Nutritious, and Balanced Meals:

Gross Costs - - - - - -

Less: Earned Revenue - - - - - -

Net Costs - - - - - -

Total Gross Costs 1,109 4,724 1,653 9,920 152 214

Less: Total Earned Revenue 267 222 158 363 65 5

Net Cost of Operations $ 842 $ 4,502 $ 1,495 $ 9,557 $ 87 $ 209

FSA CCC FAS
Financial Statements, Notes, Supplemental and Other Accompanying Information

161

FY 2010

Intragovernmental With the Public Intragovernmental With the Public Intragovernmental With the Public

Assist Rural Communities to Create Prosperity so They Are

Self-Sustaining, Repopulating, and Economically Thriving:

Gross Costs $ 74 $ 4,201 $ - $ - $ - $ -

Less: Earned Revenue - 603 - - - -

Net Costs 74 3,598 - - - -

Ensure Our National Forests and Private Working Lands Are

Conserved, Restored, and Made More Resilient to Climate Change,

While Enhancing Our Water Resources:

Gross Costs - - - - - -

Less: Earned Revenue - - - - - -

Net Costs - - - - - -

Help America Promote Agricultural Production and 

Biotechnology Exports as America Works to Increase Food Security:

Gross Costs - - - - - -

Less: Earned Revenue - - - - - -

Net Costs - - - - - -

Ensure that All of America's Children Have Access

to Safe, Nutritious, and Balanced Meals:

Gross Costs - - 1,129 94,460 382 936

Less: Earned Revenue - - 2 49 2 157

Net Costs - - 1,127 94,411 380 779

Total Gross Costs 74 4,201 1,129 94,460 382 936

Less: Total Earned Revenue - 603 2 49 2 157

Net Cost of Operations $ 74 $ 3,598 $ 1,127 $ 94,411 $ 380 $ 779

RMA FNS FSIS
Financial Statements, Notes, Supplemental and Other Accompanying Information

162

FY 2010

Intragovernmental With the Public Intragovernmental With the Public Intragovernmental With the Public

Assist Rural Communities to Create Prosperity so They Are

Self-Sustaining, Repopulating, and Economically Thriving:

Gross Costs $ 98 $ 465 $ 54 $ 146 $ 35 $ 68

Less: Earned Revenue 2 92 6 82 1 49

Net Costs 96 373 48 64 34 19

Ensure Our National Forests and Private Working Lands Are

Conserved, Restored, and Made More Resilient to Climate Change,

While Enhancing Our Water Resources:

Gross Costs - - 35 93 - -

Less: Earned Revenue - - 4 52 - -

Net Costs - - 31 41 - -

Help America Promote Agricultural Production and 

Biotechnology Exports as America Works to Increase Food Security:

Gross Costs - - 21 56 - -

Less: Earned Revenue - - 2 32 - -

Net Costs - - 19 24 - -

Ensure that All of America's Children Have Access

to Safe, Nutritious, and Balanced Meals:

Gross Costs 113 540 298 800 - -

Less: Earned Revenue 1 107 33 450 - -

Net Costs 112 433 265 350 - -

Total Gross Costs 211 1,005 408 1,095 35 68

Less: Total Earned Revenue 3 199 45 616 1 49

Net Cost of Operations $ 208 $ 806 $ 363 $ 479 $ 34 $ 19

AMS APHIS GIPSA
Financial Statements, Notes, Supplemental and Other Accompanying Information

163

FY 2010

Intragovernmental With the Public Intragovernmental With the Public Intragovernmental With the Public

Assist Rural Communities to Create Prosperity so They Are

Self-Sustaining, Repopulating, and Economically Thriving:

Gross Costs $ 241 $ 976 $ 45 $ 224 $ 87 $ 336

Less: Earned Revenue 24 89 8 1 11 6

Net Costs 217 887 37 223 76 330

Ensure Our National Forests and Private Working Lands Are

Conserved, Restored, and Made More Resilient to Climate Change,

While Enhancing Our Water Resources:

Gross Costs 1,088 4,396 542 2,749 54 213

Less: Earned Revenue 108 402 94 10 7 4

Net Costs 980 3,994 448 2,739 47 209

Help America Promote Agricultural Production and 

Biotechnology Exports as America Works to Increase Food Security:

Gross Costs - - 1 4 40 155

Less: Earned Revenue - - - - 5 3

Net Costs - - 1 4 35 152

Ensure that All of America's Children Have Access

to Safe, Nutritious, and Balanced Meals:

Gross Costs - - - - 130 506

Less: Earned Revenue - - - - 17 9

Net Costs - - - - 113 497

Total Gross Costs 1,329 5,372 588 2,977 311 1,210

Less: Total Earned Revenue 132 491 102 11 40 22

Net Cost of Operations $ 1,197 $ 4,881 $ 486 $ 2,966 $ 271 $ 1,188

FS NRCS ARS
Financial Statements, Notes, Supplemental and Other Accompanying Information

164

FY 2010

Intragovernmental With the Public Intragovernmental With the Public Intragovernmental With the Public

Assist Rural Communities to Create Prosperity so They Are

Self-Sustaining, Repopulating, and Economically Thriving:

Gross Costs $ 20 $ 650 $ 13 $ 20 $ 55 $ 141

Less: Earned Revenue 16 - - - 23 11

Net Costs 4 650 13 20 32 130

Ensure Our National Forests and Private Working Lands Are

Conserved, Restored, and Made More Resilient to Climate Change,

While Enhancing Our Water Resources:

Gross Costs 5 151 5 7 - 1

Less: Earned Revenue 4 - - - - -

Net Costs 1 151 5 7 - 1

Help America Promote Agricultural Production and 

Biotechnology Exports as America Works to Increase Food Security:

Gross Costs 4 134 8 13 - -

Less: Earned Revenue 3 - - - - -

Net Costs 1 134 8 13 - -

Ensure that All of America's Children Have Access

to Safe, Nutritious, and Balanced Meals:

Gross Costs 6 192 10 15 3 8

Less: Earned Revenue 6 - - - 1 1

Net Costs - 192 10 15 2 7

Total Gross Costs 35 1,127 36 55 58 150

Less: Total Earned Revenue 29 - - - 24 12

Net Cost of Operations $ 6 $ 1,127 $ 36 $ 55 $ 34 $ 138

NIFA ERS NASS
Financial Statements, Notes, Supplemental and Other Accompanying Information

165

FY 2010

Intragovernmental With the Public Intragovernmental With the Public Intragovernmental With the Public

Assist Rural Communities to Create Prosperity so They Are

Self-Sustaining, Repopulating, and Economically Thriving:

Gross Costs $ 4,023 $ 3,144 $ 201 $ 365 $ 7,123 $ 20,475

Less: Earned Revenue 496 3,224 328 (3) 1,220 4,531

Net Costs 3,527 (80) (127) 368 5,903 15,944

Ensure Our National Forests and Private Working Lands Are

Conserved, Restored, and Made More Resilient to Climate Change,

While Enhancing Our Water Resources:

Gross Costs - - 117 213 2,372 10,306

Less: Earned Revenue - - 192 (2) 436 489

Net Costs - - (75) 215 1,936 9,817

Help America Promote Agricultural Production and 

Biotechnology Exports as America Works to Increase Food Security:

Gross Costs - - 12 22 297 3,020

Less: Earned Revenue - - 20 - 188 225

Net Costs - - (8) 22 109 2,795

Ensure that All of America's Children Have Access

to Safe, Nutritious, and Balanced Meals:

Gross Costs - - 156 286 2,227 97,743

Less: Earned Revenue - - 256 (2) 318 771

Net Costs - - (100) 288 1,909 96,972

Total Gross Costs 4,023 3,144 486 886 12,019 131,544

Less: Total Earned Revenue 496 3,224 796 (7) 2,162 6,016

Net Cost of Operations $ 3,527 $ (80) $ (310) $ 893 $ 9,857 $ 125,528

RD DO Total
Financial Statements, Notes, Supplemental and Other Accompanying Information

166

FY 2010 Intradepartmental

Eliminations Grand Total

Assist Rural Communities to Create Prosperity so They Are

Self-Sustaining, Repopulating, and Economically Thriving:

Gross Costs $ (1,686) $ 25,912

Less: Earned Revenue (450) 5,301

Net Costs (1,236) 20,611

Ensure Our National Forests and Private Working Lands Are

Conserved, Restored, and Made More Resilient to Climate Change,

While Enhancing Our Water Resources:

Gross Costs (874) 11,804

Less: Earned Revenue (255) 670

Net Costs (619) 11,134

Help America Promote Agricultural Production and 

Biotechnology Exports as America Works to Increase Food Security:

Gross Costs (86) 3,231

Less: Earned Revenue (38) 375

Net Costs (48) 2,856

Ensure that All of America's Children Have Access

to Safe, Nutritious, and Balanced Meals:

Gross Costs (1,286) 98,684

Less: Earned Revenue (242) 847

Net Costs (1,044) 97,837

Total Gross Costs (3,932) 139,631

Less: Total Earned Revenue (985) 7,193

Net Cost of Operations $ (2,947) $ 132,438
Financial Statements, Notes, Supplemental and Other Accompanying Information

167

FY 2009

Intragovernmental With the Public Intragovernmental With the Public Intragovernmental With the Public

Assist Rural Communities to Create Prosperity so They Are

Self-Sustaining, Repopulating, and Economically Thriving:

Gross Costs $ 904 $ 1,974 $ 1,095 $ 11,757 $ 70 $ 193

Less: Earned Revenue 219 223 2 2,361 87 -

Net Costs 685 1,751 1,093 9,396 (17) 193

Ensure Our National Forests and Private Working Lands Are

Conserved, Restored, and Made More Resilient to Climate Change,

While Enhancing Our Water Resources:

Gross Costs 103 226 399 1,825 - -

Less: Earned Revenue 25 26 - 1 - -

Net Costs 78 200 399 1,824 - -

Help America Promote Agricultural Production and 

Biotechnology Exports as America Works to Increase Food Security:

Gross Costs - - 136 1,612 34 94

Less: Earned Revenue - - 192 112 43 -

Net Costs - - (56) 1,500 (9) 94

Ensure that All of America's Children Have Access

to Safe, Nutritious, and Balanced Meals:

Gross Costs - - - - - -

Less: Earned Revenue - - - - - -

Net Costs - - - - - -

Total Gross Costs 1,007 2,200 1,630 15,194 104 287

Less: Total Earned Revenue 244 249 194 2,474 130 -

Net Cost of Operations $ 763 $ 1,951 $ 1,436 $ 12,720 $ (26) $ 287

FSA CCC FAS
Financial Statements, Notes, Supplemental and Other Accompanying Information

168

FY 2009

Intragovernmental With the Public Intragovernmental With the Public Intragovernmental With the Public

Assist Rural Communities to Create Prosperity so They Are

Self-Sustaining, Repopulating, and Economically Thriving:

Gross Costs $ 67 $ 10,082 $ - $ - $ - $ -

Less: Earned Revenue - 2,878 - - - -

Net Costs 67 7,204 - - - -

Ensure Our National Forests and Private Working Lands Are

Conserved, Restored, and Made More Resilient to Climate Change,

While Enhancing Our Water Resources:

Gross Costs - - - - - -

Less: Earned Revenue - - - - - -

Net Costs - - - - - -

Help America Promote Agricultural Production and 

Biotechnology Exports as America Works to Increase Food Security:

Gross Costs - - - - - -

Less: Earned Revenue - - - - - -

Net Costs - - - - - -

Ensure that All of America's Children Have Access

to Safe, Nutritious, and Balanced Meals:

Gross Costs - - 1,097 78,332 354 875

Less: Earned Revenue - - 2 40 3 140

Net Costs - - 1,095 78,292 351 735

Total Gross Costs 67 10,082 1,097 78,332 354 875

Less: Total Earned Revenue - 2,878 2 40 3 140

Net Cost of Operations $ 67 $ 7,204 $ 1,095 $ 78,292 $ 351 $ 735

RMA FNS FSIS
Financial Statements, Notes, Supplemental and Other Accompanying Information

169

FY 2009

Intragovernmental With the Public Intragovernmental With the Public Intragovernmental With the Public

Assist Rural Communities to Create Prosperity so They Are

Self-Sustaining, Repopulating, and Economically Thriving:

Gross Costs $ 79 $ 682 $ 49 $ 129 $ 32 $ 64

Less: Earned Revenue 1 107 4 74 - 41

Net Costs 78 575 45 55 32 23

Ensure Our National Forests and Private Working Lands Are

Conserved, Restored, and Made More Resilient to Climate Change,

While Enhancing Our Water Resources:

Gross Costs - - 20 52 - -

Less: Earned Revenue - - 1 30 - -

Net Costs - - 19 22 - -

Help America Promote Agricultural Production and 

Biotechnology Exports as America Works to Increase Food Security:

Gross Costs - - 20 52 - -

Less: Earned Revenue - - 2 30 - -

Net Costs - - 18 22 - -

Ensure that All of America's Children Have Access

to Safe, Nutritious, and Balanced Meals:

Gross Costs 61 528 298 788 - -

Less: Earned Revenue 1 83 24 450 - -

Net Costs 60 445 274 338 - -

Total Gross Costs 140 1,210 387 1,021 32 64

Less: Total Earned Revenue 2 190 31 584 - 41

Net Cost of Operations $ 138 $ 1,020 $ 356 $ 437 $ 32 $ 23

AMS APHIS GIPSA
Financial Statements, Notes, Supplemental and Other Accompanying Information

170

FY 2009

Intragovernmental With the Public Intragovernmental With the Public Intragovernmental With the Public

Assist Rural Communities to Create Prosperity so They Are

Self-Sustaining, Repopulating, and Economically Thriving:

Gross Costs $ 260 $ 1,111 $ 28 $ 126 $ 79 $ 315

Less: Earned Revenue 27 115 5 - 25 12

Net Costs 233 996 23 126 54 303

Ensure Our National Forests and Private Working Lands Are

Conserved, Restored, and Made More Resilient to Climate Change,

While Enhancing Our Water Resources:

Gross Costs 991 4,227 520 2,296 49 193

Less: Earned Revenue 101 436 90 10 16 9

Net Costs 890 3,791 430 2,286 33 184

Help America Promote Agricultural Production and 

Biotechnology Exports as America Works to Increase Food Security:

Gross Costs - - 1 4 36 142

Less: Earned Revenue - - - - 12 5

Net Costs - - 1 4 24 137

Ensure that All of America's Children Have Access

to Safe, Nutritious, and Balanced Meals:

Gross Costs - - - - 116 463

Less: Earned Revenue - - - - 36 18

Net Costs - - - - 80 445

Total Gross Costs 1,251 5,338 549 2,426 280 1,113

Less: Total Earned Revenue 128 551 95 10 89 44

Net Cost of Operations $ 1,123 $ 4,787 $ 454 $ 2,416 $ 191 $ 1,069

FS NRCS ARS
Financial Statements, Notes, Supplemental and Other Accompanying Information

171

FY 2009

Intragovernmental With the Public Intragovernmental With the Public Intragovernmental With the Public

Assist Rural Communities to Create Prosperity so They Are

Self-Sustaining, Repopulating, and Economically Thriving:

Gross Costs $ 23 $ 686 $ 15 $ 20 $ 54 $ 132

Less: Earned Revenue 28 - - - 20 3

Net Costs (5) 686 15 20 34 129

Ensure Our National Forests and Private Working Lands Are

Conserved, Restored, and Made More Resilient to Climate Change,

While Enhancing Our Water Resources:

Gross Costs 5 158 5 7 1 1

Less: Earned Revenue 6 - - - - -

Net Costs (1) 158 5 7 1 1

Help America Promote Agricultural Production and 

Biotechnology Exports as America Works to Increase Food Security:

Gross Costs 4 135 10 14 - -

Less: Earned Revenue 6 - - - - -

Net Costs (2) 135 10 14 - -

Ensure that All of America's Children Have Access

to Safe, Nutritious, and Balanced Meals:

Gross Costs 6 203 11 15 1 2

Less: Earned Revenue 8 - - - - -

Net Costs (2) 203 11 15 1 2

Total Gross Costs 38 1,182 41 56 56 135

Less: Total Earned Revenue 48 - - - 20 3

Net Cost of Operations $ (10) $ 1,182 $ 41 $ 56 $ 36 $ 132

NIFA ERS NASS
Financial Statements, Notes, Supplemental and Other Accompanying Information

172

FY 2009

Intragovernmental With the Public Intragovernmental With the Public Intragovernmental With the Public

Assist Rural Communities to Create Prosperity so They Are

Self-Sustaining, Repopulating, and Economically Thriving:

Gross Costs $ 4,069 $ 2,707 $ 204 $ 340 $ 7,028 $ 30,318

Less: Earned Revenue 471 3,320 320 3 1,209 9,137

Net Costs 3,598 (613) (116) 337 5,819 21,181

Ensure Our National Forests and Private Working Lands Are

Conserved, Restored, and Made More Resilient to Climate Change,

While Enhancing Our Water Resources:

Gross Costs - - 108 181 2,201 9,166

Less: Earned Revenue - - 169 2 408 514

Net Costs - - (61) 179 1,793 8,652

Help America Promote Agricultural Production and 

Biotechnology Exports as America Works to Increase Food Security:

Gross Costs - - 12 20 253 2,073

Less: Earned Revenue - - 18 - 273 147

Net Costs - - (6) 20 (20) 1,926

Ensure that All of America's Children Have Access

to Safe, Nutritious, and Balanced Meals:

Gross Costs - - 158 263 2,102 81,469

Less: Earned Revenue - - 247 3 321 734

Net Costs - - (89) 260 1,781 80,735

Total Gross Costs 4,069 2,707 482 804 11,584 123,026

Less: Total Earned Revenue 471 3,320 754 8 2,211 10,532

Net Cost of Operations $ 3,598 $ (613) $ (272) $ 796 $ 9,373 $ 112,494

RD DO Total
Financial Statements, Notes, Supplemental and Other Accompanying Information

173

FY 2009 Intradepartmental

Eliminations Grand Total

Assist Rural Communities to Create Prosperity so They Are

Self-Sustaining, Repopulating, and Economically Thriving:

Gross Costs $ (1,310) $ 36,036

Less: Earned Revenue (503) 9,843

Net Costs (807) 26,193

Ensure Our National Forests and Private Working Lands Are

Conserved, Restored, and Made More Resilient to Climate Change,

While Enhancing Our Water Resources:

Gross Costs (838) 10,529

Less: Earned Revenue (257) 665

Net Costs (581) 9,864

Help America Promote Agricultural Production and 

Biotechnology Exports as America Works to Increase Food Security:

Gross Costs (436) 1,890

Less: Earned Revenue (40) 380

Net Costs (396) 1,510

Ensure that All of America's Children Have Access

to Safe, Nutritious, and Balanced Meals:

Gross Costs (1,275) 82,296

Less: Earned Revenue (260) 795

Net Costs (1,015) 81,501

Total Gross Costs (3,859) 130,751

Less: Total Earned Revenue (1,060) 11,683

Net Cost of Operations $ (2,799) $ 119,068
Financial Statements, Notes, Supplemental and Other Accompanying Information

174 = 

NOTE 20. COST OF STEWARDSHIP PP&E

The acquisition cost of stewardship land in FY 2010 and FY 2009 was $449 million and $168 million, 

respectively. 

NOTE 21. APPORTIONMENT CATEGORIES OF OBLIGATIONS INCURRED

FY 2010

Direct Reimbursable Total

Apportionment by Fiscal Quarter $ 35,605 $ 2,075 $ 37,680

Apportionment for Special Activities 126,313 23,609 149,922

Exempt from Apportionment 1,065 1 1,066

Total Obligations Incurred $ 162,983 $ 25,685 $ 188,668

FY 2009

Direct Reimbursable Total

Apportionment by Fiscal Quarter $ 38,698 $ 2,310 $ 41,008

Apportionment for Special Activities 103,216 25,331 128,547

Exempt from Apportionment 952 1 953

Total Obligations Incurred $ 142,866 $ 27,642 $ 170,508

NOTE 22. AVAILABLE BORROWING AUTHORITY,END OF PERIOD

Available borrowing authority at September 30, 2010 and 2009 was $39,385 million and $32,508 

million, respectively.

NOTE 23. TERMS OF BORROWING AUTHORITY USED

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 bearing 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.

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 the Federal Credit Reform Act of 1990 as amended, 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.
Financial Statements, Notes, Supplemental and Other Accompanying Information

175 = 

USDA has authority to borrow from the Federal Financing Bank (FFB) 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 are generally secured by 

unpaid loan principal balances. CBO’s outstanding are related to pre-credit reform loans and no longer 

are used for program financing.

FFB’s 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 24. ADJUSTMENT TO BEGINNING BALANCE OF BUDGETARY RESOURCES DUE TO CHANGE IN ACCOUNTING PRINCIPLE

FCIC has permanent indefinite appropriations available to fund premium subsidy, delivery expenses, 

losses in excess of premiums and research and development costs. Beginning in FY 2010, FCIC returned 

to the U.S. Treasury all unobligated balances in its indefinite appropriation in excess of the amount 

FCIC is authorized by statue to retain which includes the capital stock, paid-in capital, and the 

contingency fund. Prior to this change, FCIC carried over its unobligated balances each year. As a result 

of this change, FCIC adjusted the unobligated balance brought forward on the Statement of Budgetary 

Resources and the unexpended appropriations beginning balance on the Statement of Changes in Net 

Position in FY 2010 for the amount that would have been returned had the change been made in FY 

2009. This reduced beginning balances by $444 million.

NOTE 25. 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, (3) certain commodity program costs 

and 4) 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. 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 commodity program costs is used to encourage the 

exportation of agricultural commodities and products, to encourage domestic consumption of 
Financial Statements, Notes, Supplemental and Other Accompanying Information

176 = 

agricultural products by diverting them, and to reestablish farmers’ purchasing power by making 

payments in connection with the normal production of any agricultural commodity for domestic 

consumption.

The permanent indefinite appropriation for FS programs is used to fund Recreation Fee Collection 

Costs, Brush Disposal, License programs, Smokey Bear and Woodsy Owl, Restoration of Forest Lands 

and Improvements, Roads and Trails for States, National Forest Fund, Timber Roads, Purchaser 

Elections, Timber Salvage Sales and Operations, and Maintenance of Quarters. Each of these permanent 

indefinite appropriations is funded by receipts made available by law, and is available until expended.

NOTE 26. 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 27. DIFFERENCES BETWEEN THE STATEMENT OF BUDGETARY RESOURCES AND THE BUDGET OF THE UNITED STATES GOVERNMENT

The differences between the FY 2009 Statement of Budgetary Resources and the FY 2009 actual 

numbers presented in the FY 2011 Budget of the United States Government (Budget) are summarized 

below. 

The budget excludes expired accounts that are no longer available for new obligations. Adjustments 

were made subsequent to the budget submission as follows:

CCC zeroed out the balance in its Export Guarantee Program, Negative Subsidies account for FACTS II 

reporting and corrected an abnormal balance in its Export Credit Guarantee Program fund. 

The Budget includes the Milk Market Orders Assessment Fund since employees of the Milk Market 

Administrators participate in the Federal retirement system, though these funds are not available for 

use by the Department.

Other items are mainly due to rounding. 

A comparison between the FY 2010 Statement of Budgetary Resources and the FY 2010 actual numbers 

presented in the FY 2012 Budget cannot be performed as the FY 2012 Budget is not yet available. The 

FY 2012 Budget is expected to be published in February 2011 and will be available from the Government 

Printing Office. 
Financial Statements, Notes, Supplemental and Other Accompanying Information

177 = 

FY 2009

Budgetary 

Resources

Obligations 

Incurred

Distributed 

Offsetting 

Receipts Net Outlays

Combined Statement of Budgetary Resources $ 208,761 $ 170,508 $ 3,574 $ 125,333

Reconciling items:

 Expired accounts (13,252) (2,634) - -

 CCC export guarantee program negative subsidies 27 27 - (91)

 Milk Market Orders Fund 54 54 - -

 Other (22) (2) - 6

Budget of the United States Government $ 195,568 $ 167,953 $ 3,574 $ 125,248

NOTE 28. UNDELIVERED ORDERS AT THE END OF THE PERIOD

Budgetary resources obligated for undelivered orders as of September 30, 2010 and 2009 was $54,799 

million and $44,332 million, respectively.

NOTE 29. INCIDENTAL CUSTODIAL COLLECTIONS

Custodial collections represent National Forest Fund receipts from the sale of timber and other forest 

products, 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.

Revenue Activity: FY 2010 FY 2009

Sources of Collections:

Miscellaneous $ 80 $ 86

Total Cash Collections 80 86

Accrual Adjustments (4) (4)

Total Custodial Revenue 76 82

Disposition of Collections:

Transferred to Others:

Treasury (69) (85)

( Increase )/Decrease in Amounts Yet to be Transferred (7) 3

Net Custodial Activity $ - $ -
Financial Statements, Notes, Supplemental and Other Accompanying Information

178 = 

NOTE 30.FIDUCIARY ACTIVITIES

Rural Housing Insurance Fund (RHIF) was established by Public Law 89-117 pursuant to section 517 of 

title V of the Housing Act of 1949, which authorized RD to collect escrow payments on behalf of new and 

existing Single Family Housing borrowers. Other fiduciary activities by RD include but are not limited 

to collections from borrowers, interest paid on escrow accounts, payments to insurance agencies and 

taxing authorities.

Rural Housing Rural Housing

Insurance Insurance

Fund Fund

2010 2009

Fiduciary net assets, beginning of year $ 97 $ 95

 Fiduciary revenues - -

 Contributions 474 433

 Investment earnings - -

 Gain (Loss) on disposition of investments, net - -

 Administrative and other expenses - -

 Disbursements to and on behalf of beneficiaries (471) (431)

Increases/(Decrease) in fiduciary net assets 3 2

Fiduciary net assets, end of year $ 100 $ 97

Schedule of Fiduciary Activity

For the Years Ended September 30, 2010 and 2009

Rural Housing Rural Housing 

Insurance Insurance

Fund Fund

2010 2009

Fiduciary Assets

 Cash and cash equivalents $ 2 $ 8

 Investments 98 $ 89

 Other assets - $ -

Fiduciary Liabilities

 Less: Liabilities - $ -

Total Fiduciary Net Assets $ 100 $ 97

Fiduciary Net Assets

As of September 30, 2010 and 2009
Financial Statements, Notes, Supplemental and Other Accompanying Information

179 = 

NOTE 31. RECONCILIATION OF BUDGETARY RESOURCES OBLIGATED TO NET COST OF OPERATIONS 

Budgetary and proprietary accounting information are inherently different because of the types of 

information and the timing of their recognition. The reconciliation of budgetary resources obligated and 

the net cost of operations provides a link between budgetary and proprietary accounting information. It 

serves not only to explain how information on net obligations relates to the net cost of operations but 

also to assure integrity between budgetary and proprietary accounting. 

Net obligations and the net cost of operations are different because (1) the net cost of operations may be 

financed by non-budgetary resources (e.g. imputed financing); (2) the budgetary and non-budgetary 

resources used may finance activities which are not components of the net cost of operations; and (3) 

the net cost of operations may contain components which do not use or generate resources in the 

current period.
Financial Statements, Notes, Supplemental and Other Accompanying Information

180 = 

2010 2009

Resources Used to Finance Activities:

Budgetary Resources Obligated -

Obligations Incurred $ 188,668 $ 170,508

Less: Spending authority from offsetting collections and recoveries 38,928 38,245

Obligations net of offsetting collections and recoveries 149,740 132,263

Less: Distributed Offsetting receipts 2,088 3,574

Net Obligations 147,652 128,689

Other Resources -

Transfers in(out) without reimbursement (90) (562)

Imputed financing from costs absorbed by others 1,090 1,033

Other (1,173) (863)

Net other resources used to finance activities (173) (392)

Total resources used to finance activities 147,479 128,297

Resources Used to Finance Items not Part of the Net Cost of Operations:

Change in undelivered orders (10,505) (6,538)

Resources that fund expenses recognized in prior periods (5,638) (4,692)

Budgetary offsetting collections and receipts that do not affect net cost of operations -

Credit program collections which increase liabilities for loan guarantees or allowances for subsidy 15,770 13,145

Change in Unfilled Customer Orders 656 286

Decrease in exchange revenue receivable from public 7,054 6,697

Other 493 2,111

Resources that finance the acquisition of assets (25,033) (26,597)

Other resources or adjustments to net obligated resources that do not affect net cost of operations 2,055 359

Total resources used to finance items not part of the net cost of operations (15,148) (15,229)

Total resources used to finance the net cost of operations 132,331 113,068

Components of the Net Cost of Operations that will not Require or Generate

Resources in the Current Period:

Components Requiring or Generating Resources in Future Periods -

Increase in annual leave liability 21 12

Increase in environmental and disposal liability - -

Upward/Downward reestimates of credit subsidy expense 1,502 1,928

Increase in exchange revenue receivable from the public - -

Other (1,154) 997

Total components of Net Cost of Operations that will require or generate

 resources in future periods 369 2,937

Components not Requiring or Generating Resources -

Depreciation and amortization 262 223

Revaluation of assets or liabilities 27 27

Other Components not Requiring or Generating Resources:

Bad Debt Expense (531) (1,226)

Cost of Goods Sold 835 2,803

Other (855) 1,236

Total components of Net Cost of Operations that will not require or generate resources (262) 3,063

Total components of Net Cost of Operations that will not require or generate

 resources in the current period 107 6,000

Net Cost of Operations $ 132,438 $ 119,068
Financial Statements, Notes, Supplemental and Other Accompanying Information

181 = 

NOTE 32. SUBSEQUENT EVENTS

A settlement agreement was signed on October 19, 2010, including $680 million in monetary relief from 

the Judgment Fund, $80 million in debt relief, and programmatic relief in connection with a class 

action filed by Native American farmers and ranchers who allege discrimination under the Equal Credit 

Opportunity Act and Title VI of the Civil Rights Act of 1964. After approximately a year of negotiations 

beginning in October 2009, parties presented the court with a settlement agreement on October 29, 

2010. The court granted preliminary approval of the agreement on November 1, 2010, and will make a 

final determination after a fairness hearing. 
Financial Statements, Notes, Supplemental and Other Accompanying Information

182 = 

Required Supplementary Stewardship Information 

STEWARDSHIP INVESTMENTS (UNAUDITED) 

FY 2010 FY 2009 FY 2008 FY 2007 FY 2006

Expense Expense Expense Expense Expense

Non-Federal Physical Property:

Food and Nutrition Service

Supplemental Nutrition Assistance Program $ 41 $ 55 $ 32 $ 20 $ 21

Special Supplemental Nutrition Program 17 15 10 15 12

National Institute of Foods and Agriculture

Extension 1890 Facilities Program 19 17 17 17 17

Total Non-Federal Property $ 77 $ 87 $ 59 $ 52 $ 50

Human Capital:

National Institute of Foods and Agriculture

Higher Education and Extension Programs $ 559 $ 547 $ 521 $ 524 $ 525

Food and Nutrition Service

Supplemental Nutrition Assistance Program 63 19 36 51 66 Agricultural Research Service

National Agricultural Library 24 23 22 22 22

Risk Management Agency

Risk Management Education 6 6 10 11 10

Total Human Capital $ 652 $ 595 $ 589 $ 608 $ 623
Financial Statements, Notes, Supplemental and Other Accompanying Information

183 = 

FY 2010 FY 2009 FY 2008 FY 2007 FY 2006

Expense Expense Expense Expense Expense

Research and Development:

Basic Research: 

Agricultural Research Service

Human Nutrition $ 45 $ 43 $ 42 $ 42 $ 41

Collaborative Research Program - 2 2 2 3

Product Quality/Value Added 56 54 51 52 51

Livestock Production 44 43 42 42 41

Crop Production 119 102 99 99 97

Food Safety 53 53 51 51 50

Livestock Protection 45 42 40 41 43

Crop Protection 103 100 96 97 96

Environmental Stewardship 103 112 109 110 107

National Institute of Foods and Agriculture

Land-grant University System 283 256 245 245 245

Forest Service 94 87 82 60 76

Economic Research Service

Economic and Social Science 8 8 8 7 7

National Agricultural Statistics Service

Statistical 3 3 3 3 2

Total Basic Research $ 956 $ 905 $ 870 $ 851 $ 859

Applied Research: 

Agricultural Research Service

Human Nutrition $ 35 $ 34 $ 35 $ 35 $ 36

Collaborative Research Program - 1 2 1 4

Product Quality/Value Added 44 43 43 43 45

Livestock Production 35 34 35 35 36

Crop Production 96 82 82 83 84

Food Safety 43 42 43 43 44

Livestock Protection 36 33 34 34 38

Crop Protection 82 81 80 81 83

Environmental Stewardship 83 90 92 92 94

National Institute of Foods and Agriculture

Land-grant University System 461 435 418 416 416

Forest Service 227 220 207 154 166

Economic Research Service

Economic and Social Science 74 71 69 68 68

National Agricultural Statistics Service

Statistical 4 5 5 3 3

Total Applied Research 1,220$ 1,171$ $ 1,145 $ 1,088 $ 1,117

Development: 

Agricultural Research Service

Human Nutrition $ 9 $ 8 $ 8 $ 9 $ 8

Product Quality/Value Added 11 11 11 11 11

Livestock Production 9 9 8 8 8

Crop Production 24 20 20 20 20

Food Safety 11 11 10 11 11

Livestock Protection 9 8 8 8 9

Crop Protection 20 20 20 20 20

Environmental Stewardship 21 23 22 22 22

Forest Service 17 16 15 47 76

Total Development $ 131 $ 126 $ 122 $ 156 $ 185

Total Research and Development 2,307$ 2,202$ $ 2,137 $ 2,095 $ 2,161
Financial Statements, Notes, Supplemental and Other Accompanying Information

184 = 

Non-Federal Physical Property

Food and Nutrition Service

FNS’ non-Federal physical property consists of computer systems and other equipment obtained by 

State and local governments for the purpose of administering the Supplemental Nutrition Assistance 

Program (SNAP). The total SNAP expense for ADP Equipment & Systems has been reported as of the 

date of FNS’ financial statements. FNS’ non-Federal physical property also consists of computer 

systems and other equipment obtained by the State and local governments for the purpose of 

administering the Special Supplemental Nutrition Program for Women, Infants and Children.

National Institute of Food and Agriculture 

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.

Human Capital

National Institute of Food and Agriculture 

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, an Alaska Native Serving and Native Hawaiian Serving institutions program, a 

resident instruction grant program for insular areas, and a capacity building program at the 1890 

institutions. 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. NIFA also supports extension-related work at 1862 and 1890 land-grant 

institutions throughout the country through formula and competitive programs. NIFA supported the 

Outreach and Assistance for Disadvantaged Farmers Program for the first time in fiscal 2003. The 

purpose is to enhance the ability of minority and small farmers and ranchers to operate farming or 

ranching enterprises independently to assure adequate income and maintain reasonable lifestyles.

Food and Nutrition Service

FNS’ human capital consists of employment and training (E&T) for the SNAP. The E&T program 

requires recipients of SNAP benefits to participate in an employment and training program as a 

condition to SNAP 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 812,318 work registrants subject to the 3-month SNAP participant limit and 

1,503,052 work registrants not subject to the limit in either job search, job training, job workfare, 

education, or work experience. 

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. NAL 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.

NAL was created as the departmental library for USDA in 1862 and became a national library in 1962. 

One of four national libraries of the U.S. (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, NAL serves as the U.S. center for the 
Financial Statements, Notes, Supplemental and Other Accompanying Information

185 = 

international agricultural information system, coordinating and sharing resources and enhancing global 

access to agricultural data. NAL collection of more than 50 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 Federal Agricultural Improvement and Reform Act of 1996, the FCIC has formed new partnerships 

with the NIFA, 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 since 2003 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.

During fiscal years 2010 and 2009, the RME worked toward the goals by funding risk management 

sessions, most of which targeted producers directly. The number of producers reached through these 

sessions is approximately 47,100 and 20,000 in fiscal years 2010 and 2009, respectively. Additionally, 

some training sessions helped those who work with producers, such as lenders, agricultural educators, 

and crop insurance agents, better understand those areas of risk management with which they may be 

unfamiliar. Total RME obligations incurred by the FCIC were approximately $6 million for fiscal years 

2010 and 2009. The following table summarizes the RME initiatives since fiscal year 2006:

(dollars in millions) 2010 2009 2008 2007 2006

RME Obligations $ 6 6 10 11 10

Number of producers attending RME sessions 47,100 20,000 49,000 49,000 48,000

One of the directives of the Agricultural Risk Protection Act (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

The Agricultural Research Service (ARS) mission is to conduct research to develop and transfer 

solutions to agricultural problems of high national priority and provide information access and 

dissemination to: ensure high quality, safe food, and other agricultural products; assess the nutritional 

needs of Americans; sustain a competitive agricultural economy; enhance the natural resource base and 

the environment; and provide economic opportunities for rural citizens, communities, and society as a 

whole. ARS’ programs are aligned under the Department’s priorities as follows:
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USDA Strategic Goal 1: Assist Rural Communities to Create Prosperity So They Are Self-Sustaining, Repopulating, 

and Economically Thriving

Product Quality/Value Added – Many agricultural products are marketed as low value commodities and 

harvested commodities often suffer losses due to spoilage or damage during shipping, storage, and 

handling. Healthy foods are often not convenient and/or are not widely accepted by many consumers.

Biobased product represent small fraction of the market for industrial products and their performance 

is often uncertain. Biofuels and some biobased products are not yet economically competitive with 

petroleum-based products.

ARS has active research programs directed toward: 1) improving the efficiency and reducing the cost for 

the conversion of agricultural products into biobased products and biofuels; 2) developing new and 

improved products to help establish them in domestic and foreign markets; and 3) providing higher 

quality, healthy foods that satisfy consumer needs in the United States and abroad. Note: Some of ARS’ 

Livestock and Crop Production research is carried out under this Strategic Goal and Strategic Goal 3.

National Agricultural Library — The Library, the world’s largest library serving agriculture, delivered more than 

91 million direct customer service transactions in FY 2010, a reduction of about 2 percent from the FY 

2009 level due to a change in the way Web usage metrics are recorded. NAL no longer reports total 

“hits” but rather total unique visitors, page views, and searches. 

Buildings and Facilities —ARS has more than 100 laboratories, primarily located throughout the United States.

ARS’ facilities programs are designed to meet the needs of its scientists and support personnel to 

accomplish the agency’s mission. 

USDA Strategic Goal 2: Ensure Our National Forests and Private Working Lands Are Conserved, Restored, 

and Made More Resilient to Climate Change, While Enhancing Our Water Resources

Environmental Stewardship — ARS’ research programs in environmental stewardship support scientists at 70

locations. Emphasis is given to developing technologies and systems that support profitable production 

and enhance the Nation’s vast renewable natural resource base.

ARS is currently developing the scientific knowledge and technologies needed to meet the challenges 

and opportunities facing U.S. agriculture in managing water resource quality and quantity under 

different climatic regimes, production systems, and environmental conditions. ARS’ air resources 

research is developing measurements, prediction, and control technologies for emissions of greenhouse 

gases, particulate matter, ammonia, hydrogen sulfide, and volatile organic compounds affecting air 

quality and land-surface climate interactions. The agency is a leader in developing measurement and 

modeling techniques for enhancing the health and productivity of soils, including developing predictive 

tools to assess the sustainability of alternative land management practices. Finding mechanisms to aid 

agriculture in adapting to changes in atmospheric composition and climatic variations are also 

important components of ARS’ research program.

ARS’ grazing and range land research includes the conservation and restoration of the Nation’s range 

land and pasture ecosystems and agroecosystems through improved management of fire, invasive 

weeds, grazing, global change, and other agents of ecological change. ARS is currently developing 

improved grass and forage legume germplasm for livestock, conservation, bioenergy, and bioproduct 

systems as well as grazing-based livestock systems that reduce risk and increase profitability. In 

addition, the agency is developing whole system of management strategies to reduce production costs 

and risks.
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USDA Strategic Goal 3: Help America Agricultural Production and Biotechnology Exports As America Works to 

Increase Food Security

Livestock Production — ARS’ livestock production program is directed toward: 1) safeguarding and utilizing 

animal genetic resources, associated genetic and genomic databases, and bioinformatics tools; 2) 

developing a basic understanding of the physiology of livestock and poultry; and 3) developing 

information, tools, and technologies that can be used to improve animal production systems. The 

research is heavily focused on the development and application of genomics technologies to increase the 

efficiency and product quality of beef, dairy, swine, poultry, aquaculture, and sheep systems.

Current areas of emphasis include increasing efficiency of nutrient utilization; increasing animal well

being and reducing stress in production systems; increasing reproductive rates and breeding animal 

longevity; developing and evaluating non-traditional production systems (e.g., organic, natural); and 

evaluating and conserving animal genetic resources.

Crop Production — ARS’ crop production program focuses on developing and improving ways to reduce crop 

losses while protecting and ensuring a safe and affordable food supply. The research program 

concentrates on effective production strategies that are environmentally friendly, safe to consumers, 

and compatible with sustainable and profitable crop production systems. Research activities are 

directed at safeguarding and utilizing plant genetic resources and their associated genetic, genomic, and 

bioinformatics databases that facilitate selection of varieties and/or germplasm with significantly 

improved traits.

Current research activities attempt to minimize the impacts of crop pests while maintaining healthy 

crops and safe commodities that can be sold in markets throughout the world. ARS is conducting 

research to discover and exploit naturally occurring and engineered genetic mechanisms for plant pest 

control; develop agronomic germplasm with durable defensive traits, and transfer genetic resources for 

commercial use. ARS is also providing taxonomic information on invasive species that strengthen 

prevention techniques, aid in detection/identification of invasives, and increase control through 

management tactics which restore habitats and biological diversity.

USDA Strategic Goal 4: Ensure that All of America’s Children Have Access to Safe, Nutritious, and 

Balanced Meals

Food Safety — Assuring that the United States has the highest levels of affordable, safe food requires that 

the food system be protected at each stage from production through processing and consumption from 

pathogens, toxins, and chemical contaminants that cause diseases in humans. The U.S. food supply is 

very diverse, extensive, easily accessible, and thus vulnerable to the introduction of biological and 

chemical contaminants through natural processes, intentional means, or by global commerce.

ARS’ current food safety research is designed to yield science-based knowledge on the safe production, 

storage, processing, and handling of plant and animal products, and on the detection and control of 

toxin producing and/or pathogenic bacteria and fungi, parasites, chemical contaminants, and plant 

toxins. ARS’ research activities involve a high degree of cooperation and collaboration both within the 

USDA-REE agencies as well as with USDA’s Food Safety and Inspection Service and the Animal and 

Plant Health Inspection Service, and with other entities, including the Food and Drug Administration, 

the Centers for Disease Control, the Department of Homeland Security, and the Environmental 

Protection Agency. ARS also collaborates in international research programs to address and resolve 

global food safety issues.
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Specific research efforts are directed toward developing new technologies that assist ARS stakeholders 

and customers, that is, regulatory agencies, industry, and commodity and consumer organizations in 

detecting, identifying, and controlling foodborne diseases that affect human health.

Livestock Protection — ARS’ animal health program is directed at protecting and ensuring the safety of the 

Nation’s agriculture and food supply through improved disease detection, prevention, control, and 

treatment. Basic and applied research approaches are used to solve animal health problems of high 

national priority. Emphasis is given to methods and procedures to control animal diseases.

The research program has 10 strategic objectives: 1) establish ARS’ laboratories into a fluid, highly 

effective research network to maximize use of core competencies and resources; 2) access specialized 

high containment facilities to study zoonotic and emerging diseases; 3) develop an integrated animal 

and microbial genomics research program; 4) establish centers of excellence in animal immunology; 5) 

launch a biotherapeutic discovery program providing alternatives to animal drugs; 6) build a 

technology driven vaccine and diagnostic discovery research program; 7) develop core competencies in 

field epidemiology and predictive biology; 8) develop internationally recognized expert collaborative 

research laboratories; 9) establish a best in class training center for our Nation’s veterinarians and 

scientists; and 10) develop a model technology transfer program to achieve the full impact of ARS’ 

research discoveries.

ARS’ current animal research program includes eight core components: 1) biodefense research, 2) 

animal genomics and immunology, 3) zoonotic diseases, 4) respiratory diseases, 5) reproductive and 

neonatal diseases, 6) enteric diseases, 7) parasitic diseases, and 8) transmissible spongiform 

encephalopathies.

Crop Protection – ARS research on crop protection is directed toward epidemiological investigations to 

understand pest and disease transmission mechanisms, and to identify and apply new technologies that 

increase our understanding of virulence factors and host defense mechanisms.

Currently, ARS’ research priorities include: 1) identification of genes that convey virulence traits in 

pathogens and pests; 2) factors that modulate infectivity, gene functions, and mechanisms; 3) genetic 

profiles that provide specified levels of disease and insect resistance under field conditions, and 4) 

mechanisms that facilitate the spread of pests and infectious diseases.

ARS is developing new knowledge and integrated pest management approaches to control pest and 

disease outbreaks as they occur. Its research will improve the knowledge and understanding of the 

ecology, physiology, epidemiology, and molecular biology of emerging diseases and pests. This 

knowledge will be incorporated into pest risk assessments and management strategies to minimize 

chemical inputs and increase production. Strategies and approaches will be available to producers to 

control emerging crop diseases and pest outbreaks.

Human Nutrition – Maintenance of health throughout the lifespan along with prevention of obesity and 

chronic diseases via food-based recommendations are the major emphasis of ARS’ human nutrition 

research program. These health-related goals are based on the knowledge that deficiency diseases are 

no longer the most important public health concerns. Excessive consumption has become the primary 

nutrition problem in the American population. This is reflected by increased emphasis on prevention of 

obesity from basic science through intervention studies to assessments of large populations. ARS’ 

research programs also actively study bioactive components of foods that have no known requirement 

but have health promotion activities.

Four specific areas of research are currently emphasized: 1) nutrition monitoring and the food supply, 

e.g., a national diet survey and the food composition databank; 2) dietary guidance for health 
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promotion and disease prevention, i.e., specific foods, nutrients, and dietary patterns that maintain 

health and prevent diseases; 3) prevention of obesity and related diseases, including research as to why 

so few of the population do not follow the Dietary Guidelines for Americans; and 4) life stage nutrition 

and metabolism, in order to better define the role of nutrition in pregnancy, growth of children, and for 

healthier aging. 

National Institute of Food and Agriculture

NIFA 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. NIFA administers grants and formula payments to State institutions to supplement State and 

local funding for agriculture research.

Forest Service

Forest Service R&D has an integrated portfolio that supports achievement of the agency’s strategic goals 

with an emphasis in seven strategic program areas: 

Wildland Fire and Fuels - R&D provides managers the knowledge and tools to reduce the negative 

impacts of fire and enhance the beneficial effects of fire, as a natural process, and the human process of 

fire and fuels management on society and the environment. 

Research focuses on understanding and modeling fundamental fire processes; interactions of fire with 

ecosystems and the environment; social and economic aspects of fire; evaluation of integrated 

management strategies and disturbance interactions at multiple scales; and application of fire research 

to address management problems.

Invasive Species — R&D provides the scientific information, methods, and technology to reduce or 

eliminate the introduction, spread, and impact of invasive species, and to restore or improve the 

functionality of ecosystems affected by invasives species. 

Research focuses on plants, animals, fish, insects, diseases, invertebrates, and other species not native 

to an ecosystem whose introduction is likely to cause economic or environmental harm. 

Water, Air, and Soil — R&D enables the sustainable management of these essential resources by providing 

clear air and safe drinking water, by protecting lives and property from wildlife fire and smoke, and 

through adapting to climate variability and change. 

The program features ecosystem services with a high level of integration between water, air, and soil 

research, such as the effects of climate variability and change on water budgets or carbon sequestration 

from an ecosystem perspective.

Wildlife and Fish — R&D relies upon interdisciplinary research to inform policy initiatives affecting wildlife 

and fish habitat on private and public lands, and the recovery of threatened or endangered species. 

Scientists investigate the complex interactions among species, ecosystem dynamics and processes, land 

use and management, and any emerging broadscale threats, including global climate change, loss of 

open space, invasive species, and disease. 

Resource Management and Use — R&D provides the scientific and technology base to sustainably manage 

and use forest resources and forest fiber-based products. 

Research focuses on the plant sciences, soil sciences, social sciences, silviculture, productivity, forest 

and range ecology management, harvesting and operations, forest and biomass products and 

utilization, economics, urban forestry, and climate change. 
Financial Statements, Notes, Supplemental and Other Accompanying Information

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Outdoor Recreation — R&D promotes human and ecological sustainability by researching environmental 

management, activities, and experiences that connect people with the natural world. 

Research in Outdoor Recreation is interdisciplinary, focusing on nature-based recreation and the 

changing trends in American society; connections between recreation visitors, communities, and the 

environment; human benefits and consequences of recreation and nature contact; the effectiveness of 

recreation management and decision-making; and sustaining ecosystems affected by recreational use.

Inventory and Monitoring — R&D provides the resource data, analysis, and tools needed to monitor forest 

ecosystems at greatest risk from rapid change due to threats from fire, insects, disease, natural 

processes, or management actions. From their research, scientists determine the status and trend of the 

health of the Nation’s forests and grasslands, and the potential impact from climate change.

Their research integrates the development and use of science, technology, and remotely sensed data to 

better understand the incidences of forest fragmentation over time from changes in land use or from 

insects, disease, fire, and extreme weather events.

A representative summary of FY 2010 accomplishments include:

• 38 new interagency agreements and contracts; 

• 12 interagency agreements and contracts continued; 

• 1,790 articles published in journals; 

• 1,481 articles published in all other publications; and

• 2 patents granted. 

Economic Research Service

The 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 

National Agricultural Statistics Service 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, 

products for data users are being improved using technologies such as remote sensing and geographic 

information systems. Continued service to users will be increasingly dependent upon methodological 

and technological efficiencies.
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Required Supplementary Information

DEFERRED MAINTENANCE (UNAUDITED) 

Deferred maintenance is maintenance that was scheduled to be performed but was delayed until a 

future period. Deferred maintenance represents a cost that the Federal Government has elected not to 

fund and, therefore, the costs are not reflected in the financial statements.

Maintenance is defined to include preventive 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. Maintenance 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.
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Forest Service

FY 2010 Cost to Return to 

Acceptable Condition

Cost of Critical 

Maintenance

Cost of Non-critical 

Maintenance

Asset Class

Bridges $ 172 $ 34 $ 138

Buildings 1,038 125 913

Dam 24 6 18

Minor Constructed Features 115 - 115

Fence 297 297 -

Handling Facility 22 22 -

Heritage 26 8 18

Road 3,108 311 2,797

Trail Bridge 11 4 7

Wastewater 37 23 14

Water 117 66 51

Wildlife, Fish, TES 7 5 2

Trails 296 7 289

General Forest Area - - -

Total Forest Service $ 5,270 $ 908 $ 4,362

FY 2009 Cost to Return to 

Acceptable Condition

Cost of Critical 

Maintenance

Cost of Non-critical 

Maintenance

Asset Class

Bridges $ 156 $ 29 $ 127

Buildings 1,023 144 879

Dam 29 10 19

Minor Constructed Features 107 - 107

Fence 298 298 -

Handling Facility 22 22 -

Heritage 25 9 16

Road 3,178 318 2,860

Trail Bridge 11 4 7

Wastewater 40 24 16

Water 118 67 51

Wildlife, Fish, TES 6 4 2

Trails 294 5 289

General Forest Area - - -

Total Forest Service $ 5,307 $ 934 $ 4,373

Deferred maintenance is reported for general Property, Plant, and Equipment (PP&E), heritage assets, 

and stewardship land. It is also reported separately for critical and noncritical amounts of maintenance 

needed to return each class of asset to its acceptable operating condition. Critical maintenance is 

defined as a serious threat to public health or safety, a natural resource, or the ability to carry out the 

mission of the organization. Noncritical maintenance is defined as a potential risk to the public or 

employee safety or health (e.g., compliance with codes, standards, or regulations) and potential adverse 

consequences to natural resources or mission accomplishment. 
Financial Statements, Notes, Supplemental and Other Accompanying Information

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The Forest Service began reporting deferred maintenance in 2000. Estimates of deferred maintenance 

for all major classes of PP&E, heritage assets, and stewardship assets are based on condition surveys. 

The agency has completed two rounds of condition surveys providing a comprehensive national 

assessment of Forest Service property. 

For roads, deferred maintenance is determined from surveys of an annual random sample of a 

sufficient number of roads to achieve estimates of 95-percent accuracy and 95-percent confidence.

Validation of this process is ongoing. 

Deferred maintenance needs for all other asset groups are determined from surveys of all individual 

assets on a revolving schedule where the interval between visits does not exceed 5 years.

No deferred maintenance exists for fleet vehicles as they are managed through the agency’s working 

capital fund (WCF). Each fleet vehicle is maintained according to schedule. The cost of maintaining the 

remaining classes of equipment is expensed.

The overall condition of major asset classes range from poor to good depending on the location, age, 

and type of property. The standards for acceptable operating condition for various classes of general 

PP&E, stewardship, and heritage assets are as follows.

Conditions of roads and bridges within the National Forest System (NFS) road system are measured by 

various standards: 

• Federal Highway Administration regulations for the Federal Highway Safety Act; 

• Best management practices for the nonpoint source provisions of the Clean Water Act from 

Environmental Protection Agency and States; 

• Road management objectives developed through the National Forest Management Act forest 

planning process; and

• Forest Service Directives—Forest Service Manual (FSM) 7730, Operation and Maintenance (August 25, 

2005, amendment was superseded with October 1, 2008, revision); Forest Service Handbook (FSH) 

7709.56a, Road Preconstruction, and FSH 7709.56b, Transportation Structures Handbook. 

Dams shall be managed according to FSM 7500, Water Storage and Transmission, and FSH 7509.11, 

Dams Management Handbook. The condition of a dam is acceptable when the dam meets current 

design standards and does not have any deficiencies that threaten the safety of the structure or public. 

For dams to be rated in acceptable condition, the agency needs to restore the dams to the original 

functional purpose, correct unsightly conditions, or prevent more costly repairs.

Buildings shall 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.

These requirements are found in FSM 7310, Buildings and Related Facilities, revised November 19, 

2004. The condition of administrative facilities ranges from poor to good, with approximately 35

percent needing major repairs or renovations; approximately 14 percent in fair condition; and 51

percent of the facilities in good condition. 

The agency is currently developing an integrated strategy to realign our administrative facility 

infrastructure to meet current organizational structure and to reduce the maintenance liability for 

unneeded buildings, free up land for use by local communities and private enterprise, and provide 

added funds for infrastructure maintenance and development. Forest Service anticipates maximum 

benefits from a combination of appropriations, facility conveyance receipts, and decommissioning of 

unneeded facilities. 
Financial Statements, Notes, Supplemental and Other Accompanying Information

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Recreation facilities include developed recreation sites, general forest areas, campgrounds, trailheads, 

trails, water and wastewater systems, interpretive facilities, and visitor centers. These components are 

included in several asset classes of the deferred maintenance exhibit. All developed sites are managed in 

accordance with Federal laws and regulations (Code of Federal Regulations (CFR) 36). 

Detailed management guidelines are contained in FSM 2330, Publicly Managed Recreation 

Opportunities, and forest- and regional-level user guides. Quality standards for developed recreation 

sites were established as meaningful measures for health and cleanliness, settings, safety and security, 

responsiveness, and the condition of the facility. 

The condition assessment for range structures (fences and stock handling facilities) is based on (1) a 

determination by knowledgeable range specialists or other district personnel of whether 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-standing range methodology is used to gather this 

data. 

Heritage 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 in the agency is as visitation or recreation 

sites and, therefore, may not fall under the management responsibility of the heritage program. 

Trails and trail bridges are managed according to Federal law and regulations (CFR 36). More specific 

direction is contained in FSM 2350, Trail, River, and Similar Recreation Opportunities, and the FSH 

2309.18, Trails Management Handbook. 

Deferred maintenance of structures for wildlife, fish, and threatened and endangered species is 

determined by field biologists using their professional judgment. The deferred maintenance is 

considered critical if resource damage or species endangerment would likely occur if maintenance were 

deferred much longer. 

Condition of Heritage Assets and Stewardship Lands

The Statement of Federal Financial Accounting Standard No. 29, Heritage Assets and Stewardship 

Lands, reclassified information on heritage and stewardship land assets from “supplementary” to 

“basic.” This change moves the acquisitions and withdrawals of these assets to the financial notes, 

accompanying the financial statements. The condition information for these assets remains 

supplementary. 

Heritage Assets

Heritage professionals are responsible for documenting and maintaining cultural resource condition 

assessments to standard. Periodic monitoring and condition assessments are the basis for applying 

protective measures and treatments to vulnerable, deteriorating, or threatened cultural resources. The 

condition of heritage assets depends on the type of asset and varies from poor to fair.

Stewardship Land

The condition of NFS lands varies by purpose and location. The Forest Service monitors the condition 

of its stewardship lands based on information compiled by two national inventory and monitoring 

programs—Forest Inventory and Analysis (FIA) and Forest Health Monitoring (FHM). 

Although most of the estimated 193 million acres of stewardship lands continue to produce valuable 

benefits – clean air and water, habitat for wildlife, and products for human use – significant portions 

are at risk to pest outbreaks or catastrophic fires. 
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There are 25 million acres of NFS forest lands at risk to future mortality from insects and diseases, 

based on the 2006 publication of Mapping Risk from Forest Insects and Diseases. Invasive species of 

insects, diseases, and plants continue to affect our native ecosystems by causing mortality to, or 

displacement of, native vegetation. 

The projected accomplishments on NFS lands include treatment of 198,478 acres for invasives and 

33,043 acres for native pests. These numbers should be considered preliminary, with final amounts of 

acres treated for invasives and native pests on NFS lands available at www.fs.fed.us in February 2011. 

Agricultural Research Service

FY 2010 FY 2009

Asset Class

Buildings $ 251 $ 258

Structures 21 19

Heritage 94 89

Total Agricultural Research Service $ 366 $ 366

Deferred Maintenance (DM) includes work needed to meet laws, regulations, codes and other legal 

direction as long as the original intent or purpose of the fixed asset is not changed. Also includes work 

performed to bring an asset up to present environmental standards or correction of safety problems.

Critical DM is DM that is identified for critical systems including HVAC, electrical, roofing, and 

plumbing tasks. Non-critical DM is all other systems. DM is reported for buildings, structures and 

heritage assets.

Executive Order (EO) 13327 requires all Federal agencies to assess the condition of their facilities and 

plan for their full life cycle management. The Condition Index (CI) is a general measure of the 

constructed asset’s condition at a specific point in time. It is calculated as the ration of repair needs, or 

DM, to plant replacement value (PRV). PRV can be calculated systematically and without much effort.

The condition of the constructed asset is a more difficult figure to determine. A repair need is the 

amount necessary to ensure a constructed asset is restored to a condition substantially equivalent to the 

originally intended and designed capacity, efficiency or capability. Ideally, with enough money and 

time, repair needs would be determined for each asset by inspection, evaluation of the repairs required, 

and consistent estimating of the repairs throughout ARS. ARS does not have available manpower in

house to complete this type of inspection and estimating, nor the funding to contract. ARS looked at 

approaches to model ARS assets and evaluate the results for management purposes. 

Whitestone Research is a company that estimates DM based on the age of the facility, geographic 

location, typical major components and size of the structure. Whitestone first inspected a sample of 

representative buildings from 36 ARS sites (roughly 55 percent of the total inventory) and used 

parametric models to estimate DM and PRV. These results were generalized to the entire population of 

ARS facilities. Assuming a PRV of $3.8 billion, the CI ratio (1 - $DM/PRV) is 92 percent, an outcome 

commonly classified as “adequate.” 
Financial Statements, Notes, Supplemental and Other Accompanying Information

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STATEMENT OF BUDGETARY RESOURCES (UNAUDITED) 

FY 2010 FSA CCC FAS RMA FNS FSIS AMS APHIS

Non-Budgetary Non-Budgetary

Financing Financing

Budgetary Accounts Budgetary Accounts Budgetary Budgetary Budgetary Budgetary Budgetary Budgetary

Budgetary Resources:

Unobligated balance, brought forward, October 1 (Note 24) $ 2,692 $ 1,726 $ 2,020 $ 971 $ 368 $ 557 $ 15,471 $ 32 $ 497 $ 299

Recoveries of prior year unpaid obligations 71 97 1,332 34 24 3 990 132 18 128

Budget Authority:

Appropriation 4,274 - 18,014 - 391 6,979 87,130 1,028 8,316 1,443

Borrowing Authority - 3,034 39,063 1,199 - - - - - -

Earned -

Collected 660 2,389 11,294 500 48 2,449 129 141 57 143

Change in receivables from Federal Sources (1) - 14 1 21 - - 19 - (4)

Change in unfilled customer orders -

Advances received - - 382 - 1 - - - - -

Without advance from Federal Sources 4 (16) - (19) 135 - - 9 - -

Expenditure transfers from trust funds - - 937 - - - - - - -

Nonexpenditure transfers, net, anticipated and actual - - (3,618) - 143 1 7,039 - (7,068) (200)

Temporarily not available pursuant to Public Law - - - - - - - - (122) -

Permanently not available (469) (1,309) (41,586) (348) (82) (2,353) (313) (2) (134) (2)

Total Budgetary Resources 7,231 5,921 27,852 2,338 1,049 7,636 110,446 1,359 1,564 1,807

Status of Budgetary Resources:

Obligations Incurred:

Direct 5,383 2,676 3,127 1,228 345 7,073 95,816 1,168 1,396 1,379

Reimbursable 421 - 22,438 - 120 - 51 141 53 140

Unobligated Balance:

Apportioned 460 822 305 861 176 559 3,774 46 100 268

Exempt from Apportionment 204 - 1,188 5 - - - - - -

Unobligated balance not available 763 2,423 794 244 408 4 10,805 4 15 20

Total Status of Budgetary Resources 7,231 5,921 27,852 2,338 1,049 7,636 110,446 1,359 1,564 1,807

Change in Obligated Balances:

Obligated balance, net, brought forward October 1 594 479 9,308 (18) 71 392 5,347 169 168 360

Obligations incurred 5,804 2,676 25,565 1,228 465 7,073 95,867 1,309 1,449 1,519

Gross outlays (5,294) (2,552) (23,881) (1,115) (446) (7,233) (93,951) (1,169) (1,420) (1,341)

Recoveries of prior year unpaid obligations, actual (71) (97) (1,332) (34) (24) (3) (990) (132) (18) (128)

Change in uncollected payments from Federal Sources (3) 15 (14) 19 (156) - - (28) - 4

Obligated balance, net, end of period -

Unpaid obligations 1,046 541 9,895 238 182 230 6,272 194 181 438

Uncollected customer payments from Federal Sources (15) (19) (247) (158) (271) - - (44) (2) (23)

Obligated balance, net, end of period 1,031 522 9,648 80 (89) 230 6,272 150 179 415

Net Outlays:

Gross outlays 5,294 2,552 23,881 1,115 446 7,233 93,951 1,169 1,420 1,341

Offsetting collections (660) (2,389) (12,613) (501) (49) (2,449) (129) (141) (57) (143)

Distributed offsetting receipts (213) - - (576) - - - (10) (154) (19)

Net Outlays $ 4,421 $ 163 $ 11,268 $ 38 $ 397 $ 4,784 $ 93,822 $ 1,018 $ 1,209 $ 1,179
Financial Statements, Notes, Supplemental and Other Accompanying Information

197 = 

FY 2010 GIPSA FS NRCS ARS NIFA ERS NASS RD DO TOTAL

Non-Budgetary Non-Budgetary

Financing Financing

Budgetary Budgetary Budgetary Budgetary Budgetary Budgetary Budgetary Budgetary Accounts Budgetary Budgetary Accounts

Budgetary Resources:

Unobligated balance, brought forward, October 1 (Note 24) $ 13 $ 2,747 $ 1,768 $ 423 $ 204 $ 6 $ 7 $ 5,910 $ 1,992 $ 106 $ 33,120 $ 4,689

Recoveries of prior year unpaid obligations 5 40 384 20 318 - 1 233 975 22 3,721 1,106

Budget Authority:

Appropriation 42 6,094 1,010 1,264 1,386 83 162 6,453 - 632 144,701 -

Borrowing Authority - - - - - - - - 17,619 - 39,063 21,852

Earned -

Collected 49 495 113 75 15 1 18 4,886 8,099 712 21,285 10,988

Change in receivables from Federal Sources 1 (50) 1 (22) 7 - 19 4 - 180 189 1

Change in unfilled customer orders -

Advances received - 8 (3) 2 23 - 3 - - 10 426 -

Without advance from Federal Sources - 8 46 74 (32) 4 8 (2) 1 55 309 (34)

Expenditure transfers from trust funds - - - - - - - - - - 937 -

Nonexpenditure transfers, net, anticipated and actual - (1) 2,940 2 123 - - 356 - 30 (253) -

Temporarily not available pursuant to Public Law - - - - (12) - - - - - (134) -

Permanently not available (1) - - (2) (5) (1) - (5,381) (4,589) (4) (50,335) (6,246)

Total Budgetary Resources 109 9,341 6,259 1,836 2,027 93 218 12,459 24,097 1,743 193,029 32,356

Status of Budgetary Resources:

Obligations Incurred:

Direct 46 6,571 4,414 1,394 1,754 83 161 8,209 20,155 605 138,924 24,059

Reimbursable 46 409 156 120 (2) 5 28 620 - 939 25,685 -

Unobligated Balance:

Apportioned 16 1,362 403 289 232 1 20 2,225 2,550 113 10,349 4,233

Exempt from Apportionment - - - - - - - - - - 1,392 5

Unobligated balance not available 1 999 1,286 33 43 4 9 1,405 1,392 86 16,679 4,059

Total Status of Budgetary Resources 109 9,341 6,259 1,836 2,027 93 218 12,459 24,097 1,743 193,029 32,356

Change in Obligated Balances:

Obligated balance, net, brought forward October 1 6 2,290 3,225 342 1,630 26 22 5,516 22,837 138 29,604 23,298

Obligations incurred 92 6,980 4,570 1,514 1,752 88 189 8,829 20,155 1,544 164,609 24,059

Gross outlays (87) (6,509) (3,265) (1,353) (1,185) (69) (180) (5,474) (13,507) (1,328) (154,185) (17,174)

Recoveries of prior year unpaid obligations, actual (5) (40) (384) (20) (318) - (1) (233) (975) (22) (3,721) (1,106)

Change in uncollected payments from Federal Sources (1) 42 (47) (51) 25 (4) (27) (2) (1) (236) (498) 33

Obligated balance, net, end of period -

Unpaid obligations 10 3,072 4,242 574 1,965 46 33 8,649 29,414 511 37,540 30,193

Uncollected customer payments from Federal Sources (6) (310) (144) (142) (62) (5) (30) (14) (905) (415) (1,730) (1,082)

Obligated balance, net, end of period 4 2,762 4,098 432 1,903 41 3 8,635 28,509 96 35,810 29,111

Net Outlays:

Gross outlays 87 6,509 3,265 1,353 1,185 69 180 5,474 13,507 1,328 154,185 17,174

Offsetting collections (49) (503) (110) (77) (38) (1) (21) (4,886) (8,099) (722) (22,648) (10,989)

Distributed offsetting receipts - (429) 1 (13) (4) - - (661) - (10) (1,512) (576)

Net Outlays $ 38 $ 5,577 $ 3,156 $ 1,263 $ 1,143 $ 68 $ 159 $ (73) $ 5,408 $ 596 130,025$ $ 5,609
Financial Statements, Notes, Supplemental and Other Accompanying Information

198 = 

FY 2009 FSA CCC FAS RMA FNS FSIS AMS APHIS

Non-Budgetary Non-Budgetary

Financing Financing

Budgetary Accounts Budgetary Accounts Budgetary Budgetary Budgetary Budgetary Budgetary Budgetary

Budgetary Resources:

Unobligated balance, brought forward, October 1: $ 2,215 $ 869 $ 2,098 $ 2,516 $ 382 $ 2,057 $ 14,258 $ 29 $ 433 $ 368

Recoveries of prior year unpaid obligations 55 72 181 10 170 4 507 1,441 15 168

Budget Authority:

Appropriation 2,733 - 15,444 - 331 6,843 75,647 982 8,227 1,394

Borrowing Authority - 2,937 28,870 340 - - - - - -

Earned -

Collected 728 1,628 11,722 553 102 4,211 84 146 58 105

Change in receivables from Federal Sources (3) - (89) - 42 - - (15) - 8

Change in unfilled customer orders -

Advances received - - 154 - - - - - - -

Without advance from Federal Sources 1 23 - (18) (13) - - 3 - -

Expenditure transfers from trust funds - - 1,130 - - - - - - -

Nonexpenditure transfers, net, anticipated and actual 51 - (2,241) - 102 1 6,590 - (6,616) (300)

Temporarily not available pursuant to Public Law - - - - - - - - - -

Permanently not available (321) (524) (27,444) (1,583) (75) (2) (2,119) (9) (295) (9)

Total Budgetary Resources 5,459 5,005 29,825 1,818 1,041 13,114 94,967 2,577 1,822 1,734

Status of Budgetary Resources:

Obligations Incurred:

Direct 2,317 3,279 3,573 847 529 12,113 79,454 2,419 1,274 1,099

Reimbursable 450 - 24,232 - 144 - 42 126 51 336

Unobligated Balance:

Apportioned 2,523 628 329 363 89 996 1,520 12 33 267

Exempt from Apportionment - - 841 4 - - - - 32 -

Unobligated balance not available 169 1,098 850 604 279 5 13,951 20 432 32

Total Status of Budgetary Resources 5,459 5,005 29,825 1,818 1,041 13,114 94,967 2,577 1,822 1,734

Change in Obligated Balances:

Obligated balance, net, brought forward October 1 497 330 7,646 6 20 456 4,288 162 122 391

Obligations incurred 2,767 3,279 27,805 847 673 12,113 79,496 2,545 1,325 1,435

Gross outlays (2,618) (3,036) (26,050) (879) (423) (12,173) (77,928) (1,108) (1,265) (1,289)

Recoveries of prior year unpaid obligations, actual (55) (72) (181) (10) (170) (4) (507) (1,441) (15) (168)

Change in uncollected payments from Federal Sources 2 (23) 89 18 (29) - - 12 - (8)

Obligated balance, net, end of period -

Unpaid obligations 606 514 9,541 159 187 392 5,347 186 170 387

Uncollected customer payments from Federal Sources (12) (35) (233) (177) (116) - - (17) (2) (27)

Obligated balance, net, end of period 594 479 9,308 (18) 71 392 5,347 169 168 360

Net Outlays:

Gross outlays 2,618 3,036 26,050 879 423 12,173 77,928 1,108 1,265 1,289

Offsetting collections (729) (1,628) (13,006) (553) (103) (4,211) (84) (146) (58) (104)

Distributed offsetting receipts (951) - - (474) (1) - - (11) (155) (15)

Net Outlays $ 938 $ 1,408 $ 13,044 $ (148) $ 319 $ 7,962 $ 77,844 $ 951 $ 1,052 $ 1,170
Financial Statements, Notes, Supplemental and Other Accompanying Information

199 = 

FY 2009 GIPSA FS NRCS ARS NIFA ERS NASS RD DO TOTAL

Non-Budgetary Non-Budgetary

Financing Financing

Budgetary Budgetary Budgetary Budgetary Budgetary Budgetary Budgetary Budgetary Accounts Budgetary Budgetary Accounts

Budgetary Resources:

Unobligated balance, brought forward, October 1: $ 14 $ 2,170 $ 1,793 $ 241 $ 127 $ 4 $ 4 $ 1,827 $ 1,929 $ 58 $ 28,078 5,314

Recoveries of prior year unpaid obligations 6 38 572 111 446 4 6 153 672 57 3,934 754

Budget Authority:

Appropriation 40 7,107 1,308 1,387 1,270 80 152 8,847 - 543 132,335 -

Borrowing Authority - - - - - - - - 11,628 - 28,870 14,905

Earned -

Collected 42 535 108 105 46 - 24 3,846 7,315 816 22,678 9,496

Change in receivables from Federal Sources - (23) (6) - (2) - - 4 - 24 (60) -

Change in unfilled customer orders -

Advance received - 2 4 - (18) - - - - (2) 140 -

Without advance from Federal Sources - (51) 17 (6) 11 1 - - 215 (10) (47) 220

Expenditure transfers from trust funds - - - - - - - - - - 1,130 -

Nonexpenditure transfers, net, anticipated and actual - - 1,612 3 160 - - 204 - 3 (431) -

Temporarily not available pursuant to Public Law - - - - (12) - - - - - (12) -

Permanently not available (1) (5) (1) (6) (5) (1) (2) (2,636) (3,498) (7) (32,938) (5,605)

Total Budgetary Resources 101 9,773 5,407 1,835 2,023 88 184 12,245 18,261 1,482 183,677 25,084

Status of Budgetary Resources:

Obligations Incurred:

Direct 46 6,544 3,540 1,300 1,717 81 153 5,780 16,269 532 122,471 20,395

Reimbursable 42 482 99 112 102 1 24 555 - 844 27,642 -

Unobligated Balance:

Apportioned 8 2,031 794 399 202 1 5 4,423 1,333 154 13,786 2,324

Exempt from Apportionment - - - - - - - - - - 873 4

Unobligated balance not available 5 716 974 24 2 5 2 1,487 659 (48) 18,905 2,361

Total Status of Budgetary Resources 101 9,773 5,407 1,835 2,023 88 184 12,245 18,261 1,482 183,677 25,084

Change in Obligated Balances:

Obligated balance, net, brought forward October 1 6 1,707 3,006 340 1,489 29 20 4,916 20,358 182 25,277 20,694

Obligations incurred 88 7,026 3,639 1,412 1,819 82 177 6,335 16,269 1,376 150,113 20,395

Gross outlays (83) (6,480) (2,836) (1,306) (1,223) (80) (169) (5,580) (12,903) (1,348) (141,959) (16,818)

Recoveries of prior year unpaid obligations, actual (6) (38) (572) (111) (446) (4) (6) (153) (672) (57) (3,934) (754)

Change in uncollected payments from Federal Sources - 74 (11) 6 (9) (1) - (4) (215) (14) 107 (220)

Obligated balance, net, end of period

Unpaid obligations 11 2,641 3,322 432 1,716 27 25 5,527 23,741 319 30,836 24,414

Uncollected customer payments from Federal Sources (5) (351) (97) (90) (86) (1) (3) (11) (904) (181) (1,232) (1,116)

Obligated Balance, net, end of period 6 2,290 3,225 342 1,630 26 22 5,516 22,837 138 29,604 23,298

Net Outlays:

Gross outlays 83 6,480 2,836 1,306 1,223 80 169 5,580 12,903 1,348 141,959 16,818

Offsetting collections (42) (536) (111) (105) (29) - (24) (3,846) (7,315) (814) (23,948) (9,496)

Distributed offsetting receipts - (574) 1 (23) (5) - - (1,310) - (56) (3,100) (474)

Net Outlays $ 41 $ 5,370 $ 2,726 $ 1,178 $ 1,189 $ 80 $ 145 $ 424 $ 5,588 $ 478 114,911$ $ 6,848
Financial Statements, Notes, Supplemental and Other Accompanying Information

200

RISK ASSUMED INFORMATION (UNAUDITED) 

Risk assumed is generally measured by the present value of unpaid expected losses net of associated 

premiums based on the risk inherent in the insurance or guarantee coverage in force. Risk assumed 

information is in addition to the liability for unpaid claims from insured events that have already 

occurred. The assessment of losses expected based on the risk assumed are based on actuarial or 

financial methods applicable to the economic, legal and policy environment in force at the time the 

assessments are made. The FCIC has estimated the loss amounts based on the risk assumed for its 

programs to be $7,546 million and $8,930 million as of September 30, 2010 and 2009, respectively.
Other Accompanying Information

201

4. Other Accompanying Information

Appendix A — Response to Management Challenges

The Department of Agriculture’s (USDA) Office of Inspector General (OIG) has identified and reported 

10 management challenges for Fiscal Year (FY) 2010. The report includes the most significant 

challenges faced by USDA. It can be found at:

http://www.usda.gov/oig/webdocs/MgmtChallenges2010.pdf. 

The OIG report also includes emerging issues that could become a Departmental challenge in upcoming 

years. OIG did not remove any of the previous year’s challenges; however, sub-elements/issues reported 

under Challenge 2 (Internal Controls), Challenge 5 (Civil Rights), and Challenge 6 (Global Trade) were 

removed. OIG added new issues under Challenge 1 (Interagency Coordination) and Challenge 2 

(Internal Controls).

The following table summarizes those challenges that changed from FY 2009 to FY 2010.

FY 2009 Management Challenges FY 2010 Changes

Challenge #1

Issue: Interagency Communication, Coordination, and Program 

Integration Need Improvement

Challenge #1

Issue added: Coordination between Federal agencies to prevent residue 

from entering the food supply

Emerging Issue

National Organic Program

Challenge #2

Issue added: National Organic Program

Challenge #2

Issue: Implementation of Strong, Integrated, Internal Control Systems 

Still Needed

Challenge #2

Issue added: Standard Reinsurance Agreement

Issue added: Group Risk Plan and the Group Risk Income Protection 

program

Challenge #2

Issue: Capitalize on Farm Service Agency Compliance Activities to 

Improve Program Integrity

Issue Removed by OIG

Challenge #5

Issue: Develop Procedures to Control and Monitor Case File 

Documentation and Organization

Issue Removed by OIG

Challenge #6

Issue: Strengthen Trade Promotion Operations Issue Removed by OIG

Section 4. 

Other Accompanying Information
Other Accompanying Information

202

The following table includes FY 2010 accomplishments; FY 2011 planned actions, and ongoing activities 

to address the Department’s challenges.

USDA’s Management Challenges

1) Interagency Communications, Coordination, and Program Integration Need Improvement.

• Farm Programs: Challenge #1. Farm Service Agency (FSA),Risk Management Agency (RMA), Natural Resources Conservation Service (NRCS)

− Implement a Comprehensive Information Management System (CIMS) to better share program data and eliminate duplicate reporting by 

producers;

− Implement a more effective data reconciliation process, as mandated by the Agricultural Risk Protection Act of 2000 (RMA and FSA);

− Incorporate data mining techniques that detect data anomalies and prevent potential improper payments; and

− Integrate interagency communication and coordination in their program activities to ensure that one agency’s actions do not adversely affect 

another’s programs.

Fiscal Year 2010 Accomplishments

• RMA, FSA, worked jointly on the CIMS project and accomplished the following:

− Met with Approved Insurance Providers (AIP) to review CIMS project, functions, and services in order to assess progress to date and future 

direction;

− Established requirements for RMA Reinsured Policy Acceptance Systems to use CIMS data for verification of new producers reported to 

RMA;

− Continued development of a streamlined acreage reporting process that will enable the producer to report common data once. RMA, FSA, 

NRCS and NASS will share the data to eliminate duplicate reporting, including the formation of a Department-wide acreage reporting effort

sponsored by the OCIO and FFAS;

− Established discovery reports of possible differences in RMA and FSA business entities and comparable crop acreage;

− FSA provided CIMS access to more than 12,000 FSA county and state office workers, including use of CIMS to provide insurance 

production for use in calculating benefits in the ACRE program;

− Coordinated efforts between FSA and NRCS on participant eligibility including crop insurance guarantee information for use by the 

Supplemental Revenue Assistance Payments (SURE) program in calculating 2008 benefits;

− NRCS finalized the Conservation Stewardship Program (CSP) rule to include provisions that utilize the FSA farm record system to 

determine producer eligibility; and

− NRCS amended program policy to address resource concerns related to land with expiring Conservation Reserve Program (CRP) contracts.

Planned Actions for Fiscal Year 2011

• Implement future enhancements to the CIMS project;

• Improve access to data required for program benefits;

• Timely identify and discover possible data differences;

• Establish process and conditions for AIPs to report on data records differences;

• Establish a more efficient and faster producer service by allowing data to be loaded directly to AIPs systems;

• RMA will perform reviews to reconcile information utilized for FSA disaster programs where FSA county offices find instances in which RMA 

and FSA program data do not match;

• RMA will continue to research, develop and implement data mining techniques and implement them as appropriate;

• RMA and FSA will establish a memorandum of understanding for the SURE and Average Crop Revenue Election (ACRE) disaster 

programs outlying interaction between the two agencies concerning these programs;

• Continue to analyze crop reporting data recommendations from the RMA/FSA working group;

• Establish a memorandum of understanding between FSA and RMA for the SURE and ACRE disaster programs outlining interaction 

between the two Agencies concerning these programs; and

• NRCS will continue to coordinate issues and opportunities common to the conservation agencies and related to program financial 

assistance eligibility, the Service Center Information Management System and the Federal Financial Accountability and Transparency Act.

Inspection of Agricultural Commodities: Challenge #1. Animal and Plant Health Inspection Service (APHIS)

• Develop and provide to the Department of Homeland Security’s U.S. Customs and Border Protection (CBP), a system of risk assessment 

for rail cargo so that the degree of risk can be determined.

Planned Actions for Fiscal Year 2011

• Coordinate with CBP on the establishment of the railway assessment project; and

• Collect data and perform risk assessment.

National Residue Program for Cattle: Challenge #1. Food Safety and Inspection Service (FSIS)

• Improve coordination among Federal agencies to prevent residues from entering the food supply – build a consensus with the Food and 

Drug Administration (FDA) and the Environmental Protection Agency (EPA). 
Other Accompanying Information

203

Fiscal Year 2010 Accomplishments

• Held a chemical residues summit with representatives from USDA, FDA, and EPA, to coordinate chemical residue strategy.

Planned Actions for Fiscal Year 2011

• Provide proposals to FDA and EPA to:

− Update the memorandum of understanding that established the Surveillance Advisory Team (SAT) and Interagency Residue Control Group 

(IRCG);

− Draft a charter governing SAT and IRCG operations;

− Develop a process for elevating issues identified by SAT and IRCG to executive-level officials for appropriate action;

− Develop plans to ensure the National Residue Program has the resources needed to test for substances identified as high-risk;

− Develop plans through SAT for periodically reviewing FSIS’ sampling methods;

− Develop a plan to establish policies for handling hazardous substances with no tolerances; and

− Work with FDA to develop a process for expedited approval of new testing methodologies.

2) Implementation of Strong, Integrated Internal Control Systems Still Needed. Rural Housing Service (RHS)

• Pursue computer matching agreements with other agencies that provide disaster response and relief; and

• Develop procedures to monitor and control assistance in response to disasters.

Fiscal Year 2010 Accomplishments

• Issued revised disaster procedures to field offices to monitor the provision of housing assistance;

• Established internal controls to prevent duplicative assistance;

• Worked with organizations and impacted communities to ensure disaster supplemental appropriations are made available and used in areas 

affected by the disaster;

• Developed a Data Check Query Tool, within the Single Family Housing Direct Program, that provides users with an automated method to 

ensure application data was entered accurately into the Dedicated Loan Origination System;

• Provided training to the field staff on identifying and correcting errors before loans are obligated; and

• Revised procedures for monitoring the delinquency rates for Section 502 direct loans.

Planned Actions for Fiscal Year 2011

• Coordinate with other federal agencies to include Federal Emergency Management Agency and Small Business Administration to share 

benefit information on who has applied for or received disaster assistance to avoid/minimize the potential for duplicate benefits;

• Provide staff training, as needed; on (1) How delivering disaster assistance differs from regular program assistance and (2) Checking for 

duplicate benefits from other sources; and

• Perform additional enhancements to the automated system based on any agreements entered into with any other government agencies.

• Strengthen quality control and perform required reconciliation of producer/policyholder data in the Federal Crop Insurance Program (RMA)

• Continue efforts to establish a consistent and comprehensive review process to be used by all reinsured companies;

• Implement a system to evaluate the overall effectiveness and reliability of quality control reviews performed by companies;

• Develop a comprehensive, systematic, and well-defined strategy for its compliance-related efforts, to include the organizational structure 

needed to support the strategy;

• Conduct and document an overall risk assessment of program operations to identify major program vulnerabilities and focus, coordinate, 

and prioritize resources on high-risk areas; and

• Ensure that AIPs follow RMA’s policies and procedures while underwriting nursery crop insurance policies, adjusting resulting losses, and 

reporting loss data to RMA.

Fiscal Year 2010 Accomplishments

• Issued a new Standard Reinsurance Agreement for crop year 2011 including a revised Appendix IV Quality Assurance and Integrity 

document that establishes a consistent and comprehensive review process to be used by all reinsured companies;

• Completed National Program Operations Reviews on five AIPs’ operations to determine their compliance with quality control guidelines 

listed in the Standard Reinsurance Agreement and associated Appendix IV;

• RMA expanded its strategic data acquisition and analysis efforts by incorporating additional remote sensing and geospatial analyses to its 

data warehousing and data mining initiative, and increased the application of these data and analysis tools to include underwriting and 

program integrity issues throughout the crop insurance program; and

• RMA performed spot checks on selected nursery policies to determine Approved Insurance Providers compliance with the Nursery Crop 

Provisions, Special Provisions of Insurance, and all nursery procedures including the Nursery Underwriting Guide, and the Nursery Loss 

Adjustment Standards Handbook.
Other Accompanying Information

204

Planned Actions for Fiscal Year 2011

• Conduct National Program Operations Reviews on six AIP operations to determine their compliance with quality control guidelines listed in 

the Standard Reinsurance Agreement and associated Appendix IV; and

• Revise the “RMA Strategic Plan” to incorporate a well defined strategy for its compliance related efforts.

• Improve verification under the Group Risk Plan (GRP) and Group Risk Income Protection programs (GRIP). (RMA)

• Notify AIPs in writing that they are required to physically verify the crops they have insured under GRP/GRIP as part of the acreage report 

field reviews.

Fiscal Year 2010 Accomplishments

• As required in OIG Audit 05601-14-Te, “Group Risk Crop Insurance,” RMA completed actions to formalize the reporting and analysis of 

Approve Insurance Providers required acreage field reviews for GRP/GRIP policies.

• Prepare complete, accurate financial statements without extensive manual procedures and adjustments. (all agencies that prepare financial 

statements)

Fiscal Year 2010 Accomplishments

• FS: 

− Implemented stronger internal controls over interim financial reporting to identify trends, variances, or abnormal activity/transactions. 

Specifically:

o Developed automated cash reconciliation tool that facilitates more timely resolution of funds balance variance and automatically produces 

cash summary reports;

o Improved the work processes by eliminating 11 pages of FACTS II PRC Validation errors which increased the efficiency and productivity on 

FACTS II reporting and eliminated recurring year-end cash adjustments;

o Created a trial balance tool that tracks the ARRA Funds and the top 5 treasury symbol activity;

o Developed and implemented an internal control process to monitor SUSF activities to determine the impact on financial reporting and to 

identify aged transactions to be cleared;

o Updated the FACTS I process to compare data on a monthly basis and improved the monitoring of the Unidentified Trading Partner Usage

Code; 

o Developed general ledger activity and trend analysis reports to identify unusual and/or unexplained financial activity for use by Operational 

Branches in monitoring their respective account balances;

o Created SF-133 automated tool to calculate data sets for adjustment review; and

o Implemented stronger monitoring functions over financial reporting financial controls to supplement A-123 Appendix A testing. These 

functions are performed quarterly to form an independent basis for certification of financial statements.

• NRCS:

− Developed business requirements and provided support to implement the successful resolution of financial audit findings on access controls 

for Fund Manager and ProTracts software access;

− Obtained contractor support to conduct audit remediation services; conducted reviews in 18 States;

− Issued interim policy via national instructions on reimbursable agreements, open obligations, accruals, capital leases, internal use software, 

and unfilled customer orders.

Planned Actions for Fiscal Year 2011

• FS: 

− Prepare for conversion to the new USDA financial systems (Financial Management Modernization Initiative);

− Complete implementation of the new system for accepting credit cards for fees and services/products provided by the Agency throughout all 

153 national forests;

− Work with Federal Accounting Standards Advisory Board on developing clearer guidance regarding deferred maintenance reporting 

requirements; and

− Institute rotational effectiveness of field operated internal controls over financial reporting.

• NRCS:

− Strengthen separation of duties for cost share agreement management by implementation of nationally standardized permissions in 

ProTracts;

− Continue contractor support services including, performing additional state office site visits, finalizing corrective actions of audit issues, and 

training for new policies and procedures;

− Complete managerial cost accounting business requirements, model design, and Statement of Net Costs methodology to ensure proper 

presentation of the Statement of Net Costs;

− Prepare for conversion to the USDA Financial Management Modernization Initiative financial system;

− Issue financial policies and procedures; and

− Complete comprehensive training for financial and non-financial employees at all organizations levels.
Other Accompanying Information

205

• Improve Forest Service (FS) and NRCS internal controls and management accountability in order to effectively manage resources, measure 

progress towards goals and objectives, and accurately report accomplishments.

Fiscal Year 2010 Accomplishments

• FS: 

− Closed significant programmatic audit recommendations for 78 audit recommendations from 20 OIG audits. Specifically:

o Developed new databases to improve tracking and monitoring of Emergency Equipment Rental Agreements (EERAs);

o Provided new guidance to line officers when conducting fire investigations;

o Improved Partnership Program implementation and oversight;

o Provided direction to Firefighting Associations to restrict privileges to create and modify electronic training records;

o Implement actions to assure all aircraft leased for firefighting meet the airworthiness standards and appropriate maintenance and inspection 

programs;

o Ensured all Regions using alternate appraisal methods have calculation models that are consistent with FS’ Timber Sale Preparation 

Handbook;

o Twenty-five of the outstanding financial statement audit findings for previous years were closed in FY 2010. No material weaknesses 

identified in the financial statement audit for third consecutive year;

o Implementing new system throughout the Agency to allow customers to use credit cards in order to streamline collection activities and 

reduce risk;

o Implemented improved reporting and monitoring over Agency travel;

o Implemented additional assessments over critical program management functions in areas such as ARRA program of work, grant 

management;

o Instituted stronger programmatic controls for deferred maintenance and environmental disposal liabilities;

o Conducted assessments of cash management functions at all FS operated Job Corp Centers;

o Created database to trend unliquidated obligations certification, assess quality of certification, and provide feedback to regional offices. 

Auditors reduced the FS lack of monitoring over Unliquidated Obligations issue to a control deficiency and maintained that through FY 2010; 

and

o Maintained robust and effective information security program. Continued progress in the reduction of significance of audit issues and 

maintained no material weakness in this area.

• NRCS:

− Released the Conservation Effects Assessment Project (CEAP) report for cropland on the Upper Mississippi River Basin. The release of this 

report included a thorough technical review of processes which were then established for future reports on cropland; and

− Implemented software controls to manage the statutory direct and indirect annual payment limitation rules for two Conservation Security 

Program signup periods.

Planned Actions for Fiscal Year 2011

• FS: 

− Conduct evaluation of grant management function to identify opportunities to improve overall compliance and effectiveness of the entire 

program;

− Implement stronger cash management policy and procedures for Job Corp centers;

− Finish implementation of credit card system;

− Fully implement recommendations for ARRA efforts;

− Implement statistical evaluation of unliquidated obligations balances; and

− Implement corporate aggregation evaluation process that evaluates results of audit and assessments to identify systemic internal control 

weaknesses inherent in business processes that impact programmatic effectiveness.

• NRCS:

− Release additional CEAP studies; Release final report for the Chesapeake Bay crop and pastureland study. With these studies, NRCS will 

be able to assess the outcome of its programs and use the reports to facilitate decisions on the most effective future programmatic 

investments;

− Implement corrective actions on findings from the Conservation Security Program review prior to making 2010 payments; and

− Release a revised Conservation Programs Manual and train all office staff.
Other Accompanying Information

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• Strengthen oversight of the National Organic Program (NOP). (Agricultural Marketing Service)

Fiscal Year 2010 Accomplishments

• Worked in partnership with the Office of General Counsel to pursue enforcement actions;

• Developed an enforcement policy that specifies when civil penalties or other enforcement actions are warranted;

• Implemented policy and procedures for follow up monitoring of compliance with NOP enforcement actions, and increased timeliness and 

efficiency in complaint handling;

• Provided guidance on NOP reviews and audits;

• Renewed the status of California as a state organic program;

• Initiated development of the NOP Program Handbook;

• Implemented a document control policy; and

• Revised the NOP Quality Manual to include accreditation procedures.

Planned Actions for Fiscal Year 2011

• Establish guidelines to require certifiers to conduct periodic residue testing; and

• Issue an amendment to remove the Federal Advisory Committee Act requirements from the NOP regulations.

3) Continuing Improvements Needed in Information Technology (IT) Security. (Office of the Chief Information Officer and agency level IT managers)

• Emphasize security program planning and management oversight and monitoring.

Fiscal Year 2010 Accomplishments

• Implemented four time-phased strategic improvement plans, the “Cyber and Privacy Policy and Oversight (CPPO) 100-Day Plan,” “Getting 

to Federal Information Security Management Act (FISMA) Green Plan,” the Agriculture Security Operations Center 36-month "Get Healthy" 

plan and the OIG's “Get Healthy - Remediation of FISMA Weaknesses Plan,” to systematically mitigate identified IT risks and improve the 

USDA Security posture;

• Launched the Certification and Accreditation Center of Excellence to ensure compliance with OMB Circular A-130 Appendix III and 

implemented Department-wide best practices in system authorizations, Cyber Security Assessment and Management (CSAM) utilization, 

Plans of Action and Milestones (POA&M) management, and risk management strategies;

• Completed Phase 1 of the CSAM Remediation effort to improve the consistency and quality of the C&A/system authorization data points, 

reporting and tracking of system authorizations, and risk management;

• Hosted the USDA Cyber Security Summit and Department-wide “live” Information Security Awareness and Specialized Security training 

sessions to improve cyber security education and awareness and provide specialized training Department-wide; 

• Drafted the Governance, Risk, and Compliance (GRC) Strategic Plan to focus on the strategic and technical aspects of the information 

security program. The Office of the Chief Information Officer’s (OCIO) GRC Strategic Plan emphasizes using the Risk Management 

Framework to mitigate vulnerabilities with the highest overall risk to the department;

• Worked diligently with USDA’s agencies to promote and collaborate with the Cyber Security Plans and to validate and ensure consistency of 

data in CSAM to improve the management of IT system risks;

• Launched the Agriculture Security Operations Center (ASOC) to improve the USDA security posture and institute operational best practices; 

and

• Continued using the monthly FISMA program compliance scorecard to monitor agency FISMA compliance including Plans of Action and 

Milestones (POA&Ms), Whole Disk Encryption deployment, and Configuration Management to mitigate identified system risks.

Planned Actions for Fiscal Year 2011

• Continue implementation of “Getting to FISMA Green” and OIG “Get Healthy” Plans to systematically mitigate identified risks;

• Continue leveraging CSAM, security metrics, program reviews, and the monthly FISMA program compliance scorecard to manage IT 

security program compliance and oversight;

• Continue deployment of Risk Management Framework initiative and implement CSAM Version 3.0 to leverage CSAM’s continuous 

monitoring capabilities across the Department;

• Continue deployment of ASOC and related program initiatives; and

• Continue Department-wide Cyber Security Awareness and Education efforts to increase end-user awareness of cyber security best 

practices.

• Establish an internal control program throughout the systems’ life cycle.

Fiscal Year 2010 Accomplishments

• Reviewed and revised Cyber Security Departmental Regulations as needed to maintain concurrency with National Institute of Standards 

and Technology (NIST) and other program requirements;

• Staffed critical positions to ensure compliance with incident handling and response requirements and improve the security management 

operations;
Other Accompanying Information

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• Defined operational metrics for key security initiatives, and for endpoint health (via BigFixTM);

• Established Departmental bi-weekly meetings to discuss issues covering all aspects of NIST Security Policy 800-53 compliance and 

Departmental IT Security policies;

• Expanded the CSAM Dashboard to improve system authorization reporting, security control tracking and management and continuous 

monitoring functionality; and

• Conducted annual reviews on: USDA Cyber Security Policies, Certification and Accreditation (C&A) documentation, agency security plans 

(for systems not undergoing Certification & Accreditation), Contingency Plan test plans and test reports, outstanding POA&Ms, security 

controls assessments, security awareness training, IT systems inventories and Acquisition Approval Requests.

Planned Actions for Fiscal Year 2011

• Continue using CSAM to implement Continuous Monitoring and automate the Concurrency Review process; 

• Develop dashboard and supporting analytics to monitor and assess security operational metrics; and

• Continue using Security Metrics and agency program reviews to measure agency Security Program compliance and maturity.

• Identify, test, and mitigate IT security vulnerabilities (risk assessments).

Fiscal Year 2010 Accomplishments 

• Established C&A Center of Excellence to provide agencies with operational support and tools for the USDA C&A process, including the 

conduct of concurrency reviews, the development and management of POA&Ms, the use of CSAM tool, to ensure that USDA complies with 

NIST, FISMA, OMB, and USDA security polices and requirements;

• Began 14 and completed 10 assessments of the security practices within their IT operations programs;

• Continued reviewing selected POA&M closure documentation to validate/verify correction actions; and

• Continued C&A concurrency review program.

Planned Actions for Fiscal Year 2011

• Continue implementation of the Risk Management Framework and continuous monitoring initiatives;

• Begin remaining agencies' IT operational assessments, to complete baseline of entire department by end of FY; follow up with 2010 

assessments to review progress on programmatic developmental milestones.

• Remediate IT Material Weakness relating to: Logical and Physical Access Controls, Disaster Recovery Planning, and Configuration Management

Fiscal Year 2010 Accomplishments

• Issued a memorandum directing compliance with Departmental Regulation 3505-003, Access Control Policy, and created program level 

POA&Ms as needed to address program risks;

• Developed tactical plan for monitoring monthly access control review efforts to ensure compliance with program goals;

• Integrated eAuthentication and LincPass cards to provide two-factor authentication to all eAuthentication-protected applications; and

• USDA’s 4 largest facilities that have over 1000 users (South Building, Riverdale, the Beltsville Agriculture Research Center, and the Kansas 

City Commodity Office) have personal identity verification card readers that meet the criteria put forward by Homeland Security Presidential 

Directive 12: Policy for a Common Identification Standard for Federal Employees and Contractors;

• Validated agency change management processes during C&A concurrency reviews; and

• Deployed the BigFixTM end point monitoring tool to over 130,000 endpoints Department-wide; began awareness campaign with agency 

CIO's focusing on FDCC compliance, and obsolete/high risk commercial software deployment;

• Verified submission of agency continuity of operations/disaster recovery plans in CSAM; and

• Verified continuity of operations plans annual testing.

Planned Actions for Fiscal Year 2011

• Continue monitoring agency compliance with access control policies;

• Develop the Department-wide Privilege Management Plan;

• Implement Digital Signature and Encryption Plans; and

• Complete the Identity Credential and Access Management technical infrastructure.

• Continue program oversight activities focusing on change/configuration and patch management.

• Expand continuous monitoring data awareness campaign to encompass OS patching, IPv6, critical trends, and the transition from 

informational to actionable reporting via BigFixTM; 

• Continue Departmental initiatives to establish and fund alternate ‘hot sites’ for Service Center Agencies; and

• Continue USDA training and oversight activities to ensure effective Continuity of Operations for all systems.

4) Departmental Efforts and Initiatives in Homeland Security Need To Be Maintained

• Implement commodity inventory systems that provide critical homeland security features. (FSA)

Planned Actions for Fiscal Year 2011

Continue implementation of the Web-based Supply Chain Management (WBSCM) system to be used by the Agricultural Marketing Service, FSA, 

the Food and Nutrition Service, Foreign Agricultural Service (FAS) and the U.S. Agency for International Development; 
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• Begin user security role testing within the implementation phase of the WBSCM. Completed user training and data management activities 

for WBSCM;

• Continue WBSCM security testing and begin communication with external stakeholders; and

• Define validation criteria and perform validation of Transactional Data Staging Database.

Agriculture Quarantine and Inspection Activities. (APHIS)

• Develop the necessary processes and procedures to assess inspection effectiveness;

• Identify major risks posed by foreign pests and diseases at ports of entry; and

• Ensure that staffing levels at ports are sufficient to meet risks.

Fiscal Year 2010 Accomplishments

• Held quarterly meetings to review data quality and performance measures; and

• Completed reviews at six ports in Texas, New Jersey, Arizona, Illinois, Florida, and Freeport/Nassau Bahamas.

Planned Actions for Fiscal Year 2011

• Use the current staffing model that does a good job of predicting USDA’s need for addressing agricultural risk at ports. APHIS will 

coordinate its staffing model with CBP to ensure it meets CBP staffing requirements; and

• Participate in a Trend Analysis Working Group that will analyze and predict the highest risk areas in cargo pathways.

Avian Influenza Surveillance Activities. (APHIS)

• Develop a Memorandum of Understanding with the U.S. Department of Health and Human Services that describes coordination efforts in 

the event of a Presidential emergency; and

• Consult with other Federal agencies and the poultry industry to identify the capability needed to respond to a probable scenario for a highly 

pathogenic avian influenza (HPAI) outbreak.

Fiscal Year 2010 Accomplishments

• Addressed quarantine and movement control issues for non-infected egg production in the event of a HPAI outbreak;

• Established a cooperative agreement with Texas A&M University to develop a preparedness and response emergency management 

dashboard system; and

• Established a cooperative agreement with the California Department of Food and Agriculture for further developing the California Animal 

Health Emergency System, to provide an information system of critical tasks and activities for responders in an outbreak.

Planned Actions for Fiscal Year 2011

• USDA (APHIS) and the U.S. Department of Homeland Security (DHS) will conduct a test response to a declared emergency requiring 

support from DHS’ Federal Emergency Management Agency;

• Formalize an agreement with DHS that clarifies and defines each department’s roles and responsibilities in the event of a USDA declared 

emergency, Presidential declared emergency, or major disaster; and

• Continue to work with DHS to identify the best interagency mechanism to formalize relationship within the context of the National Response 

Framework.

Importation and Movement of Live Animals. (APHIS)

• Provide procedures and implementation date for entering and analyzing instances of problems through its live animal tracking information 

system;

• Develop an automated system to track problems with imported animals;

• Provide procedures describing coordination efforts with CBP officials at the northern border to ensure that all animal shipments are properly 

inspected;

• Provide procedures for monitoring and reconciling imported cattle, the disease risk analysis for restricted imported swine, and the import 

protocol for cattle imported from Mexico;

• Provide procedures for analyzing rejected animals at the Mexican border; and

• Provide instructions regarding the inventory of USDA seals, and a summary of seal inventory conducted in 2009. 

Fiscal Year 2010 Accomplishments

• Revised and implemented Veterinary Services Memorandum No. 592.122, “Inventory, Use and Control of Animal and Plant Health 

Inspection Service Seals by Veterinary Services Personnel”; and

• Completed deployment of the Veterinary Services Process Streamlining – Animal Import IT application (VSPS-AI) and made available to all 

US ports-of-entry where USDA live animal inspection services are provided.

Planned Actions for Fiscal Year 2011

• Develop procedures for entering and analyzing instances of non-compliance and the actual date of the Live Animal Imports Module (LAIM) 

is fully implemented at all ports of entry;

• Develop a Standard Operating Procedure that describes how USDA and CBP will coordinate efforts at the northern border of ports of entry;

• Develop a procedure for monitoring and reconciling imported cattle, and a copy of the disease risk analysis performed on restricted 

imported swine; and

• Develop procedures for entering and analyzing rejections at the border of Mexico and the actual date of LAIM system is fully implemented at 
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all ports of entry on the U.S. border with Mexico.

5) Material Weaknesses Continue to Persist in Civil Rights Control Structure and Environment. (Office of the Assistant Secretary for Civil Rights)

• Develop a plan to process employment complaints timely and effectively in collaboration with USDA agencies; and

• Implement a monitoring framework to track the processing of complaints so that the agency can intervene when timeframes are not being met.

Fiscal Year 2010 Accomplishments

• Revised Standard Operating Procedures to incorporate monitoring and measures to intervene when timeframes are not being met;

• Established timeframes for the intake process so it not will exceed the deadline for completion of the formal complaint process; and

• Implemented controls to ensure timely processing of the Final Agency Decision (FAD) report. The Director, Office of Adjudication is 

provided with a weekly FAD report for a second level of review and monitoring.

6) USDA Needs To Develop a Proactive, Integrated Strategy To Help American Producers To Meet the Global Trade Challenge. (FAS and APHIS) 

• Continue to strengthen genetically engineered organism field testing controls to prevent inadvertent genetic mixing with agricultural crops for export.

Fiscal Year 2010 Accomplishments

• Obtained certification and accreditation on the Biotechnology Integrated Database System and written certification that the ePermits 

tracking system is fully deployed;

• Developed a revised regulation on the required field data reports and notices for all permits and notifications;

• Implemented procedures for processing missing/late progress report;

• Developed procedures for the Civil Penalty Action Team; and

• Established guidance for establishing and implementing timeframes for devitalization of genetically engineered crops.

Planned Actions for Fiscal Year 2011

• Develop guidance to better manage Genetically Engineered (GE) Organism Field Releases; and

• Revise regulations on the location of planted GE field test sites. 

• Develop a global market strategy.

Fiscal Year 2010 Accomplishments

• Developed a Global Market Strategy in coordination with the USDA Intra-Departmental Coordination Committee on International Affairs and 

consultation with Congress; and

• Initiated periodic representational events with agricultural contacts.

Planned Actions for Fiscal Year 2011

• Continue to implement the Global Market Strategy and refine as needed; and

• Continue to initiate periodic representational events with agricultural contacts.

7) Better Forest Service Management and Community Action Needed to Improve the Health of the National Forests and Reduce the Cost of Fighting 

Fires.

• Work with other land management agencies and State and local governments to conduct hazardous fuels reduction projects in those areas where 

they will have the greatest impact on reducing risk ; 

• Work with Congress and other land management agencies to find ways to convince State and local governments to enact and enforce fire-wise 

building and zoning codes in areas threatened by wildland fire ; 

• Improve its internal controls over wildland fire expenditures and the delivery of systems to help managers improve cost-containment decisions ; and

• Ensure human and physical resources to effectively address the changing environment of forest health and the expanding wildland urban interface 

(WUI).

Fiscal Year 2010 Accomplishments

• Allocated resources to address the changing environment of forest health and the expanding WUI;

• Continued to conduct large fire cost review and implement corrective actions, as applicable;

• Partnered with states and counties to develop and deliver fire prevention ordinances to use in planning and zoning in WUI areas;

• Participated in meetings held by the National Association of State Foresters; and

• Fully implemented the Wildland Fire Decision Support System that assists fire managers and analyst in making strategic and tactical 

decisions and introduces economic principals into the fire decision process.

Planned Actions for Fiscal Year 2011

• Issue guidance for monitoring the effectiveness of hazardous fuel treatments and restoration projects;

• Continue to develop tools for the Regions to use in assessing and managing wildfire risk;

• Continue to work with State, local and tribal governments and other land management agencies to encourage the use of community 

programs, such as Firewise and Ready, Set, GO!, to better protect people and communities threatened by wildland fire;

• Work with other land management agencies and State and local governments to conduct hazardous fuels reduction projects in areas with 

the greatest impact of reducing risk;
Other Accompanying Information

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• Direct human and physical resources to address the changing environment of forest health and the expanding WUI; and

• Develop and implement the Cohesive Wildland Fire Management Strategy.

8) Improved Controls Needed for Food Safety Inspection Systems.

• Complete corrective actions on prior recommendations.

Fiscal Year 2010 Accomplishments

• Responded to ongoing audits and completed final actions needed to reduce the backlog of outstanding “open” recommendations. FSIS 

closed 29 recommendations increasing the percentage of recommendations issued since 2000 that are closed to 87 percent.

• Continued achievement of management decision to meet OIG deadlines; and

• Issued reports to FSIS programs on open audit recommendations which has resulted in more coordinated and efficient reports to complete 

the final actions needed for recommendation closure.

Planned Actions for Fiscal Year 2011

• Continue to reduce the backlog of outstanding “open” recommendations, and use the audit recommendation tracking system to keep 

management apprised of “open” recommendations.

• Develop a time-phased plan to complete assessments of the food safety system control plans developed by USDA-inspected facilities and 

assessments of those facilities’ production processes, including a review program that includes periodic reassessment.

Fiscal Year 2010 Accomplishments

• Performed Food Safety Assessments (FSAs) at establishments responsible for the annual production of approximately 95 percent of meat 

and poultry products;

• Conducted a performance and functional testing of the Public Health Inspection System (PHIS) to ensure the system operates as intended; 

and

• Issued a technical report outlining the FSA prioritization criteria and an FSIS Directive on FSA scheduling and prioritization.

Planned Actions for Fiscal Year 2011

• Implement and complete user acceptance testing of PHIS; and

• Test and implement the electronic FSA system in PHIS, which will include date “flags” to be used in scheduling FSAs.

• Improve the accuracy of data available in the systems.

Fiscal Year 2010 Accomplishments

• Completed development of PHIS features, to better ensure the accuracy of compliance and other data; and

• Completed an analysis of humane handling noncompliance rates at dairy cow establishments compared to establishments that slaughter 

other adult cattle to determine whether more frequent humane handling reviews are needed.

Planned Actions for Fiscal Year 2011

• Complete performance and functional testing of PHIS during user acceptance testing;

• Implement PHIS training for in-plant inspection personnel nationwide;

• Continue programs to improve data quality, analysis, and distribution;

• Develop Directives, Notices, and related training that emphasizes the development of data-driven inspection; and 

• Improve access to AssuranceNet to help Districts meet in-Plant Performance System review requirements.

• Continue to develop and implement a strategy for hiring and training inspectors.

Fiscal Year 2010 Accomplishments

• Continued to hire Consumer Safety Inspectors and Food Inspectors with various incentives including bonuses, superior qualification 

appointments, and paying travel and transportation expenses;

• Conducted surveys to verify that inspectors are performing assigned duties;

• Utilized a structured on-the-job training program for Food Inspectors to reinforce concepts covered in classroom training; and

• Reviewed training reports to ensure appropriate personnel receive needed training.

Planned Actions for Fiscal Year 2011

• Complete an evaluation of the new circuit maintenance guidelines;

• Establish procedures and policies to ensure newly hired mission critical personnel receive training within 1 year of starting their position and 

that they recertify this training annually;

• Continue to offer volunteer training opportunities to veterinary students, and paid veterinary student programs to increase awareness and 

generate interest in veterinarian work at FSIS;

• Continue to train field veterinarians in Enforcement and Investigations Analysis Officer (EIAO) methodologies to conduct expanded critical 

public health assurance duties;

• Continue to offer a 9-week public health focused veterinary educational program for all new veterinary hires; and

• Continue to offer veterinarians opportunities for advancement as they follow diverse career pathways within FSIS.
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9) Implementation of Renewable Energy Programs at USDA (Department-wide)

• Develop and implement a viable and comprehensive renewable energy strategy for USDA agencies and programs.

Fiscal Year 2010 Accomplishments

• The Energy Council Coordinating Committee (ECCC) drafted a mission and vision statement along with objectives for a proposed USDA 

Comprehensive Renewable Energy Strategic Plan (Plan);

• Prepared a Decision Memorandum to the Secretary on the development and deployment of the Renewable Energy Strategic Plan; and

• Vetted awards through the ECCC to avoid duplication of funding. USDA programs are currently being evaluated to determine what data is 

being provided to document the “actual” outcome vs. the “projected “outcome of funded projects.

Planned Actions for Fiscal Year 2011

• Prepare the strategic plan with a goal of having it in place by end of first quarter of FY 2011;

• Continue to evaluate potential awardees listing to assure no duplication is occurring;

• Complete the analysis of existing data to assure “actual “outcomes are being tracked.

10) Implementation of the American Recovery and Reinvestment Act (ARRA) of 2009 (all agencies that receive Recovery Act Funds)

• Provide timely and effective oversight of USDA Recovery Act monies and activities.

− Implement proper controls and oversight to ensure accountability;

− Distribute funding to participants that meet eligibility guidelines;

− Validate that participants properly comply with program requirements; and

− Ensure the program performance measures and accomplishments are fully supported.

Fiscal Year 2010 Accomplishments

• Established the Transparency and Accountability Reporting Division in the Office of the Chief Financial Officer to support the Department 

with timely and effective ARRA reporting and guidance to ensure greater transparency in Recovery Act implementation and delivery;

• Published departmental guidance on recipient reporting and trained agencies on the new guidance;

• Continued weekly Department of Agriculture Recovery Team (DART) meetings to provide forum for agencies to identify best practices, 

share lessons learned, and resolve implementation issues;

• Continued monitoring program eligibility;

• Conducted training via webinars to prepare recipients for their reporting responsibilities;

• FNS used ARRA funding to provide about $10.8 billion in additional Supplemental Nutrition Assistance Program (SNAP) benefits – about 

$890 million in additional benefits each month to help combat hunger and provide needed resources to communities. SNAP is now serving 

over 42 million low-income Americans each month;

• RD created web-based Dashboard to provide real-time ARRA statistics to identify low-performing program areas;

• RD created an ARRA project reporting database to ensure timely reporting of a project’s progress;

• RD invested more than $120 million in ARRA projects benefitting tribes;

• Rural Business and Cooperative Service assisted rural small businesses with $1.5 billion in loan guarantees and grants;

• Rural Housing Service’s (RHS) Community Facilities obligated $1 billion for essential rural facilities related to health care, public safety, 

education, public services, transportation, and cultural projects;

• Rural Utilities Service’ (RUS) Broadband obligated $1.0 billion in projects to bring broadband service to rural areas;

• RUS’ Water Programs obligated $2.8 billion to extend new or improved water service to 1.57 million rural customers;

• RHS’ Single Family Homes Direct and Guaranteed Programs provided rural homeowners with more than $11.2 billion in financial 

assistance; and

• NRCS initiated Corrective Action Plans to resolve identified deficiencies in all states with Emergency Watershed Protection Program 

(EWPP) Floodplain Easements.

Planned Actions for Fiscal Year 2011

• Agencies will continue servicing loans and grants;

• Agencies and Department officials will continue monitoring recipient reporting to FederalReporting.gov;

• Agencies will continue to review all quarterly recipient reports and address any discrepancies;

• RD will track project performance and job verification;

• RD will participate in tribal conferences to provide additional guidance on recipient reporting;

• RD will extend terms and contract hires and temporary ARRA employees for one-year to assist in monitoring, auditing, generating special 

reports;

• FS will improve the ARRA contract and grant monitoring regarding payments by implementing corrective actions as recommended in the 

various FY 2010 OIG Fast Reports; and

• NRCS will conduct follow-up state visits to determine the effectiveness of new controls that have been implemented to prevent reoccurrence of deficiencies noted in previous studies related to ARRA, EWPP–Floodplain Easements.
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Appendix B — Improper Payment and Recovery Auditing Details

Since 2000, agencies have reported efforts to reduce erroneous payments through the Office of 

Management and Budget’s (OMB) Circular A-11, “Preparation, Submission, and Execution of the 

Budget.” Under the Improper Payments Information Act (IPIA), executive agencies must identify any of 

its programs that may be susceptible to significant improper payments, estimate the annual amount of 

improper payments and submit those estimates to Congress. Certain agencies were required to conduct

recovery auditing. Specifically, agencies entering into contracts worth more than $500 million in a 

fiscal year (FY) must execute a cost effective program for identifying errors made in paying contractors 

and for recovering amounts erroneously paid to the contractors. On August 10, 2006, government-wide 

guidance was consolidated into OMB Circular A-123, “Management's Responsibility for Internal 

Control, Appendix C, Requirements for Effective Measurement and Remediation of Improper 

Payments.” Under this guidance, the U.S. Department of Agriculture (USDA) has 5 programs required 

to report under Section 57 of OMB Circular A-11 and has identified an additional 11 programs at risk of 

significant improper payments through the risk assessment process.

Under the Improper Payments Information Act of 2002 (IPIA), executive agencies must identify 

programs susceptible to significant improper payments, estimate the annual amount of improper 

payments, and submit those estimates to Congress.

Accomplishments this year include:

• Measuring programs at risk of significant improper payments;

• Developing corrective action plans to reduce improper payments and establishing both reduction 

and recovery targets (where appropriate) for the programs at risk of significant improper payments; 

• Complying with reporting standards; and

• Completing risk assessments for all low risk programs.

USDA’s improper payment error rate of 5.37 percent for FY 2010 declined from 5.92 percent in FY 

2009. Despite the drop, a $21.5 billion increase (30 percent) in high risk program outlays from FY 2009 

to FY 2010 put USDA’s estimated improper payments at $5 billion for FY 2010. This figure compares to 

$4.3 billion in FY 2009. The increase in outlays was largely attributable to the increase in demand for 

food and nutrition assistance due to the economic downturn. The FY 2010 results demonstrate that 

improper payment error rates are being reduced and progress is being made:

• Seven USDA high risk programs reported improper payment error rates below their FY 2009 error 

rate;

• Six USDA high risk programs, representing 61 percent of USDA’s total high risk program outlays, 

reported error rates below their reduction targets in FY 2009. This number exceeded USDA’s goal of 

achieving reduction targets for 50 percent or more of the Department’s total high risk program 

outlays;

• Forest Service’s (FS) Wildland Fire Suppression Management Program error rate of 0.00 percent 

was below its reduction target of 0.02 percent, and equal to its FY 2009 error rate;

• Food and Nutrition Service’s (FNS) Supplemental Nutrition Assistance Program (SNAP) error rate of 

4.36 percent was below its reduction target of 5.00 percent, and below its FY 2009 error rate of 5.01 

percent. The SNAP error rate is a historic low for the program. This is the 6th year in a row that the 

SNAP error rate has been less than 6 percent;

• FNS’ Child and Adult Care Food Program error rate of 0.99 percent was less than its reduction target 

of 1.46 percent and the FY 2009 error rate of 2.07 percent;

• RD’s Rental Assistance Program error rate of 1.39 percent was less than its reduction target of 2.00 

percent and its FY 2009 error rate of 2.06 percent;
Other Accompanying Information

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• The Farm Service Agency’s (FSA) Market Assistance Loan Program error rate of 0.81 percent was 

less than its reduction target of 1.50 percent and its FY 2009 error rate of 2.56 percent;

• FSA’s Loan Deficiency Payments Program error rate of 0.44 percent was below its reduction target of 

0.60 percent; 

• FNS’ National School Lunch Program (NSLP) error rate of 16.28 percent was below its FY 2009 

error rate of 16.44 percent; however, this was above its reduction target of 15.60 percent; 

• FNS’ Women, Infants and Children Program error rate of 1.17 percent was below its FY 2009 error 

rate of 1.27 percent; however, this was above its reduction target of 0.80 percent; and

• FSA’s Noninsured Assistance Program error rate of 11.65 percent was below its FY 2009 error rate of 

14.18 percent, however, this was above its reduction target of 9.22 percent. 

The root causes of improper payments are summarized into the error categories of verification, 

authentication, and administrative. Verification errors relate to verifying such recipient information as 

earnings, income, assets, work status, etc. Authentication errors relate to authenticating the accuracy of 

qualifying for program specific requirements, criteria or conditions. Administrative errors relate to the 

accuracy of the entry, classification, or processing of information associated with applications, 

supporting documents, or payments.

For FY 2010, the root causes of USDA improper payments were categorized as:

• Forty-nine percent attributable to verification error; and

• Fifty-one percent attributable to administrative error.

USDA establishes improper payment recovery targets for high risk programs, where appropriate, and 

actively collects recoveries.

Actions taken by USDA during FY 2010 include:

• Implemented Departmental High-Dollar Quarterly Report of improper payments identified in highrisk programs and actions taken by agencies to recover overpayments;

• Designated a Senate-confirmed appointee as the Accountable Official for meeting improper payment 

reduction targets and consolidating program integrity activities;

• Developed and provided additional error measurements with semi-annual reporting;

• Provided an Annual Accountable Official Report to the USDA Inspector General for the USDA highpriority programs (SNAP and NSLP);

• Provided Departmental improper payments information for the Government-wide 

PaymentAccuracy.gov Web site that includes key indicators and statistics by program;

• Completed risk assessments for 32 programs in FY 2010 as scheduled on a three year cycle. No new 

programs were declared high risk as a result of the risk assessments;

• Recovered $310 million in improper payments, exceeding the Departmental recovery target of $54 

million;

• Analyzed requirements and impacts of S. 1508, Improper Payments Elimination and Recovery Act of 

2010 and provided comments to OMB;

• Participated in OMB workgroups established under Executive Order (EO) 13520 “Reducing 

Improper Payments” providing research and recommendations to OMB on actions to aid Federal 

agencies in reducing improper payments; and

• Led the Executive Order (EO) 13520, “Reducing Improper Payments,” Forensic Accounting and 

Auditing Workgroup. The workgroup submitted recommendations to OMB for utilizing forensic

accounting and auditing techniques to prevent improper payments.

USDA’s goal is to continue to achieve error reduction and recovery targets established for FY 2011. In 

addition to meeting the requirements of IPIA, the Department is developing plans to implement the 

new requirements from EO 13520, the Presidential Memorandum “Enhancing Payment Accuracy 
Other Accompanying Information

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Through a Do Not Pay List,” the Presidential Memorandum “Finding and Recapturing Improper 

Payments,” and the Improper Payments Elimination and Recovery Act (IPERA) of 2010. 

USDA’s actions planned for FY 2011 include:

• Develop a Departmental action plan outlining the requirements and actions necessary to implement 

IPERA, EO 13520 “Reducing Improper Payments”, and the other new Government-wide 

requirements to reduce, eliminate and recovery improper payments;

• Develop and implement policies, controls, procedures and checklists at appropriate levels to reduce 

improper payments;

• Create aggressive correction plans that target the verification and administrative root causes of 

errors and address internal control issues for each program; 

• Provide training to field personnel and cooperative partners that address specific issues found in 

internal controls, control procedures and the potential risks of noncompliance;

• Sustain accountability at all levels by incorporating the employee’s individual results into their

annual performance evaluations;

• Provide grants and technical assistance to State agencies aimed at simplifying the application and 

eligibility determination systems of SNAP;

• Provide Departmental criteria for statutory, technical and other functionality of the Governmentwide “Do Not Pay List” Web site being developed to allow agencies to verify eligibility against 

multiple databases before grants, contract, benefit award and/or payments are issued;

• Issue a Departmental payment recapture/recovery auditing contract available for all Departmental 

programs to address IPERA requirements for identifying and recovering overpayments; and

• Participate in interagency workgroups to assist OMB in developing Government-wide guidance for 

implementing IPERA, EO 13521, and other initiatives to reduce improper payments and recover 

overpayments.

OMB provided a reporting template for IPIA in OMB Circular A-136, “Financial Reporting 

Requirements.” The template requires responses to specific issues. USDA’s response to these issues 

follows.

The Office of the Chief Financial Officer (OCFO) issued detailed guidance for the risk assessment 

process, including templates. OCFO also reviewed drafts. Programs with larger outlays were required to 

perform more detailed assessments than smaller programs. For USDA’s largest programs, the risk 

assessment process required the following:

• Amount of improper payments needed to meet the reporting standards;

• Description of the program, including purpose and basic eligibility requirements;

• Definition of improper payments specific to the program;

• Program vulnerabilities linked to improper payments;

• Internal controls designed to offset the program vulnerabilities;

• Internal controls testing for selected programs;

• Listing of significant reviews and audits;

• Final determination of risk level;

I. Describe your agency’s risk assessments, performed subsequent to compiling 

your full program inventory. List the risk-susceptible programs identified through 

your risk assessments.
Other Accompanying Information

215

• Planned future enhancements (optional); and

• Description of how improper payments are recovered (optional).
Other Accompanying Information

216

USDA has identified the following 16 programs as susceptible to significant improper payments.

Selection Methodology Agency Program

Section 57 of OMB Circular A11

Farm Service Agency (FSA), Commodity 

Credit Corporation (CCC) 

Marketing Assistance Loan Program (MAL)

Food and Nutrition Service (FNS) Supplemental Nutrition Assistance Program (SNAP)

National School Lunch Program (NSLP)

School Breakfast Programs (SBP)

Special Supplemental Nutrition Program for Woman, Infants and 

Children (WIC)

USDA Identified as 

Susceptible to Significant 

Improper Payments

FSA, CCC Milk Income Loss Contract (MILC) Program

Loan Deficiency Payments (LDP)

Direct and Counter-Cyclical Payments (LCP)

Conservation Reserve Program (CRP)

Miscellaneous Disaster Programs (MDP)

Noninsured Assistance Program (NAP)

Food Nutrition Service (FNS) Child and Adult Care Food Program (CACFP)

Forest Service (FS) Wildland Fire Suppression Management (WFSM)

Rural Development (RD) Rental Assistance Program (RAP)

Risk Management Agency (RMA) Federal Crop Insurance Corporation (FCIC) Program Fund

Natural Resources Conservation Service 

(NRCS)

Farm Security and Rural Investment Act Programs (FSRIP)

Agency Program Sampling Process

FNS Supplemental Nutrition 

Assistance Program 

(SNAP)

Statistical Sampling

Each month, States select a statistically random sample of cases from a universe of all households 

receiving SNAP benefits for that given month. Most States draw the samples using a constant 

sampling interval. There are some States which employ simple random and/or stratified sampling 

techniques. Required annual sample sizes range from 300 for State agencies with small SNAP 

populations to more than 1,000 for larger States. The average is approximately 950 per State. 

States are required to complete at least 98 percent of selected cases deemed to be part of the 

desired SNAP universe. Federal sub-samples are selected systematically by FNS from each State’s 

completed reviews. These sample sizes range from 150 to 400 per State.

Error Rate Calculation

The National payment error rate is calculated using a multi-step process:

• Each State agency conducts quality control (QC) reviews of the monthly sample of 

cases. The QC review measures the accuracy of eligibility and benefit determinations for 

each sampled case against SNAP standards. State agencies are required to report to 

FNS the findings for each case selected for review.

• FNS then sub-samples completed State QC reviews and re-reviews selected individual 

case findings for accuracy. Based on this sub-sample, FNS determines each State 

agency’s official error rate using a regression formula.

• The national payment error rate then is computed by averaging the error rate of the 

active cases for each State weighted by the amount of issuance in the State.

II. Describe the statistical sampling process conducted to estimate the improper 

payment rate for each program identified.
Other Accompanying Information

217

Agency Program Sampling Process

FNS National School Lunch 

Program (NSLP)

• USDA conducts studies approximately every 5 years to assess the level of error in 

program payments because detailed information on the circumstances of the NSLP and 

SBP participating households are not collected administratively. The November 2007 – 

NSLP/SBP Access, Participation, Eligibility and Certification (APEC) Study – makes use 

of a national probability sample of school food authorities (SFAs), schools, certified 

students and their households, and households that applied and were denied for 

program benefits in School Year 2005-06.

• A stratified random sample of 78 unique public SFAs was selected in the first stage of 

sampling. Stratification variables included geographic region, prevalence of schools 

having a SBP and those using Provision 2/3, and a poverty indicator. For SFAs that do 

not have Provision 2/3 schools, three schools, on average, were selected for inclusion in 

studying the second stage of sampling. Schools were stratified into two groups: 1) 

elementary schools and 2) middle and high schools. The school sample included both 

public and private schools. A total of 264 schools participated in the study (216 nonProvision 2/3 schools, 24 Provision 2/3 schools in their base year, and 24 Provision 2/3 

schools not in their base year). For the third stage of sampling, samples of households 

were selected in 240 of these schools to yield completed interviews for about 3,000 

students certified for free and reduced-price meals, and 400 denied applicant 

households.

• The sample of approved and denied applicant households was augmented by sampling 

of applications from Provision 2/3 schools in which household surveys were not 

conducted. Application reviews of about 6,800 students approved for free and reducedprice meals and more than 1,000 denied applicants were conducted to estimate the case 

error rate due to administrative error.

• Data on counting and claiming errors were collected in all schools selected for 

application reviews. On randomly selected school days, field staff observed 

approximately 100 lunch transactions at each of the 245 schools participating in NSLP, 

as well as 50 breakfast transactions at each of the 218 schools participating in SBP. 

Cashier error was estimated using information from these meal transactions. Data on 

school-recorded daily meal totals across all points of sale, aggregated meal counts 

reported to the district, and total meals submitted to the State agency for reimbursement 

were examined to determine claiming errors.

• To update the erroneous payment rate estimates in NSLP without having to conduct 

another full round of primary data collection, a series of econometric models were 

developed that captured the relationship between characteristics of the districts that 

participated in the APEC study, and their estimated rates of certification error. Estimated 

coefficients from these models were used in conjunction with updated values of district 

characteristics obtained from the School Food Authorities Verification Summary Reports 

to predict certification error. Certification error rates were then translated into amounts 

and rates of erroneous payments in each district. Aggregating the district level estimates 

produced a national measure of predicted erroneous payments. 

FNS School Breakfast Program 

(SBP) 

The statistical sampling process for this program is similar to NSLP. See the NSLP description. 

FNS Special Supplemental 

Nutrition Program for 

Women, Infants and 

Children (WIC) 

FNS plans to continue periodic examinations of WIC vendor and certification error.

• Vendor Error — The 2005 vendor error study employed a nationally representative 

probability sample of WIC vendors. A two-stage clustered design was developed to 

facilitate over-sampling of WIC-only stores. Current lists of authorized WIC vendors were 

collected from the 45 States plus the District of Columbia that use retail vendors from 

delivery of benefits. These lists were used to establish the retail vendors for delivery of 

benefits and the national sample frame of vendors active during the study period. 

Geographic Information System software was used to form 365 primary sampling units 

(PSU) in contiguous counties. Most PSUs had at least 80 vendors. The study selected 

100 PSUs using probability non-replacement sampling with probabilities proportional to 

the size of the PSU. About 16 vendors and 4 reserve vendors were selected from each 

of the 100 PSUs. The final sample size (unweighted) was 1,768 vendors. The study 

compared the purchase price paid by the compliance buyer with i) observed shelf prices, 

and ii) the purchase amount the vendor reported to the State to yield estimates of 
Other Accompanying Information

218

Agency Program Sampling Process

overcharge and undercharge.

• Certification Error — The 1998 WIC Income Verification Study was designed to provide 

information on the characteristics of a nationally representative sample of WIC 

participants in the contiguous United States, certified for the program that spring. The 

sample was based on a multi-stage sample design, with 50 geographic PSUs selected at 

the first stage, 79 local WIC agencies selected at the second stage, and 178 WIC service 

sites selected at the third stage. WIC participants were randomly sampled for the study 

at the 178 WIC service sites as they appeared for WIC certification. In-person interviews 

were completed with 3,114 WIC participants at the 178 WIC service sites. The estimate 

of improper payments comes from a follow-up in-home survey conducted with 

approximately one out of every three persons selected for the in-person interviews. The 

in-home survey was designed to verify income information through review of household 

income documents. In-home interviews were completed with 931 respondents.

FNS Child and Adult Care Food 

Program (CACFP)

The national estimate of erroneous payments for the sponsor error component is based on a 

nationally representative sample of sponsor files for 660 Family Day Care Homes (FDCH) in 60 

distinct sponsors in 14 States. The tiering status of FDCHs was first verified by determining their 

school area eligibility (at least 50 percent of students were approved for free/reduced-price meals 

and Census Block Group area eligibility (at least 50 percent of children at or less than 185 percent 

of the Federal P=overty Guidelines)) for Tier I and Tier II status. A sponsor of an FDCH not verified 

through area eligibility was contacted to secure additional documentation in support of the FDCH’s 

tiering status, such as income and categorical eligibility.

FSA/CCC Marketing Assistance Loan 

Program (MAL)

• A statistical sample of high risk programs is conducted by the FSA County Office Review 

Program (CORP) under the direction of the Operations Review and Analysis Staff 

(ORAS).

• Testing is conducted using statistically sound samples drawn from the total population of 

program payments made from September 2008 through August 2009. A professional 

statistician, under contract to FSA, is used to design the sampling approach, define the 

sample size, and identify the sample items. Sample size is chosen to achieve a 90 

percent two-sided confidence level.

• Once the universe of the program is determined for the target fiscal year, a stratified twostage sampling approach is used. County offices (COFs) making payments for the target 

program are selected in the first stage and individual payments made or contracts 

reviewed by COFs are selected in the second stage.

• That sample list of individual contracts or payments is provided to the members of the 

CORP staff covering the respective States. The CORP staff visits each of the COFs 

shown on the list and reviews the individual contracts or payments identified in the 

statistically sound sample. The CORP reviewers use a list of program division provided 

criteria that are drawn from legal and program administrative guidance. Findings of nonadherence to the criteria related to the individual contracts or payments in the sample will 

identify potential improper payments made. The results of that review are summarized 

and submitted to the CORP national office staff to be analyzed by the contractor 

statistician. That contractor determines the rate of improper payments based on the data 

provided by the CORP staff that visited the COFs and completed the actual review of 

documents.

FSA Milk Income Loss Contract 

Program (MILC)

See the process described in the MAL discussion. The same process was used for this program.

FSA Loan Deficiency Payments 

(LDP)

See the process described in the MAL discussion. The same process was used for this program.

FSA Direct and CounterCyclical Payments (DCP)

See the process described in the MAL discussion. The same process was used for this program.

FSA Conservation Reserve 

Program (CRP)

See the process described in the MAL discussion. The same process was used for this program.

FSA Miscellaneous Disaster 

Programs (MDP)

See the process described in the MAL discussion. The same process was used for this program.

FSA Noninsured Assistance 

Program (NAP)

See the process described in the MAL discussion. The same process was used for this program.
Other Accompanying Information

219

Agency Program Sampling Process

FS Wildland Fire Suppression 

Management (WFSM)

WFSM employs monetary unit sampling. Transactions coded to the Wildland Fire Suppression 

Fund are systematically analyzed and reviewed.

Two samples were selected by systematic random sampling with probability proportional to size 

(dollar amount). Sample size determination was based on total transaction amounts through 

6/30/2009 for sample one. The second sample size determination was based on total transaction 

amounts from 7/01/2009 through 9/30/2009. Due to the seasonality of the final amounts, the first 

nine months were sampled as a higher dollar rate (conservative rate) than the last three months. 

The final three months were sampled at the dollar rate for the entire balance.

To ensure the validity of the sample design, sample sizes, and measurement methodology, a 

professional statistician from the University of New Mexico was consulted. The sample was 

selected using a 90 percent confidence level, with a precision range of 2.5 percent. Software used 

for sample selection was SAS 9.2 for Windows. 

RD Rental Assistance 

Program (RAP)

RD reviewed the sampling plan developed by the U.S. Department of Housing and Urban 

Development for its studies. RD statisticians prepared a similar plan for this report. This report is 

based on a review of tenants receiving rental assistance (RA) during FY 2008. The sampling plan 

consisted of 666 RA payments from a universe of 3,411,380, or .02 percent. The methodology 

produced a sample with a 99-percent confidence level. This year, the audit unit from the Centralized 

Servicing Center (CSC) conducted the study rather than the RD field staff that were used in 

previous years. The study required CSC to evaluate tenant files and income calculations.

The only parameter used to determine the eligible universe was the RA payment. No other data 

element, such as location, size of property, number of units, and availability of other rental 

assistance (such as Section 8) was a consideration. The statisticians were provided a data extract 

from the Multi-Family Housing Information System. The extract contained a list of all tenants 

receiving RA during FY 2008. The data included month of payment, project name, project identifier 

(case number/project number) and tenant name and unit number. From the data extract, the 

statisticians selected the sample by a systematic sample technique.

Once the sample was identified, a letter was sent to the borrower/management agents that 

explained the process, provided the list of tenant payments to be reviewed, and provided a list of 

documents that needed to be provided to the Centralized Servicing Center (CSC) for review. The 

data received from the borrower/management agent were used to compare agency records. The 

study required CSC to complete the survey for the selected tenant payments. There was to be no 

substitution of the selected payment, and, if the management agent was unable to submit the file, 

the payment would be considered improper. 

RMA Federal Crop Insurance 

Corporation Program Fund 

(FCIC)

RMA completed the random 2006, 2007, and 2008 crop year indemnities to review during 2007, 

2008, and 2009. For FY 2010 reporting, RMA sampled and reviewed the 2008 crop year, using 

those results to replace the 2006 crop year results. This process allowed RMA to maintain a running 

average error rate for the three most recent crop years. RMA will repeat this process for 3 years to 

compile random indemnity reviews, and build a database that will identify the RMA program-error 

rate and identify any discernable trends. Samples are drawn by the compliance staff. The staff 

oversees the compliance review database and data quality control. Limited resources make it 

impractical to conduct a statistically valid program review each year. Despite these limits, in 

combination with the National Operations Reviews conducted by RMA compliance personnel, these 

random reviews of paid indemnities should provide the program with sufficient data to establish an 

acceptable error rate for the purposes of the IPIA.

NRCS Farm Security and Rural 

Investment Act programs 

(FSRIP)

NRCS determined the universe size of payments for all the programs by using all transactions for 

FY 2009 entered into the accounting system against general ledger account 4902 and Treasury 

Symbols 12_1004. Transaction codes were identified and extracted which represented payments 

against the individual program fund codes to create a universe of payments for each individual 

program.

Based upon last year’s results and conversations with the individual Program Managers, NRCS 

projected the anticipated rate of occurrence. This occurrence would be the error rate from the 

previous years’ sampling, factoring in any substantial changes made which mitigates improper 

payment risk found in prior IPIA efforts, external, and internal audits or reviews.

NRCS estimated the precision range, i.e., the upper and lower bounds around the estimated rate of 

occurrence as 5.00 percent (+/- 2.50 percent) based upon conversations with the program 

managers. While OMB guidance recommended a 90- percent confidence level, NRCS used a more 

rigorous confidence level of 95 percent for the sample since accounting and financial applications 
Other Accompanying Information

220

Agency Program Sampling Process

typically use that confidence level. Based upon the four variables above (universe size, anticipated 

occurrence rate, precision range, and confidence level), the agency calculated the necessary 

sample size.

Using a random number generator, NRCS selected payments for the sample. For program 

payments made through ProTracts system, payment amounts were aggregated by payment 

document number. ProTracts produced a payment transaction for each component of a payment 

request. This resulted in testing of the entire payment instead of a portion and simplifies the 

research required.

A complete copy of the contract file was requested from the field office. The field office was required 

to verify highly erodible land/wetland conservation compliance, and obtain adjusted gross income 

compliance documentation from the participant. Headquarters financial management (FMD) 

personnel audited the contract information against the program’s business process using a 

standard template developed for each individual program. The template ensured consistency in the 

reviews, and incorporated tests for known causes of improper payments, issues identified by the 

program managers and internal controls implemented because of prior internal and external audits 

and reviews.

Agency Program Corrective Actions Planned

FSA/CCC Marketing Assistance 

Loan program (MAL)

MAL improper payments were primarily attributable to administrative errors.

Causes of improper payments include:

• An acceptable acreage report was not obtained; 

• All required signatures were not obtained on the storage note and security agreement before 

disbursement; and

• Loan quantity amount was not supported by acceptable documentation.

Actions taken or that will be taken to reduce the weaknesses identified are as follows:

a. Broad Scope Actions Taken:

• FSA has committed to reducing improper payments and program weaknesses that 

contribute to improper payments;

• FSA has taken actions to correct its deficiencies in many areas, and incorporated the 

priority of reducing improper payments into its strategic planning documents; and

• Compliance reviews and spot-checks are required to ensure the accuracy of payments and 

integrity of FSA programs. Annually, based on a statistical sampling method, producers 

nationwide are selected for compliance review and spot-check. COFs are required to 

complete spot-checks and reviews for the various programs and activities in which the 

selected producers participate for the year, and record the results of these reviews in the 

National Compliance Review database. This reporting mechanism allows the National office 

to monitor the overall integrity of each program being implemented.

b. Actions Already Taken that Impact All Causes of Improper Payments Identified:

• Trained field personnel on improper payments and educated them on the importance of 

control procedures as well as the potential risks of noncompliance. Training was delivered

through various means including in person and via USDA’s training tool, AgLearn, and is 

being followed up with communications and job aid to help facilitate compliance controls;

• Integrated the employee’s individual performance results related to reducing improper 

payments into his/her annual performance rating;

III. Describe the Corrective Action Plans for reducing the estimated rate of 

improper payments. Include in this discussion what is seen as the cause of 

errors and the corresponding steps necessary to prevent future occurrences. 

If efforts are already underway, and/or have been ongoing for some length of 

time, it is appropriate to include that information in this section.
Other Accompanying Information

221

Agency Program Corrective Actions Planned

• Utilized program specific checklists for COF employees to use before payment. County 

Executive Directors and District Directors review the completed checklists to help identify 

apparent internal control deficiencies and address additional training needs to reduce future 

errors;

• Issued various National Notices and handbook amendments to State and county offices, 

providing them with instructions to properly disburse and process repayments related to

MAL benefits;

• Contacted State office (SO) managers where the majority of improper payments were 

identified, according to the statistical sample, to determine possible training and/or job aids 

the SO and COF staff may need to assist in facilitating compliance to controls;

• Issued a notice for each program for the FY 2008 National CORP review of improper 

payments providing detailed findings discovered during the FY 2008 statistical sample, 

including established policy and procedure references for each finding; 

• Issued various national notices to SOs and COFs re-enforcing current program policies and 

procedures; and

• Conducted a 2008 National Farm Bill training conference that included a specific 

presentation pertained to necessary internal control procedures and action expected upon 

the issuance of national CORP review notices pertaining to improper payments. PowerPoint 

presentations of each of the respective training sessions were posted to the FSA Intranet for 

immediate reference for SOs and COFs to use in conducting subsequent training sessions 

for all the applicable FSA employees within a respective state.

c. Actions That Will be Taken that Impact All Causes of Improper Payments Identified:

• Provide a notice to SOs and COFs providing the detailed findings discovered during the FY 

2010 program specific statistical sample including established policy and procedure 

references for each finding;

• Reinforce current program policies regarding program compliance through the issuance of 

National notices and handbook amendments to SOs and COFs personnel;

• Improve the quality of field guidance by implementing a process whereby program directives 

are vetted by at least six field office employees before directives are approved and issued 

Nation-wide;

• Review existing policy and procedures to determine program compliance inefficiencies and 

eliminate inadequate program compliance controls; and

• Contact State office managers where the majority of improper payments were identified 

during the 2010 IPIA reviews to facilitate necessary corrective actions in regard to training 

or clarifications regarding procedures and policies.

FNS Supplemental 

Nutrition Assistance 

Program (SNAP)

SNAP improper payments were primarily attributable to administrative and verification errors.

Causes of improper payments include:

Improper payments occurred when a participating household is certified for too many or too few 

benefits compared to the level for which they are eligible. This can result from incomplete or inaccurate 

reporting of income and/or assets by participants at the time of certification. It also can occur from 

changes subsequent to certification or errors in determining eligibility or benefits by caseworkers. 

Eligibility worker delays in action or inaction taken on client reported changes also can cause of 

improper payments.

An analysis of the FY 2009 completed statistical sample revealed that approximately 65.71 percent of 

all variances occurred before or at the most recent certification/recertification. Additionally, 69.40 

percent of the errors were State agency caused. About half of the errors (54.60 percent) were income 

related and caused by client misreporting or the agency misapplying the reported income. Misreporting 

or misapplying deductions was the second largest source of errors at 27.75 percent. 

Steps that are (or will be) taken to address specific findings in the last statistical sample

Program regulations require State agencies to analyze data to develop corrective action plans to 

reduce or eliminate program deficiencies. A State with a high error rate must develop a quality control 

(QC) corrective action plan to address deficiencies revealed through an analysis of its own QC data. A 

State with an excessive error rate will be required to invest a specified amount (depending on its error 

rate and size) designated specifically to correct and lower its error rate. The State also will face further 

fiscal penalties if it fails to lower its error rate in a future fiscal year. 
Other Accompanying Information

222

Agency Program Corrective Actions Planned

Steps that are (or will be) taken to improve the overall control environment and improper 

payments

FNS, through its regional offices, works directly with States to impart the importance of payment 

accuracy and correct payments to State leadership. The agency also helps those leaders develop 

effective corrective action strategies to reduce payment errors. Regional offices provide many forms of 

technical assistance to States, such as:

• Analyzing data;

• Reviewing and monitoring corrective action plans;

• Developing strategies for error reduction and corrective action;

• Participating on boards and in work groups; and

• Hosting, attending, and supporting payment accuracy conferences.

FNS administers a State Exchange Program that provides funds to States to facilitate travel for 

obtaining, observing, and sharing information on best practices, and effective techniques for error 

reduction. Coalitions have been formed among States to promote partnerships, information exchange 

and collaborative efforts. These efforts address mutual concerns and support development of effective 

corrective action.

FNS National School 

Lunch Program 

(NSLP)

NSLP improper payments were primarily attributable to verification and administrative errors.

Causes of improper payments include:

• Benefit calculation error or duplicate payments;

• Lack of proper documentation or inadequate supporting documentation; and

• Fraud or misrepresentation by program participants or others.

FNS has worked closely with OMB, Congress, the States, schools, and advocacy partners for two 

decades to gain a better understanding of erroneous payments, and develop and implement initiatives 

to address them.

Strengthened the Certification Process through Legislative Program Reauthorization

FNS worked with Congress to develop the Child Nutrition and WIC Reauthorization Act of 2004 (CNR) 

to enact program changes that address school meals certification problems. CNR strengthened the 

certification process by:

• Requiring SNAP direct certification for free meals in all school districts, and continuing 

authority for optional direct certification using data from the Temporary Assistance for 

Needy Families, and the Food Distribution Program on Indian Reservations;

• Simplifying the certification process by requiring a single application for all eligible children 

in a household;

• Requiring eligibility determinations to be in effect for the entire school year;

• Modifying verification requirements, and adding authority for optional direct verification of 

children’s eligibility;

• Requiring State agencies to conduct additional administrative reviews of school districts with 

higher rates of error;

• Requiring increased efforts to obtain household response to application verification 

requests; and

• Requiring districts with high rates of non-response to verification to target subsequent year 

verification activity toward error-prone applications.

FNS continues to fully implement all the CNR provisions designed to improve program accountability.

Improved State and Federal Oversight and Strengthen Program Integrity

FNS conducted the following to improve oversight and technical assistance:

• Required annual training for schools on certification and accountability issues;

• Secured funding from Congress in 2004 for FNS technical assistance to help State and 

local partners reduce administrative errors and improve program integrity;

• Provided ongoing guidance and training materials to State agencies to improve school 

monitorings;

• Issued a revised eligibility manual, which contains information on determining students’ 

eligibility for free and reduced price meals under 7 Code of Federal Regulations Parts 210 

and 220, the National School Lunch Program (NSLP), including after school snacks and 

commodity schools, and the School Breakfast Program (SBP);
Other Accompanying Information

223

Agency Program Corrective Actions Planned

• Trained more than 500 State and federal reviewers on the Coordinated Review Effort (CRE) 

process and forms to ensure that performance standards related to meal counting and 

claiming and serving reimbursable meals are met. Also, the CRE Guidance, is being 

updated to include current procedures to be utilized during CRE Reviews. State agencies 

are implementing the CRE procedures that were identified during the training sessions;

• Pursuant to the CNR, FNS released applications for the fourth round of Direct 

Certification/Verification grant funding in FY 2009. These grants are available to State 

agencies to assist in implementing mandatory direct certification, direct verification, and 

other provisions of CNR related to determining eligibility to receive benefits in NSLP and 

SBP. Child Nutrition and SNAP State agencies are eligible to apply for funds. A series of 

grants were awarded in FY 2006-09. CNR provided $8.3 million for this purpose.

• FNS annually releases a solicitation for funding to State agencies for Administrative 

Reviews and Training grants. This funding is available to perform administrative reviews 

and training of selected local educational agencies identified by the States as having 

demonstrated a high level of, or high risk for, administrative error in the NSLP. A total of $4 

million was set aside in FY 2005 and for each fiscal year thereafter.

Additional Action Planned

Planned efforts include:

• Implementing improvements in data reporting systems, and have launched an improved webased system for States to report the results of verification activity. We anticipate that this 

reporting mechanism will improve the accuracy and timeliness of this data. In addition, we 

have been actively emphasizing to States the importance of using this and other data 

sources, such as the CRE Data Report to identify and target corrective action;

• Continue the APEC study every five years, which would enable FNS to estimate and 

measure changes in erroneous payments over time, and help inform FNS, Congress, the 

States, and advocacy partners on the development of additional guidance, training, and 

policy options; and

• Implement an improved web-based system for States to report the results of verification 

activity annually. This report will improve the accuracy and timeliness of reporting and 

provide States with a way to identify and target corrective actions.

FNS School Breakfast 

Program (SBP)

SBP improper payments were primarily attributable to authentication and administrative errors.

The corrective actions planned for this program are similar to NSLP. See the NSLP description.

FNS Special Supplemental 

Nutrition Program for 

Women, Infants and 

Children (WIC)

WIC improper payments were primarily attributable to verification errors.

Causes of improper payments include:

• Vendor overcharges and undercharges; and 

• Program participants were income ineligible.

Actions to Reduce Improper Payments

Vendor Error:

The Child Nutrition Act was amended in 1996 to require the disqualification of WIC vendors who 

had been disqualified by SNAP. It also was amended in 1998 to require permanent disqualification 

of vendors who had been convicted of trafficking and illegal sales. The WIC/FSP Vendor 

Disqualification Final Rule implemented these requirements and also mandated three-year 

disqualifications for overcharging and charging for food not received. The WIC Food Delivery Final 

Rule mandated nationwide standards for vendor authorization, training, and monitoring. FNS will 

annually estimate and report improper payments to vendors based on information on vendor 

investigations routinely conducted by the State WIC Agencies and reported to FNS.

• Certification Error:

FNS plans to continue periodic examinations of certification error in the WIC Program. The Child 

Nutrition Act was amended in 1998 to require income documentation for WIC Program applicants in all 

States. The Final WIC Policy Memorandum #99-4, “Strengthening Integrity in the WIC Certification 

Process,” the WIC Certification Integrity Interim Rule, and the WIC Certification Integrity Final Rule 

implemented this requirement. The WIC Food Delivery Final Rule mandated 1-year disqualifications for 

the most serious participant violations, including dual participation and misrepresentation of income. 

The WIC Miscellaneous Final Rule required State agencies to prevent such conflicts of interest as 

clinic staff certifying themselves, close friends, or relatives, and also required State agencies to 

maintain information on participant and employee fraud and abuse. FNS plans to provide the results fo 
Other Accompanying Information

224

Agency Program Corrective Actions Planned

the measurements of improper payments due to certification error for FY 2009 payments, with the 

initial improper payment amount and error rate available in March 2011. 

FNS Child and Adult Care 

Food Program 

(CACFP)

CACFP improper payments were primarily attributable to verification errors.

Causes of improper payments include:

• Family Day Care Homes (FDCH) error in reporting the number of meals eligible for 

reimbursement; and

• Sponsor error in determining a participating FDCH’s reimbursement tier. 

Actions to Reduce Improper Payments 

CACFP has three distinct parts: Child Care Centers, Adult Day Care Facilities, and Family Day Care 

Homes (FDCH). Overall program funding is provided to State agencies which provide funds to 

sponsoring organizations to pay for claims for reimbursable meals served at provider sites. Sites can 

be as large as an institution or as small as a household. Each part of CACFP has its own 

reimbursement structure.

Payments and claim information are transferred among FNS, State agencies, program sponsors, and 

program sites. Each such transaction represents a risk for improper payment. Because requirements 

vary significantly for each different type of program sponsor and site, a full and rigorous assessment of 

the rate of improper payments is extremely complex.

The original plan was to develop a program-wide study which would examine reimbursements for 

meals served and develop program error measurements that complied with the requirements of the 

IPIA. Because of the complexities of the program, FNS estimated that it would cost $20 million to 

measure improper payments at the precision required by IPIA. This amount has not been provided.

In lieu of funding for a program-wide measurement, FNS has identified the FDCH component of this 

program as potentially high risk. FDCHs participate in CACFP through public or private nonprofit 

sponsoring organizations. FDCH improper payments are most likely caused by sponsor error in 

determining a participating home’s reimbursement tier (tiering error) or by FDCH error in reporting the 

number of meals which are eligible for reimbursement (claiming error). 

Two activities are underway which provide information on improper payments in the FDCH component 

of CACFP. A third activity was pilot tested during FY2007.

• Child Care Assessment Project (CCAP)—In the Spring of 2004, FNS began the CCAP. 

This project was designed to measure the effectiveness of efforts to improve the integrity of 

CACFP family day care homes and provide information from a broadly representative 

national sample of sponsors and providers. Over a four year period, FNS conducted 

comprehensive on-site assessments of a sample of participating family day care home 

sponsors. These assessments were designed to analyze the effectiveness of FNS 

regulatory and policy initiatives on program performance. They offered insights on the 

control points in the claiming and reimbursement process that most frequently cause or 

contribute to improper payments. FNS implemented the Targeted Management Evaluation 

process for FY 2010 and FY 2011, in response to identified areas of management 

weakness. The information from this process will help to estimate CACFP erroneous 

payments pursuant to IPIA.

• Tiering Error—FNS has developed an annual sponsor tiering error measure and tested it. 

CACFP sponsors are responsible for determining whether family day care homes receive 

meal reimbursement at the higher rate (Tier 1) or lower rate (Tier 2). The third annual data 

collection was conducted to determine a nationally representative sponsor tiering 

determination error rate.

• Claiming Error—FNS has identified two potential methods of estimating the risk of claiming 

error:

− State data approach: Use data from State monitoring visits of FDCHs.

− Sponsor data approach: Federal staff select a random sample of sponsoring organizations 

and from each use a random selection of the sponsor’s monitoring visits of FDCHs.

Both approaches compare the number of participants observed during a monitoring visit to the average 

number of meals claimed for reimbursement for the meal or snack closest to the time of the visit. FNS 

pilot-tested both approaches in conjunction with the CCAP reviews. FNS concluded that comparing 

meal claims to a sponsor’s report of the number of children observed during a monitoring visit does not 

provide a reliable estimate of family home day care meal claiming error.
Other Accompanying Information

225

Agency Program Corrective Actions Planned

FNS has contracted with Mathematica Policy Research, Inc. to evaluate the feasibility of three different 

data collection methods for validating FDCH meal reimbursement claims. The pretest found that parent 

recalls hold promise for validating whether meals claimed for children of interviewed parents are 

erroneous. A plan is being developed to further evaluate the use of parent-recall interviews in validating 

sponsor submitted meal claims for FDCHs.

FSA Milk Income Loss 

Contract Program 

(MILC)

MILC improper payments were primarily attributable to administrative errors.

Causes of improper payments include:

• Incorrect payee share calculation; 

• Wetland conservation certification not on file; and

• Income ineligibility.

For MILC corrective actions, see the MAL section. The same corrective actions apply to this program.

FSA Loan Deficiency 

Payments (LDP)

LDP improper payments were primarily attributable to administrative errors.

Causes of improper payments include:

• Incorrect rate used to calculate payment; 

• Producer did not have beneficial interest in the commodity; and

• Producer did not have risk in producing the crop. 

For LDP corrective actions, see the MAL section. The same corrective actions apply to this program.

FSA Direct and CounterCyclical Payments 

(DCP)

DCP improper payments were primarily attributable to administrative errors.

Causes of improper payments include:

• Payee did not have enough cropland interest to support claim; 

• Required signatures and/or acreage reports were not on file; and

• Payment did not take into account required base acres reduction.

For DCP corrective actions, see the MAL section. The same corrective actions apply to this program.

FSA Conservation 

Reserve Program 

(CRP)

CRP improper payments were primarily attributable to administrative and verification errors.

Causes of improper payments include:

• Cost share amount was incorrect; 

• Conservation reserve contract or plan of operation was not on file or missing signatures; 

and

• Payee share calculation incorrect.

For CRP corrective actions, see the MAL section. The same corrective actions apply to this program.

FSA Miscellaneous 

Disaster Programs 

(MDP)

MDP improper payments were primarily attributable to administrative errors.

Each fiscal year’s payment data represents different disaster response programs based on authorities 

provided by legislation passed by Congress. 

Causes of improper payments include:

• Calculated payment amount is incorrect; 

• Acceptable acreage report not on file; and

• Application not approved and payment should not have been made.

For MDP corrective actions, see the MAL section. The same corrective actions apply to this program.

FSA Noninsured 

Assistance Program 

(NAP) 

NAP improper payments were primarily attributable to administrative errors.

Causes of improper payments include:

• Application for payment filed late; 

• Incorrect total production used to calculate payment; 

• Notice of loss filed late; 

• Unit yield is not properly calculated; and

• Incorrect crop acreage used to calculate payment. 

For NAP corrective actions, see the MAL section. The same corrective actions apply to this program. 

FS Wildland Fire 

Suppression 

Management (WFSM)

FS corrective actions have significantly reduced the potential for errors. Those actions resulted in a 

zero improper payment error rate for WFSM. FS improved controls with regard to review processes, 

performed continuous internal monitoring of possible improper payments, centralized accounting 

functions, improved communications, and performed follow-up prior to payment authorization.

RD Rental Assistance 

Program (RAP)

RAP improper payments were primarily attributable to administrative and verification errors.

Cause of improper payment include: 

• Insufficient file documentation; and
Other Accompanying Information

226

Agency Program Corrective Actions Planned

• Borrower/agent calculation errors and number transposition.

Corrective actions include:

• Establish a tracking process in MFIS to monitor the number of tenant files reviewed during 

the property’s triennial Supervisory Visit. This process will provide the agency with 

additional information regarding the review of tenant files outside of the IPIA audit to help 

determine trends to supplement with the IPIA review. It also will provide RD with additional 

documentation to determine on-going compliance with the proper payment of Rental 

Assistance. Timeframe – Completed on April 14, 2010.

• Implement a new management agent performance assessment review that will reduce 

management fees paid to noncompliant management agents. If performance decreases, 

there will be a concurrent decrease in the base management fee allowed for that year. 

Errors made on tenant certifications will be one of six criteria used for determining reduction 

in management fees paid. Timeframe – December 31, 2010; and

• Continue to pursue access to the Department of Health and Human Services’ New Hires 

database and the Department of Housing and Urban Development’s Enterprise Income 

Verification System to be shared with State offices and management agents. Ongoing.

RMA Federal Crop 

Insurance 

Corporation Program 

Fund (FCIC)

Causes of improper payments include:

• Incorrect application of crop insurance policy requirements for prevented planting; 

• Incorrect acreage reports; and

• Incorrect indemnity calculations. 

FCIC improper payments were primarily attributable to verification errors.

RMA completed the fifth year of the 3-year review cycle established to determine the improper 

payment rate for the Federal Crop Insurance Program. While the strategy for identifying and controlling 

the error rate includes identifying error trends and policy concerns and correcting them, no underlying 

policy or underwriting issues have become apparent. This is in part due to the diversity of crops being 

reviewed and suggests it may be several cycles before RMA may amass sufficient numbers of samples 

on any particular crop to draw meaningful comparisons in the errors identified.

RMA continues to expand its strategic data acquisition and analysis efforts by incorporating additional 

remote sensing and geospatial analyses to its data warehousing and data mining initiative. The data 

warehouse was extended to include the compilation of detailed geospatial NEXRAD radar and rainfall 

data. The application of these data and analysis tools were then increased to include underwriting and 

program integrity issues throughout the program. Data mining activities continue to show significant 

cost avoidance savings each year by identifying and spot checking the crop insurance program most 

anomalous participants based on their history of filing claims. Additionally, RMA and FSA continue to 

work on completing the Comprehensive Information Management System. This project is designed to 

identify common and unique producer and crop information reported to both agencies; develop 

services to access the information; aid in information reconciliation; and reduce the reporting burdens 

of farmers, ranchers, producers, RMA, FSA, and crop insurance providers.

When RMA negotiated and executed the new Standard Reinsurance Agreement (SRA) starting in 

2005, it emphasized improved quality controls and enhanced penalties that together should encourage 

participating companies who sell and service Federal crop insurance policies to improve their improper 

payments rate. Based on the passage of the 2008 Farm Bill, RMA will have another opportunity 

beginning with the 2011 reinsurance year to further adjust and improve SRA holder quality control 

requirements.

NRCS Farm Security and 

Rural Investment Act 

programs (FSRI)

FSRI improper payments were primarily attributable to administrative error.

Causes of improper payments include:

• Contract modification error.

NRCS performs a quarterly review of open obligations. Checklists are developed to be completed 

during the reviews. NRCS will add specific questions to the checklist to address the documentation 

issues found during IPIA testing.
Other Accompanying Information

227

Below are summary level tables for all high risk programs outlining improper payment rates for the last 

two years and future reduction targets. When a number cannot be provided, an explanation is provided 

in the notes below. The tables include amounts from program sampling results. USDA programs report 

results the year following sampling activity. For example, results reported during FY 2010 represent 

measures of FY 2009 outlays and program activity.

Improper Payment Sampling Results ($ in millions)

Program

Results

Reported in FY 2009

Results

Reported in FY 2010

Outlays IP% IP$ Outlays IP% IP$

Marketing Assistance Loan Program, FSA/CCC [Note #3] 4,935 2.56% 85 4,151 0.81% 35

Supplemental Nutrition Assistance Program, FNS [Note #6] 34,611 5.01% 1,733 50,360 4.36% 2,195

National School Lunch Program, FNS [Note #1]

Total Program

Certification Error

Counting/Claiming Error

9,436

9,436

9,436

16.44%

9.56%

6.88%

1,551

902

649

8,925

8,925

8,925

16.28%

9.40%

6.88%

1,453

839

614

School Breakfast Program, FNS [Note #1]

Total Program

Certification Error

Counting/Claiming Error

2,273

2,273

2,273

24.62%

8.83%

15.79%

560

201

359

2,534

2,534

2,534

24.87%

9.08%

15.79%

630

230

400

Women, Infants and Children, FNS [Note #2]

Total Program

Certification Error Component

Vendor Error Component

4,483

4,483

4,483

N/A

N/A

1.27%

N/A

N/A

57

6,480

6,480

6,480

N/A

N/A

1.17%

N/A

N/A

76

Child and Adult Care Food Program, FNS [Note #2]

Total Program

FDC Homes – Tiering Decisions

FDC Homes – Meal Claims

2,214

713

713

N/A

2.07%

N/A

N/A

15

N/A

2,461

911

911

N/A

0.99%

N/A

N/A

9 

N/A

Milk Income Loss Contract Program, FSA [Note #5] [Note #3] 2 N/A N/A 602 0.66% 5

Loan Deficiency Payments, FSA [Note #5] [Note #3] 6 N/A N/A 114 0.44% 0.5

Direct and Counter-Cyclical Payments, FSA [Note #3] 4,948 0.42% 20 5,921 0.96% 56

Conservation Reserve Program, FSA [Note #3] 1,876 0.72% 11 1,814 1. 20% 24

Miscellaneous Disaster Programs, FSA [Note #3] 2,245 0.90% 19 108 4.60% 5

Noninsured Assistance Program, FSA [Note #3] 67 14.20% 8 59 11.65% 7

Wildland Fire Suppression Management, FS 1,016 0.00% 0.0 710 0.00% 0.0

Rental Assistance Program, RD 887 2.06% 18 979 1.39% 14

Federal Crop Insurance Corporation Program Fund, RMA [Note #4] 3,545 5.79% 205 8,680 6.05% 525

Farm Security and Rural Investment Act programs, NRCS 1,320 0.03% 0.0 1,505 0.41% 6

USDA Total 72,363 5.92% 4,283 93,853 5.37% 5,039

IV. Based on the Rate(s) Obtained in Step III, Set Annual Improvement Targets 

through FY 2012. 

Improper Payment Reduction Outlook FY 2010 – FY 2012
Other Accompanying Information

228

Detailed Breakout of Improper Payment Reported in FY 2010

Total 

Payments

$ in millions IP %

OverPayments

% 

UnderPayments

% 

Other

% 

Incorrect 

Disbursement

% 

Incomplete 

Paperwork

% 

Marketing Assistance Loan 

Program, FSA/CCC 

[Note #3]

4,151 0.81% 0.81% 0.00% N/A 0.09% 0.72%

Supplemental Nutrition 

Assistance Program, FNS 

[Note #6]

50,360 4.36% 3.53% 0.82% N/A 4.36%

N/A

National School Lunch 

Program, FNS 8,925 16.28% 12.34% 3.94% N/A 16.28% N/A

School Breakfast Program, 

FNS 2,534 24.87% 21.47% 3.40% N/A 24.87% N/A

Women, Infants and Children, 

FNS 6,480 1.17% 0.86% 0.31% N/A 1.17% N/A

Child and Adult Care Food 

Program, FNS 911 0.99% 0.99% 0.00% N/A 0.99% N/A

Milk Income Loss Contract 

Program, FSA [Note #5] [Note 

#3]

602 0.66% 0.41% 0.25% N/A 0.52% 0.14%

Loan Deficiency Payments, 

FSA [Note #5] [Note #3] 114 0.44% 0.30% 0.14% N/A 0.44% N/A

Direct and Counter-Cyclical 

Payments, FSA [Note #3] 5,921 0.96% 0.86% 0.10% N/A 0.74% 0.22%

Conservation Reserve 

Program, FSA [Note #3] 1,814 1.20% 1.08% 0.12% N/A 0.47% 0.76%

Miscellaneous Disaster 

Programs, FSA [Note #3] 108 4.60% 3.55% 1.05% N/A 3.56% 1.04%

Noninsured Assistance 

Program, FSA [Note #3] 59 11.65% 10.23% 1.42% N/A 5.63% 7.20%

Wildland Fire Suppression 

Management, FS 710 0.00% 0.00% 0.00% N/A 0.00% 0.00%

Rental Assistance Program, 

RD 979 1.39% 1.13% 0.26% N/A 1.19% 0.20%

Federal Crop Insurance 

Corporation Program Fund, 

RMA 

8,680 6.05% 6.02% 0.03% N/A 6.05% 0.00%

Farm Security and Rural 

Investment Program, NRCS 1,505 0.41% 0.41% 0.00% N/A 0.41% 0.00%

USDA Total 93,853 5.37% 4.42% 0.95% 0.00% 5.30% 0.07%

Improper Payment Reduction Outlook ($ in millions)

Program

FY 2011 Reporting FY 2012 Reporting FY 2013 Reporting

Outlays IP% IP$ Outlays IP% IP$ Outlays IP% IP$

Marketing Assistance Loan Program, 

FSA/CCC 2,278 0.81% 18 127 0.81% 1 127 0.81% 1 

Supplemental Nutrition Assistance 

Program, FNS [Note #6] 72,577 4.36% 3,164 76,030 4.36% 3,315 76,030 4.36% 3,315 

National School Lunch Program, FNS 10,061 15.82% 1,592 10,456 15.37% 1,607 10,456 14.93% 1,561
Other Accompanying Information

229

Improper Payment Reduction Outlook ($ in millions)

Program

FY 2011 Reporting FY 2012 Reporting FY 2013 Reporting

Outlays IP% IP$ Outlays IP% IP$ Outlays IP% IP$

School Breakfast Program, FNS 2,823 24.06% 679 2,959 23.27% 689 2,959 22.52% 666

Women, Infants and Children, FNS 7,704 0.97% 75 7,467 0.77% 58 7,467 0.57% 43 

Child and Adult Care Food Program, FNS 896 0.92% 8 908 0.87% 8 908 0.82% 7

Milk Income Loss Contract Program, FSA 225 0.66% 1 100 0.66% 0.6 100 0.66% 0.6

Loan Deficiency Payments, FSA 183 0.44% 1 24 0.44% 0.1 24 0.44% 0.1 

Direct and Counter-Cyclical Payments, 

FSA 6,223 0.40% 25 5,712 0.39% 22 5,712 0.39% 22

Conservation Reserve Program, FSA 1,973 0.70% 14 1,958 0.69% 14 1,958 0.69% 14

Miscellaneous Disaster Programs, FSA 1,284 0.88% 11 1,205 0.87% 10 1,205 0.87% 10 

Noninsured Assistance Program, FSA 122 5.90% 7 124 2.50% 3 124 2.50% 3

Wildland Fire Suppression Management, 

FS 2,300 0.02% 0.5 2,400 0.02% 0.5 2,500 0.02% 0.5

Rental Assistance Program, RD 999 1.35% 13 1,030 1.31% 13 1,079 1.28% 14

Federal Crop Insurance Corporation 

Program Fund, RMA 5,425 4.50% 244 6,000 4.40% 264 6,000 4.30% 258

Farm Security and Rural Investment, NRCS 

2,172 0.15% 3 2,688 0.10% 3 2,688 0.10% 3 

The chart below includes recovery of improper payments from USDA’s high risk programs. The 

recoveries represent overpayment amounts identified by agency post-payment reviews and annual IPIA 

statistical sampling. The prior years column includes recoveries from FY 2004 through FY 2009. As 

IPERA requirements are implemented, recoveries identified from additional programs will be included 

in future years. 

FY 2010 Recovery of Improper Payments ($ in Million)

Agency Source

FY 2010 

Amounts 

Identified

FY 2010 

Amounts 

Recovered

Prior Years 

Amounts 

Identified

Prior Years

Amounts 

Recovered

Cumulative 

(Current & 

Prior Years) 

Amounts 

Identified 

Cumulative 

(Current & 

Prior Years) 

Amounts 

Recovered

USDA (High Risk Programs) NA 310.332 NA 491.070 NA 801.402

NA 310.332 NA 491.070 NA 801.402

NA 310.332 NA 491.070 NA 801.402

Note #1: Information has not been adjusted for interaction between the different sources of certification 

error and counting/claiming error. Improper payment rates (School Year 2008/09) times SBP outlays 

(FY 2009).

Note #2: WIC and CACFP tests components of their total program. WIC currently tests and reports on 

the vendor error component of the payment process. The WIC certification error component 

information should be available in 2011. CACFP currently tests and reports on the FDCH tiering 

decision component of the payment process. FNS continues to evaluate the measurement processes for 

the CACFP meal claim component. It has not set a date for measurement and reporting.
Other Accompanying Information

230

Note #3: The FY 2010 estimated improper payment dollar amounts for MAL, DCP, CRP, MDP, and NAP 

may reflect variances from the relationship between the improper payment percentage and the outlays 

amount. These variances result from the complex, multi-stage statistical sampling methodology 

developed by the contract statistician in calculating the independent projections of the 

dollars/percentages in error. The variances are a complex ratio estimate weighted with respect to the 

payments within their applicable county stratification. They reflect the variability within the payment 

data and occur with a 90-percent confidence level. The MAL, DCP, CRP, MDP, NAP, MILC, and LDP 

universe of payments for the FY 2010 was September 2008 through August 2009. The measurement 

period was adjusted to meet the report timeframe.

Note #4: RMA uses a three year running average to calculate the improper payment error rate. This is 

the fifth year RMA has used this process to measure the improper payment error rate.

Note #5: FSA did not measure MILC and LDP for the FY 2009 IPIA review and reporting cycle since 

sampling was not cost effective due to the very low outlay amounts ($2 million for MILC and $6 million 

for LDP). FSA measured MILC and LDP for the FY 2010 IPIA review cycle.

Note #6: The SNAP FY 2010 improper payments error rate and estimated amount of improper 

payments for payments made in FY 2009 reflect the ARRA requirement to exclude small errors of $50 

and less. Future performance may be affected by the expiration of this provision. USDA and OMB 

continue to evaluate SNAP improper payment targets. The targets may be adjusted in consideration of 

increased need resulting in further growth in the program, which has been unprecedented in the last 

year, State budget constraints, and other related factors.

USDA’s task order for FY 2010 recovery auditing contractor services was unexpectedly cancelled. 

Alternatively, the FY 2010 columns in the following chart reflect the agency identified and recovered 

amounts through post-payment reviews, contract close-outs, or notification by vendors. USDA is in the 

process of establishing a replacement contract for recovery auditing services that will align its recovery 

program with the requirements of the recent Improper Payments Elimination and Recovery Act of 2010 

and the Presidential Memorandum titled “Finding and Recapturing Improper Payments.”

V. Discussion of your Agency’s Recovery Auditing effort, if applicable, including any 

contract types excluded from review and the justification for doing so; actions taken to 

recoup improper payments, and the business changes and internal controls instituted 

and/or strengthened to prevent

further occurrences. 

In addition, complete the table below.
Other Accompanying Information

231

FY 2010 Results for Recovery Auditing of Contracts ($ in Million)

Agency 

Component

Amount 

Subject to 

Review for 

FY 2010 

Reporting

Actual 

Amount 

Reviewed 

and 

Reported

FY 2010 

Amounts 

Identified 

for 

Recovery 

FY 2010 

Amounts 

Recovered 

Prior Years 

Amounts 

Identified for 

Recovery 

Prior Years

Amounts 

Recovered 

Cumulative 

(Current & 

Prior Years) 

Amounts 

Identified for 

Recovery

Cumulative 

(Current & 

Prior Years) 

Amounts 

Recovered

Forest 

Service 480.800 0.709 0.709 0.585 0.684 0.684 1.393 1.269 

Natural 

Resources 

Conservation 

Service

NA NA 0.000 0.000 0.026 0.026 0.026 0.026

Agricultural 

Research 

Service

NA 0.051 0.051 0.000 0.059 0.059 0.110 0.059

Animal and 

Plant Health 

Inspection 

Service*

160.200 157.822 0.000 0.000 0.395 0.395 0.395 0.395

Farm Service 

Agency NA NA 0.000 0.000 0.047 0.047 0.047 0.047

Food Safety 

and 

Inspection 

Service

NA NA 0.000 0.000 0.000 0.000 0.000 0.000

Rural 

Development NA 0.004 0.000 0.004 0.000 0.000 0.000 0.004 

Agricultural 

Marketing 

Service

2.200 NA 0.000 0.000 0.002 0.002 0.002 0.002

All Others NA NA N/A N/A N/A N/A N/A N/A

USDA Total NA NA 0.760 0.589 1.213 1.213 1.973 1.802

FSA

The following are steps taken to ensure agency managers are held accountable for reducing and 

recovering improper payments:

• FSA has a performance management program designed to improve individual and organizational 

effectiveness in accomplishing its mission and goals. This program provides for improper payments 

to be included in the State Executive Directors Performance Plan, element 5 titled “Program 

Management;” 

VI. Describe the steps the agency has taken and plans to take (including time 

line) to ensure that agency managers (including the agency head) are held 

accountable for reducing and recovering improper payments.
Other Accompanying Information

232

• National and State Office (STO) managers are held accountable for ensuring that program policies 

and procedures are provided to the STO and COF employees accurately and on a timely basis. 

National office managers are also held accountable, as reflected in the performance based rating 

measures, for overall program administration at the National level. FSA employees’ performance 

elements are directly related to FSA’s Strategic Plan;

• COF employees, including the County Executive Director, are responsible for making payments to 

producers and following all administrative steps in doing so. 

• Employees will be evaluated on program delivery compliance with regulations, policies, and 

procedures through their performance plans;

• The Deputy Administrator of Field Operations will facilitate meetings with the program areas to 

discuss any additional action necessary for senior management to address accountability;

• Employees at all levels of the agency will be held accountable for efficient and accurate delivery of all 

FSA programs; and

• FSA’s Strategic Plan for 2005-2011 established a performance measure to help ensure payments are 

accurate and complete. The performance measure, “Maintain or Increase the Percentage of Proper 

Payments,” is identified in FSA’s crosscutting management objective, “Strategically Managing 

Human Capital.”

FNS

An agency priority is to improve stewardship of Federal funds. Within this priority are specific goals 

applicable to programs at high risk for erroneous payments. The goal for SNAP, WIC, and CACFP is to 

reduce the error rates by continued management improvements. The goal of NSLP and SBP is to 

improve the accuracy of school administration processes that certify children for school meals. The 

agency goals and priorities are incorporated into each manager’s performance plan.

FS

The FS Albuquerque Service Center management team is held accountable by performance metrics that 

include IPIA compliance. Additionally, the agency chief financial officer will provide disbursement 

performance information to the agency head as part of the performance appraisals for senior 

leadership.

RD 

RD State Offices with improper payment errors develop a corrective action plan. The plan includes 

procedures to train field staff, borrowers and property manager in appropriate required documentation 

and follow-up with tenants and income-verifiers. 

RMA

RMA revised its strategic plan to provide results to enhance accountability. It also has established 

procedures to ensure RMA management takes future corrective actions to address program 

vulnerabilities. Additionally, every employee’s performance plan agreement has contained a positioncorresponding strategic objective element since FY 2005.

NRCS

NRCS incorporated IPIA goals and objectives in the performance standards for all senior executive 

service positions. These also have been included in the regional assistant chiefs and State 

conservationist performance plans.
Other Accompanying Information

233

While USDA is creating information systems and infrastructure to reduce improper payments, 

especially for programs susceptible to significant risk, efforts in some programs are constrained by 

limited resources. The Department has worked closely with OMB to develop action plans that focus 

available resources on the most critical needs with regard to improper payment measurement and risk 

reduction.

FSA/CCC

The Department of Agriculture Reorganization Act of 1994, Section 281, provides that “[E]ach decision 

of a State, county, or area committee or an employee of such a committee, made in good faith in the 

absence of misrepresentation, false statement, fraud, or willful misconduct shall be final not later than

90 calendar days after the date of filing of the application for benefits, [and] ...no action may be 

taken...to recover amounts found to have been disbursed as a result of the decision in error unless the 

participant had reason to believe that the decision was erroneous.” This statute commonly is referred to 

the “Finality Rule.”

FNS

Recent child nutrition reauthorization legislation, while it included some changes requested by the 

Administration to improve accountability, limited USDA’s ability to act in this area because of concerns 

about potential barriers to participation. In many instances, the mandated goal of providing easy access 

to benefits must be balanced against the goal of reducing improper and erroneous payments. In 

addition, program administration is highly decentralized, involving a myriad of governmental and nongovernmental organizations. There are approximately 100,000 school meal locations at which benefits 

are provided. Many of these benefit providers simply do not have the capacity to develop robust 

accountability processes. For these reasons, any approach to reducing school meals improper payments 

must:

• Improve accuracy without compromising access for low-income families. A process that keeps eligible children 

from participating would undermine the program;

• Not unduly increase burden on schools. Many schools consider the program burdensome now. Adding 

burden could discourage schools from participating; 

VIII. Describe any statutory or regulatory barriers which may limit the agencies’ 

corrective actions in reducing improper payments and actions taken by the 

agency to mitigate the barriers’ effects.

VII A. Describe whether the agency has the information systems and other 

infrastructure it needs to reduce improper payments to the levels the agency has 

targeted.

VII B. If the agency does not have such systems and infrastructure, describe the 

resources the 

 

 
Other Accompanying Information

234

• Be cost-effective. Improving accuracy is potentially resource-intensive. Policymakers must not create a 

process that increases net program costs; and

• Answer the needs of other users of program data, which often use certification data to distribute millions of 

dollars in other kinds of benefits to schools. As these needs contribute to the problem, a solution may 

also require new commitments from those users.

RD 

The RD program does not have the statutory authority, similar to HUD, to gain access to data from 

HHS, IRS, SSA, and DOL to be shared with field offices and management agents.

NRCS

Verification of eligibility will be an ongoing challenge for NRCS. It would be advantageous for NRCS to 

determine adjusted gross income eligibility on current and future Farm Security and Rural Investment 

Act programs (Farm Bill) participants by coordinating with IRS. For long-term contracts, the IRS 

requirement for participants to maintain tax records expires prior to the expiration of the Farm Bill 

contracts, limiting the ability to independently verify eligibility.

USDA has no additional comments.

IX. Additional comments, if any, on overall agency efforts, specific programs, best 

practices, or common challenges as a result of IPIA implementation.
Other Accompanying Information

235

Appendix C — Inspector General Act Amendments of 1988: Management’s Report on Audit 

Follow-Up

Inspector General Act Amendments of 1988: Management’s Report on Audit Follow-Up

BACKGROUND

OIG audits USDA’s programs, systems, and operations. OIG then recommends improvements to 

management based on its findings. USDA management may agree or disagree with the audit’s findings 

or recommendations. An agreement is reached during the management-decision process. If 

management agrees with a recommendation, a written plan for corrective action with a target 

completion date is developed. The plan is then submitted to OIG for concurrence. If both OIG and 

management agree that the proposed corrective action will correct the weakness, management decision 

is achieved for that recommendation.

Audit follow-up ensures that prompt and responsive action is taken. USDA’s OCFO oversees audit 

follow-up for the Department. An audit remains open until all corrective actions for each 

recommendation are completed. As agencies complete planned corrective actions and submit closure 

documentation, OCFO reviews it for sufficiency and determines if final action is completed.

FY 2010 Results 

USDA agencies closed 59 audits in fiscal 

year (FY) 2010. OIG and USDA agencies 

reached management decision on 29 

audits during the year. One audit is in 

appeal status. As shown in Exhibit 1, the 

Department reduced its inventory of open 

audits in FY 2010 by 22 percent from 135 

to 105. 

Audit Follow-Up Process

Inspector General Act Amendments of 

1988 require an annual report to Congress 

providing the status of resolved audits that 

remain open. Reports on resolved audits 

must include the elements listed in the 

accompanying bullets:

• Beginning and ending balances for the number of audit reports and dollar value of disallowed costs 

and funds to be put to better use (see definitions below);

• The number of new management decisions reached;

• The disposition of audits with final action (see definition below);

• Resolved audits that remain open 1 year or more past the management decision date require an 

additional reporting element; and

• The date issued, dollar value, and an explanation of why final action has not been taken.

Exhibit 1: Decrease in Total Open Audit Inventory

Note: The FY 2009 ending balance was revised from 127 to 135 to include 8 audits that were 

transmitted from the Office of Inspector General after the reporting period. These adjustments 

are also reflected in the beginning balances for audits with disallowed costs and funds to be put

to better use shown in Exhibit 3 and Exhibit 5.
Other Accompanying Information

236

Exhibit 2: Audit Follow-Up Definitions

Term Definition

Disallowed Cost An incurred cost questioned by OIG that management has agreed should not be chargeable to the Government.

Final Action To complete all actions that management has agreed will address the audit findings and recommendations.

Funds To Be Put 

to Better Use 

An OIG recommendation that funds could be used more efficiently if management completes the recommendation, including:

• Reductions in outlays or other savings;

• De-obligation of funds from programs or operation, or withdrawal of subsidy costs on loans, guarantees, or bonds; and

• Implementing recommended improvements for grants or contracts or unnecessary expenditures noted in pre-award 

reviews of contract or grant agreements.

Management 

Decision

Agreement between management and OIG on corrective action needed to address audit findings and recommendations.

Beginning and Ending Inventory for Audits with Disallowed Costs and Funds to Be Put to Better Use1 

Exhibit 3: Inventory of Audits with Disallowed Costs5 Exhibit 4: Distribution of Adjustments to DC 

Audits with Disallowed Costs (DC) # of Audits Amount ($) Category Amount ($)

Beginning of the Period 42 73,482,218 Legal Decision 935,039

Plus: New Management Decisions 4 6,773,158 Write-Offs 124,418

Total Audits Pending Collection of 

DC

46 80,255,376 Change in Management Decision 8,774,405

Adjustments 30,253,805 Agency Documentation 20,358,095

Revised Subtotal 50,001,571 Agency Discovery 61,848

Less: Final Actions (Recoveries)* 14 747,749 Total $30,253,805

Audits with DC Requiring Final Action 

at the End of the Period

32 $49,253,822 

Exhibit 5: Inventory of Audits with Funds To Be Put to Better Use1 

Audits with Funds to be Put to Better Use

(FTBU)

# of 

Audits Amount ($)

Beginning of the Period 15 $505,269,671

Plus: New Management Decisions 5 43,588,709 

Total Audits Pending 20 548,858,380 

Less: Final Actions 4 6,389,749 

Audits with FTBU Requiring Final Action at the 

End of the Period

16 $542,468,631 

Disposition of FTBU:

FTBU Implemented 6,389,749 

FTBU Not Implemented 0 

Total FTBU Amounts for Final Action Audits $6,389,749 

Of the 59 audits that achieved final action during the fiscal year, 14 contained DC. The number of DC

audits remaining in the inventory at the end of the fiscal year is 32 with a monetary value of 

$49,253,822. 

 

5 Exhibit 3 and Exhibit 5 include only those open audits with DC and FTBU, respectively. Additionally, some audits contain both DC and FTBU amounts. For these reasons, 

the number of audits shown as the ending balances in Exhibit 3 and Exhibit 5 does not equal the total resolved audit inventory balance in Exhibit 1.
Other Accompanying Information

237

For audits with disallowed costs that achieved final action in FY 2010, OIG and management agreed to 

collect $31,001,554. Adjustments were made totaling $30,253,805 (98 percent of the total) because of: 

1) legal decisions; 2) write-offs; 3) USDA agencies’ ability to provide sufficient documentation to 

substantiate disallowed costs; and 4) agency discovery. Management recovered the remaining 

$747,749. 

Final action occurred on four audits that involved FTBU amounts. The number of FTBU audits 

remaining in the inventory to date is 16 with a monetary value of $542,468,631. 

Exhibit 6: Decrease in the Number of Audits Open One or More Years Past the Management Decision Date

The numbers of audits open 1 or more years without final 

action in FY 2010 decreased from 98 to 60 audits, a 

39-percent decrease. During the year, an additional 23 

audits turned 1 year past Management Decision Date

(MDD) for a balance of 83 audits. USDA agencies continue 

to pursue compensating controls that address many of the 

underlying issues identified in these older audits.

Agencies have completed all planned corrective actions on 

20 audits that are pending collection of associated 

disallowed costs. Audits without final action 1 year or more 

past the MDD and behind schedule are listed individually in 

the table that follows. They are categorized by the reason 

final action has not occurred. More detailed information on 

audits on schedule and audits under collection is available from OCFO.

Exhibit 7: Distribution of Audits Open 1 Year or More Past the MDD 

Audits On Schedule Audits Behind Schedule Audits Under Collection

Agency No. DC ($) FTBU ($) No. DC ($) FTBU ($) No. DC ($) FTBU ($)

Totals 2 $204,174 0 60 $30,988,245 $497,670,263 20 $11,295,720 $1,209,659 

Management’s Report on Audit Follow-Up

Exhibit 8: Audits Open 1 Year or More Past the MDD and Behind Schedule

Audits

Date

Issued

Revised

Completion

Date Audit Title

Monetary Amount

DC$ FTBU$

(34) Pending issuance of policy/guidance and legislation

02601-1-CH 9/30/05 10/30/10 ARS Adequacy of Controls to Prevent the Improper 

Transfer of Sensitive Technology

- - 

03099-198-KC 8/22/08 2/15/11 FSA Inspection of Temporary Domestic Storage Sites for 

Foreign Food Assistance

- - 

03601-11-AT 11/17/05 3/31/11 FSA Minority Participation in Farm Service Agency’s 

Programs

- - 

03601-17-CH 9/29/08 3/31/11 FSA Controls Over Guaranteed Farm Loan Interest Rates 

and Interest Assistance

- -

04099-339-AT 3/23/05 12/31/10 RD, RHS Subsidy Payment Accuracy in Multi-Family 

Housing Program

- -

Audits one Year or More Past

(Management Decision Date) MDD # of Audits

Beginning of the period 98

Less: FY 2009 audits closed 37 

 Audit in appeal 

Subtotal FY 2009 Audits one year or more 

past MD 

 1 

60

Plus: Audits that turned one year 

during FY 2010

23

End of the Period (audit in appeal not 

listed in Exhibit below)

83
Other Accompanying Information

238

Audits

Date

Issued

Revised

Completion

Date Audit Title

Monetary Amount

DC$ FTBU$

04601-17-CH 7/2/09 2/28/11 RD, RHS Controls Over Lender Activities in the Single 

Family Housing Guaranteed Loan Program

- - 

05601-4-KC 3/4/09 9/30/11 RMA Use of the National Agriculture Statistics Service 

County Average Yields for the Group Risk Protection 

Plans of Insurance

- $70,000,000

08001-1-AT 4/19/07 10/30/10 FS Implementation of the Capital Improvement Program - -

08601-2-HY 12/22/06 12/31/10 FS Follow up on Recommendations Made on the 

Maintenance of FS Infrastructure

- -

08601-30-SF 3/31/03 12/31/10 FS Review of Security Over 

Explosives/Munitions/Magazines Located Within the 

National Forest System

- -

08601-44-SF 12/7/06 12/31/10 FS Large Fire Suppression Cost - - 

08601-45-SF 8/8/06 12/31/10 FS Follow-up Review of FS Security Over 

Explosives/Munitions Magazines Located within the 

National Forest System

- - 

08601-52-SF 8/22/08 12/31/10 FS Renewable Energy Program - -

09601-4-TE 9/30/05 3/30/11 RD, RUS Broadband Grant and Loan Programs $25,614,279 $308,063,204

09601-8-TE 3/31/09 3/30/11 RD, RUS Broadband Grant and Loan Guartanteed 

Program

- - 

10401-2-FM 11/13/08 9/30/13 NRCSe Financial Statements for FY 2008 - - 

24501-1-FM 11/24/04 10/31/10 FSIS Application Controls Performance Based Inspection 

Service System

- - 

24601-1-CH 6/21/00 3/31/11 FSIS Laboratory Testing of Meat and Poultry Products - - 

24601-2-KC 9/30/03 10/31/10 FSISe Oversight of Production Process and Recall at 

ConAgra Plant

- - 

24601-5-AT 6/24/05 10/30/10 FSIS Hazard Analysis and Critical Control Point

Implementation at Very Small Plants.

- - 

24601-7-KC 11/28/08 10/31/10 FSIS Evaluation of FSIS Management Controls over PreSlaughter Activities- -

27099-49-TE 3/10/08 11/30/11 Disaster Food Stamp Program for Hurricanes Katrina and 

Rita, Louisiana, Mississippi and Texas

- -

27601-3-CH 3/22/96 12/31/10 FNS Food Stamp Program Disqualified Recipient System - -

33601-3-CH 2/20/03 6/30/12 APHIS Safeguards to Prevent Entry of Prohibited Pests 

and Diseases into the United States

- -

33601-7-CH 8/14/07 6/30/12 APHIS Review of Customs and Border Protection 

Inspection Activities

- -

34099-2-AT 9/14/01 9/30/12 RD, RBCS Business and Industry Loan Program, 

OMNIVEST Resources, Inc. – Fort Gaines, Georgia

$4,052,351 -

34601-4-AT 1/10/03 7/31/12 RD, RBCS Lender Servicing of Business and Industry 

Guaranteed Loans in Georgia

- - 

34601-15-TE 9/30/03 12/31/10 RD, RBCS National Report on the Business and Industry 

Loan Program

- -

50401-65-FM 11/14/08 9/30/11 Office of the Chief Financial Officer USDA Consolidated 

Financial Statements FY 2007 and FY 2006

- - 

50601-8-TE 1/28/05 9/30/12 APHIS Controls Over Issuance of Genetically Engineered 

Organism Release Permits

- - 

50601-10-AT 3/8/04 5/30/11 ARS Follow-up Report on the Security of Biological 

Agents at U.S. Department of Agriculture Laboratories

- - 
Other Accompanying Information

239

Audits

Date

Issued

Revised

Completion

Date Audit Title

Monetary Amount

DC$ FTBU$

50601-14-TE 2/20/09 10/30/10 Research Education and Economics USDA’s Role in the 

Export of Genetically Engineered Agricultural 

Commodities

- -

50601-17-TE 12/12/08 10/30/10 Research Education and Economics Control over 

Importation of Transgenic Plant and Animals

- - 

50801-12-AT 9/9/02 10/30/10 Departmental Management Management of Hazardous 

Materials Management Funds

- $1,813,809

(9) Pending completion of IT system security weaknesses, systems development, implementation, or enhancement

04601-14-CH 3/20/07 10/31/10 Rural Development, Rural Housing Service Improper 

Payments - Monitoring the Progress of Corrective Action 

for High-Risk Programs in Rural Housing Service

- - 

04801-6-KC 12/18/00 10/31/10 Rural Development, Rural Housing Service Rural Rental 

Housing Program Insurance Expenses, Phase I

$1,029,999 $9,000

05600-1-TE 9/28/89 10/30/10 Risk Management Agency Crop Year 1988 Insurance 

Contracts with Claims

- -

06401-17-FM 11/5/04 12/30/12 Commodity Credit Corporation’s Financial Statements for 

Fiscal Years 2004 and 2003

- - 

24601-3-CH 9/30/04 10/31/10 Food Safety and Inspection Service Review of the Food 

Safety Information Systems

- - 

24601-7-HY 9/28/06 10/31/10 Food Safety and Inspection Service Issues Impacting the 

Development of Risk-Based Inspection at Meat and 

Poultry Processing Establishments

- - 

24601-8-CH 8/23/07 10/31/10 Food Safety and Inspection Service Egg Products 

Processing Inspection 

- -

24601-8-HY 8/24/08 10/31/10 Food Safety and Inspection Service Followup Review of 

Food Safety and Inspection Service’s Controls Over 

Imported Meat and Poultry Products

- - 

33601-1-HY 2/14/05 10/31/10 Food Safety and Inspection Service Oversight of the 

Importation of Beef Products from Canada

- - 

(5) Pending results of internal monitoring or program review

04099-212-TE 8/25/09 12/31/10 Rural Development, Rural Housing Service Multi – Family 

Housing Loans in Texas

- -

05099-109-KC 1/27/05 12/31/10 Risk Management Agency Renegotiation of the Standard 

Reinsurance Agreement

- -

08401-9-FM 11/13/08 10/30/10 Forest Service Audit of Fiscal Year 2009 Financial 

Statements

- -

27601-32-CH 9/28/04 6/30/11 Food and Nutrition Service Compliance with Improper 

Payments Reporting Requirements

- -

85401-15-FM 11/7/08 11/30/10 Rural Development's Financial Statements for Fiscal 

Years 2008 and 2007

- -

(2) Conclusion of external action

08601-51-SF 8/5/08 1/31/11 Forest Service Controls over Documenting and Reporting 

Its Hurricane Relief Expenditures to FEMA

- $116,827,492

50601-6-TE 3/4/04 12/30/10 Agricultural Research Service Controls Over Plant Variety 

Protection and Germplasm Storage

- - 
Other Accompanying Information

240

Audits

Date

Issued

Revised

Completion

Date Audit Title

Monetary Amount

DC$ FTBU$

(3) Pending results of request for change in management decision

04801-3-KC 3/31/99 10/30/10 Rural Development, Rural Housing Service Rural Rental 

Housing Program Bosley Management, Incorporated – 

Sheridan, Wyoming

$146,690 $85,516

08401-8-FM 11/15/07 11/1/10 Forest Service Financial Statements for FY 2007 and 

2006

- - 

11099-44-FM 12/14/06 10/30/10 Departmental Management Purchase Card Management 

System Controls Need Strengthening

- - 

(1) Pending Office of General Counsel (OGC) or OIG advice

04601-15-CH 3/30/07 12/31/10 Rural Development, Rural Housing Service Controls over 

Single Family Housing Funds Provided for Hurricane 

Relief Efforts

- $388,842

(6) Pending administrative action

06401-15-FM 12/26/02 12/30/12 Commodity Credit Corporation’s Financial Statements for 

FY 2002

- -

06401-20-FM 11/9/05 12/30/12 Commodity Credit Corporation’s Financial Statements for 

FY 2005 and 2004

- - 

07016-1-AT 3/15/06 10/30/10 Foreign Agricultural Service Private Voluntary 

Organization Grant Fund Accountability

$144,923 - 

07601-2-HY 7/22/08 10/30/10 Foreign Agricultural Service Export Credit Guarantee 

Program

- - 

13001-3-TE 8/16/04 11/30/10 Cooperative State Research, Education, and Extension 

Service Implementation of Agricultural Research, 

Extension and Education Reform Act of 1998

$3 $482,400

50099-11-HY 3/31/05 10/30/10 Research Education and Economics Implementation of 

Federal Research Misconduct Policy in the U.S. 

Department of Agriculture

- - 

Total Number Audits (60) Total $30,988,245 $497,670,263
Other Accompanying Information

241

Appendix D — Acronyms

A

ACMS – APHIS Cost Management System

ACRE – Average Crop Revenue Election

AGRM – Arkansas Global Rice Model

AMS – Agricultural Marketing Service

APEC – Access, Participation, Eligibility, and Certification Study

APHIS – The Animal and Plant Health Inspection Service

ARRA – American Reinvestment and Recovery Act of 2009

ARS – Agricultural Research Service

AWEP – Agricultural Water Enhancement Program

B

B&I – Business and Industry Guaranteed Loan Program

BMI – Body Mass Index

BSE – Bovine Spongiform Encephalopathy

C

CACFP – Child and Adult Care Food Program

CBWI – Chesapeake Bay Watershed

CCAP – Child Care Assessment Project

CCC – Commodity Credit Corporation

CDC – United States Centers for Disease Control and Prevention

CEAP – Conservation Effects Assessment Project

CF – Community Facilities

CNMP – Comprehensive Nutrient Management Plan

CNPP – Center for Nutrition Policy and Promotion

CNR – Child Nutrition and WIC Reauthorization Act of 2004

CPAP – Community Programs Application Processing

CPI – Counterpart International

CRE – Coordinated Review Effort

CRP – Conservation Reserve Program

CSAM – Cyber Security Assessment and Management System

CStP – Conservation Security Program

CSU – Colorado State University

CTA – Conservation Technical Assistance Program 

CWPP – Community Wildlife Protection Program

D

DC – Disallowed Costs

DCP – Direct and Counter-cyclical Program

DDA – Doha Development Agenda

DNA – Deoxyribonucleic Acid

DOI – United States Department of the Interior

E

EAB – Emerald Ash Borer

EBT – Electronic Benefits Transfer

eFMS – Electronic Funds Management System

EFNEP – The Expanded Food and Nutrition Education Program

EGVM – European Grapevine Moth

EIAO – Enforcement, Investigations, and Analysis Officers

EO – Executive Order

EQIP – Environmental Quality Incentives Program

ERS – Economic Research Service

EU – European Union

ExCEED – Extension Community Economic and Entrepreneurial 

Development Program

F

FAFH – Food Away From Home

FAS – Foreign Agricultural Service

FATER – The Food Aid Targeting Effectiveness Ratio

FCIC – Federal Crop Insurance Corporation

FDCH – Family Day Care Homes

FFAS – Farm and Foreign Agricultural Services

FFMIA – Federal Financial Management Improvement Act of 1996

FISMA -- Federal Information Security Management Act

FRCC – Fire Regime Condition Class

FRIS – Farm and Ranch Irrigation Survey

FRPP – The Farm and Ranch Protection Program 

FS – Forest Service

FSA – Farm Service Agency

FSM – Forest Service Manual

FSIS – Food Safety and Inspection Service

FSRI – Farm Security and Rural Investment Act
Other Accompanying Information

242

FLP – Farm Loan Program

FMFIA – Federal Managers’ Financial Integrity Act

FMMI – Financial Management Modernization Initiative

FNCS – Food, Nutrition, and Consumer Services

FNS – Food and Nutrition Service

FPA – Fire Program Analysis

FSWG – Food Safety Working Group

FTBU – Funds to Be Put to Better Use

FTF – Feed the Future

FWP – Farmable Wetlands Program

FWS – U.S. Fish and Wildlife Service

FY – Fiscal Year

G

GAO – United States Government Accountability Office

GAAP – Generally Accepted Accounting Principles

GCFI – Gross Cash Farm Income

GE – Genetically Engineered

GIPSA – The Grain Inspection, Packers and Stockyards 

Administration

GLS – Guaranteed Loan System

GM – Genetically Modified

GPRA – Government Performance and Results Act of 1993

H

HACCP – Hazard Analysis and Critical Control Points

HEI – Healthy Eating Index

HHS – U.S. Department of Health and Human Services 

HSI – Habitat Suitability Indices

HUD – U.S Department of Housing and Urban Development

I

IPERA – Improper Payments Elimination and Recovery Act

IPIA – Improper Payments Information Act of 2002

IPM – Integrated Pest Management

IRS – Internal Revenue Service

IT – Information Technology

IVT – Intensified Verification Testing

L

LDP – Loan Deficiency Payments

LEA – Local Education Agency

Lm – Listeria monocytogenes

M

MCA – Managerial Cost Accounting

MDD – Management Decision Date

MDP – Miscellaneous Disaster Program

MFIS – Multi-Family Information System

MIDAS -- Modernize and Innovate the Delivery of Agricultural 

Systems

MILC – Milk Income Loss Contract Program

MRL – Maximum Residue Limits

MRP – Marketing and Regulatory Program

N

NAHLN – National Animal Health Laboratory Network

NAL – National Agricultural Library

NAP – Noninsured Assistance Program

NASS – National Agricultural Statistics Service

NCP – National Conservation Planning

NDB – National Data Bank

NEPA – National Environmental Policy Act

NFS – National Forest System

NORS – National Outbreak Reporting System

NPDN – National Plant Diagnostic Network

NPGS – National Plant Germplasm System

NRCS – Natural Resources Conservation Service

NSLP – National School Lunch Program

O

OCFO – The Office of the Chief Financial Officer

OCIO – The Office of the Chief Information Officer

OIG – The Office of Inspector General

OMB – The U.S. Office of Management and Budget

P

P&S – The Packers and Stockyards Act PCR – Polymerase Chain Reaction
Other Accompanying Information

243

PAR – Performance and Accountability Report

PART – Performance Assessment Rating Tool

PFGE – Pulse-field Gel Electrophoresis

Q

QC – Quality Control

R

RAP – Rental Assistance Program

RD – Rural Development

REE – Research, Education, and Economics

RHIF – Rural Housing Insurance Fund

RMA – Risk Management Agency

RORA – Regional Office Review of Applications

RTE – Ready-to-Eat 

RULSS – Rural Utilities Loan Servicing System

RUS – Rural Utilities Service

S

SARE – Sustainable Agricultural Research and Education

SBP – School Breakfast Program

SFFAS – Statement of Federal Financial Accounting Standards

SIP – Salmonella Initiative Program

SNAP – Supplemental Nutrition Assistance Program

SPS – Sanitary/Phytosanitary

SRA – Standard Reinsurance Agreement

STO – State Office

SY – School Year

T

TANF – Temporary Assistance for Needy Families

TBT – Technical Barrier to Trade

TEFAP – The Emergency Food Assistance Program

TPP – Trans-Pacific Partnership

U

ULO – Unliquidated Obligations

USDA – U.S. Department of Agriculture

USSGL – United States Standard General Ledger 

USTR – Office of the U.S. Trade Representative

V

n/a

W

WBSCM – Web-based Supply Chain Management

WEP – Water and Environmental Programs

WEPS – Wind Erosion Prediction System

WFSP – Wildland Fire Suppression Management

WHIP – Wildlife Habitat Incentives Program

WIC – Special Supplemental Nutrition Program for Women, 

Infants and Children 

WRP – Wetlands Reserve Program

WTO – World Trade Organization

WUI – Wildland Urban Interface