FY 2007 Performance and Accountability Report 
i 

FY 2007 Performance and Accountability Report 

Table of Contents 

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

About this Report ........................................................................................................ iv 

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

An Overview of the United States Department of Agriculture.................................................................. 1

Resources .................................................................................................................................................... 5

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

Management Challenges ............................................................................................................................ 9

Future Demands, Risks, Uncertainties, Events, Conditions and Trends................................................. 17

USDA’s Results Agenda—Implementing Federal Management Initiatives............................................ 17

Financial Statement Highlights................................................................................................................ 32

Systems, Controls and Legal Compliance................................................................................................ 35

Management Assurances ................................................................................................................. 35

Federal Managers’ Financial Integrity Act Report on Management Control ................................. 36

Federal Financial Management Improvement Act Report on Financial Management Systems..... 40

Inspector General Act Amendments of 1988 Management’s Report on Audit Follow-Up ........... 42

Management’s Report on Audit Follow-Up.................................................................................... 45

II. Annual Performance Report ............................................................................... 49

Strategic Goal 1: Enhance International Competitiveness of American Agriculture .............................. 50

Strategic Goal 2: Enhance the Competitiveness and Sustainability of Rural and Farm Economies........ 62

Strategic Goal 3: Support Increased Economic Opportunities and Improved Quality of Life In Rural 

America..................................................................................................................................................... 73

Strategic Goal 4: Enhance Protection and Safety of the Nation’s Agriculture and Food Supply ............ 83

Strategic Goal 5: Improve the Nation’s Nutrition and Health................................................................. 94

Strategic Goal 6: Protect and Enhance the Nation’s Natural Resource Base and Environment............ 104

Program Assessment Rating Tool (PART) Evaluations........................................................................ 121

Program Evaluations .............................................................................................................................. 125

III. Financial Statements, Notes, Supplemental and Other Accompanying 

Information ..................................................................................................... 133

Message from the Chief Financial Officer ............................................................................................. 133

Report of the Office of Inspector General.............................................................................................. 135

CONSOLIDATED BALANCE SHEET .......................................................................................... 165

Notes to the Consolidated Financial Statements ................................................................................... 170

Required Supplementary Stewardship Information ............................................................................... 232

Required Supplementary Information.................................................................................................... 239

IV. Other Accompanying Information .................................................................... 255

Appendix A—Management Challenges................................................................................................. 255

Appendix B—Improper Payment and Recovery Auditing Details ........................................................ 287

Appendix C—Table of Exhibits............................................................................................................. 315

Appendix D—Acronyms........................................................................................................................ 317
ii 

FY 2007 Performance and Accountability Report 

Message from the Secretary 

The United States Department of Agriculture (USDA) appreciates this opportunity to 

share with all Americans, Congress, and the Executive Branch information on the 

progress made on your behalf during the past year. 

From enhancing economic opportunities for agricultural producers, to protecting the 

Nation’s food supply, to improving nutrition and health, to protecting the Nation’s 

natural resources and environment, USDA has a proud record of accomplishment in FY 

2007. We are pleased to share the highlights of our efforts in this FY 2007 Performance 

and Accountability Report. 

USDA and its more than 100,000 employees touch the lives of every American every 

day. The 144-year-old USDA is one of the most complex departments in the Federal 

Government, with more than 300 programs. Annually, we spend more than $75 billion of our fellow Americans’ 

money. In 2007, these resources helped: 

 Aid U.S. agricultural producers battered by severe weather conditions; 

 Expand economic opportunities and security for farmers, ranchers, and rural communities by implementing 

the Farm Security and Rural Investment Act of 2002; 

 Provide access to a healthy diet for needy households; 

 Improve the health of low-income pregnant and postpartum women, infants, and children; 

 Enhance U.S. farm export opportunities by advancing America’s commitment to free trade; 

 Implement the President’s Healthy Forests Initiative; 

 Protect public safety, homes, and resources during a severe fire season; 

 Support the increased use of renewable fuels, such as ethanol and biodiesel, to provide new revenues to 

farmers while reducing our Nation’s dependence on foreign fuel; 

 Improve and expand conservation programs; 

 Invest in infrastructure that can bring new economic opportunities and jobs to rural areas; 

 Modernize the nutrition guidance we give the Nation to reflect the latest scientific information and combat 

our country’s growing obesity epidemic; 

 Further advance food safety and protect U.S. agriculture from both existing and emerging threats; and 

 Leverage technology to ensure that the resources provided to us by Congress and the American people reach 

those who need them, with minimal expense and maximum impact. 
iii 

FY 2007 Performance and Accountability Report 

To help USDA become more successful, program performance must be measured and we must place an even 

greater focus on accountability. To assist in this effort, the Department created the USDA Senior Management 

Control Council to oversee and administer the Department’s assessment of internal controls for our programs, 

financial systems, and financial reporting relating to the Federal Managers’ Financial Integrity Act (FMFIA) and 

the Federal Financial Management Improvement Act (FFMIA). Through the work of the Council, valuable 

information on the state of our systems allows us to provide a reasonable assurance that the content of this report 

is based on sound, accurate data. 

I am proud to report that USDA fully implemented the requirements to assess and report on internal control for 

financial reporting this year—a significant accomplishment given the scope of our activities and the complexity of 

our operations. Our assessment identified areas within our financial reporting controls that have improved since 

our last report and areas in which continued improvement is needed—for which we have already begun executing 

corrective action plans. As such, I provide a qualified assurance that, except for the areas in need of improvement 

as described in the Management Assurances section of this report, USDA management controls, financial 

systems, and financial reporting controls meet the objectives of FMFIA and FFMIA. The financial and 

performance information presented herein is complete and accurate, and in accordance with Office of 

Management and Budget guidance and the Reports Consolidation Act of 2000. 

USDA was first called “the people’s department” by President Abraham Lincoln. I believe we still live up to that 

title. I am proud of our employees and the positive impact their diverse efforts have had on American life during 

the past year. I also want to thank you for your interest in USDA and its work. I am pleased to share this 

information with all of our stakeholders, and I look forward to reporting even more progress in the year ahead. 

Charles F. Conner

Acting Secretary of Agriculture 

November 15, 2007 
iv 

FY 2007 Performance and Accountability Report 

About this Report 

The Government Performance and Results Act of 1993 requires all Federal agencies to engage in a strategic 

planning process that directly aligns resources with results, and enhances the accountability of all government 

endeavors to the American taxpayers who finance them. 

This results-oriented process includes the development and implementation of a five-year strategic plan, as well as 

annual reporting that sets specific, measurable targets for performance at the beginning of each fiscal year, and 

then offers a concrete, data-based assessment at year-end of the success of these endeavors. 

This FY 2007 Performance and Accountability Report is the year-end progress report of the United States 

Department of Agriculture (USDA). It reviews the strategic goals and objectives the Department set for itself at 

the beginning of the fiscal year and compares initial targets to actual performance. The data used by USDA to 

measure actual performance is collected using standardized methodology that has been vetted by Federally 

employed scientists and policymakers and, ultimately, by the undersecretaries of the respective mission areas, all of 

whom attest to the completeness, reliability and quality of the data. 

In addition to promoting accountability and enhancing the management of USDA programs, this reporting also 

helps illuminate the strategic allocation of resources in the future by directly linking program performance to 

budgetary decisions. 

This report aims to inform the decisions of policymakers who make critical choices that impact USDA programs. 

It also strives to provide transparency to all Americans interested in the workings of their government and 

USDA’s ability to “manage for results” in performing its many vital public functions. 
1 

FY 2007 Performance and Accountability Report 

I. 

Management’s Discussion and Analysis 

An Overview of the United States Department of Agriculture 

The United States Department of Agriculture 

(USDA) is a diverse and complex organization with 

programs that touch the lives of all Americans every 

day. More than 100,000 employees deliver more than 

$75 billion in public services through USDA’s more 

than 300 programs worldwide, leveraging an extensive 

network of Federal, State and local cooperators. 

Founded by President Abraham Lincoln in 1862, 

when more than half of the Nation’s population lived 

and worked on farms, USDA’s role has evolved with 

the economy. Today, USDA improves the Nation’s 

economy and quality of life by: 

 Enhancing economic opportunities for U.S. 

farmers and ranchers; 

 Ensuring a safe, affordable, nutritious and 

accessible food supply; 

 Caring for public lands and helping people care for 

private lands; 

 Supporting the sound, sustainable development of 

rural communities; 

 Expanding global markets for agricultural and 

forest products and services; and 

 Working to reduce hunger and improve America’s 

health through good nutrition. 

Addressing these timeless concerns in the modern era 

presents its share of challenges. America’s food and 

fiber producers operate in a global, technologically 

advanced, rapidly diversifying and highly competitive 

business environment that is driven by sophisticated 

consumers. 

This report provides information on USDA’s core 

performance measures as described in its Strategic Plan 

for FY 2005-2010. They are: 

 To enhance international competitiveness of 

American agriculture; 

 To enhance the competitiveness and sustainability 

of rural and farm economies; 

 To support increased economic opportunities and 

improved quality of life in rural America; 

 To enhance protection and safety of the Nation’s 

agriculture and food supply; 

 To improve the Nation’s nutrition and health; and 

 To protect and enhance the Nation’s natural 

resource base and environment. 

These six goals mirror USDA’s commitment to 

provide first-class service, state-of-the-art science and 

consistent management excellence across the broad 

responsibilities of the Department. USDA uses the 

Program Assessment Rating Tool (PART) to assess 

and improve program performance so that the 

Department can achieve better results. The PART 

identifies how well and efficiently a program is 

working and what specific actions can be taken to 

improve its performance. PART ratings and analysis 
MANAGEMENT’S DISCUSSION AND ANALYSIS 

2 

FY 2007 Performance and Accountability Report 

for all Federal Government programs can be found on 

the Web at ExpectMore.gov. Other internal and 

external program evaluations related to the measures 

and conducted during fiscal year (FY) 2007 are 

included in this document. 

Although change has been a constant in the evolution 

of the U.S. farm and food sector, the new century 

brings growing importance to consumer preferences 

and the reach of global markets. USDA’s objectives 

reflect this. Through these objectives, USDA will 

strive to: 

 Expand international trade for agricultural 

products and support international economic 

development; 

 Expand domestic marketing opportunities for 

agricultural products and strengthen risk 

management, the use of financial tools and the 

provision of sound information to help farmers 

and ranchers in their decision-making process; 

 Further develop alternative markets for agriculture 

products and activities; 

 Providing financing needed to help expand job 

opportunities and improve housing, utilities and 

infrastructure in rural America; 

 Enhance food safety by taking steps to reduce the 

prevalence of foodborne hazards from farm to 

table and safeguard agriculture from natural and 

intentional threats; 

 Improve nutrition by providing food assistance and 

nutrition education and promotion; and 

 Manage and protect America’s public and private 

lands working cooperatively with other levels of 

Government and the private sector. 
MANAGEMENT’S DISCUSSION AND ANALYSIS 

3 

FY 2007 Performance and Accountability Report 

Exhibit 1: Headquarters Organization 

USDA’s FY 2007 key milestones include: 

 Awarding $19.25 million to create or retain jobs 

for businesses located in rural communities; 

 Aiding thousands of disabled farmers in 21 States 

by providing education and assistance to continue 

farming through the funding of more than $3.7 

million for “AgrAbility” projects. AgrAbility is a 

consumer-driven, USDA-funded program that 

provides vital education, assistance and support to 

farmers and ranchers with disabilities; 

 Donating nearly $35 million to 11 States to fund 

12 special projects designed to protect threatened 

and endangered species, and enhance wildlife 

habitat on wetlands. 

 Partnering with the American Angus Association 

to facilitate the registration of up to 15,400 new 

premises as part of the National Animal 

Identification System. This move will ensure the 

availability of a nationwide communications 

network to assist livestock owners and animal 

health officials in the event of an animal disease 

event. 

 Resuming the sign-up for the Emergency Forestry 

Conservation Reserve Program (EFCRP). 

EFCRP helps landowners and operators restore 

and enhance the approximately 5.6 million acres of 

forestland damaged by the hurricanes of 2005; 

 Donating $50 million worth of Governmentowned bulk commodities to U.S. food processors 

in exchange for further processed agricultural 

products to be distributed through the 

Department’s domestic and international foodassistance programs; and 

 Awarding nearly $4 million in grants to 14 tribal 

colleges in seven States. The funding will help the 

colleges purchase equipment, build or renovate 

classrooms, make needed repairs and finance 

infrastructure improvements. 

MISSION AREAS

To ensure that USDA’s efforts focus squarely on 

meeting its real world objectives, the Department’s 

work is organized by mission areas, which are a 

collection of agencies that work together to achieve 

USDA’s aforementioned strategic goals. A description 

of USDA’s seven mission areas follows. 

Natural Resources and Environment 

The Natural Resources and Environment (NRE) 

mission area consists of the Forest Service (FS) and 

the Natural Resources Conservation Service (NRCS). 

These agencies work to ensure the health of the land 

through sustainable management. FS manages 193 

million acres of national forests and grasslands for the 

American people. NRCS assists farmers, ranchers and 

other private landowners in managing their acreage for 

environmental and economic sustainability. Both 

agencies work in partnership with Tribal, State and 

local Governments, communities, related groups and 

other Federal agencies to protect the Nation’s soils, 

watersheds and ecosystems. 

Farm and Foreign Agricultural Services 

The Farm and Foreign Agricultural Services (FFAS) 

mission area is comprised of the Farm Service Agency 

(FSA), which delivers most traditional farm programs, 

the Foreign Agricultural Service (FAS), which assists 

with U.S. agricultural exports, and the Risk 

Management Agency (RMA), which predominately 

handles programs that help farmers and ranchers 
MANAGEMENT’S DISCUSSION AND ANALYSIS 

4 

FY 2007 Performance and Accountability Report 

address the unavoidable challenges inherent in 

agriculture, such as natural disasters. 

This mission area also includes two Governmentowned corporations. The Commodity Credit 

Corporation (CCC) works to stabilize farm income 

and prices to help ensure an adequate, affordable 

supply of food and fiber. This corporation is the 

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 

creating economic opportunities and improving the 

quality of life in rural America. This mission area 

unites a variety of valuable programs including housing 

programs and economic development initiatives. Rural 

infrastructure projects that finance the delivery of 

everything from safe, running water to high-speed 

Internet access also come together in this mission area. 

Collectively, these programs demonstrate core Federal 

efforts to ensure that rural communities are full 

participants in modern America. 

Food, Nutrition and Consumer Services 

The Food, Nutrition and Consumer Services (FNCS) 

mission area is comprised of the Food and Nutrition 

Service (FNS), which administers Federal nutrition 

programs, and the Center for Nutrition Policy and 

Promotion (CNPP), which provides science-based 

dietary guidance to the Nation. USDA’s 15 Federal 

nutrition assistance programs include the Food Stamp 

Program, Child Nutrition Programs, such as school 

lunches and breakfasts, and the Special Supplemental 

Nutrition Program for Women, Infants and Children. 

These programs provide vital access to nutritious food 

and support for better dietary habits for one in five 

Americans. USDA’s nutrition research and promotion 

efforts aid all Americans by linking cutting-edge 

scientific research to the nutritional needs of 

consumers. 

Food Safety 

USDA’s 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 and labeled and 

packaged correctly. 

Research, Education and Economics 

The Research, Education and Economics (REE) 

mission area brings together all of the efforts underway 

throughout USDA to advance a safe, sustainable and 

competitive U.S. food and fiber system through 

science and the translation of science into real-world 

results. This mission area is integrally involved with 

every aspect of USDA’s work. REE is comprised of 

the Agricultural Research Service (ARS), the 

Cooperative State Research, Education and Extension 

Service (CSREES), the Economic Research Service 

(ERS), the National Agricultural Statistics Service 

(NASS), and the National Agricultural Library. 

Marketing and Regulatory Programs 

The Marketing and Regulatory Programs (MRP) 

mission area 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). 

This mission area facilitates the domestic and 

international marketing of U.S. agricultural products, 

including food and fiber, livestock and grain through a 

wide variety of efforts, including the development of 

domestic and foreign agricultural trade standards via 

Federal, State and foreign cooperation. This mission 

area also conducts increasingly critical and 

sophisticated efforts to protect U.S. agriculture from 

plant and animal health-related threats, and ensures 

the humane treatment of animals. 

DEPARTMENTAL OFFICES

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 

5 

FY 2007 Performance and Accountability Report 

Resources 

Congressional appropriations are the primary funding source for USDA operations. FY 2007 program 

obligations totaled $127.9 billion, a decrease of $14.5 billion compared to FY 2006. These are current year 

obligations from unexpired funds. They do not include prior year upward or downward obligation adjustments. 

Exhibit 2: FY 2006 and 2005 USDA Program Obligations Dedicated to Strategic Goals 

USDA Program Obligations Dedicated to Strategic Goals 

FY 2007 Actual Program Obligations 

Enhance the 

Competitiveness and 

Sustainability of Rural and 

Farm Economies — 29%

Improve the 

Nation’s Nutrition 

and Health — 45%

Support Increased 

Economic Opportunities and 

Improved Quality of Life in 

Rural America — 12%

Enhance International 

Competitiveness of American

Agriculture— 4%

Protect and Enhance the 

Nation’s Natural Resource 

Base and Environment — 9%

Enhance Protection 

and Safety of the 

Nation’s Agriculture 

and Food Supply — 2%

Enhance the 

Competitiveness and 

Sustainability of Rural and 

Farm Economies — 29%

Improve the 

Nation’s Nutrition 

and Health — 45%

Support Increased 

Economic Opportunities and 

Improved Quality of Life in 

Rural America — 12%

Enhance International 

Competitiveness of American

Agriculture— 4%

Protect and Enhance the 

Nation’s Natural Resource 

Base and Environment — 9%

Enhance Protection 

and Safety of the 

Nation’s Agriculture 

and Food Supply — 2%

FY 2006 Actual Program Obligations 

Enhance the 

Competitiveness and 

Sustainability of Rural and 

Farm Economies — 32%

Improve the 

Nation’s Nutrition 

and Health — 42%

Support Increased 

Economic Opportunities and 

Improved Quality of Life in 

Rural America — 12%

Enhance International 

Competitiveness of American

Agriculture— 3%

Protect and Enhance the 

Nation’s Natural Resource 

Base and Environment — 8%

Enhance Protection 

and Safety of the 

Nation’s Agriculture 

and Food Supply — 2%

Enhance the 

Competitiveness and 

Sustainability of Rural and 

Farm Economies — 32%

Improve the 

Nation’s Nutrition 

and Health — 42%

Support Increased 

Economic Opportunities and 

Improved Quality of Life in 

Rural America — 12%

Enhance International 

Competitiveness of American

Agriculture— 3%

Protect and Enhance the 

Nation’s Natural Resource 

Base and Environment — 8%

Enhance Protection 

and Safety of the 

Nation’s Agriculture 

and Food Supply — 2%
MANAGEMENT’S DISCUSSION AND ANALYSIS 

6 

FY 2007 Performance and Accountability Report 

Exhibit 3: FY 2006 and 2005 USDA Staff Years Dedicated to Strategic Goals 

USDA Staff Dedicated to Strategic Goals 

FY 2007 Actual Staff Years 

Enhance the 

Competitiveness and 

Sustainability of Rural and 

Farm Economies — 22%

Improve the 

Nation’s Nutrition 

and Health — 2%

Support Increased 

Economic Opportunities and 

Improved Quality of Life in 

Rural America — 6%

Enhance International 

Competitiveness of American

Agriculture— 2%

Enhance Protection 

and Safety of the 

Nation’s Agriculture 

and Food Supply — 18%

Protect and Enhance the 

Nation’s Natural Resource 

Base and Environment —

50%

Enhance the 

Competitiveness and 

Sustainability of Rural and 

Farm Economies — 22%

Improve the 

Nation’s Nutrition 

and Health — 2%

Support Increased 

Economic Opportunities and 

Improved Quality of Life in 

Rural America — 6%

Enhance International 

Competitiveness of American

Agriculture— 2%

Enhance Protection 

and Safety of the 

Nation’s Agriculture 

and Food Supply — 18%

Protect and Enhance the 

Nation’s Natural Resource 

Base and Environment —

50%

FY 2006 Actual Staff Years 

Enhance the 

Competitiveness and 

Sustainability of Rural and 

Farm Economies — 19%

Improve the 

Nation’s Nutrition 

and Health — 2%

Support Increased 

Economic Opportunities and 

Improved Quality of Life in 

Rural America — 6%

Enhance International 

Competitiveness of American

Agriculture— 1%

Enhance Protection 

and Safety of the 

Nation’s Agriculture 

and Food Supply — 19%

Protect and Enhance the 

Nation’s Natural Resource 

Base and Environment —

52%

Enhance the 

Competitiveness and 

Sustainability of Rural and 

Farm Economies — 19%

Improve the 

Nation’s Nutrition 

and Health — 2%

Support Increased 

Economic Opportunities and 

Improved Quality of Life in 

Rural America — 6%

Enhance International 

Competitiveness of American

Agriculture— 1%

Enhance Protection 

and Safety of the 

Nation’s Agriculture 

and Food Supply — 19%

Protect and Enhance the 

Nation’s Natural Resource 

Base and Environment —

52%
MANAGEMENT’S DISCUSSION AND ANALYSIS 

7 

FY 2007 Performance and Accountability Report 

Performance Goals, Objectives and Results 

Of the 34 performance goals contained in USDA’s FY 2008 and Revised FY 2007 Budget Summary and Annual 

Performance Plan, 28 were met or exceeded, 1 was reported as deferred and 5 were unmet. The following 

Performance Scorecard table, organized by USDA’s strategic goals and objectives, provides a summary of the 

Department’s performance results. Additional analyses of these results can be found in the Performance Section of 

this report. 

Exhibit 4: USDA Scorecard for FY 2007 

Performance Scorecard for FY 2007 

Objectives Annual Performance Goals Result 

Strategic Goal 1: Enhance International Competitiveness of American Agriculture 

1.1 Expand and Maintain International 

Export Opportunities 

1.1.1 Dollar value of agricultural trade expanded through trade 

agreement negotiation, monitoring, and enforcement (NonSanitary and Phytosanitary) 

Unmet 

1.2 Support International Economic 

Development and Trade Capacity 

Building 

1.2.1 Food Aid Targeting Effectiveness Ratio Met 

1.2.2 Number of countries in which substantive improvements are 

made in national trade policy and regulatory frameworks that 

increase market access 

Met 

1.3 Improved Sanitary and Phytosanitary 

(SPS) System to Facilitate 

Agricultural Trade 

1.3.1 Value of trade preserved annually through USDA staff 

interventions leading to resolution of barriers created by SPS 

or TBT measures (Sanitary and Phytosanitary) ($ in millions) 

Exceeded 

Strategic Goal 2: Enhance the Competitiveness and Sustainability of Rural and Farm Economies 

2.1 Expand Domestic Market 

Opportunities 

2.1.1 Increase the number of products designated under the 

BioPreferred Program 

Unmet 

2.2 Increase the Efficiency of Domestic 

Agricultural Production and 

Marketing Systems 

2.2.1 Timeliness – Percent of time official reports are released on the 

date and time pre-specified to data users 

Met 

 2.2.2 Percent of market-identified quality attributes for which USDA 

has provided standardization (percent) 

Met 

2.3 2.3.1 Normalized value of FCIC risk protection coverage provided 

through FCIC sponsored insurance 

Met 

2.3.2 Percentage of eligible crops with NAP coverage Met 

Provide Risk Management and 

Financial Tools to Farmers and 

Ranchers 

2.3.3 Increase percentage of beginning farmers, racial and ethnic 

minority farmers, and women farmers financed by FSA 

Met 

Strategic Goal 3: Support Increased Economic Opportunities and Improved Quality of Life in Rural America 

3.1 Expand Economic Opportunities by 

Using USDA Financial Resources to 

Leverage Private Sector Resources 

and Create Opportunities for Growth 

3.1.1 Number of jobs created or saved through USDA financing of 

businesses 

Met 

3.2 3.2.1 Homeownership opportunities provided Met 

3.2.2 Number of borrowers/subscribers receiving new or improved 

service from agency funded water facility (millions) 

Exceeded 

3.2.3 Percentage of customers who are provided access to new 

and/or improved essential community health facilities 

Exceeded 

Improve the Quality of Life Through 

USDA Financing of Quality Housing, 

Modern Utilities, and Needed 

Community Facilities 

3.2.4 Percentage of customers who are provided access to new 

and/or improved essential community public safety services 

Exceeded 

3.2.5 Number of program borrowers/subscribers receiving new or 

improved electric service 

Met 

3.2.6 Number of program borrowers/subscribers receiving new or 

improved telecommunications service 

Exceeded 
MANAGEMENT’S DISCUSSION AND ANALYSIS 

8 

FY 2007 Performance and Accountability Report 

Performance Scorecard for FY 2006 

Objectives Annual Performance Goals Result 

Strategic Goal 3 (Cont’d) 

Strategic Goal 4: Enhance Protection and Safety of the Nation’s Agriculture and Food Supply 

4.1.1 Reduce overall public exposure to generic Salmonella from 

broiler carcasses using existing scientific standards 

(percentage of industry in Category 1 i.e., low risk for presence 

of Salmonella) 

Exceeded 

4.1.2 Reduce the percentage of ready-to-eat meat and poultry 

products testing positive for Listeria monocytogenes

Exceeded 

4.1 Reduce the Incidence of Foodborne 

Illnesses Related to Meat, Poultry, and 

Egg Products in the U.S. 

4.1.3 Reduce the prevalence of E. coli O157:H7 on ground beef Met 

4.2.1 The cumulative number of specific plant diseases labs are 

prepared to detect 

Met 

4.2.2 The cumulative number of specific animal diseases labs are 

prepared to detect 

Met 

4.2 Reduce the Number and Severity of 

Agricultural Pest and Disease Outbreaks 

4.2.3 Number of significant introductions of foreign animal diseases 

and pests that spread beyond the original area of introduction 

and cause severe economic or environmental damage, or 

damage to the health of animals 

Met 

Strategic Goal 5: Improve the Nation’s Nutrition and Health 

5.1 Improve Access to Nutritious Food 5.1.1 Participation levels for the major Federal nutrition assistance 

programs (millions per month): Food Stamp Program, National 

School Lunch Program, School Breakfast Program, Special 

Supplemental Nutrition Program for Women, Infants and 

Children 

Met 

5.2 Promote Healthier Eating Habits and 

Lifestyles 

5.2.1 Application and usage level of nutrition guidance tools (billions 

pieces of nutrition guidance distributed) 

Exceeded 

5.3 Improve Nutrition Assistance Program 

Management and Customer Service 

5.3.1 Increase Food Stamp payment accuracy rate Deferred 

Strategic Goal 6: Protect and Enhance the Nation’s Natural Resource Base and Environment 

6.1.1 Comprehensive nutrient management plans applied (number of 

plans) 

Unmet 

 Conservation Technical Assistance 

6.1 Protect Watershed Health to Ensure 

Clean and Abundant Water 

 Environmental Quality Incentives Program 

6.1.2 Increase Conservation Reserve Program (CRP) acres of 

riparian and grass buffers 

Unmet 

6.2.1 Cropland with conservation applied to improve soil quality Met 

 Conservation Technical Assistance Program 

 Environmental Quality Incentives Program 

6.2 Enhance Soil Quality to Maintain 

Productive Working Cropland 

 Conservation Security Program 

6.3 6.3.1 Number of acres of hazardous fuel treated that are in the 

wildland urban interface 

Met 

6.3.2 Number of acres of hazardous fuel treated that are in condition 

Classes 2 or 3 in Fire Regimes 1, 2 or 3 outside the wildlandurban interface 

Unmet 

Protect Forests and Grasslands 

6.3.3 Number of acres in condition classes 2 or 3 in Fire Regimes 1, 

2 or 3 treated by all land management activities that improve 

condition class 

Met 
MANAGEMENT’S DISCUSSION AND ANALYSIS 

9 

FY 2007 Performance and Accountability Report 

Performance Scorecard for FY 2006 

Objectives Annual Performance Goals Result 

6.3.4 Grazing land and forest land with conservation applied to 

protect and improve the resource base (millions of acres) 

Exceeded 

 Conservation Technical Assistance Program 

 Environmental Quality Incentives Program 

 Conservation Security Program 

6.4 6.4.1 Wetlands created, restored or enhanced Met 

 Conservation Technical Assistance 

Protect and Enhance Wildlife Habitat to 

Benefit Desired, At-Risk And Declining 

Species  Wetlands Reserve Program 

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. 

Management Challenges 

Annually, the Office of Inspector General (OIG) 

prepares a report for the Secretary on the most 

significant management challenges identified in 

USDA (Appendix A). These challenges have been 

identified as potential issues that could hamper the 

delivery of Department programs and services. To 

mitigate these challenges, USDA management 

provides accomplishments for the current fiscal year 

and/or planned actions for the upcoming one. Most of 

the challenges identified in FY 2006 remain for FY 

2007. Three new challenges were added. Additionally, 

the civil rights management and complaint processing 

within USDA was reinstated this fiscal year as a major 

management issue. OIG removed one FY 2006 

challenge and certain issues associated with other 

challenges because of USDA improvements. The 

following table summarizes those challenges that 

changed from FY 2006 to FY 2007.

FY 2006 Management Challenges FY 2007 Changes 

Challenge #1—Interagency Communication, 

Coordination and Program Integration Need 

Improvement 

Issue Removed—Improve communication and strengthen controls for beef 

exported to Japan. 

Challenge #2—Implementation of Strong, 

Integrated Management Control (Internal Control) 

Systems Still Needed 

Issue Added—Develop Rural Housing Service controls over administering 

disaster housing assistance programs to ensure aid is provided to those in 

need and avoid benefit duplication.

Challenge #3—Implementation of Improper 

Payments Information Act Requirements Needs 

Improvement 

Issue Removed—Strengthen program risk assessment methodology to 

identify and test the critical internal controls over program payments 

totaling more than $100 billion.

Challenge #4—Departmental Efforts and Initiatives 

in Homeland Security Need to be Maintained 

Issue Removed—Develop an information system to track noncompliance 

violations related to specified risk materials better. 

Issue Removed—Improve security and accountability of explosives and 

munitions. 

Challenge #5—Department wide Efforts and 

Initiatives on Genetically Engineered Organisms 

Need to be Strengthened 

Challenge was incorporated into a new global trade challenge 
MANAGEMENT’S DISCUSSION AND ANALYSIS 

10 

FY 2007 Performance and Accountability Report 

FY 2006 Management Challenges FY 2007 Changes 

Challenge #6—USDA’s Response to the 2005 

Hurricanes Needs Ongoing Oversight 

Challenge Removed 

New Challenge—USDA Needs to develop a Proactive, Integrated Strategy 

to Assess American Producers to Meet the Global Trade Challenge 

• Continue to strengthen genetically engineered organism field testing 

controls to prevent inadvertent genetic mixing with agricultural crops 

for export. 

• Develop a global market strategy. 

• Strengthen trade promotion operations. 

New Challenge—Better Forest Service Management and Community 

Action Needed to Improve the Health of the National Forests and Reduce 

the Costs of Fighting Fires 

• Develop methods to improve forest health. 

• Establish criteria to reduce the threat of wildland fires. 

New Challenge—Improved Controls Needed for Food Safety Inspection 

Systems

• Complete corrective actions on prior recommendations. 

• Develop a time-phased plan to complete assessments of 

establishment’s food safety system control plans and production 

processes, including a review program that includes periodic 

reassessment. 

• Develop a process to accumulate, review and analyze all data 

available to assess the adequacy of food safety systems. 

• Improve the accuracy of data available in the systems. 

• Continue to develop and implement a strategy for hiring and training 

inspectors.

Challenge Reinstated—Material Weaknesses Continue to Persist in Civil 

Rights Control Structure and Environment 

• Develop a plan to process complaints timely and effectively. 

• Ensure integrity of complaint data in the system. 

• Develop procedures to control and monitor case file documentation 

and organization.

The following table includes FY 2007 accomplishments and/or FY 2008 planned actions. 

USDA’s Management Challenges 

1) Interagency Communications, Coordination, and Program Integration Need Improvement

• Integrate the management information systems used to implement the crop insurance, conservation and farm programs; and 

• Increase organizational communication and understanding among the agencies that administer the farm and conservation 

programs. 

Fiscal Year 2007 Accomplishments 

− Initiated Departmental clearance to publish the Routine Uses for System of Records in the Federal Register to allow 

producer and member information to be disclosed to RMA and, subsequently, approve insurance providers, their agents and 

loss adjusters under contract with RMA; 

− Established future common reporting requirements for producer, State and county offices based on recommendations from 

RMA/FSA working group; and 

− FSA and RMA initiated reconciling differences between crop data definitions. 
MANAGEMENT’S DISCUSSION AND ANALYSIS 

11 

FY 2007 Performance and Accountability Report 

Planned Actions for Fiscal Year 2008 

− Continue to pilot a Comprehensive Information Management System (CIMS) Managers’ Report to identify differences in 

information provided by producers to RMA and FSA; 

− Incorporate RMA and FSA production data and Common Land Unit data into the CIMS database; 

− Develop a single acreage reporting process for insured producers to reduce the burden of duplicating reporting requirements 

for producers for common elements, which would eliminate the need for reconciliation; 

− Publish Routine Uses for System of Record for CIMS in the Federal Register to share data with insurance providers; 

− Finalize reconciliation of differences between crop data definitions; 

− Develop procedures for accessing and utilizing CIMS Projects; 

− Meet monthly to identify and resolve Geospatial data issues (FSA, RMA and NRCS); 

− Will consult on program procedures common to FSA and NRCS before directives are issued to field offices; 

− Developing the Lean Six Sigma Grants Process to better integrate the management of grants and financial assistance 

programs better. The process will include cost share, easements, stewardship, emergency landscapes and traditional 

grants; 

− Develop enhanced standard programmatic reports to isolate and resolve eligibility and vendor issues, or other data 

anomalies that might lead to improper payments efficiently; 

− Improve automated member eligibility verification, which will prevent clients from entering into new contracts or modifying 

existing contracts; and 

− Enhance NRCS Easement Business Tool to data mine and data share between USDA agencies. 

2) Implementation of Strong, Integrated Management Control (Internal Control) Systems Still Needed.

• Develop Rural Housing Service controls over administering disaster housing assistance programs to ensure aid is provided to 

those in need and avoid benefit duplication. 

Planned Actions for Fiscal Year 2008 

− Establish procedures to compare Federal Emergency Management Agency (FEMA) numbers for duplication after a disaster 

and upgrade the Multi-Family Information System to reject duplicate FEMA numbers. 

− Develop procedures to monitor owners and management agents immediately following a disaster. 

• Strengthen quality control, publish sanction procedure and perform required reconciliation in the Federal Crop Insurance 

Program. 

Fiscal Year 2007 Accomplishments 

− Reviewed selected RMA Approved Insurance Providers operations to determine their compliance with quality control 

guidelines outlines outlined in the Standard Reinsurance Agreement and associated Appendix IV. 

Planned Actions for Fiscal Year 2008 

− Continue reviews of selected Approved Insurance Providers operations to determine compliance with qualify control 

guideline outlined in the Standard Reinsurance Agreement and associated Appendix IV. 

• Improve FS internal controls and management accountability to manage its resources, measure its progress towards goals and 

objectives, and accurately report its accomplishments effectively.

Planned Actions for Fiscal Year 2008 

− Complete corrective actions to successfully implement Government Performance and Results Act; 

− Improve oversight within FS of national firefighting contract crews by implementing corrective actions in response to OIG 

audit reports; 

− Conduct annual internal control risk assessment throughout FS and develop plans to address identified risks; 

− Perform an annual systems assessment of all Forest Service financial/mixed financial systems; 

− Conduct oversight reviews on performance accountability within various regions; 

− Continue to implement corrective actions identified through the OMB Circular A-123, Appendix A , OIG/ GAO audits; and 

− Implement corrective action steps that address the FISMA plan of action and milestones. 
MANAGEMENT’S DISCUSSION AND ANALYSIS 

12 

FY 2007 Performance and Accountability Report 

•

• Capitalize on Farm Service Agency compliance activities to improve program integrity. 

Fiscal Year 2007 Accomplishments 

− Implemented Compliance Task Force recommendations; 

− Monitored review of progress for short term, medium-term and long-term solutions to resolve control weaknesses identified 

during OMB A-123, Appendix A assessment; and 

− Implemented recommendations for training methods to improve internal controls and reduce/eliminate improper payments.

Planned Actions for Fiscal Year 2008 

− Monitor the Web-based National Compliance Review database for compliance reviews and spot check results, and take 

necessary actions to correct identified internal control weaknesses; 

− Continue to implement corrective actions identified through OMB Circular A-123, Appendix A; and 

− Continue to implement recommendations to improve internal control and reduce/eliminate improper payments. 

3) Continuing Improvements Needed in Information Technology (IT) Security. 

• Emphasize security program planning and management oversight and monitoring. 

Fiscal Year 2007 Accomplishments 

− Enhanced Cyber Security Scorecard reporting requirements to reflect security components of the Privacy Act, OMB Circular 

A-123, Appendix A and the President’s Management Agenda; 

− Established a Cyber Security Service program with level one personnel to handle routine service questions and the technical 

questions handled by a number of subject matter experts; 

− Established database to track the number and types of questions fielded by the Cyber Security Service Program; 

− Provided a weekly report to management on the status of ticket closures processed at the Cyber Security Communication 

Center; and 

− Continued to yield significant improvements to Cyber Security internal process and program improvement processes. 

Planned Actions for Fiscal Year 2008 

− Continue to use the FISMA Cyber Security Scorecard and issue monthly to Senior IT leadership and executive management 

within the Department; and 

− Implement the Department of Justice’s Cyber Security Assessment and Management for FISMA reporting, Plan of Action 

and Milestones (POA&M) tracking and general security program management tool. 

• Establish an internal control program throughout the systems’ lifecycle. 

Fiscal Year 2007 Accomplishments 

− Coordinated with USDA agencies through the IT Executive Steering Committee to mitigate IT control weaknesses identified 

in FISMA and A-123 assessment reviews; 

− Implemented a quality assurance group to ensure existing OIG audit findings and POA&Ms that contribute to the 

Department’s material weakness are resolved to prevent reoccurrence; 

− Identified security risks by using a vulnerability scanner tool; and 

− Finalized contract for the procurement of SafeBoot for laptop and desktop file encryption. 

Planned Actions for Fiscal Year 2008 

− Integrate OMB Circular, A-123 and FISMA program elements into a system’s life cycle; and 

− Continue with policy and procedure updates and implement new scorecard reporting elements, as needed. 

• Identify, test and mitigate IT security vulnerabilities (risk assessments). 

Fiscal Year 2007 Accomplishments 

− Implemented the ASSERT tool to ensure that risk ratings are properly assigned and risk assessment performed; 

− Reviewed POA&M closures; and 

− Hired contractor services to assist in OCIO’s concurrency review of Certification and Accreditation packages. 
MANAGEMENT’S DISCUSSION AND ANALYSIS 

13 

FY 2007 Performance and Accountability Report 

Planned Actions for Fiscal Year 2008 

− Ensure that risk ratings are properly assigned, system self-assessments are performed, POA&Ms are generated, and tasks 

and milestones are managed appropriately; 

− Review risk ratings (systems categorizations) early in the certification and accreditation process to ensure security testing 

and evaluations are performed for the appropriate level; 

− Conduct reviews on POA&M closure documentation and control testing; 

− Initiate policy gap analysis and revise the Access Control and Configuration Management policies and procedures; and 

− Publish revised policy and procedures for Access Control; 

• Improve access controls. 

Fiscal Year 2007 Accomplishments 

− Prepared a list of common/core controls using National Institute of Standards and Technology guidance to monitor agency 

compliance with access controls for IT systems; 

− Completed a FISMA security policy gap analysis to improve review of access controls; and 

− Issued a memorandum on “Wireless Network Security” to USDA agencies to provide guidance on access controls. 

Planned Actions for Fiscal Year 2008 

− Conduct security reviews and implement policy and procedures on securing wireless devices; 

− Complete configuration guidelines for all operating systems; and 

− Monitor security status using the Cyber Security Scorecard. 

• Implement appropriate application and system software change control. 

Fiscal Year 2007 Accomplishments 

− Monitored Configuration Control Board activities as part of OCIO’s monthly security scorecard. 

Planned Actions for Fiscal Year 2008 

− Monitor this challenge during security compliance reviews. 

• Develop disaster contingency (service continuity) plans. 

Fiscal Year 2007 Accomplishments 

− Reviewed USDA agency’s contingency plans for completeness and compliance with National Institute of Standards and 

Technology guidelines. 

Planned Actions for Fiscal Year 2008 

− Test successfully all USDA agency’s Continuity of Operations plans; 

− Ensure that disaster recovery plans are in the Enterprise Contingency Planning Program System and all systems are 

accounted for through a comprehensive inventory process; and 

− Monitor USDA agencies’ compliance with disaster recovery plan testing through the Cyber Security Scorecard, and the 

Certification and Accreditation concurrency process. 

4) Implementation of Improper Payments Information Act Requirements Needs Improvement. 

• Provide management oversight at all levels, programmatically within agencies and operationally at the State offices, in the 

improper payments elimination process. 

• Develop a supportable methodology/process to detect and estimate the extent of improper payments. 

• Develop and implement a corrective action plan to reduce the amount of these payments. 

Fiscal Year 2007 Accomplishments 

− Completed all scheduled risk assessments and provided the results to OMB for review; 

− Finalized sampling for specific high risk programs and developed corrective action plans and set targets for the next year for

OMB review; 

− Submitted component rates and corrective action plans for the Special Supplemental Nutrition Program for Women, Infants 

and Children, and the Child & Adult Care Food Program; 
MANAGEMENT’S DISCUSSION AND ANALYSIS 

14 

FY 2007 Performance and Accountability Report 

− Prepared an error rate for School Lunch/Breakfast Program and developed a corrective action plan ; 

− Gathered statistical sampling results and identified actions needed by service centers to reduce future findings; 

− Updated field operation and program managers’ performance plans to include improper payment as a performance element; 

and 

− Developed plans to measure improper payments for high risk programs and provided the results to OMB for review. 

Planned Actions for Fiscal Year 2008 

− Continue to complete sampling for high risk programs; 

− Review and validate the results of the statistical sampling of the high risk programs; 

− Monitor the development of action plans to ensure areas of weakness are mitigated; and 

− Update managers and employees performance standards to include improper payment as a performance element. 

5) Departmental Efforts and Initiatives in Homeland Security Need to be Maintained. 

• Continue vulnerability and risk assessments to determine adequate food safety and security over agricultural commodities that 

the Department manages, transports, stores and distributes; 

• Continue to work with other USDA agencies to ensure effective coordination and implementation of Homeland Security 

Presidential Directive (HSPD) 9; e.g., develop animal and plant diagnostic and tracking networks; and 

• Continue efforts to coordinate with the U.S. Department of Homeland Security in implementing effective control systems to 

ensure the safety and security of agricultural products entering the country. 

•

Fiscal Year 2007 Accomplishments 

− Jointly with the Federal Bureau of Investigation, the Department of Homeland Security, the Food and Drug Administration, 

and other USDA agencies, conducted a Strategic Partnership Protection Agro-terrorism facility vulnerability assessment to 

determine appropriate levels of security needed for USDA-owned agricultural commodities, including bulk grain, oilseeds, 

rice and processed commodities. 

Planned Actions for Fiscal Year 2008 

− Analyze risk assessment findings and identify changes needed to existing policies and procedures to address weaknesses 

found. 

• Continue to strengthen controls over select agents and toxins 

Fiscal Year 2007 Accomplishments and Planned Actions for Fiscal Year 2008 

− Implemented procedures for inspecting registered organizations in possession of select agents. The new procedures verify 

that organizations conduct and document annual performance tests of their security plans. These procedures also will be 

implemented during Fiscal Year 2008. 

• Work with States in preparing for and handling avian influenza occurrences in live bird markets or other “off-farm” environments 

Fiscal Year 2007 Accomplishments and Planned Actions for Fiscal Year 2008 

− Implemented a Memorandum of Understanding between APHIS and FSA that provides a further understanding of each 

agency’s cooperation, expectations, and responsibilities to control and eradicate avian influenza and other foreign diseases 

of livestock; and 

− Implemented national avian influenza surveillance activities to be undertaken by Federal and States agencies, and the 

commercial poultry industry in the event of an outbreak. 

6) Material Weaknesses Continue to Persist in Civil Rights Control Structure and Environment. 

• Develop a plan to process complaints timely and effectively. 

Planned Actions for Fiscal Year 2008 

− Develop automated intake report for pending complaints; 

− Establish formal procedures for prompt resolution of complaints not processed timely; 

− Develop automated adjudication reports for pending complaints; 
MANAGEMENT’S DISCUSSION AND ANALYSIS 

15 

FY 2007 Performance and Accountability Report 

− Reassess performance standards for Specialists in the Employment Complaints Division to include timely completion of 

assigned cases; 

− Require contract agreements for investigations to include a standard provision for timely and quality services; and 

− Request EEOC to conduct training and provide technical assistance with investigations and processing of complaints. 

• Ensure integrity of complaint data in the system. 

Planned Actions for Fiscal Year 2008 

− Finalize formal plan for business rules; 

− Create audit procedures for reviewing sample cases for data integrity ; 

− Create automated quality control tool; and 

− Conduct audit of sample cases. 

• Develop procedures to control and monitor case file documentation and organization. 

Planned Actions for Fiscal Year 2008 

− Develop comprehensive records management procedures for EEO case files; 

− Implement procedures for transferring and safeguarding documents part of an EEO complaint file; and 

− Obtain services of an external contractor to inventory and review EEO case files and establish record retention procedures. 

7) USDA Needs To Develop a Proactive, Integrated Strategy To Assist American Producers To Meet the Global Trade 

Challenge. 

• Continue to strengthen genetically engineered organism field testing controls to prevent inadvertent genetic mixing with 

agricultural crops for export. 

• Develop a global market strategy. 

Fiscal Year 2007 Accomplishments 

− Created the Office of Country and Regional Affairs at FSA to develop and oversee country, regional and cross-cutting 

strategies; 

− Developed a tracking system to monitor foreign trading partners’ compliance with U.S. bilateral, regional and multilateral 

trade agreements covering agricultural products. 

Planned Actions for Fiscal Year 2008 

− Finalize development of 14 initial coordinated country and regional marketing strategies; 

− Develop processes and systems to monitor USDA global strategy for maximizing market access opportunities for U.S. 

agricultural exports; 

− Develop a comprehensive strategy for monitoring and enforcing noncompliance issues related to trade agreements; 

− Analyze and assess methods to increase the effectiveness and alignment of FAS international programs that effect USDA 

operations; 

− Develop integrated strategies for key crosscutting trade issues within USDA, such as avian influenza, biofuels, food security 

and new technologies/biotech; and 

− Continue bilateral and multilateral activities to provide continuity and sustained presence needed to assure market access 

for U.S. agricultural exports, and foster the global acceptance of agricultural biotechnology, as well as targeting new 

activities in support of free trade discussions. 

• Strengthen trade promotion operations. 

Planned Actions for Fiscal Year 2008 

− Analyze and reassess market development programs by coordinating industry trade partners’ program initiatives with USDA 

functional area efforts; 

− Review USDA outreach efforts, including assessment of USDA and FAS Web sites in consultation with stakeholders and 

partners; 

− Continue development of new program management software and ongoing efforts to streamline program administration; 
MANAGEMENT’S DISCUSSION AND ANALYSIS 

16 

FY 2007 Performance and Accountability Report 

− Further develop evaluation criteria and processes to demonstrate effectiveness of market development program 

administration and funding allocations; and 

− Conduct annual review/reassessment of FAS outreach effort. 

8) Better Forest Service Management and Community Action Needed to Improve the Health of the National Forests and 

Reduce the Cost of Fighting Fires. 

• Develop methods to improve forest health; and 

• Establish criteria to reduce the threat of wildland fires. 

Planned Actions for Fiscal Year 2008 

− Develop national guidance for the regions to use in assessing the risks from wildfires; 

− Monitor the effectiveness of hazardous fuel treatments and restoration projects; 

− Obtain clarification on both FS and States’ protection responsibilities in the wildland urban interface and on other private 

properties threatened by wildfires; 

− Develop partnerships with States and counties to develop and deliver fire prevention ordinances for use in planning and 

zoning in wildland urban interface areas; and 

− Conduct large fire cost reviews. 

9) Improved Controls Needed for Food Safety Inspection Systems. 

• Develop a time-phased plan to complete assessments of establishment food safety system control plans and production 

processes, including a review program that includes periodic reassessment; and 

• Continue to develop and implement a strategy for hiring and training inspectors. 

Fiscal Year 2007 Accomplishments 

− Conducted food safety assessment training; 

− Maintained data and information systems infrastructure adequate to support inspection activities; and 

− Developed an FSIS Enterprise Architecture Blueprint to document, assess and improve the lines of business processes. 

Planned Actions for Fiscal Year 2008 

− Continue to implement modernization efforts to improve the security, quality and sustainability of system infrastructure. 

• Develop a process to accumulate, review and analyze all data available to assess the adequacy of food safety system; and 

• Improve the accuracy of data available in the systems. 

Fiscal Year 2007 Accomplishments 

− Developed the Enterprise Architecture Blueprint to provide the foundation for documenting, assessing and improving the 

lines of agency business processes, and ensuring they are properly aligned to the system’s capabilities and needs. The 

blueprint also provides the mechanism to align and improve system data capture and automation capabilities further; and 

− Developed the Public Health Information Consolidation Projects (PHICP) and the Public Health Data Communication 

Infrastructure Systems (PHDCIS) to plan, track and report on the IT operational and development activities better. PHICP 

tracks and reports the development of information systems for FSIS. PHDCIS contains the operational, maintenance, and 

infrastructure hardware and activities. 

Planned Actions for Fiscal Year 2008 

− Implement a modernization effort to continue to improve the security, quality and sustainability of the system infrastructure. 
MANAGEMENT’S DISCUSSION AND ANALYSIS 

17 

FY 2007 Performance and Accountability Report 

Future Demands, Risks, Uncertainties, Events, 

Conditions and Trends 

USDA is influenced by many of the same forces that 

shape the American economy—globalization of 

markets, scientific advances and fundamental changes 

in the Nation’s family structure and workforce. U.S. 

farmers and food companies operate in highly 

competitive markets with constantly changing demand 

for high quality food with a variety of characteristics, 

including convenience, taste and nutrition. 

Additionally, homeland security is a significant, 

ongoing priority for USDA. The Department is 

working with the U.S. Department of Homeland 

Security to help protect agriculture from intentional 

and accidental acts that might affect America’s food 

supply or natural resources. 

External factors that challenge USDA’s ability to 

achieve its desired outcomes include: 

 Weather-related hardships and other 

uncontrollable events at home 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; 

 The availability of funds for financial assistance 

provided by Congress and the local and national 

economies; 

 Sharp fluctuations in farm prices, interest rates and 

unemployment also impact the ability of farmers, 

other rural residents, communities and businesses 

to qualify for credit and manage their debts; 

 The impact of future economic conditions and 

actions by a variety of Federal, State and local 

Governments that will influence the sustainability 

of rural infrastructure; 

 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 is dependent 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. 

USDA’s Results Agenda—Implementing Federal 

Management Initiatives 

USDA works to strengthen its focus on results 

through vigorous execution of the President’s 

Management Agenda (PMA). This agenda focuses on 

management improvements that help USDA 

consistently deliver more efficient and effective 

programs to its stakeholders. This process is designed 

to improve customer service and provide more effective 

stewardship of taxpayer funds. As discussed in the 

Department’s Strategic Plan for FY 2005-2010, 

USDA plans to: 

 Ensure an efficient, high-performing, diverse 

workforce, aligned with mission priorities and 

working cooperatively with partners and the 

private sector; 

 Enhance internal controls, data integrity, 

management information and program and policy 

improvements as reflected by an unqualified audit 

opinion; 

 Reduce spending and burden on citizens, partners 

and employees by simplifying access to the 

Department’s information. This enhancement is 

added by implementing business processes and 
MANAGEMENT’S DISCUSSION AND ANALYSIS 

18 

FY 2007 Performance and Accountability Report 

information technology needed to make its 

services available electronically; 

 Link budget decisions and program priorities more 

closely with program performance and consider 

the full cost of programs and activities; 

 Reduce improper payments by developing targets 

and implemented corrective action plans; 

 Efficiently and effectively manage its real property; 

 Transform IT enterprise infrastructure to be cost 

effective and consistent across all agencies and 

geographic regions; 

 Improve its research and development investments 

by using objective criteria; and 

 Support the essential work of faith-based and 

community organizations. 

USDA employees are charged with executing these 

management initiatives, which they do with an 

emphasis on customer service. The PMA calls for the 

U.S. Office of Management and Budget (OMB) to 

score departments on each initiative. Green indicates 

success; yellow indicates mixed results and red 

indicates an unsatisfactory score. There are two scores 

awarded. “Status” indicates that a department is 

meeting the standards established for success. 

“Progress” indicates that it is progressing adequately in 

meeting established deliverables and timelines. The 

arrows next to the scores indicate whether the score 

has improved ↑, declined ↓ or remained the same ↔ 

compared to FY 2006. 

Status Progress 

↔ HUMAN CAPITAL ↔ 

The PMA challenges Federal Government leaders to 

think boldly and strategically to improve the 

management and performance of Government. 

Nowhere is this challenge more important than in the 

strategic management of human capital. 

Building upon its success in completing the human 

capital initiatives and objectives set forth in its 2004 

Human Capital Strategic Plan, USDA developed a 

Strategic Human Capital Plan in December 2006. The 

plan incorporates Human Capital Accountability into 

its framework. USDA’s Strategic Human Capital Plan 

established five strategic goals that drive USDA’s 

human capital initiatives: 

 Human capital management strategies are aligned 

with the Department’s mission, goals and 

organizational objectives, and integrated into 

strategic plans, performance plans and budgets; 

 Leaders and managers effectively manage people, 

ensure continuity of leadership and sustain a 

learning environment that drives continuous 

improvements; 

 Skills, knowledge and competency 

gaps/deficiencies in mission-critical occupations 

have been closed, and meaningful progress toward 

closing skills, knowledge and competency 

gaps/deficiencies in all agency occupations has 

been made; 

 The workforce is diverse, results-oriented, highperforming, and the performance management 

system differentiates between high and low levels 

of performance, and links individual/team/unit 

performance to organizational goals and desired 

results effectively; and 

 Human capital management decisions are guided 

by a data-drive, results-oriented planning and 

accountability system. 

To attract a diverse, highly skilled workforce, USDA 

has marketed itself as the “Employer of Choice” in the 

Federal Government. Through the use of targeted 

recruitment efforts and automated hiring systems, 

USDA has achieved some of the best hiring timelines 

in the Federal Government. For its general schedule 

positions, employment offers are made within 21 days, 

on average. Offers for Senior Executives come within 

39 days. The GS timeframe is less than half of the 45-

day metric established by the Office of Personnel 
MANAGEMENT’S DISCUSSION AND ANALYSIS 

19 

FY 2007 Performance and Accountability Report 

Management (OPM) and the Senior Executive 

timeframe is consistently the best in government. 

USDA has implemented OPM’s Career Pattern 

strategies aggressively when recruiting for its mission 

critical occupations. By identifying appropriate 

applicant pools and their attractors, building 

environments suitable for those attractors and 

designing vacancy announcements highlighting the 

attractors, the Department has attracted a broader pool 

of highly skilled applicants successfully. More 

specifically, the Agricultural Research Service (ARS) 

identified a critical shortage of DVM/PhD candidates 

for Veterinary Medical Officer positions. ARS 

developed a competitive education program whereby 

candidates become full-time paid employees while 

enrolled in a full-time PhD program. ARS pays for 

tuition, books and lab fees in exchange for a three-year 

work commitment from the student. 

Through the adoption of a strategic goal focusing 

solely on accountability, USDA has demonstrated its 

commitment to excellence. The Department 

progressed substantially in completing its 

accountability reviews. By the end of the fiscal year, it 

will have conducted all required reviews. 

Implementation of the resulting recommendations has 

strengthened all human resources processes 

throughout USDA. In concert with OPM, USDA is 

enhancing its accountability program further by 

institutionalizing and standardizing the delegated 

examining review process. Through more consistent 

and timely internal reviews, USDA can focus 

additional accountability resources on strategic and 

workforce planning, leadership and knowledge 

management, and talent management. 

Additionally, in achieving its “green” status, USDA 

has: 

 Conducted a Department-wide leadership and 

human resources skills gap analysis; 

 Updated its information technology skills gap 

analysis and developed an improvement plan; 

 Developed an action plan to address the results of 

the Federal Human Capital Survey; and 

 Continued Department-wide implementation of 

its automated human resources enterprise system, 

EmpowHR. 

USDA will continue to work with its human capital 

partners to create programs that will enhance employee 

development. These programs will also increase the 

use of human capital flexibilities for managers in 

recruitment and retention, streamline processes for 

more efficient and faster service, and ensure that the 

Department workforce has the skills to meet the 

challenging demands of the 21st century. USDA is 

committed to leading by example and serving as the 

vanguard of the Federal Government’s overall human 

capital transformation efforts. Specifically, the 

Department will: 

 Continue implementing the improvement plan for 

its expanded performance management Beta site; 

 Continue reviewing opportunities for greater 

organizational and operational efficiencies within 

selected USDA mission areas; 

 Complete its scheduled accountability reviews and 

report; and 

 Develop and maintained a diverse, talented 

workforce capable of achieving the USDA 

mission. 

Status Progress 

↔ 

COMPETITIVE 

SOURCING ↔ 

The Office of the Chief Financial Officer oversees 

USDA’s Competitive Sourcing initiative. The 

Department is implementing competitive sourcing 

reasonably and rationally to achieve significant cost 

savings, improved performance and a better alignment 

of the agency’s workforce to its mission. This initiative 

is aimed at improving organizations through efficient 

and effective competition between public and private 
MANAGEMENT’S DISCUSSION AND ANALYSIS 

20 

FY 2007 Performance and Accountability Report 

sources. USDA will continue to simplify and improve 

the procedures for evaluating resources. 

The Department requires that a feasibility study, 

including cost-benefit analysis, be completed prior to 

conducting a competitive sourcing study. This strategy 

ensures that functions selected for public-private sector 

competitions result in an organization implemented 

with lower costs and increased management 

efficiencies. Studies continue to be linked to agency 

human capital plans to ensure that workforce planning 

and restructuring, and retention goals are met while 

achieving cost savings. 

USDA continues to evaluate its positions to identify 

those that can be studied to achieve efficiency and/or 

quality improvement. 

The Department has earned a yellow for status and a 

red for progress largely because of the impact of 

legislative restrictions on planned feasibility studies. 

Competitive Sourcing results are reported to Congress 

annually on December 31 for the preceding fiscal year. 

The results provided in this report are for FY 2006 as 

reported to Congress on December 31, 2006. 

Actions taken by USDA include: 

 Completed competitions to improve productivity 

and produce annual savings: 

 The Natural Resources Conservation Service 

completed a study on 34 full-time employees 

(FTEs) in FY 2006. Estimated gross savings is 

$2.8 million through 5 years with annualized 

savings of $550,000 for the competitive 

sourcing study completed in FY 2006. Actual 

savings on the studies completed in FY 2006 

totaled $568,000; 

 Planned feasibility studies covering more than 

2,500 FTEs. When the results of feasibility 

studies indicate a favorable return on 

investment and market research shows 

potential qualified vendors exist, an A-76 

competition is conducted. If the results are 

unfavorable, competitions are not conducted; 

and 

 Announced two competitive sourcing studies. 

 Conducted training on the Office of Management 

and Budget’s Competitive Sourcing Tracking and 

Workforce Inventory Tracking systems and the 

FAIR Act Inventory; and 

 Convened a Department-wide group to review 

function codes used in the FAIR Act inventory to 

reduce redundancy and replace old function code 

definitions with USDA specific definitions. 

Challenges 

 Forest Service (FS) Legislative Restrictions—House 

Appropriations Committee’s Interior, 

Environment and Related Agencies Subcommittee 

limitations on competitive sourcing. Proposed 

language in the U.S. Department of Interior FY 

2008 Appropriations Bill places a one-year 

moratorium on FS’ Competitive Sourcing 

activities. That moratorium will prevent FS from 

completing studies in accordance with the 

approved green plan. 

 Farm Service Agency and Rural Development Legislative 

Restriction—The Appropriations Act prohibits 

funds to be used to study, complete a study of, or 

enter into a contract with a private party to execute 

a competitive sourcing activity of the Secretary of 

Agriculture without a subsequent Act of Congress. 

This act covers USDA support personnel relating 

to rural development or farm loan programs; and 

 The Office of the Chief Information Officer 

competition covering desktop infrastructure, data 

center, telecommunications and cyber security 

could not be conducted in the original scope due 

to the legislative restrictions cited previously. 

Status Progress 

↔ 

FINANCIAL 

PERFORMANCE ↔ 
MANAGEMENT’S DISCUSSION AND ANALYSIS 

21 

FY 2007 Performance and Accountability Report 

OCFO oversees USDA’s Financial Performance. The 

office works with all USDA agencies and staff offices 

to ensure the Department’s financial management 

reflects sound business practices. The PMA requires 

all Federal agencies to obtain an unqualified financial 

statement audit opinion. The FY 2007 opinion was 

qualified because improvements are needed in internal 

controls over financial reporting related to the credit 

reform process. USDA financial managers have 

focused significant attention on enhancing internal 

controls, improving asset management, implementing 

a standard accounting system and improving related 

corporate administrative systems Department-wide. 

Effectively managing the use of taxpayer dollars is a 

fundamental Federal responsibility. USDA intends to 

ensure that all funds spent are accounted for properly 

to taxpayers, Congress and the Government 

Accountability Office. OCFO works to improve 

financial management in partnership with agency chief 

financial officers as a core attribute of the 

Department’s operating culture. OCFO is working 

closely with USDA agencies to eliminate all material 

weaknesses. 

OCFO will lead efforts to improve financial 

management information by helping USDA’s agencies 

develop and access useful and timely information. This 

information includes monthly financial reports, on-line 

access to real-time information and program cost 

reporting. By enhancing the integrity of financial and 

administrative data, the Department will protect 

corporate assets and conserve scarce resources. 

Financial Management Modernization Initiative (FMMI)—

FMMI’s primary objective is to improve financial 

management performance. It accomplishes the 

objective by efficiently providing USDA agencies with 

a modern, core financial management system. This 

system complies with Federal accounting and systems 

standards, and provides maximum support to the 

USDA mission. FMMI targets the replacement of the 

Foundation Financial Information System (FFIS) and 

the legacy financial and program ledgers used in the 

USDA programs. Replacing FFIS, the core financial 

management system and program ledgers with a 

modern, Web-based core financial management 

system is also expected to eliminate the need to 

operate and maintain many of USDA’s legacy feeder 

systems and the financial statements data warehouse 

currently required to produce timely external financial 

statements. 

The FMMI investment has the following key 

attributes: 

 Integration with such existing and emerging 

eGovernment initiatives as eGovernment Travel 

Services, ePayroll, Grants.gov, and eLoans; current 

corporate solutions for which financial results must 

be reflected in the budgetary and general ledger 

accounts of the Department (e.g., asset 

management and procurement) and programspecific systems that support the general ledger 

(e.g., programmatic loan systems); 

 Integration with performance management and 

budgeting, allowing USDA to meet the PMA and 

Government and Performance Results Act 

requirements; and 

 Compliance with the Federal Financial 

Management Improvement Act (FFMIA), 

including Federal financial management system 

requirements, applicable Federal accounting 

standards and U.S. Government Standard General 

Ledger at the transaction level. 

Reducing the Number of Financial System Feeders—

USDA’s current financial management system 

portfolio uses administrative systems to “feed” data 

into and provide an integrated financial system 

solution. Until the legacy applications are retired and 

replaced, they will be kept compliant with the 

Financial Systems Integration Office core financial 

systems requirements. 

The Department began to modernize and retire the 

legacy administrative systems in FY 2003. USDA has 
MANAGEMENT’S DISCUSSION AND ANALYSIS 

22 

FY 2007 Performance and Accountability Report 

retired several of the legacy applications. Others are to 

be retired and replaced by a different portfolio and 

investment within the next two fiscal years. 

FSA/CCC MIDAS (Modernize and Innovate the Delivery of 

Agricultural Systems)—MIDAS will transform the 

delivery of farmer benefits through a direct linkage 

with USDA’s FMMI system. This link will help 

reduce erroneous payments. MIDAS will increase staff 

productivity through streamlined and automated farm 

program procedures. Fewer staff will be needed to 

handle the current program volume. MIDAS will free 

staff from cumbersome manual processing, duplicative 

data entry and daily system maintenance activities 

required by the legacy environment. County office 

employees can focus on serving the customer while 

meeting program requirements. MIDAS also leverages 

modern technology to enable Web-user interface and 

strengthens USDA’s considerable investment in 

geospatial technology. It will provide automated realtime centralized payment eligibility determination, 

thorough documentation of business 

ownership/participation and automated adjustments to 

payments for outstanding producer obligations. This 

will reduce timeframes from application to receipt of 

benefits, add self-service channels via the Internet and 

store data centrally so that the customer is not bound 

to a single service center. Additionally, the computer 

system will provide a repository of data and legal 

transaction records. This repository will accept realtime queries to support the needs of Congress, USDA 

headquarters, the Office of Management and Budget 

and other Federal agencies and organizations. 

FFMIA Financial System Strategy—USDA has evaluated 

its financial management systems to assess FFMIA 

compliance. Currently, the Department is not 

compliant with the Federal Financial Management 

System requirements and Federal Information Security 

Management Act (FISMA) requirement. USDA’s 

financial systems strategy is to continue working in FY 

2008 to meet FFMIA and FISMA objectives. The 

Office of Inspector General identified material 

weaknesses for USDA’s information technology 

security and controls in FY 2007. The Department 

added new initiatives with several milestones to 

improve the controls over the Commodity Credit 

Corporation’s information security program and 

financial management systems and reporting, and its 

application controls for the Program Contracts System 

(ProTracts). ProTracts is a Web-based program 

designed to manage conservation program applications 

and cost-share agreements. While USDA has 

completed many of the FY 2007 initiatives to comply 

with statutory requirements, it will continue 

monitoring progress on plans to improve its financial 

management systems. The Department will also work 

to comply fully with FISMA requirements. 

USDA’s plans to improve financial management 

include: 

 Obtain an unqualified audit opinion on its 

financial statements; 

 Continuing to work toward eliminating all 

material weaknesses; 

 Improving financial reporting procedures and 

systems; and 

 Increasing the use of financial information in dayto-day decision-making. 

USDA scored red for status and green for progress on 

the September 30, 2007, scorecard. 

Actions taken by USDA in FY 2007 to achieve these 

results include: 

 Held monthly meetings with agency CFOs to 

discuss financial management policy, information 

systems and quality assurance issues and initiatives. 

At these meetings, agencies are provided with 

financial indicator data to provide focus for 

financial reporting quality control activities; 

 Improved agencies’ financial performance 

measures, targets and milestones as part of their 

efforts to expand the use of financial information 

for decision-making; 

 Developed significant initiatives using the Lean 

Six Sigma Transaction Process (LSTP). LSTP 
MANAGEMENT’S DISCUSSION AND ANALYSIS 

23 

FY 2007 Performance and Accountability Report 

originated in manufacturing industries during a 

time of great demand for quality and speed. One 

initiative OCFO developed with the Forest 

Service is automating the processing of contract 

invoices. This move was designed to improve 

efficiency and shorten the time required for issuing 

payments, which will save interest. LSTP is 

expected to be completed in FY 2008; 

 Continued partnership with the U.S. Department 

of Veterans Affairs Financial Services Center in 

Austin, Texas, to process USDA telephone and 

utility bills through the Electronic Data 

Interchange (EDI) process. This new process will 

allow for the invoices to be received electronically 

rather than by mail in a paper invoice form. More 

than 250,000 bills will be processed annually 

through EDI; and 

 Completed all in-scope cycle risk assessments, 

flowcharts and narratives, Information Technology 

(IT) information-gathering questionnaires, risk 

and control matrices, entity-level controls 

questionnaires, general computer control matrices, 

process and IT test plans and results as required to 

implement A-123 Appendix A, “Internal Control 

over Financial Reporting.” USDA agencies have 

finalized corrective action plans to address 

significant deficiencies and material weaknesses. 

The Department will track critical path milestones 

related to its assessment of internal control over 

financial reporting and maintain monthly status 

reports on progress toward correcting material 

weaknesses. 

Status Progress 

↔ 

EXPANDING 

E-GOVERNMENT ↔ 

USDA continues its commitment to leadership in 

Expanding Electronic Government under PMA and 

using IT to help respond more directly and effectively 

to its stakeholders. These stakeholders include farmers 

and producers, families, school children, and rural 

communities. The Department implements a sound 

and integrated enterprise architecture and manages 

secure IT investments that perform on schedule and 

within budget. USDA also participates in 30 

Presidential Initiatives and Lines of Business. 

USDA activities for FY 2007 support the following 

goals: 

 Provide customers with single points of access to 

information and shared services; 

 Simplify and unify business processes spanning 

multiple agencies; 

 Establish information and service-delivery 

standards; and 

 Consolidate redundant IT services and systems 

through shared USDA or Government-wide 

services. 

USDA scored yellow for status and red for progress on 

the September 30, 2007, scorecard. 

Actions taken by USDA in FY 2007 include: 

 Implemented an Integrated IT Governance 

Process (IGP). IGP combines Capital Planning, 

Security and Privacy, Enterprise Architecture, 

Earned Value Management, and Portfolio 

Analysis to plan, manage and control the 

Department’s IT investment portfolio more 

effectively. By integrating these disciplines in one 

process, USDA can guarantee a secure, reliable, 

consistent and efficient IT infrastructure, identify 

innovative new ways to deliver services to citizens 

and implement cost savings by combining similar 

initiatives Department-wide; 

 Expanded the Enterprise Architecture (EA) 

information base to support more robust analysis 

used to inform and guide the decision making 

process. EA establishes the enterprise-wide 

roadmap to support the Capital Planning and 

Investment Control process; 

 Established a hotline to report lost/stolen IT 

equipment to facilitate incidence response; 

 Blocked access to gaming, auction, and social 

networking sites. USDA also began an aggressive, 

proactive approach to eliminate peer-to-peer 
MANAGEMENT’S DISCUSSION AND ANALYSIS 

24 

FY 2007 Performance and Accountability Report 

activity with the network. The result was an 

approximate 64-percent reduction in virus activity 

(350,000 monthly reduced to 120,000 monthly) 

for the Department; 

 Increased outreach efforts for information security 

through a series of "Best Practices" seminars. 

Speakers have been from the National Institute of 

Standards and Technology and Department of 

Justice on security content automation and 

certification and accreditation; 

 Established a monthly cyber security scorecard to 

focus management attention on key areas 

important to such external reviewers as OMB and 

Congress; 

 Offered USDA’s eAuthentication Service as one 

of the General Services Administration-certified, 

Security Assertion Markup Language-compliant, 

Government-wide credential service providers. 

This certification enables USDA to provide Level 

2 credentials to other Federal agencies; 

 Integrated with 251 business applications - 

exceeding the FY 2007 target of 200 for the 

USDA eAuthentication Service; 

 Authorized more than 95,000 employees and 

160,000 customers for USDA's eAuthentication 

Service; 

 Continued the promotion of AgLearn as USDA’s 

official training system. AgLearn is the 

Department’s implementation of the eTraining 

Presidential eGovernment Initiative. In a typical 

month in 

FY 2007, 46,500 employees completed 760 

different courses on AgLearn; 

 Supported more than 140,000 users and more than 

1,400 Agency AgLearn Administrators with more 

than 1.1 million course completions; 

 Provided Department-wide, agency-specific 

mandatory training, including security, privacy and 

ethics training, through AgLearn; 

 Launched campaign to initiate Department-wide 

use of the SF-182 request for training form 

through AgLearn; 

 Commissioned an independent operational 

analysis that found AgLearn well on track to 

meeting the original goals and costing $1.5M less 

annually than projected in the 2004 Business Case; 

 Secured enterprise SkillSoft license for more than 

2,500 courses now available to USDA employees 

for a little more than $7 annually per user through 

AgLearn. Previously, agencies were separately 

paying more than twice as much for these same 

courses. Also included in this cost is access to 

hundreds of high-quality leadership videos 

available to USDA senior managers and 

individuals in agency-emerging leadership 

programs; 

 Continued to expand the Enterprise 

Correspondence Management Module (ECMM). 

ECMM is designed to track incoming 

correspondence from public, private, or political 

inquiries. The Secretary’s correspondence is now 

handled exclusively through ECMM; 

 Converted more than 965,000 Staff Action

documents to ECMM. More than 220,000 

documents have been created since ECMM 

launched at the beginning of FY 2006. Staff Action

is USDA’s current correspondence-management 

system; 

 Moved 49 business applications to the Enterprise 

Shared Services platform provided by USDA’s 

National Information Technology Center (NITC) 

with more than 50 other applications in various 

stages of development. NITC operates 24 hours a 

day, 7 days a week, offers Level 4 security 

clearances and hosts GovBenefits.gov; 

 Offered USDA’s customers the option to apply 

online for all of its discretionary and competitive 

grant opportunities through Grants.gov; and 

 Moved all rulemaking agencies to the Federal 

Docket Management System (FDMS) in 

partnership with the E-Rulemaking Presidential 

Initiative. FDMS allows the public to view and 
MANAGEMENT’S DISCUSSION AND ANALYSIS 

25 

FY 2007 Performance and Accountability Report 

comment easily on information pertaining to 

Federal regulations published by USDA. 

Status Progress 

↔ 

PERFORMANCE 

IMPROVEMENT 

INITIATIVE ↔ 

USDA continues to improve how it integrates 

performance information into its budget decisions and 

throughout the budget process. This integration 

includes the use of the Program Assessment Rating 

Tool (PART). PART is designed to assess and 

improve program performance and efficiency to 

achieve better results. USDA establishes its budget 

priorities based on the strategic goals and desired 

outcomes included in its strategic plan. The 

Department continues to improve its ability to 

measure performance with an emphasis on measuring 

gains in efficiency. 

USDA plans to: 

 Continue using performance information during 

all stages of the budget process; 

 Systematically evaluate programs and integrate the 

results of those evaluations into the budget 

decision-making process, i.e., rely upon PART 

assessments in budget formulation; 

 Improve measurement of program performance 

and efficiency improvements; and 

 Develop the Department’s budget focusing on 

achieving the goals and outcomes contained in the 

new strategic plan. 

USDA scored green for status and progress on the 

September 30, 2007, scorecard. Actions taken by 

USDA in FY 2007 to achieve these results include: 

 Worked with OMB, the Department conducted 

10 PART assessments. Of the 11 PARTs, one 

rated “Effective,” two rated “Moderately 

Effective,” six rated “Adequate” and two rated 

“Results Not Demonstrated (RND).” Based on 

actual funding levels for FY 2007, a little more 

than three percent of funding for USDA programs 

is associated with programs that have PART 

ratings of RND. Additionally, no USDA 

programs scored an “Ineffective” rating; 

 Worked with agencies to ensure that the specific 

plans and milestones developed to address PART 

recommendations are reasonable and detailed 

enough to address them fully. The Department 

uses the internal scorecard process to track agency 

progress toward meeting performance targets and 

addressing PART recommendations; 

 Developed budget requests and making budget 

decisions supported by sound and thorough 

analysis. This analysis considered the effects of 

funding decisions on costs and performance. 

These budget decisions were presented and 

justified to Congress and others using performance 

information; 

 Defined targets for improvements in performance 

and efficiency, and action plans to achieve targets. 

The Deputy Secretary, subcabinet and other senior 

managers continue to receive and discuss the 

Quarterly Budget and Performance Tracking 

Report. They use the report to monitor progress in 

achieving planned performance and efficiency 

gains, and take action where needed to ensure 

targets are met. All PARTed USDA programs 

have at least one efficiency measure that indicates 

programmatic strides in cost-effectiveness; and 

 Continued to use the Management Initiatives 

Tracking System (MITS) PART module to 

enable more active and efficient participation by 

senior Department officials during the PART 

process. MITS also provides managers with the 

ability to track the implementation of PART 

improvement plans and achievement of 

performance targets. 

Status Progress 

↑ REAL PROPERTY ↔ 

Executive Order 13327, Federal Real Property Asset 

Management, establishes the framework for improved 
MANAGEMENT’S DISCUSSION AND ANALYSIS 

26 

FY 2007 Performance and Accountability Report 

use and management of real property owned, leased or 

managed by the Federal Government. It is USDA 

policy to promote the efficient and economical use of 

its real property assets and assure management 

accountability for implementing Federal real property 

management reforms. Based on this policy, 

Department agencies recognize the importance of real 

property resources through increased management 

attention, the establishment of clear goals and 

objectives, improved policies and levels of 

accountability, and other appropriate actions. As the 

foundation of USDA’s real property asset management 

program, the following strategic objectives will be used 

for real property management improvement: 

USDA Real Property Asset Management Strategic 

Objectives 

1. Department’s holdings support agency missions and 

strategic goals and objectives 

2. Maximize facility utilization by co-locating agency operations 

when possible 

3. Accurately inventory and describe real property assets using 

the Corporate Property Automated Information System 

4. Use performance measures as part of the asset 

management decision process 

5. Employ life-cycle, cost-benefit analysis in the real property 

decision-making process 

6. Provide appropriate levels of investment 

7. Eliminate unneeded assets 

8. Use appropriate public and commercial benchmarks and 

best practices to improve asset management 

9. Advance customer satisfaction 

10. Provide for safe, secure and healthy workplaces 

USDA’s plans include: 

 Updated the USDA Asset Management Plan 

(AMP) and accompanying agency building block 

plans, which feature policies and methodologies 

for maintaining property holdings in an amount 

and type according to agency budget and mission. 

AMP presents the Department’s strategic vision 

and plan of action for compliance with the 

Government-wide real property management 

initiative; 

 Implemented the approved USDA AMP and 

accompanying agency building block plans 

(BBPs); 

 Revised draft interim-year targets and out-year 

goals for asset management performance measures; 

 Completed a strategy for addressing the backlog of 

deferred maintenance; 

 Ensured that agencies close any remaining data 

gaps for constructed asset-level reporting and 

developing an expanded data validation and 

verification process; 

 Maintained a comprehensive inventory and profile 

of agency real property, and providing timely and 

accurate information for inclusion into the 

Government-wide real property inventory 

database; 

 Developed a final draft interagency agreement 

between USDA and the U.S. Departments of 

Interior and Labor regarding Job Corps Centers; 

 Developed the Capital Programming and 

Investment Process to ensure scarce resources are 

directed to highest priority asset needs; 

 Completed the Asset Management Initiatives and 

Three Year Timeline document for meeting goals 

and objectives of the AMP and BBPs; and 

 Actively participated in such Government-wide 

management vehicles as the Federal Real Property 

Council (FRPC). FRPC provides a forum to 

address critical real estate and workplace issues 

challenging all Federal agencies.

USDA scored yellow for status and green for progress 

on the July 31, 2007, scorecard. 

Actions taken by USDA in FY 2007 to achieve these 

results include: 

 Revised the comprehensive AMP, including 

agency-specific BBPs, with the latest policies, 

practices and procedures. These are designed to 

optimize the level of real property operating, 

maintenance and security costs; 
MANAGEMENT’S DISCUSSION AND ANALYSIS 

27 

FY 2007 Performance and Accountability Report 

 Implemented the revised USDA AMP and agency 

BBPs and requiring agencies to supply examples of 

improved management practices resulting from 

AMP and BBP implementation; 

 Finalized draft interim-year targets and out-year 

goals for asset management performance measures; 

 Completed a strategy for addressing the backlog of 

deferred maintenance that targets available 

resources to the highest priority assets; 

 Ensured that USDA agencies continued closing 

data gaps in constructed asset-level reporting and 

requiring that agencies validate and verify data 

accuracy; 

 Maintained a comprehensive inventory and profile 

of agency real property and providing timely and 

accurate information for inclusion into the 

Government-wide real property inventory 

database; 

 Submitted a final draft interagency agreement 

between USDA and the U.S. Departments of 

Interior and Labor regarding Job Corps Centers; 

 Developed and publishing the Capital 

Programming and Investment Process to ensure 

scarce resources are directed to highest priority 

asset needs; and 

 Completed the Asset Management Initiatives and 

Three Year Timeline document for meeting goals 

and objectives of the AMP and BBPs. The 

timeline includes a list of assets for disposition and 

an investment prioritization list for mission critical 

and dependent assets. 

Status Progress 

↔ 

RESEARCH AND 

DEVELOPMENT 

INVESTMENT 

CRITERIA 

↔ 

This program initiative calls for Federal research 

agencies to use the three criteria of relevance, quality 

and performance systematically in planning and 

managing programs, and developing budgets. USDA’s 

principle research and development agencies—the 

Agricultural Research Service (ARS); Cooperative 

State Research, Education and Extension Service 

(CSREES); Economic Research Service (ERS); and 

Forest Service Research and Development (FS 

R&D)—continue to integrate criteria into their 

program planning and management processes 

aggressively. In particular, the agencies are using the 

criteria to frame external expert program reviews to 

obtain objective assessments of current programs and 

recommendations for future program planning. Using 

the criteria ensures that programs are addressing the 

right issues, meeting high-quality standards and 

accomplishing their identified goals. 

USDA’s plans include: 

 Continuing to integrate the use of the investment 

criteria in program planning, management and 

assessment; 

 Promoting collaboration among research agencies 

to promote common criteria and performance 

measures when appropriate; and 

 Using the results of program assessments to 

inform all aspects of program management. 

USDA scored green for status and progress on the 

September 30, 2007, scorecard. 

Actions taken by USDA in FY 2007 to achieve these 

results include: 

 Classified programs into portfolios, being 

subjected to rigorous external reviews. Subsequent 

annual internal reviews are being conducted to 

assess progress in responding to the external 

review recommendations; 

 Reached the halfway mark of its program 

assessments with the completion of four of the 

eight external peer reviews of its programs. The 

results of the completed program reviews are being 

used in planning and management; 

 Created a new science quality staff charged with 

providing leadership in performance 
MANAGEMENT’S DISCUSSION AND ANALYSIS 

28 

FY 2007 Performance and Accountability Report 

accountability, science application, information 

management, education and strategic planning; 

 Completed its first two program reviews and is 

drawing on them and recommendations to 

enhance the programs. Preparation for a third 

review is complete and will be implemented in the 

fall of 2007; and 

 Completed four national program assessments in 

FY 2007. The data from the assessment was fed 

into the next program cycle, incorporated into the 

research program action plans and used in the 

budgeting process. 

Status Progress 

↔ 

ELIMINATE 

IMPROPER 

PAYMENTS ↔ 

The Improper Payments Information Act (IPIA) was 

implemented in FY 2004 and became a President’s 

Management Agenda (PMA) initiative in FY 2005. 

IPIA requires that agencies measure their improper 

payments annually, develop improvement targets and 

corrective action plans and track the results annually to 

ensure that the corrective actions are effective. The 

Office of the Chief Financial Officer (OCFO) issued 

specific policy guidance including templates and 

timelines for implementing IPIA and meeting the 

goals of the PMA initiative. 

USDA scored “yellow” for status and “green” for 

progress on the September 30, 2007, scorecard. The 

Department’s overall goal is to achieve “green” in FY 

2008 and “green” in FY 2009. 

The Office of Management and Budget (OMB) 

reported that Federal agencies made more than $40 

billion in improper payments during FY 2006, down 

from $45 billion in FY 2004. 

For FY 2007, USDA identified 16 programs that are 

at risk for improper payments. USDA’s sampling of 

these programs estimated that the Department’s 

improper payments totaled $4.4 billion (improper 

payment rate of 6.1%), down from the FY 2006 

amount of $4.6 billion (improper payment rate of 

7.0%). Of the FY 2007 improper payments amount, 

$3.9 billion was due to incorrect disbursement and 

$460 million was due to incomplete paperwork. In FY 

2006 USDA reported improper payments due to 

incorrect disbursements of $2.0 billion and incomplete 

paperwork of $2.6 billion. 

This is the first year USDA measured all of its high 

risk programs. The Food and Nutrition Service’s 

(FNS) National School Lunch and School Breakfast 

programs reported improper payment rates for the first 

time in FY 2007. The estimated amounts of improper 

payments were $1.4 billion (improper payment rate of 

16.3%) for the School Lunch program and $520 

million (improper payment rate of 24.9%) for the 

School Breakfast program. Corrective action plans 

were developed for each program addressing the causes 

and identifying initiatives to reduce improper 

payments. FNS’ Women, Infant and Children 

program and Child and Adult Care Food program 

reported component rates in FY 2007 as they did for 

FY 2006. 

The seven Farm Service Agency (FSA) programs 

reported significant improvement in FY 2007. FSA’s 

estimated improper payments for FY 2007 were $563 

million (improper payment rate of 2.5%), down from 

$2.9 billion (improper payment rate of 11.2%) for FY 

2006. The FSA reductions came from improvements 

in the quality of its risk assessments and statistical 

sampling. The improved statistical sampling focused 

on verifying program eligibility and uncovered 

administrative weaknesses that prevent FSA from 

determining if payments are proper. Aggressive 

corrective action plans were developed to improve the 

quality of documentation for program eligibility. 

USDA’s plans include: 

 Achieving the overall status of green by July 1, 

2008; 

 Developing and implementing policies, controls 

and procedures at the Department, agency and 

field levels to reduce the number of improper 

payments; 

 Setting and meeting appropriate reduction targets; 
MANAGEMENT’S DISCUSSION AND ANALYSIS 

29 

FY 2007 Performance and Accountability Report 

 Setting and meeting appropriate recovery targets; 

 Demonstrating that the documentation and 

internal control failures at the field level have been 

corrected; 

 Revising sampling methodologies to provide 

improper payment rates nearer the time of payment, 

leading to more timely corrective actions; 

 Creating aggressive correction plans with 

measured performance; 

 Recovering, where possible, overpayments made to 

individuals and organizations; 

 Reporting and prosecuting fraud; 

 Training field personnel on key controls and 

teaching the importance of control procedures and 

the potential risks of noncompliance; 

 Increasing accountability at all levels by integrating 

the employee’s individual results into his or her 

annual performance rating; and 

 Enhancing program controls and reiterate current 

program policies regarding program compliance 

through notices to field personnel. 

Actions taken by USDA in FY 2007 include: 

 Provided an Improper Payments and Internal 

Controls Overview for USDA agency executives; 

 Provided a comprehensive Improper Payments and 

Internal Controls Training Session for USDA 

agency personnel; 

 Provided Improper Payments breakout sessions at 

the annual USDA Financial Management Training; 

 Consolidated small and similar programs together 

for improved focus in the risk assessment process. 

USDA moved from 146 programs in FY 2006 to 

138 programs in FY 2007; 

 Performed an inherent risk survey to better evaluate 

which programs need more frequent or robust risk 

assessments; 

 Revised risk assessment guidance to require that test 

of transactions sampling be statistical; 

 Sampled all 16 programs determined to be high 

risk by statistical or other approved methods. The 

results of these tests are shown in Appendix B of 

this report; and 

 Developed corrective actions for all high risk 

programs and set reduction and recovery targets 

for programs where appropriate. 

Status Progress 

↔ 

IMPROVED CREDIT 

PROGRAM 

MANAGEMENT ↑ 

Improved Credit Program Management is a new 

initiative under the President’s Management Agenda. 

Beginning in FY 2006, this initiative required USDA 

to: 

 Develop risk factors for predicting the cost of loan 

programs; 

 Require that guaranteed lending partners have 

effective loan-portfolio management and loss 

recovery rates; 

 Verify that lending partners have established 

quality collateral valuation processes; 

 Calculate the cost of originating, servicing and 

liquidating loans; and 

 Comply with all relevant provisions of the Debt 

Collection Improvement Act of 1996. 

USDA’s loan portfolio is approximately $100 billion in 

outstanding public debt. It represents nearly one-third 

of all debt in the Federal Government. USDA often is 

the lender of last resort, making many loans to 

borrowers who are at a higher risk for default. 

USDA is committed to achieving the goals of its credit 

programs while effectively managing its portfolio’s 

performance. USDA’s scorecard rating as of 

September 30, 2007, was “Red” for status and “Green” 

for progress. The Department is developing plans to 

meet the initiative’s goals. The Department’s target is 

to achieve “Green” in FY 2009. 
MANAGEMENT’S DISCUSSION AND ANALYSIS 

30 

FY 2007 Performance and Accountability Report 

USDA’s plans include: 

 Setting goals related to reaching target borrowers 

and reducing deviation from risk standards; 

 Setting goals to reduce the total cost of servicing 

and liquidating loans, and improve the debtrecovery rate; 

 Establishing customer satisfaction ratings that 

meet or exceed industry standards; 

 Defining its target borrower segments clearly, 

regularly assessing whether its borrowers meet that 

definition and whether such borrowers comprise 

an acceptable risk that can be managed effectively; 

 Establishing or verifying that partner lenders have 

established sound lending policies and procedures 

implemented in effective transaction-approval 

processes, loan portfolio management and loss 

recovery; 

 Establishing or verifying that partner lenders have 

created collateral valuation processes with clear 

policies and procedures ensuring independence in 

appraisals and valuations, and adequate 

monitoring of appraisers’ quality and certification; 

 Maintaining a reasonable level of risk and 

productivity of taxpayer cash used in lending 

programs through effective management 

information reporting. This reporting includes 

indicators of loan volume, exceptions to 

underwriting standards, concentrations of credit 

risk, delinquency and default rates, rating changes, 

problem loans, and charge offs, and using such 

information to improve program results; 

 Establishing mutually agreeable goals that can be 

justified by comparisons to relevant programs to 

control the total cost of originating, servicing and 

liquidating loans and improve the rate of debt 

recovery; and 

 Complying with all relevant provisions of the Debt 

Collection Improvement Act. 

Actions taken by USDA in FY 2007 include: 

 Issued guidance for writing-off or justifying loans 

delinquent more than two years in order to comply 

with OMB Circular A-129; 

 Reconciled and documented that all delinquent 

debt over two years affected by this initiative were 

written-off or fully justified at the end of the 2nd

Quarter, FY 2007; 

 Established workgroups to identify existing and 

potential risk indicators; and 

 Conducted presentations for OMB on guaranteed 

lender and collateral management by major USDA 

credit areas highlighting leadership, sound lending 

policies and procedures, loan portfolio 

management and loss recovery, and monitoring 

and evaluation of lenders. 

Status Progress 

↔ 

FAITH-BASED AND 

COMMUNITY 

INITIATIVE ↔ 

The Faith-Based and Community Initiative is working 

to create a more open and competitive awards process. 

This helps ensure that the Federal Government 

partners with the organizations most capable of 

meeting the needs of the poor. 

For years, USDA partnered with faith-based and 

community organizations to help deliver food and 

other vital assistance to those in need. The initiative 

works to strengthen these existing partnerships and 

create new ones to reach even more people in need. 

Faith-based and community groups already work with 

the individuals that the Department's assistance 

programs serve. These groups are valuable to USDA’s 

efforts in reaching more people with its programs, and 

being more successful in alleviating hunger and 

building stronger communities. 

The Initiative works to: 

 Promote opportunities and build the capacity of 

faith-based and community organizations through 

outreach and technical-assistance activities; 

 Identify and eliminate barriers that impede the full 

participation of faith-based and community 

organizations in the Federal grants process; 
MANAGEMENT’S DISCUSSION AND ANALYSIS 

31 

FY 2007 Performance and Accountability Report 

 Ensure that equal treatment principles are 

understood at the Federal, State and local levels of 

Government, and, in turn, educate faith-based and 

community organizations receiving Federal funds 

on their responsibilities; and 

 Develop and launch pilot programs to test new 

strategies and strengthen the partnership between 

faith-based and community organizations, and the 

Federal Government. 

USDA scored green for both status and progress on 

the September 30, 2007, scorecard. 

Actions taken by USDA in FY 2007 to achieve these 

results include: 

 Conducted 3,678 outreach and technical assistance 

activities to strengthen the ability of faith-based 

and community organizations to serve those in 

need; 

 Held 440 educational activities for State and local 

Government agencies and faith-based and 

community groups on equal treatment principles; 

 Developed additional Web-based resources for 

faith-based and community groups to enhance 

their knowledge about partnership opportunities 

and funding applications; 

 Reduced barriers to access for faith-based and 

community organizations applying for Federal 

funds; 

 Created new program partnership opportunities 

for faith-based and community groups; and 

 Expanded data collection on State-administered 

programs to measure the creation of new 

partnerships and study the implementation of 

equal treatment principles better. 
MANAGEMENT’S DISCUSSION AND ANALYSIS 

32 

FY 2007 Performance and Accountability Report 

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 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. 

2007 2006 

% 

Change 

Appropriations $108,428 $109,856 -1% 

Obligations Incurred $128,954 $145,458 -11% 

Net Outlays $89,950 $99,674 -10% 

Data in millions 

Appropriations 

Appropriations decreased $1.4 billion in FY 2007. 

This decrease is primarily due to a $2.2 billion 

decrease at CCC for its prior year realized losses and a 

$2.5 billion decrease at FNS for the Food Stamp 

program, offset by a $2.8 billion increase at FSA for 

disaster assistance programs and a $1.1 billion increase 

at RMA for crop insurance programs. 

Obligations Incurred And Net Outlays 

Obligations Incurred decreased $16.5 billion in FY 

2007. This decrease is primarily due to a $12.1 billion 

decrease at CCC due to favorable market conditions 

for commodities and a $1.6 billion decrease at RD due 

to the dissolution of the Rural Telephone Bank. 

Net Outlays decreased $9.7 billion in FY 2007, 

primarily due to the decrease in obligations incurred as 

described above. 

BALANCE SHEET

CONDENSED BALANCE SHEET DATA 

As of September 30, 2007 and 2006 

(in millions) 

FY 2007 FY 2006 

% 

CHANGE 

Fund Balance with Treasury $47,340 $42,191 12% 

Accounts Receivable, Net 9,218 8,881 4% 

Direct Loan and Loan Guarantees, Net 80,348 77,791 3% 

General Property, Plant, and Equipment, Net 4,931 4,905 1% 

Other 651 461 41% 

Total Assets 142,488 134,229 6% 

Debt 75,101 83,447 -10% 

Loan Guarantee Liability 1,258 1,296 -3% 

Other 38,422 39,210 -2% 

Total Liabilities 114,781 123,953 -7% 

Unexpended Appropriations 30,937 26,385 17% 

Cumulative Results of Operations -3,230 -16,109 80% 

Total Net Position 27,707 10,276 170% 

Total Liabilities and Net Position $142,488 $134,229 6% 
MANAGEMENT’S DISCUSSION AND ANALYSIS 

33 

FY 2007 Performance and Accountability Report 

Total Assets 

Total assets increased $8.3 billion in FY 2007. This 

increase is primarily due to a $5.1 billion increase in 

Fund Balance with Treasury and a $2.6 billion increase 

in Direct Loan and Loan Guarantees, Net. 

The increase in Fund Balance with Treasury is 

primarily due to FSA and FNS. FSA received $2.8 

billion for disaster assistance programs and borrowed 

$1 billion from Treasury for credit program financing. 

FNS retained $2.5 billion from the prior year for the 

Food Stamp program. CCC repaid Treasury $1.4 

billion in loan principal and interest. 

Direct Loan and Loan Guarantees, Net is the single 

largest asset on the USDA Balance Sheet. RD offers 

both direct and guaranteed loan products for rural 

housing and rural business infrastructure. These 

represent 85 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 7 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. 

The increase in Direct Loan and Loan Guarantees, 

Net is primarily due to growth in electric programs at 

RD. 

Total Liabilities 

Total liabilities decreased $9.2 billion in FY 2007. 

This decrease is primarily due to an $8.3 billion 

decrease in Debt and a $.8 billion decrease in other 

liabilities. 

Debt represents amounts owed to Treasury primarily 

by CCC and RD. For CCC, the debt primarily 

represents financing to support Direct and Counter 

Cyclical, Crop Disaster and Loan Deficiency 

programs. For RD, the debt primarily represents 

financing to support Single and Multi Family Housing 

loan programs. 

The decrease in debt is primarily due to repayment by 

CCC of $13 billion loan interest and principal on its 

credit programs, and additional borrowing by RD and 

FSA for their credit programs of $3.8 billion and $1 

billion, respectively. 

Other liabilities mainly consists of $12.9 billion in 

Resources Payable to Treasury, $1.8 billion for the 

Conservation Reserve Program, $5.4 billion for the 

Tobacco Transition Payment Program, $4.2 billion for 

the Direct and Counter-Cyclical Program and $4.6 

billion related to crop insurance programs. 

Other liabilities decreased primarily due to the return 

of $.6 billion from the Foreign Credit Liquidating 

Funds to Treasury by CCC. Liquidating funds 

primarily serve to collect principal and interest 

payments resulting from pre-credit reform loans. 

Total Net Position 

Total net position increased $17.4 billion in FY 2007. 

This increase consists of a $4.5 billion increase in 

unexpended appropriations and $12.9 billion increase 

in cumulative results of operations. The increase in 

unexpended appropriations is primarily due to the $2.8 

billion additional funding for disaster assistance 

programs received by FSA late in the fiscal year. The 

increase in cumulative results of operations is primarily 

due to an increase at CCC of $11.9 billion as a result 

of favorable market conditions for commodities which 

reduced program costs. 
MANAGEMENT’S DISCUSSION AND ANALYSIS 

34 

FY 2007 Performance and Accountability Report 

NET COST OF OPERATIONS

CONDENSED STATEMENT OF NET COST 

For the Years Ended September 30, 2007 and 2006 

(in million) 

FY 2007 FY 2006 

% 

CHANGE 

Goal 1: Enhance 

International 

Competitiveness of 

American Agriculture: $1,484 $404 267% 

Goal 2: Enhance the 

Competitiveness and 

Sustainability of Rural and 

Farm Economies: 15,099 24,458 -38% 

Goal 3: Support 

Increased Economic 

Opportunities and 

Improved Quality of Life in 

Rural America: 2,202 3,068 -28% 

Goal 4: Enhance 

Protection and Safety of 

the Nation’s Agriculture 

and Food Supply: 2,509 2,980 -16% 

Goal 5: Improve the 

Nation’s Nutrition and 

Health: 53,948 53,028 2% 

Goal 6: Protect and 

Enhance the Nation’s 

Natural Resource Base 

and Environment: 11,079 11,488 -4% 

Net Cost of Operations $86,321 $95,426 -10% 

Net Cost of Operations 

Net cost of operations decreased $9.1 billion in FY 2007. This decrease is primarliy due to reduced program costs 

of $10 billion in support of Goal 2: Enhance the Competitiveness and Sustainability of Rural and Farm 

Economies and increased costs of $.9 billion in support of Goal 1: Enhance International Competitiveness of 

American Agriculture at CCC. 

The FY 2006 Statement of Net Cost was reclassified to reflect the six strategic goals outlined in USDA’s Strategic 

Plan for FY 2005-2010. 
MANAGEMENT’S DISCUSSION AND ANALYSIS 

35 

FY 2007 Performance and Accountability Report 

Systems, Controls and Legal Compliance 

Management Assurances 

STATEMENT OF ASSURANCE

The United States Department of Agriculture’s (USDA) management is responsible for establishing and 

maintaining effective management control, financial management systems and internal control over 

financial reporting that meet the objectives of the Federal Managers’ Financial Integrity Act (FMFIA). 

USDA provides a qualified statement of assurance that management control, financial management 

systems and internal controls over financial reporting meet the objectives of FMFIA, with the exception 

of four material weaknesses and one financial system non-compliance. The details of the exceptions are 

provided in the FMFIA and the Federal Financial Management Improvement Act (FFMIA) sections of 

this report. 

USDA conducted its assessment of the financial management systems and internal control over 1) the 

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

September 30, 2007, and 2) financial reporting as of June 30, 2007, which includes safeguarding of assets 

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

Management and Budget Circular A-123, “Management’s Responsibility for Internal Control.” Based on 

the results of these evaluations, USDA reduced its existing material weaknesses under financial reporting 

from four to two. The Department’s remediation activities and the fiscal year (FY) 2007 A-123, 

Appendix A testing resulted in the FY 2006 “USDA County Office Operations” being downgraded to a 

significant deficiency and the Financial Accounting and Reporting/Accrual material weakness being 

resolved. Additionally, two new material weaknesses under financial reporting were identified for a total 

of four material weaknesses reported in FY 2007. 

Other than the exceptions noted in the FMFIA and FFMIA sections, 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, 2007, and 2) financial reporting as of June 30, 2007. However, the Departmental 

management identified prior year violations of the Anti-Deficiency Act that were not considered chronic 

or significant. These violations relate to restrictions on the use of funds to combat forest fires and 

transportation costs for donated food commodities. The latter transactions also violated the Commodity 

Credit Corporation Charter Act. 

Charles F. Conner 

Acting Secretary of Agriculture 

November 15, 2007 
MANAGEMENT’S DISCUSSION AND ANALYSIS 

36 

FY 2007 Performance and Accountability Report 

Federal Managers’ Financial Integrity Act Report on 

Management Control 

BACKGROUND

The Federal Managers’ Financial Integrity Act of 1982 

(FMFIA) requires ongoing evaluations of internal 

control and financial management systems culminating 

in an annual statement of assurance by the agency head 

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. 

Furthermore, FMFIA provides the authority for the 

Office of Management and Budget (OMB), in 

consultation with the Government Accountability 

Office (GAO), to periodically establish and revise the 

guidance to be used by Federal agencies in executing 

the law. 

In addition to FMFIA, the Federal Information 

Security Management Act (FISMA) requires agencies 

to report any significant deficiency in information 

security policy, procedure or practice identified (in 

agency reporting): 

 As a material weakness in reporting under 

FMFIA; and 

 If relating to financial management systems, as an 

instance of a lack of substantial compliance under 

the Federal Financial Management Improvement 

Act (FFMIA). (See the FFMIA Report on 

Financial Management Systems.) 

USDA conducts its annual evaluation of internal 

controls over financial reporting in accordance with 

OMB Circular A-123, “Management’s Responsibility 

for Internal Control,” Appendix A. Assessment results 

are reviewed and analyzed by the USDA Senior 

Assessment Team. Final assessment results are 

reviewed and approved by the Senior Management 

Control Council. 

USDA operates a comprehensive internal control 

program to ensure compliance with FMFIA 

requirements and other laws, and OMB Circulars A–

123 and A–127, “Financial Management Systems.” All 

USDA managers are responsible for ensuring 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 OIG and GAO, USDA 

management works aggressively to determine the 

root causes of its material weaknesses to promptly 

and efficiently correct them. 

USDA remains committed to reducing and 

eliminating the risks associated with its deficiencies 

and efficiently and effectively operating its programs in 

compliance with FMFIA. 

FY 2007 Results 

In FY 2006, USDA identified four material 

weaknesses: Information Technology (IT), Financial 

Accounting and Reporting/Accruals, County Office 

Operations (COO) and Funds Control. During FY 

2007, USDA reduced these four material weaknesses 

to two. However, two new material weaknesses related 

to unliquidated obligations and credit reform quality 

control processes were added in FY 2007. USDA now 

has a total of four material weaknesses. Therefore, the 

“Secretary’s Statement of Assurance” provides qualified 

assurance that USDA’s system of internal control 

complies with FMFIA’s objectives. The following 

Exhibit provides a summary of the material 

weaknesses. 
MANAGEMENT’S DISCUSSION AND ANALYSIS 

37 

FY 2007 Performance and Accountability Report 

Exhibit 5: Summary of Material Weaknesses

Internal Control (FMFIA Section 2) 

Statement of Assurance Qualified Statement of Assurance 

Material Weakness 

Beginning 

Balance New Resolved Consolidated Reassessed 

Ending 

Balance 

USDA Information Technology 1 1 

Financial Accounting and 

Reporting/Accruals 

1 (1) 0 

USDA County Offices Operations 1 (1) 0 

Funds Control Management1 1 1 

Financial Reporting – Unliquidated 

Obligations (New) 

 1 1 

Financial Reporting – Credit Reform (New) 1 1 

TOTAL MATERIAL WEAKNESSES 4 2 (1) 0 (2) 4 

Financial Management Systems (FMFIA Section 4) 

Statement of Assurance Qualified Statement of Assurance 

Non-Conformance 

Beginning 

Balance New Resolved Consolidated Reassessed 

Ending 

Balance 

Funds Control Management1 0 1 1 

TOTAL NON-CONFORMANCES 0 0 0 0 1 1 

1 Funds Control Management was identified as a Section 2 FMFIA material weakness in FY 2006. The material weakness was addressed in FY 2007; 

however, the financial management system non-compliance remains. (See FFMIA Report on Financial Management Systems.) 

Required Reporting 

Exhibit Numbers 6 and 7 are provided to meet the reporting requirements of OMB Circular A-136, “Financial 

Reporting Requirements” and include a breakdown by various categories related to the Financial Statement Audit 

and Management’s Statement of Assurance for FMFIA and FFMIA. 

Exhibit 6: 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 

USDA Information Technology 1 1 

Financial Accounting and 

Reporting/Accruals 

1 (1) 0 

USDA County Offices Operations 1 (1) 0 

Funds Control Management 1 1 

Financial Reporting – Unliquidated 

Obligations (New)

 1 1 

Financial Reporting – Credit Reform 

(New) 

 1 1 

TOTAL MATERIAL WEAKNESSES 4 2 (1) 0 (1) 4 
MANAGEMENT’S DISCUSSION AND ANALYSIS 

38 

FY 2007 Performance and Accountability Report 

Effectiveness of Internal Control Over Operations (FMFIA § 2) 

Statement of Assurance Unqualified 

Material Weakness 

Beginning 

Balance New Resolved Consolidated Reassessed 

Ending 

Balance 

0 0 

TOTAL MATERIAL WEAKNESSES 0 0 

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 0 1 1 

TOTAL Non-Conformances 0 1 1 

Compliance with Federal Financial Management Improvement Act (FFMIA) 

Agency Auditor 

Overall Substantial Compliance No No 

1. System Requirements No 

2. Accounting Standards Yes 

3. USSGL at Transaction Level No 

4. Information security policies, 

procedures and practices 

No 

MATERIAL WEAKNESSES REASSESSED OR RESOLVED

USDA reassessed or resolved two of its four existing 

material weaknesses in FY 2007. 

Financial Accounting and Reporting/Accruals — This 

material weakness has been resolved. The Forest 

Service (FS) and the Commodity Credit Corporation 

(CCC) management had reported a lack of effective 

preventive and detective controls around the 

completeness, accuracy and validity of accrual estimate 

calculations. Both FS and CCC have taken action to 

remediate this weakness as follows: 

FS: 

 Utilized a statistical model for estimating field 

accruals; 

 Incorporated a seasonality adjustment into the 

accrual calculations; and 

 Refined the queries and database used to calculate 

the regressions. 

CCC: 

 Strengthened the program account analysis process 

for monitoring the accounting events for each 

program; 

 Enhanced the analytical review of program 

operations prior to posting accruals; 

 Developed the Obligation and Accruals Guidance 

Report to document trigger points for recording 

account activity; and 

 Improved the managerial review process for 

accrual entries recorded at year-end. 

Additionally, this weakness included CCC’s Statement 

of Financing process, which has been resolved. They 

have: 

 Enhanced the methodology used in the 

compilation of the Statement of Financing, the 

mapping logic, and the treatment of transactions 

for specific lines items; 

 Documented the deviations from Treasury’s 

crosswalk and Implementation Guide; and 
MANAGEMENT’S DISCUSSION AND ANALYSIS 

39 

FY 2007 Performance and Accountability Report 

 Implemented an “audit task force” approach to 

perform effective technical reviews of the financial 

statement compilation process. 

USDA County Office Operations — This weakness was 

reassessed and downgraded to a significant deficiency. 

During FY 2007, FSA underwent a rigorous effort to 

identify and document the processes and controls 

existing at USDA county offices related to program 

enrollment, payment calculations, disbursements, 

receipts, reporting and monitoring. The results of this 

comprehensive assessment confirmed that mitigating 

factors are in place to reduce the risk of a material 

misstatement occurring in the financial statements. 

Controls were strengthened by no longer accepting 

cash receipts in one-person offices and centralizing 

password maintenance/access to county office systems. 

NEW MATERIAL WEAKNESSES

USDA identified two new material weaknesses under 

Financial Reporting related to unliquidated obligations 

and improvements needed in the Credit Reform 

quality control process. 

Financial Reporting – Unliquidated Obligations 

USDA assessed the controls for reviewing 

unliquidated obligations and determined there was a 

lack of consistent review of unliquidated obligations at 

several component agencies. As a result, accounts 

were not being deobligated on a timely basis as 

required by Department regulation and procedures. 

USDA agencies need to implement effective and 

sustainable control procedures over the review and 

certification of unliquidated obligations. 

Financial Reporting – Credit Reform 

USDA determined that controls were lacking in the 

Credit Reform quality assurance process to ensure that 

the cash flow models, data inputs, estimates and 

reestimates for financial reporting were subject to 

appropriate controls and management oversight. As a 

result, additional resources were needed to correct the 

credit reform information in the financial statements 

and related disclosures. USDA plans to perform and 

document independent quality assurance reviews of 

model changes, data extracts and the reestimates 

process before delivery to external parties. 

SUMMARY OF OUTSTANDING MATERIAL WEAKNESSES

Material Weakness 1. USDA Information Technology Overall Estimated Completion Date FY 2008 

Existing Internal control design and operating effectiveness deficiencies in the four areas: software change control, 

disaster recovery, logical access controls, and physical access that aggregate to an overall IT material weakness. 

FY 2007 Accomplishments: Planned Actions: 

• Implemented the required National Institute of Standards and 

Technology controls for IT throughout USDA and other policy 

guidance; 

• Instituted a quality assurance process to ensure that deficiencies 

are resolved at root causes and operating effectively; 

• Implemented the Inter-Agency Planning, Assessing and 

Remediating Controls group to identify clear responsibilities for 

internal control in agencies sharing IT systems and networks 

reducing combined agency resources required for internal control 

efforts while improving the effectiveness of internal controls; 

• Consolidated the A-123 and FISMA efforts so that agencies would 

only have to document and test internal control and IT security 

weaknesses once, by one methodology; and 

• Selected a Department of Justice tool to aid USDA agencies in 

tracking and documenting IT controls, policies, procedures and 

standardizing testing. Streamlined process facilitates the annual A123 and FISMA reviews and tests, reducing agency resources 

required for these efforts.

• Standardize and streamline FISMA and A-123 testing; 

• Fully implement FISMA compliance tool throughout 

USDA; 

• Execute internal control education plan for all levels and 

agencies throughout USDA; 

• Remediate the IT material weakness; and 

• Continue monitoring progress through the Information 

Technology Executive Steering Committee.
MANAGEMENT’S DISCUSSION AND ANALYSIS 

40 

FY 2007 Performance and Accountability Report 

Material Weakness 2. Funds Control Management Overall Estimated Completion Date FY 2008 

Existing Improvements needed in funds control processes. 

FY 2007 Accomplishments: Planned Actions: 

• Monthly reviews and analysis of CCC obligation status with fund 

managers; 

• Quarterly certification of CCC obligations by fund managers; 

• Institutionalized monthly and quarterly review and certification 

processes; and 

• Strengthened the program account analysis process.

• Document CCC obligation business events and develop 

solutions for providing pre-authorization of funds.

Note: Funds Control Management is also classified as an FFMIA system non-compliance for FY2007. 

3. Financial Reporting – Unliquidated 

Obligations 

Material Weakness Overall Estimated Completion Date FY 2008 

New 

Lack of consistent review of unliquidated obligations. 

Planned Actions: 

• Implement effective and sustainable control procedures over the review and certification of unliquidated obligations at the 

component level.

Material Weakness 4. Financial Reporting – Credit Reform Overall Estimated Completion Date FY 2008

New Controls are lacking in the Credit Reform quality assurance process to ensure that cash flow models, data inputs, 

estimates and reestimates are subject to appropriate management oversight. 

Planned Actions: 

• Ensure proper monitoring and reporting of change control process; and 

• Perform and document independent quality assurance reviews of model changes, data extracts and the reestimate process before 

delivery to external parties.

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 Standard General Ledger at the transaction level. 

Additionally, the Federal Information Security 

Management Act (FISMA) requires that there be no 

significant weaknesses in information security policies, 

procedures or practices to be substantially compliant 

with FFMIA (referred to as Section 4 in the 

accompanying table). 
MANAGEMENT’S DISCUSSION AND ANALYSIS 

41 

FY 2007 Performance and Accountability Report 

Exhibit 7: Initiatives To Be Completed 

Outstanding Initiatives to Achieve FFMIA Compliance 

Initiative 

Section of 

Non-compliance Agency 

Target 

Completion Date 

Information Technology1 1 and 4 Multiple 9/30/2008 

Funds Control Management Section 1 

Section 3 

CCC 

FS 

9/30/2009 

9/30/2008 

Sections: 

FFMIA: 

1 – Federal financial management system requirements. 

3 – Standard general ledger at the transaction level 

FISMA: 

4 – Information security policies, procedures or practices. 

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

Control, is comprised of four initiatives: Software Change Control; Disaster Recovery; Logical Access Controls; and Physical Access 

Controls. 

FY 2007 RESULTS

During FY 2007, USDA evaluated its financial 

management systems to assess substantial compliance 

with the Act. In assessing FFMIA compliance, 

USDA considered all the information available. This 

information included the auditor’s opinions on 

component agencies’ financial statements, the work of 

independent contractors and progress made in 

addressing the material weaknesses identified in the 

FY 2006 Performance and Accountability Report – 

Report on Management Control section. 

The Department is not substantially compliant with 

Federal financial management system requirements 

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 results in noncompliance with the FISMA requirement. As part of 

the financial systems strategy, USDA agencies 

continue to work to meet FFMIA and FISMA 

objectives. The Information Technology Executive 

Steering Committee continues to monitor the 

correction of information technology weaknesses in 

USDA’s financial systems. The Department made 

substantial progress in addressing its information 

technology weakness. However, additional effort is 

required to comply substantially with the Act’s 

requirements. 

The descriptions of corrective actions taken to address 

the information technology, financial accounting and 

reporting, and funds control initiatives reported in FY 

2006 are included in the FMFIA section of this report. 

Auditor-identified deficiencies at the USDA Forest 

Service related to the requirement to record obligations 

in the standard general ledger at the transaction level 

were identified in FY 2007. Transactions were not 

obligated as required by appropriation law prior to 

payment. The transactions include temporary travel, 

grants and other reoccurring utility type transactions. 

Posting models are needed at the transaction level to 

accommodate transfers of stewardship land 

acquisitions and to record exchange review transactions 

to the proper general ledger accounts. Corrective 

action plans will be developed to address these 

deficiencies. 

The financial management system non-compliance 

portion of the CCC FY 2006 Funds Control material 

weakness is now being reported under FFMIA. While 

additional work remains, CCC has made progress 

toward implementation of a funds control system to 

remediate the financial system noncompliance. 
MANAGEMENT’S DISCUSSION AND ANALYSIS

42 

FY 2007 Performance and Accountability Report 

Federal Financial Management System 

Requirements/Funds Control Management 

In FY 2007, CCC began to address the need for a fully 

integrated funds control system within the financial 

management system that is capable of interfacing with 

CCC’s general ledger system at the transaction level 

and provides management with timely information to 

periodically monitor and control the status of 

budgetary resources recorded in the general ledger. FY 

2007 accomplishments include: 

 Developed the to-be process design; and 

 Developed the business case for the Modernize 

and Innovate the Delivery of Agricultural Systems 

(MIDAS). 

In FY 2008, CCC will: 

 Document CCC obligation business events and 

develop solutions for providing pre-authorization 

of funds; 

 Prepare system requirements documentation; 

 Select software solution; and 

 Begin to implement the software solution. 

In FY 2009, CCC will: 

 Develop a fully integrated funds control system; 

and 

 Continue implementation of the software package. 

Inspector General Act Amendments of 1988 

Management’s Report on Audit Follow-Up 

BACKGROUND

The Office of Inspector General (OIG) audits 

USDA’s programs, systems and operations. OIG then 

recommends improvements to management based on 

its findings. USDA management may or may not 

agree with the audit’s findings or recommendations. 

An agreement is reached during the managementdecision 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 its 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 Office of the Chief Financial 

Officer (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 2007 Results 

USDA agencies closed 64 audits in FY 2007. The 

Department’s current inventory of audits that have 

reached management decision and require final action 

to close totals 154 which includes 37 new audits in FY 

2007. Two of these audits are in appeal status. As 

shown in the accompanying exhibit, the Department 

continued to reduce its inventory of open audits in FY 

2007. This is a 32-percent decrease during since FY 

2003. 

Exhibit 8: Decrease in Total Open Audit Inventory 

Note: The FY 2006 ending balance was revised from 168 to 181 to include 13 

audits that reached management decision in September 2006. 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 10 and 

Exhibit 12. 

Audit Follow-Up Process 

The 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 

first three of the accompanying bullets: 
MANAGEMENT’S DISCUSSION AND ANALYSIS

43 

FY 2007 Performance and Accountability Report 

 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 one 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. For audits in 

formal administrative appeal or awaiting a 

legislative solution, reporting may be limited to the 

number of affected audits. 

Exhibit 9: 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 The completion of all actions that management 

has concluded is necessary in its management 

decision with respect to the findings and 

recommendations included in an audit report. In 

the event that management concludes no action 

is necessary, final action occurs when a 

management decision is accomplished. 

Funds To Be 

Put to 

Better Use 

(FTBU) 

An OIG recommendation that funds could be 

used more efficiently if management took actions 

to implement and complete the recommendation, 

including: 

• Reductions in outlays; 

• De-obligation of funds from programs or 

operations; 

• Withdrawal of interest subsidy costs on 

loans or loan guarantees, insurance or 

bonds; 

• Costs not incurred by implementing 

recommended improvements related to the 

operations of the establishment, a 

contractor or grantee; 

Term Definition 

• Avoidance of unnecessary expenditures 

noted in pre-award reviews of contract or 

grant agreements; or 

• Any other savings which are identified 

specifically. 

Management 

Decision 

Management’s evaluation of the audit findings 

and recommendations, and the issuance of a 

final decision on corrective action agreed to by 

management and OIG concerning its response 

to the findings and recommendations. 

OCFO works with component agencies and OIG to 

identify and resolve issues that affect the timely 

completion of corrective actions. USDA agencies are 

required to prepare combined, time-phased 

implementation plans and interim progress reports for 

all audits that remain open one or more years beyond 

the management decision date. Time-phased 

implementation plans are updated and submitted at 

the end of each quarter. They are updated to include 

newly reported audits that meet the one-year-pastmanagement decision criterion. These plans contain 

corrective action milestones for each recommendation 

and corresponding estimated completion dates. 

Quarterly interim progress reports are provided to 

OCFO on the status of corrective action milestones 

listed in the time-phased implementation plan. These 

reports show incremental progress toward completion 

of planned actions, changes in planned actions, actual 

or revised completion dates and explanations for any 

revised dates. 

The Department is currently in the testing phase for 

implementation of its online Web-based Audit 

Tracking Module (ATM) that will improve the audit 

tracking and management processes. The ATM is 

designed to 1) make the tracking process more 

efficient and easier to manage, and 2) ensure that 

appropriate management and functional-level officials 

and staff have real-time accurate information. It will 

also allow for efficient coordination between USDA 

agencies, OCFO, and the OIG. 
MANAGEMENT’S DISCUSSION AND ANALYSIS

44 

FY 2007 Performance and Accountability Report 

Beginning and Ending Inventory for Audits with 

Disallowed Costs (DC) and Funds to Be Put to Better 

Use (FTBU)1

Of the 64 audits that achieved final action during the 

fiscal year, 21 contained disallowed costs (DC). The 

number of DC audits remaining in the inventory at 

the end of the fiscal year is 52 with a monetary value of 

$105,242,632. 

For audits with disallowed costs that achieved final 

action in FY 2007, OIG and management agreed to 

collect $17,799,418. Adjustments were made totaling 

$7,231,206 (41 percent of the total) because of: 1) 

changes in management decision; 2) legal decisions; 3) 

write-offs; 4) USDA agencies’ ability to provide 

sufficient documentation to substantiate disallowed 

costs; and 5) agency discovery. Management recovered 

the remaining $10,568,212. 

Exhibit 10: Inventory of Audits with Disallowed Costs1

Audits with Disallowed Costs # of 

Audits 

Amount ($) 

Beginning of the Period 62 112,382,569

Plus: New Management 

Decisions 

11 10,659,481

Total Audits Pending Collection 

of Disallowed Costs 

73 123,042,050

Adjustments (7,231,206)

Revised Subtotal 115,810,844

Less: Final Actions 

(Recoveries)* 

21 (10,568,212)

Audits with DC Requiring Final 

Action at the End of the Period 

52 105,242,632

*Recoveries do not include $104,557 interest collected. 

 

1 Exhibit 10 and Exhibit 12 include only those open audits with 

disallowed costs and funds to be put to better use, respectively. 

Additionally, some audits contain both DC and FTBU amounts. For 

these reasons, the number of audits shown as the ending balances 

in Exhibit 10 and Exhibit 12 will not equal the total resolved audit 

inventory balance in Exhibit 8. 

Exhibit 11: Distribution of Adjustments to Disallowed Costs 

Category Amount ($) 

Changes in Management Decision 136,018 

Legal Decisions 681,004 

Write-Offs 4,751,352 

Agency Documentation 1,750,966 

Agency Discovery -88,134 

Total 7,231,206 

Final action occurred on 5 audits that involved FTBU 

amounts. USDA projects more efficient use for 99.9 

percent of the amount identified based on the 

corrective actions implemented. The number of FTBU 

audits remaining in the inventory to date is 23 with a 

monetary value of $68,450,878. 

Exhibit 12: Inventory of Audits with Funds To Be Put to 

Better Use 

Audits with Funds to be 

Put to Better Use 

# of 

Audits Amount ($) 

Beginning of the Period 22 224,199,709 

Plus: New Management 

Decisions 

6 6,378,639 

Total Audits Pending 28 230,578,348 

Less: Final Actions 5 162,127,470 

Audits with FTBU Requiring 

Final Action at the End of the 

Period 

23 68,450,878 

Disposition of Funds to Be 

Put to Better Use: 

FTBU Implemented 161,926,675 

FTBU Not Implemented 200,795 

Total FTBU Amounts for 

Final Action Audits 162,127,470 

Audits Open One or More Years Past the Management 

Decision Date 

The number of audits open one or more years without 

final action decreased from 123 to 113 audits. USDA 

agencies continue to pursue compensating controls 

that address many of the underlying issues identified in 

these older audits. Although there were more audits 

added to this category of audits in FY 07, final action 

was completed on 24 percent of last year’s open audit 

inventory. These closures represent 47 percent (30 of 

64) of all the audits closed for the FY. 
MANAGEMENT’S DISCUSSION AND ANALYSIS

45 

FY 2007 Performance and Accountability Report 

Exhibit 13: Decrease in Audits Open One or More Years 

Past Management Decision Date 

Two audits are proceeding as scheduled, 78 are behind 

schedule and agencies have completed corrective 

actions on 33 audits that are pending collection of 

associated disallowed costs. While an additional 7 

audits were scheduled for completion by September 

30, 2007, final action documentation was not 

evaluated during this reporting period. 

Audits without final action one or more years past the 

management decision date 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. 

The categories are pending the following activities: 

 Issuance of policy/guidance; 

 Conclusion of investigation, negotiation or 

administrative appeal; 

 Completion of IT system security weaknesses, 

systems development, implementation, 

reconciliation or enhancement; 

 Results of internal monitoring or program review; 

 Results of agency request for change in 

management decision; 

 Office of the General Counsel or OIG advice; 

 Conclusion of external action; and 

 Administrative action. 

Exhibit 14: Distribution of Audits Open One or More Years Past the Management Decision Date, Disallowed Costs and FTBU 

Audits On Schedule Audits Behind Schedule Audits Under Collection 

Agency No. DC($) FTBU ($) No. DC ($) FTBU ($) No. DC ($) FTBU ($) 

Totals 2 0 0 78 25,745,752 28,134,584 33 48,347,563 33,937,655 

Management’s Report on Audit Follow-Up 

Exhibit 15: Audits Open One Year or More Past the Management Decision Date and Behind Schedule 

Monetary Amount 

Audits 

Date 

Issued 

Revised 

Completion 

Date Audit Title DC FTBU 

(33) Pending issuance of policy/guidance 

05600-1-TE 09/28/89 9/30/07 RMA Crop Year 1988 Insurance Contracts with 

Claims 

- - 

04801-4-CH 02/12/99 10/31/07 RHS Evaluation of Rural Rental Housing Tenant 

Income Verification Process 

- - 

04801-6-KC 12/18/00 10/31/07 RHS Rural Rental Housing Program Insurance 

Expenses, Phase I 

$1,029,999 $9,000 

08601-38-SF 9/23/04 3/31/08 FS Review of Firefighting Safety Program - - 

08601-41-SF 113/2006 3/31/08 FS Collaborative Ventures and Partnerships with 

Non-Federal Entities 

$37,890 - 

10099-10-KC 09/30/03 12/30/07 NRCS Homeland Security Protection of Federal 

Assets 

- - 

13001-3-TE 8/16/04 4/30/08 CSREES Implementation of Agricultural Research, $3 $482,400 
MANAGEMENT’S DISCUSSION AND ANALYSIS

46 

FY 2007 Performance and Accountability Report 

Monetary Amount 

Audits 

Date 

Issued 

Revised 

Completion 

Date Audit Title DC FTBU 

Extension, and Education Reform Act of 1998 

24099-3-HY 6/21/00 10/31/07 FSIS Imported Meat and Poultry Inspection Process - - 

24099-4-HY 02/25/03 10/31/07 FSIS Imported Meat and Poultry Inspection Process, 

Phase II 

- - 

24501-1-FM 11/24/04 6/30/08 FSIS Application Controls Review of FSIS’ 

Performance Based Inspection Service System 

- - 

24601-2-HY 6/9/04 6/30/08 FSIS Oversight of the Listeria Outbreak in the 

Northeast U.S. 

- - 

24601-6-CH 3/15/06 10/31/07 FSIS Review of Food Safety Inspection Service's InPlant Performance Systems (IPPS) - - 

27601-3-CH 03/22/96 03/31/08 FNS Food Stamp Program—Disqualified Recipient 

System 

- - 

27601-27-CH 04/30/02 03/31/08 FNS Food Service Management Companies - - 

27601-35-CH 7/14/06 5/31/09 FNS Child and Adult Care Food Program, Supper 

Meals Served in Schools 

- - 

33099-5-CH 4/20/05 9/30/08 APHIS National Cooperative State/Federal Bovine 

Tuberculosis Eradication Program 

- - 

34099-2-AT 09/14/01 10/31/07 RBS Business and Industry Loan Program, 

Omnivest Resources, Inc. 

$4,052,351 - 

34601-1-HY 07/22/98 10/31/07 RBS Business and Industry Loan Program—

Morgantown, West Virginia 

- - 

34601-3-CH 03/11/03 10/31/07 RBS Processing of Loan Guarantees to Members of 

the Western Sugar Cooperative 

- - 

34601-7-SF 12/04/02 10/31/07 RBS B&I Liquidation of Loans to the Pacific 

Northwest Sugar Company in Washington State 

- $14,000,000 

34601-8-SF 9/30/03 10/31/07 RBS Liquidation of Business and Industry 

Guaranteed Loans 

$45,246 $598,112 

34601-15-TE 09/30/03 10/31/07 RBS National Report on the Business and Industry 

Loan Program 

- - 

50099-17-KC 2/17/05 03/31/08 CSREES Biosecurity Grant Funding Controls over 

Biosecurity Grants Funds Usage 

- $4,318 

50601-2-HY 9/9/05 11/30/07 DA/OHCM Review of Management Oversight of 

Federal Employees’ Compensation Act Operations 

- - 

50601-6-TE 03/04/04 12/30/07 ARS Controls Over Plan Variety Protection and 

Germplasm Storage 

- - 

50601-9-AT 3/24/04 11/30/08 DA/OPPM (HS) Controls Over Chemical and 

Radioactive Materials at U.S. Department of 

Agriculture Facilities 

- - 

50601-10-AT 3/8/04 12/31/07 HS Follow-up Report on the Security of Biological 

Agents at USDA Laboratories 

- - 

50801-2-HQ 2/27/97 9/30/08 OCRE Evaluation Report for the Secretary on Civil 

Rights Issues, Phase I 

- - 

50801-12-AT 9/9/02 11/30/07 DA Management of Hazardous Materials 

Management Funds 

- $1,813,809 

60801-1-HQ 9/30/98 9/30/08 OCRE Evaluation of the Office of Civil Rights Efforts 

to Reduce Complaints Backlog 

- - 

60801-2-HQ 3/24/99 9/30/08 OCRE Evaluation of the Office of Civil Rights 

Management of Settlements Agreements 

- - 

60801-3-HQ 3/10/00 9/30/08 OCRE Evaluation Report for the Secretary on Civil 

Rights Issues (Phase 7) 

- - 

60801-4-HQ 3/10/00 9/30/08 OCRE Status of Recommendations Made in Prior 

Evaluations of Program Complaints 

- - 

(2) Pending conclusion of investigation, negotiation or administrative appeal 
ANNUAL PERFORMANCE REPORT 

47 

FY 2007 Performance and Accountability Report 

Monetary Amount 

Audits 

Date 

Issued 

Revised 

Completion 

Date Audit Title DC FTBU 

04801-3-KC 03/31/99 10/31/07 RHS Bosley Management, Inc. – Sheridan, 

Wyoming 

$146,690 $85,516 

34004-5-HY 02/18/00 10/31/07 RBS Audit of Procurement Operations, Virginia 

State Office, Richmond, Virginia 

- - 

(19) Pending completion of IT system security weaknesses, systems development, implementation, or enhancement

03099-27-TE 5/24/01 10/01/07 FSA Payment Limitations – Majority Stockholders of 

Corporations 

- - 

06401-17-FM 11/5/04 09/30/09 CCC Financial Statements for FY 2004 - - 

08099-6-SF 03/27/01 09/30/08 FS Security Over USDA Information Technology 

Resources 

- - 

08401-2-FM 02/28/03 09/30/08 FS Audit of FY 2002 Financial Statements – 

Summary of Information Technology Findings 

- - 

08601-40-SF 7/6/05 3/31/08 FS Emergency Equipment Rental Agreements Audit - - 

10099-1-TE 02/01/02 12/31/07 NRCS Security Over IT Resources - - 

11099-44-FM 12/14/06 11/30/08 Potential Improper Payments/Purchase Card 

Management System 

- - 

24099-1-FM 08/11/03 10/31/07 FSIS Security Over Information Technology 

Resources at FSIS 

- - 

24601-3-CH 9/30/04 10/31/07 FSIS Review of the Food Safety Information 

Systems 

- - 

24601-3-HY 6/29/04 10/31/07 FSIS Effectiveness Checks for the Pilgrim’s Pride 

Recall 

- - 

33099-4-CH 03/03/04 9/30/08 APHIS Management and Security of Information 

Technology Resources 

- - 

33501-1-CH 03/31/05 12/31/07 APHIS Review of Application Controls for the Import 

Tracking System 

- - 

33601-1-HY 2/14/05 6/30/08 APHIS (FSIS) Oversight of the Importation of Beef 

Products from Canada 

- - 

33601-4-CH 03/31/03 9/14/07 APHIS Controls Over Permits to Import 

Biohazardous Materials 

- - 

50501-4-FM 10/21/05 9/30/07 OCIO Review of the U.S. Department of 

Agriculture’s Certification and Accreditation Efforts 

50401-53-FM 11/15/04 9/30/07 OCFO (OCIO) USDA Consolidated Financial 

Statements FY 2004 and FY 2003 

- - 

50401-56-FM 11/15/05 9/30/07 OCFO USDA Consolidated Financial Statements FY 

2004 and 2005 

- - 

60016-01-HY 9/8/05 9/30/08 OCRE Follow up on the Recommendations Made to 

the Office of Civil Rights for Program and 

Employment 

- - 

85401-9-FM 11/7/03 10/31/07 RD Financial Statements for FY 2003 and 2002 - - 

(8) Pending results of internal monitoring or program review

06401-4-KC 2/26/02 6/30/08 CCC Financial Statements for FY 2001 - $19,586 

13501-1-HY 7/8/05 12/31/07 CSREES Application Controls Review of the 

Cooperative Research Education and Extension 

Management System 

- - 

08601-1-HY 3/31/05 3/31/08 FS Implementation of the Government Performance 

and Results Act 

- - 

08401-4-FM 11/10/04 9/30/07 FS Audit of Fiscal Year 2004 Financial Statements - - 

08601-30-SF 03/31/03 3/31/08 FS Review of FS Security Over 

Explosives/Munitions/Magazines Located Within the 

National Forest System 

- - 

08601-42-SF 3/14/06 3/31/08 FS Firefighting Contract Crews - - 
MANAGEMENT’S DISCUSSION AND ANALYSIS

48 

FY 2007 Performance and Accountability Report 

Monetary Amount 

Audits 

Date 

Issued 

Revised 

Completion 

Date Audit Title DC FTBU 

08601-45-SF 8/8/06 3/31/08 FS Follow-up Review of FS Security Over 

Explosives/Munitions Magazines Located within the 

National Forest System 

- - 

33099-11-HY 6/12/06 9/30/07 APHIS Oversight of the Avian Flu Outbreak - - 

(1) Pending results of request for change in management decision

10501-5-SF 7/24/06 12/31/07 NRCS Application Controls Program Contracts 

System 

- - 

(2) Pending Office of General Counsel (OGC) or OIG advice 

23801-1-HQ 08/20/98 11/30/07 OO Review of Office of Operations Contract with 

B&G Maintenance, Inc. 

- $249,866 

85001-1-HY 4/25/06 10/31/07 RD Review of Shenandoah Valley Electric 

Cooperative’s Grant 

$8,000,000 - 

(3) External Action Required 

08003-5-SF 12/15/00 3/31/08 FS Land Acquisitions and Urban Lot Management 

Program 

- $10,329,300 

24601-1-CH 06/21/00 10/31/07 FSIS Laboratory Testing of Meat and Poultry 

Products 

- - 

27099-60-AT 12/23/05 6/30/08 FNS Special Wages Incentives Program in Puerto 

Rico 

$11,780,275 - 

(10) Pending Administrative Action

05099-18-KC 6/1/04 6/2/08 RMA Management and Security of Information 

Technology Resources 

- - 

05099-109-KC 1/27/05 9/30/10 RMA Activities to Renegotiate the Standard 

reinsurance Agreement 

- - 

06401-15-FM 12/26/02 09/30/09 CCC Financial Statements for FY 2002 - - 

06401-16-FM 11/7/03 12/31/07 CCC Financial Statements for FY 2003 

10601-7-TE 6/7/06 12/31/07 NRCS Controls Over Vehicle Maintenance Costs - - 

33601-1-AT 09/14/04 9/30/08 APHIS Security Over Owned and Leased Aircraft - - 

50099-11-HY 03/31/05 12/30/07 REE Implementation of Federal Research 

Misconduct Policy in the U.S. Department of 

Agriculture 

- - 

50099-13-AT 03/29/02 12/31/07 Multi-Agency Audit Oversight and Security of 

Biological Agents at Laboratories Operated by 

USDA 

- - 

50601-5-AT 9/30/98 12/31/07 CSREES Managing Facilities Construction Grants $653,298 $542,677 

50601-10-KC 1/25/06 9/30/07 APHIS Monitoring BSE Expanded Surveillance 

Program Implementation Phase II 

- - 

Total Number Audits (78) Total $25,745,752 $28,134,584 
49 

FY 2007 Performance and Accountability Report 

II. 

Annual Performance Report 

he United States Department of Agriculture’s 

(USDA) mission 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 executed 

this mission in FY 2007 through activities such as: 

 Completing new free trade agreements, opening 

new international markets and maintaining 

existing markets; 

 Meeting with experts from around the globe to 

discuss current and emerging economic 

opportunities; 

 Providing farmers and ranchers with risk 

management and financial tools; 

 Expanding economic opportunities by improving 

the quality of life through financing housing, 

utilities and community facilities in rural areas; 

 Ensuring the safety and protection of the Nation’s 

food supply; 

 Helping millions of low-income households and 

most of America’s children improve their health 

and diets via targeted nutrition assistance 

programs; 

 Fostering better nutrition and health with dietary 

guidance and promotion; 

 Fighting potential pest and disease outbreaks; 

 Working to ensure the health and protection of 

the environment; and 

 Providing aid to those impacted by severe weather 

and other disasters.

Exhibit 16: Key Performance Measures 

2007 Key Performance Measures 2006 Key Performance Measures 

Data Not 

Available — 1

Not 

Met — 5

Met or

Exceeded — 28

Data Not 

Available — 1

Not Met — 5

Met or

Exceeded — 33

Note: Performance measures are refined based on Program Assessment Rating Tool (PART) reviews. The PART is a method of measuring program success. 

T
ANNUAL PERFORMANCE REPORT 

50 

FY 2007 Performance and Accountability Report 

USDA’s public performance management reporting 

process includes: 

 A strategic plan that contains the Department’s 

long-term goals and strategies 

(www.ocfo.usda.gov); 

 An annual budget summary and performance plan 

that outlines strategies and targets for achieving 

USDA’s long-term goals (www.obpa.usda.gov); 

and 

 A performance and accountability report that 

illustrates to the American people and Congress 

how well the Department did in reaching its goals 

(http://www.ocfo.usda.gov/usdarpt/usdarpt.htm). 

Most of USDA’s programs and activities are 

represented in specific performance goals and targets, 

which are described in this section. The performance 

measures report data through the third quarter of FY 

2007, and use projections for the fourth quarter. FY 

2007 data using actual fourth quarter figures will be 

reported in the FY 2008 Planning and Accountability 

Report. 

The Department also conducts and supports a broad 

range of research, educational and statistical activities 

that contribute to the achievement of its goals. The 

Department’s success depends on creating and 

enhancing knowledge at the frontiers of physical and 

social sciences, and providing that knowledge to 

agriculture, forestry, consumers and rural America. 

Accordingly, selected accomplishments in research are 

presented throughout this report. Data collection 

methodology is standardized and transparent and is 

vetted by scientists, policymakers and the 

Department’s senior management. 

When he created the USDA, it was President 

Abraham Lincoln’s hope “that by the best cultivation 

in the physical world, beneath and around us, and the 

intellectual and moral world within us, we shall secure 

an individual, social and political prosperity and 

happiness, whose course shall be onward and upward, 

and which, while the earth endures, will not pass 

away.” The following chapters of the USDA 

Performance and Accountability Report show how the 

Department committed itself to keeping President 

Lincoln’s dream alive during FY 2007. 

Strategic Goal 1: Enhance International 

Competitiveness of American Agriculture 

A prosperous food and agricultural sector contributes 

to the Nation’s economic vitality and standard of 

living. The sector’s success depends on the ability to 

expand into new markets, raise capital, protect itself 

against financial risk and adjust to changing market 

conditions. Increasing the efficiency of the agricultural 

sector and developing new uses for agricultural 

products are critical to the Nation’s economic health. 

Expanding global markets for agricultural products is 

critical for the long-term economic health and 

prosperity of the domestic food and agricultural sector. 

America’s natural resources, technologies and 

infrastructure enable agricultural production beyond 

domestic needs. Expansion of global markets will 

increase demand for agricultural products and 

contribute directly to economic stability and prosperity 

for America’s ranchers and farmers. 

To expand overseas markets and facilitate trade, 

USDA assists in the negotiation, monitoring and 

enforcement of trade agreements. Working with 

producers and commodity trade associations, USDA 

administers an array of market development and export 

promotion programs designed to build long-term 

markets abroad. The Department helps expand trade 

opportunities through technical assistance and training 

programs. These tools support agricultural 

development and growth in developing countries. 

They also help these countries participate in, and 

benefit from, international trade. USDA works to 

facilitate trade by adopting science-based regulatory 

systems and standards. 
ANNUAL PERFORMANCE REPORT 

51 

FY 2007 Performance and Accountability Report 

OBJECTIVE 1.1:EXPAND AND MAINTAIN INTERNATIONAL 

EXPORT OPPORTUNITIES

Overview 

United States agricultural exports were $79 billion in 

FY 2007, up $10.4 billion from FY 2006 and the 

second highest annual increase ever. Record sales are 

expected in every major product category except 

cotton. Two-thirds of the overall export increase this 

year is because of more sales of grains and oilseeds 

with sales up an estimated $4.7 billion and $2.4 

billion, respectively. Large exportable supplies, tight 

markets and rising unit value raised corn exports $2.5 

billion, while soybeans rose $1.7 billion and wheat 

another $1.5 billion. Other developments unrelated to 

tight grain and oilseed markets contributed to one of 

the largest increases of U.S. agricultural exports in 

history. 

Key Outcome 

Increased Access to Global Markets for U.S. 

Agricultural Producers and Exporters 

Horticultural exports jumped $1.1 billion to a record 

$17.8 billion supported by a competitive dollar, strong 

foreign demand and higher prices for some products. 

Animal product exports rose $900 million with gains 

for beef, pork, broiler meat, hides and dairy products. 

Beef exports to Asian markets rose, pork exports 

remain at record levels, and increased shipments and 

high global prices pushed U.S. dairy exports to record 

highs. 

The World Trade Organization (WTO) is charged 

with administering trade rules among its 150 member 

countries and customs areas. The goal of reaching an 

agreement on the outline of a new multilateral trade 

agreement by the expiration of the United States’ 

Trade Promotion Authority (TPA) on June 30 was 

not reached mainly due to disagreement among 

members on disciplines for non-agricultural market 

access. Still, efforts to obtain agreement are ongoing as 

USDA continues to work with the Office of the U.S. 

Trade Representative (USTR) to reach that goal. The 

USTR is the lead trade negotiator for the U.S. 

Government. 

In 2007, the free trade agreement (FTA) with the 

Dominican Republic (DR) took effect. The DR joins 

El Salvador, Guatemala, Honduras and Nicaragua, all 

of which had implemented the Dominican RepublicCentral American Free Trade Agreement (DRCAFTA) in the preceding year. The remaining DRCAFTA partner, Costa Rica, ratified the accord 

through a referendum, and will implement it in 2008. 

In addition, the United States has successfully 

completed FTA negotiations with Peru, Colombia, 

Panama and South Korea. These agreements now 

await ratification by the Congress. 

Discussions on a FTA with Malaysia are ongoing. 

However, renewal of Trade Promotion Authority 

(TPA) by the Congress will be required in order for 

that initiative, or any other future FTA initiative, to be 

brought to a favorable conclusion. 

USDA also continues to monitor the impact of earlier 

FTAs. One such agreement is the North American 

Free Trade Agreement (NAFTA), a comprehensive 

trade-liberalization regime between the United States, 

Canada and Mexico, which will be fully implemented 

by January 2008. Supported by NAFTA, U.S. 

agricultural exports to Canada and Mexico continue to 

expand at an accelerated rate, setting new records year 

after year. Canada remains the largest market with 

U.S. agricultural sales forecast at a record $13.1 billion 

in FY 2007. Canada is a major market for U.S. fresh 

and processed fruits and vegetables, snack foods, wine 

and many other consumer-ready products. Mexico 

remains the 2nd largest market with FY 2007 exports 

forecast at a record $12.6 billion. Mexico’s demand for 

U.S. agricultural products continues to grow. Higher 

prices are leading to record U.S. coarse grains sales to 

Mexico and a large increase for soybeans this year. 

Mexico is a large buyer of U.S. coarse grains, soybeans, 

cotton and wheat, but higher-value consumer foods are 

increasingly important as well. U.S. meat exports have 

rapidly grown in the past few years, and larger 

increases are expected this year for fresh vegetables, 

dairy products, poultry meat and sweeteners. 
ANNUAL PERFORMANCE REPORT 

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FY 2007 Performance and Accountability Report 

Another example is a specific Morocco FTA issue in 

which aggressive monitoring of this agreement 

identified a compliance issue with Morocco’s 

implementation of the wheat tariff rate quota (TRQ). 

United States and Moroccan officials have had several 

bilateral discussions to address issues of timeliness and 

transparency. Morocco’s administration of wheat TRQ 

has improved, facilitating increased U.S. exports of 

wheat. 

United States agricultural exports to Japan are forecast 

at $9.3 billion, making it the 3rd largest agricultural 

export market. About 60 percent of sales to Japan 

consists of bulk and intermediate commodities, mainly 

coarse grains, soybeans, wheat and animal feeds. 

Again, higher unit values result in large value gains for 

U.S. corn and soybeans. The rest of the sales are highvalue consumer-ready foods, mainly pork, fresh and 

processed fruits and vegetables, tree nuts and pet 

foods. Despite continued import restrictions on beef 

due to fears involving a chronic central nervous system 

disease found in cattle, Bovine Spongiform 

Encephalopathy (BSE), U.S. beef exports showed signs 

of recovery in 2007. During the first nine months of 

FY 2007 (October 2006 – June 2007), beef shipments 

rose to 28,113 metric tons valued at $142 million. 

The European Union (EU) remains the fourth largest 

market for U.S. agricultural products. Exports to the 

EU were $7.7 billion in FY 2007. The EU is an 

important market for soybeans, tobacco, animal feeds 

and live animals. It is the largest market for tree nuts, 

and an important market for other selected consumer 

foods and beverages, most notably wine and fresh fruit. 

The importance of the EU market for U.S. suppliers 

continues to decline with fewer opportunities in most 

categories due to sanitary and phytosanitary (SPS) 

restrictions, restrictions on biotech crops, and highly 

restrictive food laws that limit market access, domestic 

supports that keep production high and highlycompetitive processed food industries. (SPS refers to 

measures imposed by governments to protect human, 

animal and plant health from foreign pests, diseases 

and contaminants.) 

U.S. agricultural exports to China, the fifth largest 

market, are forecast at a record $7.6 billion in FY 

2007. Exports to China have risen rapidly in the past 

few years because of China’s strong economic growth 

and record U.S. soybean and cotton sales. China is also 

the largest market for U.S. animal hides. U.S. 

consumer food sales remain modest due to very high 

tariffs and large foreign investment flows impacting 

domestic production capacity. However, China has 

become an important poultry and meat market. Sales 

are rising for fresh fruit, processed fruits, vegetables, 

tree nuts and many other consumer foods. China’s 

trade barriers are being reduced through its WTO 

membership, producing dividends which will continue 

for the next several years. 

USDA works closely with the USTR and other 

Government agencies to pursue new trade agreements. 

In FY 2007, Vietnam gained membership to the 

WTO, following 11 years of negotiation. As part of 

the WTO negotiations, Vietnam signed a WTO 

bilateral trade agreement with the United States. 

Additionally, while Russia is still working toward 

multilateral consensus on its WTO accession, after 

nearly 15 years, the United States and Russia 

concluded a bilateral agreement in connection with its 

pending accession. Furthermore, the United States 

continues to work on accession agreements with 

several other countries. 

USDA and the USTR also work to enforce the 

provisions of existing agreements, providing U.S. 

exporters and consumers with the full economic 

benefit of trade agreements and rules. USDA also 

works to maintain effective government-togovernment relationships that support open trade that 

will lead to increased export opportunities for U.S. 

farmers and agribusinesses. The Department’s industry 

partners promote trade and outreach activities to 

educate producers, processors and exporters on 

emerging market opportunities as a result of trade 

agreements. To capitalize on trade opportunities, 

USDA offers market intelligence, supply and demand 

forecasts and sales-development assistance to enhance 

U.S. exporters’ success in the highly competitive global 

marketplace. 
ANNUAL PERFORMANCE REPORT 

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FY 2007 Performance and Accountability Report 

Challenges for the Future 

USDA can increase export opportunities for the 

United States through a WTO agreement providing 

new rules for agricultural trade as well as through other 

bilateral and regional FTAs. New WTO rules would 

eliminate export subsidies, decrease trade-distorting 

domestic support and reduce market-access barriers 

around the world. Agriculture is a central theme for 

this round of WTO negotiations and a sensitive issue 

for most developing countries. In these countries, the 

food and agriculture sector is the dominant economic 

driver. With numerous successful FTAs in the 

Western Hemisphere, a new agreement with Korea 

will open access to critical markets in Asia. If TPA is 

reinstated, USDA will be able to engage in even more 

market-opening activities. TPA is designed to enable 

U.S. negotiators to lead the way in completing major 

new trade agreements that advance the global interests 

of the United States, including agricultural interests. 

USDA will also continue to monitor the 

implementation of existing agreements to preserve 

existing trade and expand markets. 

Selected Results in Research, Extension and Statistics 

USDA Assists in Improving Russian Agricultural Statistics. 

Through the U.S. Department of State’s Emerging Markets 

Program, USDA has been collaborating with the Russian State 

Statistics Service (ROSSTAT) to improve that country’s 

agricultural statistics. The Department helped organize Russia’s 

2006 agricultural census, the first since 1920. In recognition of 

this support, the ROSSTAT presented gold medals to the 

Department’s International Programs Office staff for 

“Distinguished Service.” The medals were the first presented to 

foreigners by the ROSSTAT. 

China in 21st Century Agricultural Markets. China is one of the 

top 10 markets for U.S. agricultural exports and the world’s 

largest producer and exporter of many commodities. USDA 

continues to investigate how policy and economic developments 

in China affect global agricultural markets. In one recent article 

entitled: “Food Safety Improvements Underway in China,” 

Department analysts examined the growing concern by 

consumers, both domestically and internationally, for safer food. 

The report discusses China’s initial steps to overhaul its food 

system to meet international food safety standards. 

Macroeconomic Linkages to Agriculture. The USDA 

publication “Weaker Dollar Strengthens US Agriculture,” reports 

that the depreciating U.S. dollar combined with strong economic 

growth in developing countries has increased the competitive 

advantage of U.S. agriculture and stimulated foreign demand for 

U.S. agricultural products. 

Analysis of Results 

USDA did not reach its performance goal of 

preserving $900 million of agricultural trade through 

trade agreement negotiation, monitoring and 

enforcement largely because not all successfully 

negotiated FTAs have been implemented. Costa Rica 

is scheduled to hold a referendum on ratification and 

the U.S. Congress has not yet ratified the Peru, 

Colombia, Panama and South Korea FTAs. There 

were no large, unexpected threats addressed under 

Department monitoring and enforcement activities 

except for those related to sanitary and phytosanitary 

(SPS) barriers, which are accounted for separately 

under Objective 1.3 in this report. The number of 

trade maintenance issues and their potential impact on 

U.S. exports depends primarily on foreign 

governmental action. Both the problems and the 

solutions are highly 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. The cost of an 

action can range from a few thousand to billions of 

dollars. 
ANNUAL PERFORMANCE REPORT 

54 

FY 2007 Performance and Accountability Report 

USDA’s selection of this performance measure 

demonstrates the critical role that the negotiation and 

enforcement of trade agreements play in expanding 

and maintaining export opportunities. As the U.S. 

continues to negotiate new bilateral, regional and 

multilateral trade agreements, the challenge will be to 

monitor and enforce compliance. Monitoring will 

ensure that U.S. agriculture receives full benefits from 

negotiated reductions in tariff barriers. 

The exact value of new markets opened through trade 

agreements is difficult to determine using traditional 

economic models. In a new market, there are little data 

to estimate consumer demand. Market development 

takes time and centers on consumer and wholesaler 

education to create a desire to purchase U.S. products, 

rather than those of competitors. Therefore, it is 

difficult for USDA to estimate the impact of 

monitoring and enforcement efforts. Instead, the 

Department tracks only instances in which there is a 

clearly defined and imminent threat, which is then 

acted upon. 

The figures in the accompanying exhibit reflect the 

uncertainty of trade negotiations and disruptions. Next 

steps include completion of the Doha Round of WTO 

negotiations, various bilateral and regional free trade 

agreements and continued monitoring and 

enforcement of existing agreements that affect U.S. 

agriculture. (The Doha Round refers to multilateral 

negotiations to liberalize trade conducted under the 

auspices of the WTO.) 

Exhibit 17: Increase U.S. Export Opportunities 

Fiscal Year 2007 

Annual Performance Goals and Indicators Target Actual Result 

1.1.1 Dollar value of agricultural trade preserved through trade 

agreement negotiation, monitoring and enforcement (Non-SPS) 

($ Mil) 

$900 $670 Unmet 

Exhibit 18: Trends in Expanding and Retaining Market Access

Fiscal Year 2007 

Trends 2003 2004 2005 2006 2007 

1.1.1 Dollar value of agricultural trade preserved 

through trade agreement negotiation, 

monitoring and enforcement 

($ Mil) Baseline: 1999 = $2,567 

$2,713 $3,950 $800 $14 $670 

FYs 2003 - 2004 data is based on SPS and non-SPS related trade barriers. FY 2005, 2006 and 2007 data is based on non-SPS trade barriers. 
ANNUAL PERFORMANCE REPORT 

55 

FY 2007 Performance and Accountability Report 

OBJECTIVE 1.2: SUPPORT INTERNATIONAL ECONOMIC 

DEVELOPMENT AND TRADE CAPACITY BUILDING

Overview 

The ultimate goal for supporting developing countries 

is to help them become economically stable and 

capable of supporting their populations. USDA 

participates in this effort by providing food assistance 

and trade and development programs. The 

Department supports these programs along with other 

Federal agencies such as the U.S. Agency for 

International Development (USAID). USDA’s 

technical assistance and training play a vital role in 

helping developing countries meet their WTO 

obligations, strengthen policy and regulatory 

frameworks and avoid or eliminate unjustified trade 

barriers. Assistance in trade capacity building also 

supports market-infrastructure development. This 

development assistance includes market information, 

agricultural grades and standards and the cold-chain 

technology by which perishables are kept cold until 

they reach consumers. The assistance also helps 

increase capacity to purchase U.S. exports. In 

combination with food assistance that covers gaps in 

supplies and keeps the population healthy, USDA 

deploys its unique resources and expertise in 

agricultural development activities. These activities 

help advance market-based policies and institutions, 

develop sustainable agricultural systems and strengthen 

agricultural research and education in developing 

countries. Assistance focuses on improving agricultural 

productivity and markets as the engines for economic 

growth. The Department also helps developing 

countries increase trade and integrate the agricultural 

sector into the global economy through regulatory 

reform. Other priorities include reducing hunger and 

malnutrition with sustainable, productivity-enhancing 

technologies and supporting agricultural 

reconstruction in post-conflict or disaster areas. 

Key Outcome 

Improved Ability in Developing Countries to 

Sustain Economic Growth and Benefit from 

International Trade 

USDA currently administers two international food 

assistance grant programs: the McGovern-Dole 

International Food for Education and Child Nutrition 

Program, and the Food for Progress program. Under 

the McGovern-Dole program, the primary 

beneficiaries of USDA food assistance in developing 

countries are school children and their mothers. The 

program provides for the donation of U.S. agricultural 

commodities and associated financial and technical 

assistance for pre-school and school-based feeding 

programs. McGovern-Dole also authorizes the support 

of maternal, infant and child nutrition programs. Its 

purpose is to support a healthy young population 

necessary for a stable society and a capable workforce. 

A healthy and literate workforce attracts jobs, supports 

a sustainable economy and helps establish a secure 

food supply through domestic production and imports. 

All private voluntary organizations that offer food aid 

through McGovern-Dole conduct extensive 

operational and results surveys. USDA evaluates the 

results to determine the programs’ effectiveness. 

Additionally, semi-annual reports share results and 

challenges. 

The Food for Progress program provides for the 

donation of U.S. agricultural commodities to 

developing countries and emerging democracies 

committed to introducing and expanding free 

enterprise in the agricultural sector. Priority is given to 

countries, with the greatest need for food, that are 

making efforts to improve food security and 

agricultural development, alleviate poverty and 

promote broad-based, equitable and sustainable 

development. 
ANNUAL PERFORMANCE REPORT 

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FY 2007 Performance and Accountability Report 

The 2002 National Security Strategy of the United 

States recognizes that the root cause of foreign threats 

can be the lack of economic development, which often 

results in political instability. The National Security 

Strategy is prepared periodically by the President for 

Congress and outlines the major national security 

concerns of the U.S., and how the administration 

plans to deal with them. For most developing 

countries, a productive and sustainable agricultural 

sector bolsters economic well-being. Thus, agricultural 

development is crucial to the National Security 

Strategy. In developing and transitioning economies, 

USDA focuses on: 

 Eliminating trade and investment barriers to 

stimulate economic growth; 

 Raising agricultural productivity in a sustainable 

environment to boost food availability and 

improve nutrition through scientific and 

technological advancement; 

 Institution building to strengthen sustainable 

agriculture, market infrastructure and the 

development of market-information systems; 

 Working with international standard-setting 

bodies to adopt science-based rules and policies; 

and 

 Providing food assistance to support social stability 

and enhance economic development. 

Recent examples of the above actions include two 

biotechnology technical assistance activities designed 

for farmers. The first workshop was conducted in the 

Philippines where 20 farm leaders—representing the 

Philippines, Indonesia, Thailand, Vietnam, Malaysia 

and China—held discussions on acceptance and 

market access for biotechnology crops and supported 

the organizational sustainability of the Asian Farmers 

Regional Network. The second was a farmer-tofarmer workshop conducted in South Africa in which 

thirty agricultural officials and seed-industry and 

farmer-organizations from Kenya, Uganda, Tanzania 

and Mali participated. They discussed practical options 

for promoting the acceptance and development of 

agricultural biotechnology, especially for maize and 

cotton. The two activities involved over 50 leaders 

from 10 countries. 

Another example is USDA assistance to Iraq through 

the Iraq Agricultural Extension Revitalization Project 

(IAER) and provision of expert advisors to the 

Ministry of Agriculture and Provincial Reconstruction 

Teams (PRTs). PRTs are units led by the U.S. 

Department of State with military support, charged 

with fostering security and stability, while facilitating 

economic reconstruction. The USDA advisors focus 

on rehabilitating agricultural infrastructure, both 

physical and institutional. More USDA advisors have 

been recruited and are being cleared for deployment. 

At the Iraqi Ministry of Agriculture in Baghdad, 

advisors are working to strengthen agricultural 

strategy, food safety, soil science and agricultural 

extension and education. In addition, a consortium of 

land-grant universities, led by USDA, is further 

bolstering extension efforts by providing training and 

technical assistance to Iraqi universities under the 

IAER Project. Funding for the effort is provided by 

the U.S. Department of State. 

Under the U.S.-India Agricultural Knowledge 

Initiative (AKI) of 2005, USDA is helping to revitalize 

the strong partnership in agriculture born of the Green 

Revolution in the 1960s. Projects are focusing on 

human capacity building, biotechnology, food 

processing and marketing and water resources 

management. The AKI is also helping to build a sound 

policy and regulatory environment in India that 

promotes trade and investment while reinvigorating 

U.S.-India agricultural-university partnerships with 

new collaborative activities. A notable AKI 

accomplishment is support for approval of imported 

Indian mangos for the U.S. market by the Animal and 

Plant Health Inspection Service with benefits for the 

Indian economy and new opportunities for U.S. 

agricultural products to be introduced into Indian 

markets. 
ANNUAL PERFORMANCE REPORT 

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FY 2007 Performance and Accountability Report 

Selected Results in Research, Extension and Statistics 

Laying the Ground Work for Future International 

Development and Trade. Through a USDA International Science 

and Education grant, 50 Cornell University students and 25 Indian 

students from several universities completed the course 

requirements for Agriculture in Developing Nations in the field of 

International Agriculture and Rural Development. The grant is 

designed to increase cross-cultural understanding and 

agribusiness networks between the U.S. and India. The course 

included a 20-day field study trip to sites in India. It enabled the 

development of long-term collaboration among partnership 

institutions. Additionally, Indian students were able to apply for 

graduate studies in leading U.S. land grant universities. 

Challenges for the Future 

Hunger and malnutrition still impact much of the 

world. USDA works closely with the United Nations’ 

World Food Program (WFP) and private voluntary 

relief and development organizations. WFP offers 

food assistance to natural disaster victims, the 

displaced and the world’s hungry and poor. 

Trade-capacity building (TCB), or trade-related 

technical assistance, helps strengthen developing 

countries’ agricultural institutions and regulatory 

systems, encourages compliance with international 

norms and fosters the adoption of U.S. approaches to 

agricultural policy and regulatory procedures. TCB 

also supports the President’s national security strategy 

by assisting nations in developing economic stability 

through free trade and open markets. 

A key USDA trade policy priority — a successful 

conclusion to the Doha Round — recognizes the 

importance of trade to developing countries. TCB 

opportunities give developing countries an incentive to 

participate in the Doha process. By helping countries 

joining WTO understand and meet their new 

commitments, TCB builds markets for the future by 

fostering economic growth. 

The United States is concluding a growing number of 

FTAs with developing countries. In addition to 

promoting market access, such agreements encourage 

economic growth and closer political ties with 

countries important to U.S. national security. Because 

of these linkages, technical assistance is an integral part 

of the negotiating package. 

TCB is critical in addressing the many technical 

barriers that impede access for U.S. agricultural 

products in global markets. By helping countries 

develop transparent, science-based regulations and 

increasing understanding of the U.S. regulatory 

system, TCB can expand access for U.S. agricultural 

products. Likewise, this assistance enables recipient 

countries to access other world markets. 

The U.S. is the world’s leader in food aid, providing 

more than half of total worldwide assistance to combat 

malnutrition. U.S. food-aid programs are a joint effort 

across several Federal departments. USDA works with 

USAID, private voluntary relief and development 

organizations, American universities, Federal agencies 

and the WFP to provide targeted food aid and 

assistance where it is needed most. Economic 

development activities aimed at market-capacity 

building for both domestic and international trade are 

supported through the provision of food assistance. 

These activities combined with USDA technical 

assistance and training foster stable societies, economic 

growth and market-infrastructure development. 

Consequently, recipient countries are able to boost 

domestic production and, in turn, reduce their 

dependence on food aid. The activities aid recipient 

countries in building sound economic policies that 

support sustainable development and participation in 

global agricultural trade. 

Analysis of Results 

The food aid targeting effectiveness ratio is a longterm measure which has been developed to gauge the 

effectiveness of USDA food aid programs in 

improving food security in low income countries. The 

ratio measures how effective the targeting of USDA 

food aid programs is in addressing the food 

distribution gap in the most food insecure countries. 

The USDA Economic Research Service calculates the 

ratio using its food security assessment model which 

measures food security based on estimations of food 
ANNUAL PERFORMANCE REPORT 

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FY 2007 Performance and Accountability Report 

gaps in 70 of the world’s poorest countries. Food gaps 

represent the difference between projected food 

availability and targeted food consumption. The 

performance goal for supporting improvements in 

foreign trade policies was exceeded, with impacts in 

thirteen countries. 

Under the DR-CAFTA, USDA trade capacity 

building efforts have led to mutually beneficial 

accomplishments in Central America. Over the past 

year, notifications to the Sanitary and Phytosanitary 

Committee of the WTO increased from zero to 16 in 

the Dominican Republic, and from four to 16 in 

Nicaragua. These notifications allow U.S. exporters to 

better understand regulatory changes affecting their 

goods prior to shipment overseas. In addition, Costa 

Rica, El Salvador, Guatemala, Honduras and 

Nicaragua partially harmonized their official 

emergency response systems for all avian pathological 

diseases to better coordinate regionally in the event of 

an avian influenza outbreak, thus reducing the 

potential of disease reaching the United States border. 

In addition, Costa Rica, Dominican Republic, El 

Salvador, Guatemala, Honduras and Nicaragua 

committed to regionally harmonize laboratory testing 

procedures as well as to develop a regional reference 

laboratory system. Harmonized laboratory testing 

procedures that are consistent with U.S. testing 

methodology across the DR-CAFTA countries 

reduces the potential for U.S. exports to be rejected. 

USDA hosted a workshop in El Salvador in November 

2006 for Central American plant-health officials to 

gain knowledge of new USDA rules for mitigation of 

pests and diseases related to the export of peppers and 

tomatoes to the United States. Developing strategic 

relationships with officials attending the workshop has 

improved USDA’s ability to access information on 

phytosanitary conditions in Central America. Central 

American countries are also benefiting from new 

market opportunities introduced in the workshop. 

In support of the African Growth and Opportunity 

Act (AGOA) that significantly enhances U.S. market 

access for 38 Sub-Saharan African (SSA) countries,

USDA’s Pest Risk Assessment (PRA) project with 

USAID has trained over 200 persons from 35 

countries in SSA on a wide variety of issues related to 

phytosanitary protocols. When the project began in 

2003, PRAs had been submitted to USDA for only 

two products from Sub-Saharan Africa. Since then, 

USDA’s efforts have improved overall phytosanitary 

capabilities throughout Sub-Saharan Africa by 

strengthening links with national plant protection 

organizations, fostering increased regional 

collaboration, supporting greater activity in 

international organizations and providing targeted 

technical training on phytosanitary issues. Four final 

rules have been published in the Federal Register, 

establishing the conditions for importation of 

commodities—Zambian baby corn and baby carrots, 

Kenyan peas and Namibian table grapes—into the 

United States, setting the stage for trade in fresh 

produce from Sub-Saharan Africa. Additionally, 36 

PRAs (including four regional PRAs), the precursors 

to import rules, are in various stages of development. 

At this year’s AGOA Forum, USDA committed to 

further streamline the regulatory process for PRAs. 

USDA technical assistance was also provided to SubSaharan African countries for understanding 

complexities of Codex Alimentarius, the international 

organization for setting food standards worldwide. 

Adoption of Codex standards by U.S. trading partners 

provides regulatory measures within legal parameters 

of WTO agreements. African countries have begun to 

participate more frequently in Codex meetings, but 

these meetings often involve complex technical issues 

that have been under discussion for years, leaving 

novice delegates at a clear disadvantage. To address 

this gap, USDA hosted a technical assistance 

workshop in Mozambique, a seminar for African 

Codex contact points in Washington, D.C. and a 

colloquium on key Codex issues in Ghana. As a result, 

African delegates have a better understanding of the 

issues that will be negotiated at upcoming Codex 

Committee and Commission meetings. SSA delegates 
ANNUAL PERFORMANCE REPORT 

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FY 2007 Performance and Accountability Report 

are also building coalitions both within the continent 

and with the United States and, in January 2007, 

created a regional strategy for the Codex Committee 

for Africa to be implemented over the next five years. 

USDA is helping Egypt develop its regulatory 

framework for agricultural biotechnology. These 

efforts include an environmental risk assessment 

workshop for ministry officials and the National 

Biosafety Committee and ongoing expert consultations 

to the Ministry of Agriculture in developing an 

authorization system for field trials for 

commercialization of genetically modified crops. As a 

result, this year Egypt has—for the first time—

approved permits for field trials for several agricultural 

biotechnology products. 

Following USDA assistance in achieving greater 

consistency and transparency in international 

standards, Armenia passed a new food safety law in 

January 2007 that incorporates science-based processes 

and international standards established by Codex 

Alimentarius. This new law will also help facilitate 

U.S. exports to that country. 

USDA has provided training for personnel from the 

Serbian Ministry of Agriculture extension service and 

from universities in pest management, including 

identification, diagnosis, risk assessment, risk 

management, monitoring and international standards. 

As a follow-up, in May 2007 staff from USDA’s 

Center for Integrated Pest Management installed and 

provided training in Serbia on basic software modules 

that USDA’s Animal and Plant Health Inspection 

Service uses to meet U.S. phytosanitary requirements 

and those of the International Plant Protection Center 

(IPPC). This will help Serbia to meet reporting 

requirements established by the IPPC and the 

European and Mediterranean Plant Protection 

Organization (EPPO) for international agricultural 

trade. Moreover, it will help to facilitate expansion of 

trade between Serbia and the United States. 

The Department of Agriculture of the Philippines 

(DA) used USDA training to develop food safety 

regulations that mirror those of the United States, 

improve the consultative process during the 

development of food policies and regulations and 

formulate more WTO-consistent food regulations 

regarding quarantine, inspection and customs 

clearance. The positive working relationship between 

the DA and USDA has helped resolve key market 

access issues, such as maintaining the market in the 

Philippines for U.S. beef and lifting the temporary ban 

on U.S. beef offal. 

Exhibit 19: Support Foreign Food Assistance 

Fiscal Year 2007 

Annual Performance Goals and Indicators Target Actual Result 

1.2.1 Food Aid Targeting Effectiveness ratio 45% 45% Met

Note: This is a new measure; thus, trend information is unavailable. 

Exhibit 20: Support Foreign Food Assistance 

Fiscal Year 2007 

Annual Performance Goals and Indicators Target Actual Result 

1.2.2 Number of countries in which substantive improvements have 

been made in national trade policy and regulatory frameworks 

that increase market access 

7 13 Met 

Note: This is a new measure; thus, trend information is unavailable. 
ANNUAL PERFORMANCE REPORT 

60 

FY 2007 Performance and Accountability Report 

OBJECTIVE 1.3: IMPROVED SANITARY AND 

PHYTOSANITARY (SPS) SYSTEM TO FACILITATE 

AGRICULTURAL TRADE

Overview 

Sanitary and Phytosanitary (SPS) measures are those 

imposed by governments to protect human, animal 

and plant health from pests, diseases and 

contaminants. These measures often hinder trade, 

intentionally or unintentionally, reasonably or 

unreasonably. USDA agencies work with other 

Federal agencies to address and mitigate SPS measures 

imposed by foreign governments. 

Key Outcome 

An Improved Global SPS System for 

Facilitating Agricultural Trade 

The negative impact of some SPS measures is growing 

due to increasing trade in food and agricultural 

products. This is apparent in the growth of trade in 

consumer-ready products such as meats, fruits, 

vegetables and processed foods. The problem is 

compounded by the emergence of threats like BSE, 

poor regulatory infrastructure in many developing 

countries and political pressures that cause foreign 

governments to implement stricter-than-needed SPS 

measures. 

In response, USDA works closely with other Federal 

agencies to strengthen regulatory coordination, address 

SPS measures and other technical barriers to trade and 

encourage trading partners to use sound science and 

risk management principles in regulatory decision 

making. USDA leads Federal efforts to monitor 

adherence to the SPS Agreement of the WTO and 

helps lead enforcement of the agreement. USDA also 

works through international organizations to develop 

stronger science-based standards to facilitate trade. 

Additionally, USDA conducts regulatory capacitybuilding activities with selected trading partners. 

These activities protect the life and health of humans, 

animals and plants around the world. They also 

facilitate trade through efficient regulation. 

USDA has several tools to help monitor international 

regulatory activities. For example, WTO members 

submit more than 800 annual notifications of intent to 

alter or create import requirements related to food 

safety or plant and animal health. USDA maintains 

the official U.S. Enquiry Point and Notification 

Authority to track and respond to these notifications. 

The Department reacts aggressively to restrictive 

measures. USDA maintains a monitoring system that 

allows it to address problems quickly. 

While some of the issues are difficult to resolve, 

USDA can pursue long-term solutions. BSE is a good 

example. In FY 2007, USDA submitted 

documentation on BSE risk factors and BSE risk 

mitigation measures to the World Organization for 

Animal Health (OIE) and received a formal 

“Controlled Risk” categorization that will provide 

additional scientific rationale to our efforts to expand 

market access in key markets already open to U.S. beef 

exports (such Japan, Korea, Taiwan and Mexico) and 

to reopen those markets (such as China and Russia) 

that have been closed to U.S. beef since the initial case 

of BSE was detected in December 2003. The 

Department also strives to hold countries accountable 

for complying with their trade agreements. This will 

continue to be a top priority for USDA as it seeks to 

reopen markets for U.S. beef. 

Selected Results in Research, Extension and Statistics 

Food Safety Improvements Underway in China. With the 

expansion in food imports, there are growing concerns about food 

safety practices in countries that export to the U.S. For example, 

there is a gap between Chinese and international food safety 

standards. A November 2006 article in Amber Waves, a 

newsletter produced by the Economic Research Service, reviews 

the challenges for Chinese food safety and Government 

programs to improve standards. Only a small portion of Chinese 

production meets the new Government standards for safer food. 
ANNUAL PERFORMANCE REPORT 

61 

FY 2007 Performance and Accountability Report 

Challenges for the Future 

Given the increasing global flow of food and 

agricultural products, the ability of foreign countries to 

develop and implement sound, science-based 

regulatory systems is vital to the long-term safety of 

U.S. agriculture and our food supply. U.S. agriculture 

benefits greatly from the development of regulatory 

frameworks in other countries. These frameworks can 

address technical trade barriers and SPS measures in a 

transparent and scientifically based manner. Besides 

monitoring and enforcing its rights under the WTO 

SPS agreement, USDA is working to support the 

development and adoption of science-based 

international standards and SPS regulatory systems. 

These efforts are critical to the Department’s ability to 

bring developing countries into the global trading 

system so that they support further liberalization 

through multilateral trade negotiations. 

USDA works closely with the USTR and other 

Government agencies to pursue and enforce trade 

agreements. These agreements include provisions to 

ensure that technical regulations and measures 

designed to enhance food safety and protect plant and 

animal health do not become barriers to trade. USDA 

staff in more than 90 countries helps open, retain and 

expand international markets for U.S. food and 

agricultural products. This staff includes veterinarians, 

economists, marketing experts, plant pathologists and 

others. While this group represents USDA overseas as 

its key supplier of market intelligence, it also helps 

solve minor trade threats before they become 

substantial disruptions. Staff members do this by being 

able to speak knowledgeably with foreign decision 

makers. They also help support U.S.-based technical 

experts who develop science-based protocols and 

health certification procedures for exporting food and 

agricultural products. 

Analysis of Results 

USDA met its performance goal of preserving $2.2 

billion of trade in 2007 through USDA staff 

interventions leading to resolutions of issues created by 

SPS barriers or TBT measures. This was accomplished 

through monitoring and compliance enforcement, 

overseas advocacy and negotiations of technical 

protocols. The two most important successes were 

regaining commercially viable access to the Korea 

market for U.S. beef and lifting a detaining order 

Mexico placed on imports of U.S. rice not 

accompanied by a “GMO-free” certificate. 

Trade issues and their impact on U.S. exports depend 

primarily on foreign action, sometimes 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 dollars to 

billions of dollars. While USDA can establish 

priorities in advance for known constraints, unforeseen 

events will occur that require realigning priorities. 

USDA’s selection of this performance measure 

demonstrates the growing importance of addressing 

SPS barriers to maintain or expand trade. As the U.S. 

Government continues to negotiate new bilateral, 

regional and multilateral trade agreements, the 

challenge will be to monitor and enforce compliance 

with both trade and technical commitments. This 

monitoring will ensure that U.S. agriculture receives 

full benefits from negotiated reductions in tariff rates 

by preventing needless SPS trade barriers. 

The figures reflect the uncertainty of trade disruptions. 

Just weeks after Japan resumed imports of beef in 

December 2005, it re-imposed the ban after finding 

beef that violated the recently agreed-upon technical 

protocol. After U.S. negotiations and inspection of 

processing facilities, the Japanese market reopened in 

June 2006. 
ANNUAL PERFORMANCE REPORT 

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FY 2007 Performance and Accountability Report 

Exhibit 21: Increase U.S. Export Opportunities 

Fiscal Year 2007 

Annual Performance Goals and Indicators Target Actual Result 

1.3.1 Value of trade preserved annually through USDA staff 

interventions leading to resolutions of barriers created by SPS 

or TBT measures. ($ Bil) 

$2.2 $2.457 Exceeded 

Exhibit 22: Trends in Expanding and Retaining Market Access 

Fiscal Year 20071

Trends 2003 2004 2005 2006 2007 

1.3.1 Value of trade preserved annually through 

USDA staff interventions leading to 

resolutions of barriers created by SPS or 

TBT measures. ($ Mil) Baseline: 1999 = 

$2,567 

$2,713 $3,950 $2,000 $2,600 $2,457 

1 FYs 2003 - 2004 data is based on SPS and non-SPS related trade barriers. FY 2005, 2006 and 2007 data is based on SPS trade barriers. 

Strategic Goal 2: Enhance the Competitiveness 

and Sustainability of Rural and Farm Economies 

Rural America is of critical importance to the Nation’s 

prosperity and technological advancement. USDA 

enhances the competitiveness and sustainability of 

rural and farm economies by expanding domestic 

market opportunities, increasing the efficiency of 

domestic agricultural production and marketing 

systems and providing risk management and financial 

tools to farmers and ranchers. 

OBJECTIVE 2.1:EXPAND DOMESTIC MARKET 

OPPORTUNITIES

Overview 

Biobased products are commercial or industrial 

products (other than food or feed) composed mainly of 

biological products such as renewable agricultural 

materials (plant, animal and marine materials) or 

forestry materials. Using biobased products lessens 

national dependence on foreign oil. It also promotes 

economic development by creating new jobs in rural 

communities and providing new markets for farm 

commodities. Section 9002 of the Farm Security and 

Rural Investment Act of 2002 (FSRIA) authorized the 

Federal Biobased Products Preferred Procurement 

Program (FB4P). FB4P authorizes the preferred 

procurement of biobased products that fall under items 

(generic groupings of products) designated by 

rulemaking. 

Key Outcome 

Increased use of biobased products 

throughout the agricultural sector 

In October 2006, FB4P was renamed as 

“BioPreferred.” The funding level for FY 2007 is 

$1 million in mandated Commodity Credit 

Corporation funds and $1.5 million in appropriated 

funding. The Office of Energy Policy and New Uses 

(OEPNU) implements it through successive 

rulemakings. Creating a demand for biobased products 

supports the farm and rural sectors by expanding and 

stabilizing the demand for agricultural commodities. 

To designate by rulemaking, USDA must provide 

information on the product’s environmental and health 

effects, and life-cycle costs. The Department also can 

set a minimum biobased content for the item. USDA 

identifies products and manufacturers and must gain 

their voluntary support in providing test information 

on those products to enable designation. Also under 

BioPreferred, OEPNU expects to publish a proposed 

rule regarding a voluntary labeling program. Under the 

program, manufacturers of qualifying products will be 
ANNUAL PERFORMANCE REPORT 

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FY 2007 Performance and Accountability Report 

permitted to carry the USDA Certified Biobased 

Product label and logo. 

Congress created BioPreferred to achieve the following 

objectives: 

 Spur demand growth for new biobased products; 

 Increase domestic demand for agricultural 

commodities; 

 Encourage the development of processing and 

manufacturing in rural communities; 

 Capture environmental benefits; and 

 Enhance the Nation’s energy security. 

FSRIA calls for Federal agencies to purchase biobased 

products over their petroleum-based counterparts, as 

long as the biobased materials are reasonably available 

and priced, and comparable in performance. As the 

country’s single largest consumer, purchasing roughly 

$400 billion annually in goods and service, the Federal 

Government’s preferred use of biobased resources will 

help achieve the above stated objectives. 

A series of rules to designate items for preferred 

procurement have been published. Manufacturers of 

products falling under those items have posted product 

and contact information on a BioPreferred electronic 

catalog for qualifying products under designated items. 

The first final rule (round 1), was published on March 

16, 2006. Three more proposed rules (rounds 2, 3 and 

4) were subsequently published in the Federal 

Register. Once finalized these rules will add 30 

designated items. The items by round include: 

 Round 1 — mobile equipment hydraulic fluids, 

biobased roof coatings, water-tank coatings, diesel 

fuel additives, penetrating lubricants, bedding, bed 

linens and towels; 

 Round 2 — Adhesive and mastic removers, plastic 

insulating foam for residential and commercial 

construction, hand cleaners and sanitizers, 

composite panels, fluid-filled transformers, 

disposable containers, fertilizers, soluble, semisynthetic, and synthetic metalworking fluids, 

sorbents, and graffiti and grease removers; 

 Round 3 — 2-Cycle engine oils, lip care products, 

nondurable films, stationary equipment hydraulic 

fluids, disposable cutlery, glass cleaners, food grade 

greases, multipurpose greases, rail track greases, 

truck greases, greases not classified elsewhere, dust 

suppressants, carpets, and carpet and upholstery 

cleaners; and 

 Round 4 — Bathroom and spa cleaners, clothing 

products, concrete and asphalt release fluids, 

general purpose de-icers, durable films, general 

purpose firearm lubricants, cold weather firearm 

lubricants, floor strippers, pretreatment/spot 

removers, laundry products, metalworking fluids—

straight oils, and wood and concrete sealers. 

Technical information to support each proposed rule is 

available at the BioPreferred Web site at 

www.biobased.oce.usda.gov. 

The proposed rules for rounds 2, 3, and 4 are part of a 

series of rules that will be issued designating biobased 

items. USDA has identified about 170 items for which 

it is collecting test data needed for the additional 

designations of items. These designations will extend 

preferred procurement status to include all qualifying 

biobased products. 

Previously, USDA had developed a model 

procurement program of training and education to 

help Federal procurement officials and biobased 

product users identify and purchase the qualifying 

materials. Information on the guidelines and the 

model program are available at 

http://www.usda.gov/biobased. 

The benefits of this BioPreferred are broad. Some 

accrue directly to the private sector through the 

program’s operation. Others may accrue indirectly via 

the public sector. 

For Federal agencies, the BioPreferred program 

encourages the purchase of more environmentally 

sustainable products. It also helps agencies identify 

those products, increases the availability and diversity 

of biobased products and helps agencies reduce 

environmental footprint. 
ANNUAL PERFORMANCE REPORT 

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FY 2007 Performance and Accountability Report 

For manufacturers and vendors, the BioPreferred 

program creates a preferred market for biobased 

products, provides large-scale demonstration of 

biobased products’ performance in use, spurs 

development of new biobased products and develops 

alternatives to fossil energy based products. 

Collectively, the benefits from BioPreferred create an 

information database that both the private and public 

sectors can use to evaluate designated items to make an 

informed purchasing/procurement decision. This 

information also helps reduce the dependence on 

petroleum-based products and reduce environmental 

impacts. BioPreferred increases the demand for 

processing facilities in rural areas. It also boosts the 

demand for biomass material from agricultural, marine 

and forest sources. 

Challenges for the Future 

USDA is looking for ways to develop an infrastructure 

to support the efficient and economically viable 

development of biobased products. Other challenges 

include: 

 Informing rural America about the benefits of 

biodiesel fuel use and helping farmers transition to 

a new style of operating; 

 Developing public policies supporting biobased 

products; 

 The need for public education about the 

environmental, performance and energy-security 

benefits of using biobased products, and managing 

the carbon cycle more effectively; 

 The development and evaluation of measures that 

identify and assess the benefits of the increased 

usage of biobased products, including benefits 

internal to the seller and user of the products, and 

external benefits that affect society and the 

environment; 

 The willingness of manufacturers and vendors of 

biobased products, working with USDA, to 

provide the material and data necessary to test and 

evaluate the biobased content, environmental 

attributes and life-cycle costs required for the 

Department to designate generic groupings of 

products for preferred procurement within the 

program; and 

 The willingness of manufacturers and vendors of 

biobased products designated by rulemaking for 

preferred procurement within the program to 

cooperate with USDA in publicizing their 

availability. 

This can be done by vendors voluntarily posting 

product and contact information on the program Web 

site at www.biobased.oce.usda.gov. This will allow 

Federal agencies to find biobased products for 

procurement. 

In response to these challenges, USDA is creating 

regulations and operating procedures for the Bioenergy 

Program and the BioPreferred program. The 

Department is continuing to shape a model 

procurement program for Federal agencies to help 

them meet their responsibilities within the program’s 

parameters. This model will educate and train Federal 

agencies about procurement and how to use related 

informational resources. It will also allow 

manufacturers and vendors to identify and evaluate 

biobased products available in the marketplace for 

their use. This model procurement program will make 

an important contribution toward creating marketbased opportunities to produce and consume increased 

amounts of biobased products. 

Analysis of Results 

Rules are being issued designating multiple biobased 

items that will receive a preference in Federal 

procurements; they were not published on schedule 

and the goal is unmet. The rulemaking process took 

longer than expected. 

The BioPreferred program is expected to significantly 

increase the use of biobased products within the 

Federal Government. This increased usage, in turn, 

will encourage the production of biobased products for 

that market. The program calls for Federal agencies to 

give preference to designated biobased products in 

Government purchases within one year of publication 

of the final rule. 
ANNUAL PERFORMANCE REPORT 

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FY 2007 Performance and Accountability Report 

Exhibit 23: Increase the Use of Biobased Products 

Fiscal Year 2007 

Annual Performance Goals and Indicators Target Actual Result 

2.1.1 Increase the number of products designated under the 

BioPreferred Program 

Publish 16 

items in Final 

Rule 

Published 6 

items in Final 

Rule 

Unmet 

Note: This measure changes annually; thus, trend information is not available. 

OBJECTIVE 2.2: INCREASE THE EFFICIENCY OF DOMESTIC 

AGRICULTURAL PRODUCTION AND MARKETING SYSTEMS

Overview 

Key Outcome 

Agricultural Producers Who Compete 

Effectively in the Economic Market 

USDA improves market competitiveness and increases 

the efficiency of agricultural marketing systems. For 

example, the Department provided greatly enhanced 

access to marketing information for producers and 

marketers of farm products, and those in related 

industries, by initiating the Market News portal. The 

portal provides electronic access and custom report 

capability on current market data for fruits and 

vegetables, livestock and grain. Additional reporting 

capabilities also have been added for ethanol prices and 

agricultural energy updates. The portal is being 

modified to provide organic price reporting 

information. Market News is the only nationwide 

mechanism for gathering and publishing price data on 

specific agricultural commodities. This timely, 

accurate and unbiased market information covers local, 

regional, national and international markets. The 

information is designed to help traders of U.S. 

agricultural products decide where and when to sell, 

and at what price. USDA also distributes Market News

which reports current data on supply, movement, 

contractual agreements, inventories and prices for 

many agricultural commodities. It does this by 

collecting, analyzing and disseminating market 

information for numerous agricultural commodities. 

Electronic access and e-mail subscriptions for all 

commodities are available at http://marketnews.usda 

.gov/. Federal and cooperating State reporters obtain 

market information. USDA then analyzes, compiles 

and disseminates the information immediately to all 

interested parties. 

Market News provides agricultural producers access to 

the necessary information for determining contract 

values, dispute resolution and reporting under trade 

agreements. Market News reports are used in judicial 

proceedings and when the International Trade 

Commission is considering dumping allegations with 

respect to agricultural commodities and products 

entering the country. U.S. Customs and Border 

Protection use USDA price data to assess the value of 

imports. Agricultural commodity and product 

contracts are routinely linked to prices reported by 

Market News. The Market News portal provides a 

Web-based search engine that allows users to find 

market information and tailor reports by commodity, 

variety, shipping point and destination market. 

USDA worked closely with the rapidly expanding 

organic agriculture industry to refine the definitions 

and requirements for organic production and labeling. 

USDA’s National Organic Program participated in an 

industry meeting to discuss the services available to 

U.S. farmers and agricultural processors. The 

Department plans to enhance and expand the use of 

production and handling standards for certified 

organic products. 

The Organic Foods Production Act of 1990 created 

the National Organic Program. It is designed to 

establish national standards governing the marketing 

of agricultural products as organically produced. These 

standards assure consumers that organically produced 

products meet a consistent standard. They also 

facilitate commerce in fresh and processed food that is 

produced organically. Before the program’s creation, 
ANNUAL PERFORMANCE REPORT 

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FY 2007 Performance and Accountability Report 

individual States established their own organic 

production and labeling requirements. The nationwide 

program provides a more efficient and competitive 

system for the marketing of organic agricultural 

products within the U.S. and for exports. 

USDA continued its Farmers Market Promotion 

Program, revised the Farmers Market Resource Guide, 

maintained a close working relationship with the 

Farmers Market Consortium, updated the Web site on 

Farmers Market resources and participated in the 

Farmers Market Coalition. More information on all of 

these activities is available at http://www.ams.usda. 

gov/farmersmarkets/. The program’s marketing experts 

provide technical advice and assistance to States and 

municipalities interested in creating or upgrading 

wholesale market facilities, auction and collection 

markets and retail farmers markets. They also conduct 

feasibility studies in cooperation with the private 

sector, not-for-profit organizations and other 

Government agencies to evaluate and suggest efficient 

ways to handle and market agricultural commodities. 

USDA researches marketplace changes to assist States, 

localities, market managers/operators and growers in 

making strategic decisions for future business 

development. 

The program facilitates distribution of U.S. 

agricultural products, identifies marketing 

opportunities, provides analysis to help take advantage 

of those opportunities and develops and evaluates 

solutions. Marketing solutions include improving 

farmers markets and other direct-to-consumer 

marketing activities, researching and developing 

marketing channels, providing information and 

education, encouraging the adoption of improved 

post-harvest technology and designing market 

facilities. The program benefits agricultural producers 

by providing solutions to marketing problems so that 

they can remain financially viable. Consumers benefit 

from increased availability and alternative, costefficient sources. 

USDA also provided assistance, both directly to 

farmers and through local and State organizations, to 

help small farmers in marketing their products. Areas 

of support focused on training, the development of 

good agricultural practices, market research and crop 

diversification. 

Selected Results in Research, Extension and Statistics 

Increasing the Nutritional Value of Wheat. USDA-supported 

researchers cloned a gene, GPC-B1, from wild wheat. The gene 

increases the protein, zinc and iron content in the grain. This 

finding offers a potential solution to nutritional deficiencies 

affecting hundreds of millions of children around the world. The 

researchers found that all commercial pasta and bread wheat 

varieties analyzed so far have a nonfunctional copy of the GPC 

gene. This suggests that the gene was lost during wheat 

domestication. Reintroducing the functional gene into commercial 

wheat varieties could increase their nutritional value. 

Protecting the Honeybee. A microarray, a device that can 

measure thousands of genes simultaneously, was developed and 

distributed by USDA-supported researchers. The device, among 

myriad other uses, will allow scientists to study honeybee genes. 

American Foul Brood (AFB), a disease caused by bacteria, 

attacks bee larvae and can kill entire honeybee colonies. The 

microarray lets researchers look at how AFB is affecting the bee, 

what genes are involved in the process and, more importantly, 

determine an appropriate immune response to promote honey 

bee health. The microarray is also a potentially powerful tool for 

research into the Collapsing Colony Disorder (CCD) of 

honeybees. CCD threatens pollination, honey production and the 

production of crops dependent on bees for pollination. Without 

pollination, most plant fruits will not develop. 

Ethanol Co-Products Used for Livestock Feed. Important coproducts result when corn is converted to ethanol. The coproducts, also called distillers grains (DDG) or corn gluten feed, 

can be fed to livestock. USDA and the Nebraska Corn 

Development, Utilization and Marketing Board conducted a 12-

State study to determine the extent to which co-products are used 

by livestock operations and to identify concerns and barriers 

which prevent operations from using co-products. The survey, the 

most extensive of its kind, should provide a good baseline for 

tracking ethanol co-product feeding trends in the future. 

The First Decade of Genetically Engineered Crop in the 

United States. Ten years after the first generation of genetically 

engineered (GE) varieties became available commercially, their 

adoption by U.S. farmers is widespread. Despite the benefits to 

farmers, such as higher yields, time-management savings and 

lower pesticide costs, environmental and consumer concerns 

may have limited acceptance of GE crops, particularly in Europe. 

The USDA report, The First Decade of Genetically Engineered 

Crop in the United States, focuses on GE crops and their 

domestic adoption during the past decade. The report found that 

(1) the pace of research and development by producers of GE 

seed has been rapid, (2) farmers have adopted some GE 

varieties widely and rapidly, and benefited from such adoption, 

and (3) the level of consumer concerns about foods that contain 

GE ingredients varies by country, with European consumers 

being most concerned. 
ANNUAL PERFORMANCE REPORT 

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FY 2007 Performance and Accountability Report 

In addition, the Agricultural Statistics Board (ASB) 

prepares and issues official national and State forecasts 

and estimates relating to crop production, stocks of 

agricultural commodities, livestock products, dairy 

products, poultry products, agricultural prices, 

agricultural wage rates, chemical usage and other 

related subjects. The calendar lists release dates and 

specified times for USDA’s national agricultural 

statistics reports. These reports cover more than 120 

crops and 45 livestock items. All of the agricultural 

statistics reports scheduled by ASB were released ontime to achieve the 100 percent performance target in 

FY 2007. 

Analysis of Results 

USDA strives to release its ASB reports on time 100 

percent of the time each year. It is imperative to 

deliver high-quality, objective, relevant, timely and 

accurate statistics to producers and other data users. 

Such statistics allow users to make sound decisions. 

Official agricultural statistics promote a level playing 

field in production agriculture with impartial 

information available to all at a publicized time. These 

data, provided throughout the year, are important to 

the commodity and agricultural markets. They help 

provide a fair and equitable environment. The data are 

also used by public officials to make informed 

decisions. USDA policymakers and Congress use this 

information to help build a strong, sustainable U.S. 

farm economy.

Exhibit 24: Agricultural Statistics Reports Released On-Time 

Fiscal Year 2006 

Annual Performance Goals and Indicators Target Actual Result 

2.2.1 Agricultural Statistics Board reports are released on time 100 

percent of the time 

Agricultural 

Statistics Board 

reports are 

released on 

time 100 

percent of the 

time 

Agricultural 

Statistics 

Board reports 

were released 

on time 100 

percent of the 

time 

Met 

Exhibit 25: Trends in Agricultural Statistics Reports Released On-Time 

Fiscal Year 2007 

Trends 2003 2004 2005 2006 2007 

2.2.1 Agricultural Statistics Board reports are 

released on time 100 percent of the time 

100.0% 99.2% 99.8% 100.0% 100.0% 

Exhibit 26: Percent of Market-Identified Quality Attributes for which USDA Has Provided Standardization 

Fiscal Year 2007 

Annual Performance Goals and Indicators Target Actual Result 

2.2.2 Percent of market-identified quality attributes for which USDA 

has provided standardization (percent) 

97% 97% Met 
ANNUAL PERFORMANCE REPORT 

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FY 2007 Performance and Accountability Report 

Exhibit 27: Trends in Market-Identified Quality Attributes for which AMS/GIPSA Has Provided Standardization 

Fiscal Year 2007 

Trends 2003 2004 2005 2006 2007 

2.2.2 Percent of market-identified quality 

attributes for which USDA has provided 

standardization (percent) 

96% 96% 96% 97% 97% 

Overview 

USDA facilitates the marketing of agricultural 

products in domestic and international markets, while 

ensuring fair trading practices and promoting a 

competitive and efficient marketplace, to the benefit of 

producers, traders, and consumers of U.S. food and 

fiber products. Programs promote a strategic 

marketing perspective that adapts product and 

marketing decisions to consumer demands, changing 

domestic and international marketing practices, and 

new technology. 

Key Outcome 

Economically Sound Agricultural 

Production Sector 

A variety of programs enhance the marketing and 

distribution of agricultural products. Activities include 

the dissemination of market information; surveillance 

of egg handling operations; development of 

commodity grade standards; protection of producers 

from unfair marketing practices; statistical sampling of 

commodities for pesticide residues; development of 

organic standards; research and technical assistance 

aimed at improving efficiency of food marketing and 

distribution; and pesticide recordkeeping. 

USDA also establishes the official U.S. standards for 

grain, conducts official weighing and grain inspection 

activities, and grades rice, dry beans and peas, 

processed grain products, and hops. USDA regulates 

and monitors the activities of dealers, market agencies, 

stockyard owners, live poultry dealers, packer buyers, 

packers, and swine contractors in order to detect 

prohibited unfair, unjust discriminatory or deceptive, 

and anti-competitive practices in the livestock, meat 

and poultry industries. USDA also reviews the 

financial records of these entities to promote the 

financial integrity of the livestock, meat, and poultry 

industries. 

Analysis of Results 

USDA accomplished its goal for FY 2007 partly by 

developing two additional quality attribute standards. 

These standards were grades of peppers (other than 

sweet peppers) and a revised standard for turkey meat. 

At a meeting of the Fruit and Vegetable Industry 

Advisory Committee, USDA was asked to identify 

fresh fruit and vegetables that may be better served if 

grade standards were developed. USDA identified 

pepper varieties that could not be certified to a U.S. 

grade as possibly in need of official grade standards, 

because they were not included in the current United 

States Standards for Grades of Sweet Peppers. Such 

standards are used by the fresh produce industry to 

describe the product they are trading, thus facilitating 

the marketing of the product. 

Prior to undertaking research and other work 

associated to develop the standards, USDA published 

a notice in the Federal Register soliciting comments 

on the possible development of United States 

Standards for Grades of Peppers (Other Than Sweet 

Peppers). In response to the request for comments, 

USDA received two comments; one comment was 

from an industry group, and another one was from a 

pepper shipper. Both comments were in support of 

developing the standards. 
ANNUAL PERFORMANCE REPORT 

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FY 2007 Performance and Accountability Report 

The adoption of the U.S. grade standards will provide 

the pepper (other than sweet peppers) industry with 

U.S. grade standards similar to those extensively in use 

by the fresh produce industry to assist in the orderly 

marketing of other commodities. Accordingly, USDA 

adopted the United States Standards for Grades of 

Peppers (Other Than Sweet Peppers). The effective 

date of the standard was March 7, 2007. 

In April 2007, the United Nations Economic 

Commission for Europe (UNECE) adopted the 

revised standard for turkey meat developed by USDA’s 

poultry programs. For the past several years, a USDA 

official has chaired the Specialized Section in the 

process of revising the poultry standards of the 

UNECE. From 2004 through 2007, USDA led the 

standard through the process of gaining consensus 

from UNECE delegates to adoption by the Working 

Party on Agricultural Quality Standards, the official 

standards body of UNECE. 

The purpose of the turkey meat standard is to facilitate 

global trade by providing an international language for 

use between buyers and sellers. The language describes 

turkey meat items commonly traded in international 

commerce, and it defines a coding system for each 

item that supports electronic commerce and 

communications. In addition to the language, the 

standard provides photos that correspond with the text 

descriptions of each item. 

Those who benefit from the development and use of 

this standard include U.S. producers, processors and 

marketers of turkey and turkey products. This segment 

of U.S. agriculture can use the standard to expand 

markets and increase global trading of turkey and 

turkey products. 

USDA also amended the U.S. Standards for Soybeans 

and offered a rapid, field-based test for Ochratoxin, a 

mycotoxin which can occur in corn and wheat. USDA 

amended the soybean standard and established a new 

milling yield standard for Medium Grain Rice 

produced in the western United States. Efforts to offer 

a rapid field-based test for Ochratoxin were delayed 

due to substandard commercial test kit performance. 

OBJECTIVE 2.3: PROVIDE RISK MANAGEMENT AND 

FINANCIAL TOOLS TO FARMERS AND RANCHERS

USDA is committed to enhancing the competitiveness 

of the American agricultural economy. Farmers and 

ranchers must have timely and accurate information to 

stay ahead in an increasingly global market and reduce 

the risks inherent in agriculture. USDA provides the 

risk-management and financial tools needed to 

minimize losses and maximize the efficiencies of 

agricultural operations. Vital to the economic wellbeing of farmers and ranchers is their ability to 

increase production, maintain their farms and 

equipment and lessen risks in the production process. 

Agricultural producers often face economic losses due 

to causes beyond their control, such as low prices and 

reduced yields due to drought, excessive moisture, 

insects and other natural disasters. Production 

agriculture is characterized by small profit margins and 

ever-changing cycles of good and bad yields. USDA 

provides and supports cost-effective risk management 

for farmers. This assistance is designed to improve the 

economic stability of agriculture by developing risk 

management tools. Tools range from yield-based 

insurance products that protect individual crops 

against loss of yield to products that protect an entire 

operation against loss. Providing risk management 

tools to farmers and ranchers helps them protect their 

livelihood in times of disasters. USDA uses the value 

of risk protection to measure the effectiveness of risk 

management. The value of risk protection denotes the 

amount of insurance in force protecting and stabilizing 

the agricultural economy. It also illustrates the 

acceptance of these products by producers and 

indicates a broadening of economic stability across the 

agricultural spectrum. 
ANNUAL PERFORMANCE REPORT 

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FY 2007 Performance and Accountability Report 

Overview 

Key Outcome 

Increased Value of Risk Protection Provided to 

Agricultural Producers through FCICSponsored Insurance 

The USDA Federal crop insurance program provides 

an actuarially sound risk management program to 

reduce agricultural producers’ economic losses due to 

natural disasters. Recently, USDA has seen dramatic 

growth in this program. In 1998, the program insured 

181.8 million acres. Insured acreage has since grown 

steadily, reaching 206.4 million acres by 2000, 217.4 

million acres by 2003, and 261.7 million acres by 

2007. Since 2000, insured acreage in the program has 

increased by 55.3 million acres, for an overall increase 

of 27.0 percent. Federal crop insurance is available to 

producers solely through private insurance companies 

that market and provide full service on policies upon 

which they share the risk with USDA. Principally, the 

Standard Reinsurance Agreement (SRA) defines the 

amount of risk they share. The SRA calls for insurance 

providers to deliver risk-management insurance 

products to eligible entities under certain terms and 

conditions. Providers are responsible for all aspects of 

customer service and guarantee payment of producer 

premiums to the Federal Crop Insurance Corporation 

(FCIC). In return, FCIC reinsures the policies and 

provides premium subsidy to producers and 

reimbursement for private insurance companies’ 

administrative and operating expenses. FCIC is a 

wholly-owned Government corporation created in 

1936 to provide a comprehensive Nationwide crop 

insurance program. 

In 2005, FCIC renegotiated the SRA. The changes 

promote policy sales in less profitable areas and reduce 

program fraud, waste and abuse. During 2007, 16 

companies participated. Most of these companies have 

requested authorization to increase the amount of 

premium they underwrite and the number of States 

they intend to serve. USDA continues to receive 

inquiries from additional insurance companies 

interested in joining the program. The value of risk 

protection provided to agricultural producers through 

FCIC-sponsored insurance exceeded $50 billion in 

2007. As recently as 1998, the value of this risk 

protection was less than $28 billion. 

Selected Results in Research, Extension and Statistics 

Plant Disease Early-Warning Systems. The most valuable 

early-warning systems provide timely forecasts that farmers can 

use to make informed pest management decisions. To evaluate 

the value of early-warning systems, USDA examined its 

coordinated system for soybean rust surveillance, reporting, 

prediction and management. The Department estimated that the 

information provided by the framework increased U.S. soybean 

producers’ profits by as much as $299 million in 2005 ($4.12 per 

acre), the year in which it was developed. 

Valuing Counter-Cyclical Payments: Implications for 

Producer Risk Management and Program Administration. A 

new model improved USDA’s original method of estimating 

counter-cyclical payment rates. The model accounted for the 

variability in market price forecast errors. This enhanced method 

produced more accurate estimates. Forecasters and producers 

can use the model to calculate the probabilities of repayment. 

Producers can reduce the probability of repayment by using 

commodity futures contracts to hedge against losses in expected 

counter-cyclical payments. 

Challenges for the Future

USDA’s challenge is to continue expanding and 

improving coverage, particularly for underserved 

States, areas, communities and commodities. To do 

this, the Department needs to address the information 

technology cost increase associated with maintaining 

and upgrading data needs. 

USDA is researching how to deliver more products to 

cover specialty crops with unique agronomic and 

economic characteristics, including reviewing and 

approving private-sector insurance products reinsured 

by FCIC that are targeted to the unique needs of 

underserved areas and various specialty crops. The 

Department also continues to evaluate the delivery of 

other risk management products to agricultural 

producers as well as to provide education, outreach and 
ANNUAL PERFORMANCE REPORT 

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FY 2007 Performance and Accountability Report 

non-insurance risk management assistance initiatives 

and tools through partnerships. Today, approximately 

79 percent of the acreage planted in major crops is 

covered by Federal crop insurance. Coverage is 

routinely expanded by providing existing crop 

insurance programs in new counties and States. It also 

occurs through the development of new types of 

coverage, such as the market-based coverage for 

livestock, pasture, rangeland, and forage (PRF) and 

revenue protection. These programs, along with 

diversified production, marketing, and the use of 

futures and options, allow each producer to customize 

his or her risk management strategy. These products 

help producers protect themselves from yield or market 

risks. 

To meet producer needs, USDA continues to seek out 

actuarially sound and innovative risk management 

solutions for providing coverage suited for a diverse 

agriculture. For example, a new plan of insurance for 

PRF uses an index consisting of a satellite-based 

vegetative index and a proxy crop, paired with a 

Temperature Constrained Normalized Difference 

Vegetation Index (NDVI). Another PRF solution uses 

a Rainfall Index, which uses a weighted warm 

season/cool season indexing period and the National 

Oceanic and Atmospheric Administration rainfall data 

system. 

FCIC improves economic stability within agriculture 

by ensuring that new and innovative risk management 

alternatives are available to agricultural producers and 

their lenders. The increased value of risk protection 

provided to agricultural producers through FCICsponsored insurance illustrates the acceptance of these 

products by producers. It also shows the broadening of 

tools to ensure greater economic stability across the 

agricultural spectrum. 

USDA continued to strengthen its procedures for the 

evaluation of the plans of operation that are submitted 

by insurance companies to be eligible for an SRA with 

FCIC. The evaluation includes analysis of financial 

solvency and operational capacity to ensure that the 

insurance companies are able to adequately sell and 

service Federal crop insurance. USDA continues to 

conduct in-depth review and analysis of all reinsurance 

arrangements, plans of operations and support 

contracts such as data processing agreements. 

USDA expanded its strategic data acquisition and 

analysis efforts by adding 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 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 save 

money by preventing cases of fraud, waste and abuse. 

USDA’s Risk Management Agency (RMA) and 

USDA’s Farm Service Agency (FSA) continue to work 

on the Comprehensive Information Management 

System (CIMS). This project is designed to identify 

common and unique producer and crop information 

reported to both agencies; develop services to access 

the information; and reduce the reporting burdens of 

farmers, ranchers, producers, RMA, FSA, and crop 

insurance providers. 

USDA continues to assess producers’ needs and 

private risk-management tools to ensure that new and 

innovative alternatives are available. 

Analysis of Results 

USDA exceeded its target by $9.9 billion in FY06, and 

is on target in FY07. During the 2006 crop year, the 

economic risk of American agricultural producers was 

reduced by approximately $49.9 billion through 

Federal crop insurance coverage. The performance 

measure illustrates the dollar value of FCIC insurance 

in force within the agricultural economy. It also shows 

the amount of potential collateral provided to qualify 

for commercial loans. Since the 1999 crop year, the 

value has increased by approximately $19 billion. 

While there are a number of factors that influence 

these figures, including market-price increases and 

inflation, they still represent a major growth in the 

amount of the agricultural economy insured via the 

FCIC-sponsored insurance. 
ANNUAL PERFORMANCE REPORT 

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FY 2007 Performance and Accountability Report 

USDA has enhanced the value of risk protection 

significantly through FCIC-sponsored insurance since 

FY 2000. The Department continues to work closely 

with insurance companies that market and provide full 

service for the crop insurance policies, as well as 

researches and develops new products that address the 

needs of producers. USDA has partnered with State 

departments of agriculture, universities and farm 

organizations to deliver regionalized risk management 

education programs for producers in the historically 

underserved States and for specialty crop producers. 

Due to these efforts, the Federal crop insurance 

program should continue to provide actuarially sound 

risk management solutions to strengthen and preserve 

the economic stability of American agricultural 

producers. 

The Non-insured Crop Disaster Assistance Program 

(NAP) provides financial assistance to producers of 

crops for which there is no available crop insurance 

when low yields, loss of inventory, or prevented 

planting occur because of a natural disaster. FSA/CCC 

has met its FY 2007 target for increasing the 

percentage of eligible crops with NAP coverage to 

11.76%. The NAP program set a performance 

threshold to meet its annual goal of a range from 

11.5% to 14.5%. The target and threshold represents 

the value of crops participating in the program 

compared to the universe of the value of crops eligible 

to participate in the NAP program. While the 

participation rate may fluctuate from year to year, the 

program remains on track towards meeting its long 

term target of 13.9% in FY 2010.

USDA provides direct and guaranteed farm operating 

and ownership loans to farmers and ranchers 

temporarily unable to obtain credit from a commercial 

lender, Farm Credit System institution or other lender 

at reasonable rates and terms. The Farm Credit 

Program is designed to maintain and improve the 

quality of life in rural America and on the farm 

through constant commitment to competitive lending, 

expert financial services and advice. USDA assistance 

is particularly important to minorities, women and 

beginning farmers who typically have limited financial 

assets or limited farming experience. 

Barriers to entering production agriculture include 

such factors as the initial capital investment, high land 

values and increasing input costs. Beginning farmers, 

racial and ethnic minority farmers and women are 

especially susceptible to these barriers because of their 

limited resources. Access to loan funds can be an 

important tool in overcoming the barriers and allowing 

these groups to begin or maintain a farming operation. 

USDA accomplished its goal of providing increased 

assistance to minorities, women and beginning farmers 

in FY 2007. These results continue the trend of 

increased lending to the targeted groups.

Because of the volatile nature of the market and the 

unpredictability of natural disasters, USDA regularly 

reviews its NAP and other farm support programs. 

These reviews help provide effective, customer-focused 

programs. Additionally, information technology and 

infrastructure modernization represent an ongoing 

challenge to the Department. Significant costs are 

associated with providing adequate technical assistance 

to support USDA programs and management. 

The structure of U.S. agriculture continues to change. 

Most farms have grown larger and increasingly 

dependent on technology. These changes resulted in 

increased capital needed to gain entry into farming. 

The costs of operating a farm also continue to increase 

because of higher input costs. These issues create 

major challenges for the Department. To keep pace, 

USDA will continue efforts to modernize the program 

delivery system and refine and adjust program 

requirements to maximize opportunities for minority, 

women and beginning farmers.
ANNUAL PERFORMANCE REPORT 

73 

FY 2007 Performance and Accountability Report 

Exhibit 28: Providing Tools to Help Farmers and Ranchers Stay Economically Viable 

Fiscal Year 2007 

Annual Performance Goals and Indicators Target Actual Result 

2.3.1 Normalized value of FCIC risk protection coverage provided through 

FCIC sponsored insurance ($ Bil) 

$50.7 $48.9†

 Met†

2.3.2 Percentage of eligible crops with Non Insured Crop Disaster 

Assistance Payments (NAP) coverage 

13.00% 11.76% Met* 

2.3.3 Increase percentage of beginning farmers, racial and ethnic minority 

farmers, and women farmers financed by FSA 

16.00% 15.9 %* Met 

†

Value meets the performance threshold for “met.” 

*Values in the range 11.5-14.5% meet the performance threshold for “met.” 

Exhibit 29: Trends in Providing Tools To Keep Farmers and Ranchers Economically Viable 

Fiscal Year 2007 

Trends 2003 2004 2005 2006 2007 

2.3.1 Normalized value of FCIC risk protection coverage 

provided through FCIC sponsored insurance ($ Bil) 

Baseline: 1999 = $30.9 

$40.7 $41.5 $44.7 $48.1 $50.7 

2.3.2 Percentage of eligible crops with Non Insured Crop 

Disaster Assistance Payments (NAP) coverage 

6.66% 11.12% 12.82% 12.70% 11.76% 

2.3.3 Increase percentage of beginning farmers, racial 

and ethnic minority farmers, and women farmers 

financed by FSA 

14.20% 14.50% 15.00% 15.50% 16.00%

Strategic Goal 3: Support Increased Economic 

Opportunities and Improved Quality of Life In 

Rural America 

OBJECTIVE 3.1:EXPAND ECONOMIC OPPORTUNITIES BY 

USING USDA FINANCIAL RESOURCES TO LEVERAGE 

PRIVATE SECTOR RESOURCES AND CREATE 

OPPORTUNITIES FOR GROWTH

Overview 

USDA’s programs support low-interest financing of 

rural businesses to leverage limited private sector 

financial resources. Its funds promote opportunities for 

economic growth as measured by jobs created and 

saved. 

One of USDA’s core missions is to ensure that rural 

residents enjoy the same economic opportunities as 

that of other Americans. Credit limitations and other 

market imperfections can hurt rural economies. Job 

growth is limited and incomes are insufficient for rural 

families to thrive and rural youth to stay in local 

communities. USDA programs, therefore, serve as 

capital enhancement tools for rural America. They 

provide affordable access to capital for investment in 

businesses and economic infrastructure. Long-standing 

Department programs and the more recently 

implemented energy-related and value-added 

programs greatly facilitate the expansion of economic 

opportunities in rural areas. 

Key Outcome 

Enhanced Capital Formation for Rural 

Communities 

The Internet-based economy provides unique 

opportunities for rural America. A rural broadband 

infrastructure can help overcome many limitations on 

rural business development caused by geographic 

distance and a small local customer base. Thus, USDA 

is providing capital to finance access to broadband 

service for rural communities. Internet access is critical 
ANNUAL PERFORMANCE REPORT 

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FY 2007 Performance and Accountability Report 

to enabling rural businesses to participate in the 

developing global economy. 

USDA’s Business and Industry (B&I) Guaranteed 

Loan Program provides up to a 90 percent guarantee 

to commercial lenders. In California, for example, an 

$8.5 million B&I loan financed a new, state-of-the-art 

rice processing facility in a rural county with an 

unemployment rate almost double the State average 

(9.3 percent versus 5 percent). USDA financially 

supported a locally owned, family-run business 

employing 90 people. 

In Louisiana, a $2.5 million B&I loan was used to 

restructure existing debt, purchase equipment and 

provide working capital for a food products company. 

B&I guaranteed loan funds helped create 42 jobs and 

save 75 others. They also expanded this business’ 

market nationally for such Cajun food products as 

sausage links, dressing mix, roux and other Cajun 

culture products. 

In Ohio, $3.6 million in B&I loans to a hardwood 

floor manufacturer helped finance construction of 

drying kilns for green lumber and processing 

equipment for flooring products. Funds were also used 

to refinance debt. The USDA loans helped increase 

the number of jobs from 44 to 82. 

In Arizona, a $3.1 million B&I loan to a Native 

American housing authority financed the construction 

of a 30,000-square-foot block plant. The plant now 

produces aerated concrete products including various 

size blocks and roof and floor flat panels through a 

product known as “FlexCrete.” Experts say that, while 

FlexCrete possesses concrete-like qualities, it is 

lightweight with a high insulation value. 

A Michigan specialty-paper manufacturer used a $2.5 

million B&I loan to purchase and install 21 energy 

stations. The manufacturer used the stations to operate 

a heat-recovery system designed to supplement the 

paper mill’s energy sources. Monthly energy savings is 

projected to be near $180,000. The company employs 

198 people. 

USDA also uses revolving loan programs to make 

small grants and loans to local, not-for-profit 

organizations for re-lending to other rural businesses. 

Typically, these businesses are small or beginning 

operations that are sole proprietorships or family 

partnerships. Recipients may have insufficient credit 

histories to qualify for commercial loans or may need 

loan terms not offered on a traditional commercial 

basis. Intermediary organizations participating in these 

programs can provide business-education consulting 

services and marketing support along with loans. 

Typically, these are working capital loans to 

entrepreneurs trying to provide new services or goods. 

For instance, in a 9-county area of southern Kentucky, 

start-up funds were used to purchase medical 

equipment for an outpatient home infusion therapy 

center employing 24 people. 

The USDA Value Added Producer Grant Program 

has allowed many rural producers to enhance their 

share of revenues received for their processed products. 

For example, 27 producers in Monticello, Kentucky 

invested in a regional soybean mill. A value-added 

grant coupled with a loan from the State’s agricultural 

development fund allowed the group to purchase a 

local feed facility to install soybean extrusion 

equipment. Today, the mill produces a high-quality 

product and continues to improve production and 

marketing capacity. Extruded soybean meal is a highenergy natural product sold as animal feed for 

chickens, hogs and cattle. Soybean oil is food-grade 

unrefined oil that can be made into bio-diesel fuel and 

cattle feed or used for cooking products. Soy hulls are 

sold as ingredients for cattle feed. The owners now 

have production control and can capture revenues that 

would have gone to others most likely outside the 

region. 

In Connecticut, a group of nine dairy producers 

formed a limited-liability company to develop and 

market a value-added, producer-owned brand of milk 

and milk products exclusively from local dairy farms. 

Initially, the group received a value-added planning 

grant. It, then, was awarded a working-capital grant to 
ANNUAL PERFORMANCE REPORT 

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FY 2007 Performance and Accountability Report 

help launch operations. The group’s high-quality 

products can now be found in many large New 

England supermarkets. Cooperative ownership assures 

profits are returned to those in the rural community. 

These programs also improve employment 

opportunities in rural areas. Whether a $20,000 grant 

is used to improve small town lighting or provide 

targeted training to attract a prospective business 

operator, all rural residents benefit from these 

investments. A USDA loan or grant to a rural business 

for expansion, modernization or start-up, enhances the 

local job market mix and improves the local tax base. 

The overall local rural economy is stimulated, jobs are 

created and the quality life improves for most citizens. 

Challenges for the Future 

Rural economies face challenges different from those 

of urban and suburban areas. These challenges include: 

 Historical dependence on local natural resources 

and farm commodities that are subject to cyclical 

trends and changing regulatory standards and 

oversight; 

 Low profit margins on local commodity sales yet 

strong competition from foreign commodities; 

 Large-scale changes in technology without 

corresponding skills in rural areas; and 

 Inaccessibility and low-density populations 

resulting in limited foot traffic for retail 

establishments and smaller discretionary budgets 

for business improvements, upgrades and 

modernization. 

Additionally, rural areas typically have underdeveloped 

public services that make it difficult to attract or retain 

businesses. The lack of public funding for amenities 

typically offered in urban areas, such as dedicated 

business parks or expanded transportation links, 

represents additional challenges. Education, health 

care and entertainment typically are perceived to be 

marginally acceptable in rural areas. However, recent 

proposals provide funding for Rural Critical Access 

facilities. These proposals, coupled with existing 

community facilities programs for rural healthcare will 

improve rural healthcare quality. In reality, every rural 

area has unique issues. 

USDA State and area staff work with regional and 

State entities to make the best use of Department 

dollars and other public and private funds. While some 

areas need more jobs, others are being defined by new 

industries or commodities. USDA tries to be sensitive 

to these varying needs. 

The Department’s grant programs provide funds to 

under-resourced rural communities to improve their 

local infrastructure or expertise to be more attractive to 

new businesses and maintain appeal to local residents. 

For example, while city improvements are usually 

funded by special local business tax assessments, they 

may not be affordable in a marginally viable rural area. 

Frequently, companies looking for a new location need 

special skill sets. USDA grants can fund small, 

targeted job-training programs. In Oklahoma, for 

example, a grant provided to a local university funded 

the development of a center for the arts. This grant 

allowed students to participate in a hospitality-training 

program. The center also serves as the anchor for a 

downtown revitalization strategy. The strategy 

targeted local artisans and attracted both tourists and 

local buyers. The grant will result in job training, 

business enhancement and market creation. 

All rural residents benefit when the local economy 

prospers. More and better jobs, and more services, 

such as health care facilities, shopping, cultural 

activities, and recreational amenities, and the 

availability of electronic communications improve the 

quality of life and encourage young people to settle and 

stay. Additionally, even small economic gains can 

increase the tax base to improve public infrastructure. 

Renewable energy projects funded by USDA loans and 

grants improve the local economy through new jobs at 

the energy plants, enhanced tax base and local profits. 

Recent funds allowed many small business owners to 

decrease their energy consumption; thus, their profit 

margins increase. 
ANNUAL PERFORMANCE REPORT 

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FY 2007 Performance and Accountability Report 

Selected Results in Research, Extension and Statistics 

USDA studies rural economic development by collecting 

statistics, conducting research and providing technical 

assistance to the Nation’s 2,500 agricultural cooperatives. The 

Department uses the data to analyze cooperative operating 

statistics. The statistics are then used to help rural businesses 

refine their operating models to remain financially sound 

employers. With more than 175,000 employees nationwide 

generating $120 billion in sales, rural cooperatives often are the 

largest employers in local rural communities and vital to a region’s 

economy. 

USDA distributes more than 6,500 cooperative related publications 

annually and provides internet access to more than 200 

publications through its Web site at 

http://www.rurdev.usda.gov/rbs/pub/NEWPUB.htm. Cooperative 

business publications address issues ranging from start-up to 

addressing economic imperfections in the marketplace. Rural 

Cooperatives Magazine examines current hot topics related to the 

recent rural renaissance, such as the role of information technology 

in the ethanol industry. 

The Department’s programs help improve rural communities by 

providing technical assistance to limited resource farmers. For 

example, the Bogue Sound Watermelon Growers Association is a 

new farming cooperative in North Carolina. It began with 20 

farmers in a rural, 3-county region of southeastern North Carolina. 

In their first season, the farmers marketed 19 truckloads of 

watermelons. They wanted to add to that success and improve 

economic returns. The farmers looked to establish their 

watermelons as a premium-quality item both locally and nationally. 

USDA conducted a feasibility study on the potential for expanding 

watermelon sales. Staff examined such factors as production 

practices, marketing, management and projected financial 

performance. Recent operations have been very successful. 

Robust sales have brought prices two-to-three cents per pound 

higher than market price and volume has increased fourfold. 

USDA Increases Access to Historic Census of Agriculture 

Data. The Department is working to digitize and provide access to 

the entire Censuses of Agriculture. Historical information has been 

made available for many censuses, including the first ever 

agricultural census, conducted in 1840. These historic data can be 

accessed at 

http://www.agcensus.usda.gov/Publications/Historical_Publications/

index.asp. Additional census results will be posted to this site as 

they are converted to electronic files. 

Analysis of Results 

The number of jobs created or saved is linked directly 

to the amount of total available USDA business 

program funding, amounts obligated and disbursed to 

awardees and local economic conditions. Annual job 

targets are based on historical 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. Annual budget 

authorities’ subsidy rates and program levels vary 

annually. Recently, they resulted in general decline in 

annual job numbers. Although FY 2007 targets and 

results decreased, they met expectations given the level 

of budget authority, subsidy rate, timing and 

availability of program funds. Remaining program 

funds will carry over into FY 2008 and continue to 

provide benefits to rural communities in the next fiscal 

year. 

USDA business loan and grant programs go hand-inhand with the expansion of economic opportunity as 

measured by jobs created and saved. Despite this 

relationship, USDA funds have long-lasting, 

intangible direct and indirect economic impacts. Thus, 

the Department looks to estimate the overall economic 

impact of scarce budget funds on rural areas. 

USDA has developed the Socio-Economic Benefit 

Assessment System (SEBAS) to enhance the ability to 

estimate net program–investment effectiveness. 

SEBAS uses detailed information about Department 

loan or grant funds in conjunction with other available 

Federal data resources. This process enables estimates 

of the direct and indirect impacts of program 

assistance on local and regional economic 

performance. It also affects the quality of life in rural 

areas. SEBAS is being tested with various USDA 

programs. It will allow the Department to analyze data 

internally to measure program effectiveness. USDA 

will also be able to use the findings to help develop 

strategies to enhance program efficiency and 

performance. Future results will measure program 

effectiveness in many ways. They will also serve as 

management tools to help improve program efficiency 

and performance with limited resources. 
ANNUAL PERFORMANCE REPORT 

77 

FY 2007 Performance and Accountability Report 

Exhibit 30: Strengthen Rural Businesses 

Fiscal Year 2007 

Annual Performance Goals and Indicators Target Actual Result 

3.1.1 Jobs Created or Saved 65,100 66,000 Met 

Exhibit 31: Trends in Creating or Saving Jobs 

Fiscal Year 2007 

Trends 2003 2004 2005 2006 2007 

3.1.1 Jobs Created or Saved 87,619 81,030 73,617 73,072 66,000 

OBJECTIVE 3.2: IMPROVE THE QUALITY OF LIFE 

THROUGH USDA FINANCING OF QUALITY HOUSING,

MODERN UTILITIES, AND NEEDED COMMUNITY FACILITIES

Overview 

USDA successfully improved the quality of life in rural 

America during FY 2007. The Department financed: 

 Quality homes for 33,264 guaranteed loan and 

10,700 direct loan home buyers; 

 New/improved water and waste disposal facilities 

for 1,457,000 subscribers; 

 New or upgraded electric service for 1.6 million 

consumers; 

 Broadband telecommunications in 749 counties 

for 1,205,212 subscribers; and 

 Improved community facilities for 15.5 million 

rural residents. 

Key Outcome 

Improved Rural Quality of Life Through 

Homeownership, New and/or Improved Water 

and/or Waste Disposal Facilities, New and/or 

Improved Electric Facilities and/or New or 

Improved Telecommunications Facilities 

The availability of adequate housing is critical to a 

community’s well-being. Ensuring that low-income 

families have access to decent and safe housing is a 

major concern in every area whether urban or rural. 

USDA provides financing for low- and moderateincome rural families who cannot obtain credit from 

other sources to help them own homes. Owning a 

home provides stability for families and gives them the 

opportunity to strengthen their financial condition by 

accumulating equity. The President has expressed his 

desire to increase homeownership, particularly among 

minorities. He established a major initiative to increase 

minority homeownership nationwide. USDA is 

aggressively implementing an action plan to support 

the President’s goal. 

If new businesses are to operate in a rural community, 

that community must possess basic infrastructure and 

the amenities these firms require and employees desire. 

These amenities include clean water, adequate 

housing, reliable electricity and telecommunications, 

and such essential needs as quality education, health 

care, daycare, public safety services and cultural 

activities. If a community cannot meet the public’s 

essential needs, young people neither will stay in nor 

migrate to rural areas. USDA is an important source of 

credit and technical assistance for developing the 

economic infrastructure of rural America. These 

resources are essential if rural residents and 

communities are to improve their quality of life 

through increased economic opportunity. 

Providing reliable, affordable electricity is essential to 

the economic well-being and quality of life for all of 
ANNUAL PERFORMANCE REPORT 

78 

FY 2007 Performance and Accountability Report 

the Nation’s rural residents. The electric programs 

provide capital to upgrade, expand, maintain and 

replace America’s vast rural electric infrastructure. 

They also provide leadership, guidance and other 

benefits. 

In FY 2007, USDA provided funds to construct, 

renovate or improve 1,200 essential community 

facilities. Rural Americans had new or improved 

services available from 95 health care facilities, 393 

public safety facilities, 65 educational/cultural facilities, 

5 energy-related facilities, 175 public buildings and 

improvements and a number of other essential 

community facilities. In this period, more than 15.5 

million rural residents had new or improved services 

available to them through these facilities. 

Water and sewer facilities impact the economic 

infrastructure of communities. By investing in water 

and sewer facilities, communities can: 

 Save or create jobs; 

 Leverage funds with the private sector and local 

and state agencies; 

 Attract Federal funds from other agencies; and 

 Enlarge the property tax base. 

USDA leveraged $525,865,257 from other sources 

with $1.45 billion of Department funds. Investments 

in water and sewer facilities are critical in encouraging 

economic growth. The following examples of projects 

demonstrate the potential economic impacts on project 

beneficiaries: 

 Holly Ridge, North Carolina, a coastal 

community, faced a crisis with its sewer system. 

The town operated under a special order of 

consent from the State Department of 

Environment and Natural Resources. The order 

barred it from adding any new sewer users. 

Additionally, the discharge into the rivers from the 

existing sewer system did not meet the permit’s 

requirements. USDA provided a $1,350,000 loan 

and a $2,183,000 grant to upgrade the existing 

plant, expand and improve the collection system 

and add a land application spraying field to 

eliminate the discharge of treated effluent into 

rivers and streams. 

The upgraded sewer system created several 

immediate benefits. Eliminating the river 

discharge improved the environment. 

Approximately 150 residents, many with failing 

septic tanks, were added to the system after project 

completion. A major Holly Ridge company 

expanded and continued operations, saving 75 

jobs. An additional 250 residential customers have 

been added to the sewer system. Today, the town 

has 25 commercial customers. The Holly Ridge 

community continues to grow naturally and more 

consistently with environmental concerns. 

 The Northeast Arkansas Public Water Authority 

was created to develop a regional water treatment 

plant to serve the cities of Hoxie, Walnut Ridge 

and Alicia and the Lawrence County Regional 

Water District. These communities serve around 

3,800 residential and business customers in the 

Delta Region of Arkansas, the total population of 

which exceeds 8,200. USDA has assisted the water 

authority in obtaining leveraged funds from the 

Arkansas Natural Resource Commission and the 

Delta Regional Authority for capital 

improvements. In addition to the water treatment 

plant, there will also be a major water transmission 

line to deliver the water to the cities. The total 

funding package is $11,500,000. 

Besides area residents, the plant will also serve 

several small businesses and major manufacturers. 

In the county seat of Lawrence County, Walnut 

Ridge, a small hospital, nursing homes, a public 

school, a small four-year college and an old airport 

with some manufacturing facilities will all benefit. 

The plant will be designed so that it expands 

easily. This project will provide a safe, dependable 

supply of surface water to a large area of Northeast 

Arkansas. It is expected that the plant will be in 

full production in the summer of 2009. 
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FY 2007 Performance and Accountability Report 

 In April 2007, USDA electric programs approved 

a loan to Earth Resources, Inc., of Carnesville, 

Georgia. The loan funds were used to finance a 

20-megawatt generating facility fueled by 80 

percent wood waste and biomass and 20 percent 

chicken litter. This plant is the first in the State to 

use a gasification system to convert poultry litter 

into a useful product—electricity. This facility will 

generate enough energy annually to meet the 

needs of more than 15,000 homes. The plant’s use 

of wood waste, biomass and chicken litter provides 

an attractive solution to the problem of disposing 

of these items. Gasification technology also 

produces lower emissions and less reliance on fossil 

fuels. 

USDA broadband access loans fund the deployment of 

high-speed Internet services in rural America. The 

following two examples are representative of recent 

successful projects. 

 Before USDA’s loan, Greenville, Alabama, a small 

city in Butler County with a population around 

7,100, relied on slow dial-up Internet service—

even for city services. A rural broadband access 

loan to Camellia Communications now funds 

service to Greenville and other rural communities. 

It also funds high-speed broadband service to 

Greenville’s local Government and police, fire and 

public works department. The city clerk reports 

broadband Internet service has been a huge 

advantage helping improve productivity and 

efficiency. The emergency operation center now is 

able to monitor the weather regularly for up-todate information and disaster preparedness 

purposes. 

 In Kansas, the Phillipsburg County economic 

development director noted that the broadband 

loan to Nex-Tech has helped create a predominant 

change in the business atmosphere in the county 

and surrounding area. The new technology helps 

promote business growth and expansion. It also 

helps local employers entice, hire and train more 

work force from within and around the area. The 

area population is increasing as evidenced by new 

home construction and a growing demand for 

rental properties. Community development 

activity within Phillips County has risen sharply, 

with town leaders looking at community 

beautification, infrastructure improvements and 

new housing projects. Although these benefits may 

not all be due to Nex-Tech’s fiber broadband 

deployment, the essence of having a strong 

business base to draw a work force (i.e., residents) 

into an area starts with the premise of a viable 

infrastructure for business growth. 

Challenges for the Future 

Challenges continue to be rising building costs, which 

results in fewer homes, community facilities and water 

and waste systems. Also, droughts, limited water 

resources, extreme temperatures and other 

environmental factors present unique problems in 

developing utility systems. Solutions are expensive, 

resulting in the need for additional grant funds to 

develop projects. 

USDA single-family housing programs assist low- and 

moderate-income rural residents in becoming 

homeowners. These programs are designed to 

strengthen families and communities, enhance wealth 

creation and contribute to a more broadly based 

ownership society. 

USDA housing program assistance provides direct and 

guaranteed loans to help rural households achieve 

homeownership. More than 22,000 low-income rural 

Americans achieved the dream of homeownership 

through these programs in FY 2007. These programs 

specifically attempt to increase the number of minority 

homeowners. To stretch resources, the programs’ loans 

and loan guarantees are supplemented with resources 

from private-sector banks, not-for-profit agencies and 

State housing finance agencies. 

The capital made available through electric programs 

ensures that low-cost, reliable electric power is 

available to rural consumers, businesses, schools, 

health facilities and other consumers. The consumer 
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FY 2007 Performance and Accountability Report 

density in rural areas is a fraction of that in urban 

areas. This difference necessitates access to lower cost 

capital to provide a comparable level of service. The 

electric program finances the construction of electric 

generation, transmission and distribution facilities 

serving 39 million rural residents in 2,480 of the 

country’s 3,100 counties. While rural electric 

cooperatives deliver about 10 percent of the total 

kilowatt hours sold in the country, they serve 75 

percent of the landmass. Cooperatives service 7 

consumers per mile of distribution line compared to 35 

for investor-owned utilities and 47 for municipalowned systems. Cooperatives also generate revenue per 

mile of line of only $8,558, compared to $58,981 for 

investor-owned utilities and $72,146 for municipalowned utilities. 

USDA is committed to bringing affordable broadband 

to all rural Americans. Broadband is a transformative 

technology. It allows rural communities to enhance the 

quality of health care and education dramatically. 

Broadband offers every rural business access to regional 

national and international markets. It reduces barriers 

of time and distance, levels the playing field and makes 

rural communities better places to live, work and raise 

a family. Demand for the broadband loan program 

continues to be strong. USDA has provided financing 

for broadband deployment in excess of $2.1 billion 

under the Rural Broadband Access Loan and Loan 

Guarantee Program. The program provides loans, loan 

guarantees and grants for the construction, 

improvement and acquisition of facilities and 

equipment for broadband service in eligible rural 

communities. Additionally, all telecommunications 

facilities financed through the traditional 

telecommunications loan program must be broadband 

capable. Supplementing these two programs, the 

Distance Learning and Telemedicine Loan and Grant 

Program provides financing for advanced 

telecommunications services for health and education 

applications to hospitals, clinics, schools, universities 

and not-for-profit organizations across rural America. 

Water programs are a leading source of credit for 

water and waste projects in rural America. They 

provide low-interest loans and guaranteed loans, grants 

and technical assistance to rural communities to 

develop essential water and waste infrastructure. With 

dependable infrastructure, communities can sustain 

economic development or improve the quality of life 

for their residents. Rural Americans may enjoy the 

same high standards of living and full participation in 

the global economy as their urban or suburban 

counterparts. Thus, water programs are designed to 

make funds available to small communities most in 

need of drinkable water, and ensure that facilities used 

to deliver drinking water are safe and affordable. 

In FY 2007, the programs invested more than $1.46 

billion in direct and guaranteed loans and grants to 

help rural communities develop 1,275 water and waste 

disposal facilities. These facilities provided new or 

improved water and waste disposal services to 

1,457,000 subscribers. 

Selected Results in Research, Extension and Statistics 

Extension Instrumental in the Recovery Effort from 

Hurricane Katrina. Since Hurricanes Katrina and Rita, USDA’s 

Children, Youth, and Families at Risk Program (CYFAR) has 

been helping recovery efforts in Louisiana. Through CYFAR, the 

Department allocates funding to land-grant university extension 

services for community-based programs for at-risk children and 

their families. Focusing on helping families, the CYFAR team 

responded by adapting existing resources from CYFARnet and 

other extension services. Recovery fact sheets were developed 

and made available to field agents to distribute at shelters, 

businesses, schools, churches and disaster recovery centers. 

Hurricane recovery resource kits were developed for agents to 

reproduce as needed in their local parishes. Specially developed 

Storm Recovery Guides for homeowners and renters were 

distributed to families in need. Teachers across Louisiana were 

provided 15,000 “After the Storm” booklets and 10,000 “How Am 

I?” booklets for children impacted by the hurricanes. Hundreds of 

teachers were also provided additional “Hurricane Recovery 

Educator Resource Kits” to use with elementary school-aged 

children. 
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FY 2007 Performance and Accountability Report 

Analysis of Results 

The targets were selected based on USDA’s 

expectations for loan obligations. The expectations 

were based on the anticipated price of housing and the 

probable continuation of the low interest rate 

environment prevalent in 2004 and 2005. 

While the Section 502 Guaranteed Loan Program 

obligated more funding than last year, the actual 

number of new homeowners is less than anticipated. 

The lower number is attributed to escalating home 

prices and rising interest rates making housing less 

affordable for low- and moderate-income borrowers, 

who also have trouble qualifying for loans. Those who 

do qualify need larger loans to purchase their homes; 

thus, more funding was obligated than last year despite 

a lower number of new homeowners. 

The President’s 2008 Budget proposes the reallocation 

of resources from direct lending to guaranteed lending. 

The 502 guaranteed loan program will experience an 

increase in resource while direct lending will be 

eliminated. Rural Development is working to develop 

a subsidized 502 

guaranteed program to benefit the very low income 

rural residents who traditionally look to USDA direct 

funding for assistance. 

The water program far exceeded this year’s goal 

because of various factors both internal and external to 

the agency. Demand was much stronger than 

expected. The loan-to-grant ratio also increased over 

last year. This increase allowed more loans to be made. 

Another reason the goal was exceeded was because 

USDA State offices funded more projects. 

The community facilities program exceeded its goal to 

provide needed community facilities to rural 

Americans because of the division’s emphasis on public 

safety and health care facilities. USDA staff has 

provided outreach at national, State and regional 

conferences, emphasizing its ability to provide facilities 

at reasonable rates and terms for rural Americans. The 

electric programs fully utilized its loan lending 

authority for FY 2007. Target performance measures 

were met or exceeded. The telecommunications 

program also exceeded its target for borrowers’ 

subscribers receiving new or improved service. The 

telecommunications loan lending authority was 

utilized fully. 

USDA continues to fund the deployment of advanced 

telecommunications facilities in rural America. This 

continued investment results in many financial and 

technical benefits for the borrowers. One result is the 

availability of new or improved service for the 

borrowers’ customers, the residents and businesses that 

they serve. In some cases, the financing provided by 

USDA reduces the operating and capital costs of the 

borrower, without a direct increase in the number of 

subscribers. Thus, the number of customers served by 

new or improved telecommunications facilities has 

fluctuated over the last few years. Despite the 

fluctuation, a substantial number of customers 

continue to benefit from these investments in 

infrastructure made possible by USDA’s rural 

development programs. 

Exhibit 32: Improving Rural Quality of Life Through Homeownership Opportunities 

Fiscal Year 2007 

Annual Performance Goals and Indicators Target Actual Result 

3.2.1 Homeownership opportunities provided 37,578 43,900 Met 
ANNUAL PERFORMANCE REPORT 

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FY 2007 Performance and Accountability Report 

Exhibit 33: Trends in Rural Home Ownership 

Fiscal Year 2007 

Trends 2003 2004 2005 2006 2007 

3.2.1 Homeownership opportunities provided 44,130 48,894 43,224 40,517 43,900 

Exhibit 34: Improving Rural Quality of Life Through Water and Waste Disposal Facilities 

Fiscal Year 2007 

Annual Performance Goals and Indicators Target Actual Result 

3.2.2 Number of program borrowers/subscribers receiving new or 

improved service from Agency funded water facility 

557,000 1,457,000 Exceeded 

Exhibit 35: Trends in Water and Waste Disposal Service 

Fiscal Year 2007 

Trends 2003 2004 2005 2006 2007 

3.2.2 Number of program borrowers/subscribers 

receiving new or improved service from 

Agency funded water facility 

593,582 965,780 1,325,000 1,637,554 1,457,000 

Exhibit 36: Improving Rural Quality of Life Through Community Facilities 

Fiscal Year 2007 

Annual Performance Goals and Indicators Target Actual Result 

3.2.3 Percentage of customers who are provided access to new 

and/or improved essential community health facilities 

1.0% 4.25% Exceeded 

3.2.4 Percentage of customers who are provided access to new 

and/or improved essential community public safety services 

1.3% 2.87% Exceeded 

Exhibit 37: Trends in Community Facilities 

Fiscal Year 2007 

Trends 2003 2004 2005 2006 2007 

3.2.3 Percentage of customers who are provided 

access to new and/or improved essential 

community health facilities 

NA NA 3.5% 3.8% 4.25% 

3.2.4 Percentage of customers who are provided 

access to new and/or improved essential 

community public safety services 

NA NA 4.1% 3.8% 2.87% 
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FY 2007 Performance and Accountability Report 

Exhibit 38: Improving Rural Quality of Life Through Electric Facilities 

Fiscal Year 2007 

Annual Performance Goals and Indicators Target Actual Result 

3.2.5 Number of program borrowers/subscribers receiving new or 

improved electric service 

8,000,000 8,000,000 Met 

Exhibit 39: Trends in Electric Facilities 

Fiscal Year 2007 

Trends 2003 2004 2005 2006 2007 

3.2.5 Number of program borrowers/subscribers 

receiving new or improved electric service 

3,745,559 4,325,559 2,360,477 8,183,649 8,000,000 

Exhibit 40: Improving Rural Quality of Life Through Telecommunications Facilities 

Fiscal Year 2007 

Annual Performance Goals and Indicators Target Actual Result 

3.2.6 Number of program borrowers/subscribers receiving new or 

improved telecommunications service 

250,000 1,205,000 Exceeded 

Exhibit 41: Trends in Telecommunications Facilities 

Fiscal Year 2007 

Trends 2003 2004 2005 2006 2007 

3.2.6 Number of program borrowers/subscribers 

receiving new or improved 

telecommunications service 

382,229 373,813 240,000 297,027 1,205,000 

Strategic Goal 4: Enhance Protection and Safety 

of the Nation’s Agriculture and Food Supply 

USDA ensures a secure agricultural production system 

and healthy food supply to consumers. The 

Department accomplishes this task by protecting the 

food supply against pests and diseases, minimizing 

production losses, maintaining market viability and 

containing environmental damage. USDA also ensures 

that the commercial supply of meat, poultry and egg 

products moving in interstate commerce or exported to 

other countries is safe, wholesome and labeled and 

packaged correctly. Additionally, the Department 

ensures that meat, poultry and egg products imported 

from other countries are produced by a system 

equivalent to its own. 

Ensuring the safety of America’s meat, poultry and egg 

products requires a strong infrastructure. Thus, USDA 

has stationed public-health servants throughout the 

country and in laboratories, plants and import houses. 

The Department continues an enhanced, risk-based 

approach to inspection. Through these efforts, the 

Department reallocates its resources to focus more 

closely on food-safety systems and preventing public 

health problems before they occur. This initiative 

advances a coordinated national and international food 

safety, risk management system from farm to table. A 

significant contribution to the risk-based approach to 
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FY 2007 Performance and Accountability Report 

inspection is the development of a public health 

infrastructure. This infrastructure includes: 

 Improvements to public health data analysis and 

information exchange; 

 Advanced surveillance and detection systems; 

 A well-trained workforce; 

 Swift, secure and multi-directional 

communications; and 

 Disaster preparedness and response capability. 

OBJECTIVE 4.1: REDUCE THE INCIDENCE OF FOODBORNE 

ILLNESSES RELATED TO MEAT, POULTRY, AND EGG 

PRODUCTS IN THE U.S. 

Overview 

Protecting the Nation’s food supply is a formidable 

task and requires sound science. There is heightened 

apprehension that terrorists could target the Nation’s 

food supply as well as the potential for new and 

emerging microbial hazards. Thus, the Department 

must assess and update its food safety systems 

continually. USDA continues to eliminate foodborne 

illness through testing, risk assessments, partnerships 

with its stakeholders and policy decisions based on 

sound science. 

Key Outcome 

Reduction in Foodborne Illness Associated 

with the Consumption of Meat, Poultry and Egg 

Products 

USDA conducted approximately 1,300 Food Safety 

Assessments (FSA) in FY 2007. An FSA evaluates an 

establishment’s sanitation controls and compliance 

with microbiological performance criteria. It also 

reviews the adequacy of slaughterhouse and processing 

plant Hazard Analysis and Critical Control Point 

(HACCP) systems. HACCP refers to the design and 

operation of an establishment’s prerequisite programs, 

and its response to food-safety control deviations. 

Enforcement, investigation and analysis officers and 

public health veterinarians trained in FSA 

methodology conduct these assessments. Officials 

often conduct FSAs “for cause,” such as in response to 

a pathogen-positive product sample or other events 

that indicate possible food safety concerns. FSAs are 

also conducted randomly or on a cyclical basis. 

Challenges for the Future 

Unfortunately, meat, poultry and egg products can 

become compromised after USDA inspection and 

prior to consumption. Thus, the Department is 

assessing how to limit or prevent accidental or 

intentional contamination. 

Additional challenges faced by USDA include 

protecting at-risk groups, namely the very young, 

pregnant women, older adults, people with chronic 

diseases and those with weakened immune systems. 

USDA will continue to rely heavily on data to allow 

proactive decisions affecting food safety and public 

health. The Department will enhance data 

management and delivery via information technology 

to quickly respond to indications of risk to human 

health. 

To ensure rapid and effective communication between 

Federal and State agencies in responding to emergency 

incidents, USDA is working with the U.S. Food and 

Drug Administration and other agencies to conduct 

vulnerability assessments on both legally and illegally 

imported foods. Protocols have been developed to 

respond to products that have entered the country 

illegally. 

USDA trains newly hired inspection personnel, and 

provides refresher training to existing field inspection 

personnel through the Food Safety Regulatory 

Essentials (FSRE) program. FSRE outlines inspection 

responsibilities in relation to the HACCP/Pathogen 

Reduction regulation. The occupational groups 

receiving this training include food and consumer 

safety inspectors, public health veterinarians, program 

and import inspectors, and enforcement investigations 

and analysis officers. 
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FY 2007 Performance and Accountability Report 

In January, USDA began inspecting 4,458 small and 

very small meat and poultry slaughter and processing 

plants with Federal inspectors, based on its 

Performance-Based Inspection System (PBIS) records 

of 2007. PBIS schedules inspection procedures the 

same way in all processing plants, regardless of the 

particular food safety hazard associated with the 

products produced or processes performed at one plant 

versus another. The businesses that fall into this 

category have a particular need for current and 

frequent food safety information. They generally lack 

the resources to monitor food safety developments 

from the Department, academia or trade associations. 

To address this challenge, USDA has initiated efforts 

to work with these plants, including another 2,400 

(approximately) under State inspections, to overcome 

these issues. The Department has implemented an 

action plan to deliver outreach assistance to promote 

risk-based food safety and food defense systems for 

small and very small plants. While the reaction to 

these initial steps has been positive, data show that 

additional effort is needed. 

The Technical Service Center (TSC) serves as the 

agency’s center for technical assistance, advice and 

guidance regarding the implementation of national 

food safety policies, programs, systems and procedures. 

The TSC created a customer-service guarantee which 

ensures that all plants that contact TSC receive 

uniform, consistent and prompt answers. It can be 

found at 

www.fsis.usda.gov/PDF/TSC_Response_to_Calls_&_

EMails.pdf . 

Selected Results in Research, Extension and Statistics 

A Step in Reducing Foodborne Disease by Poultry. 

Campylobacteriosis is a leading foodborne disease in developed 

countries, including the U.S. While birds, primarily chickens and 

turkeys, are considered the primary reservoir of C. jejuni, 

transmission among poultry flocks and farms is poorly 

understood. C. jejuni is the pathogen that causes 

Campylobacteriosis and is the leading cause of food poisoning in 

the U.S. A USDA-sponsored study showed that house flies may 

be one risk factor in the pathogen’s transmission among poultry. 

Other environmental factors, such as ventilation, water and litter 

are also important. 

Rapid Detection of Biohazards. USDA-supported scientists 

have developed a cloth that has the potential to detect bacteria, 

viruses and other biohazards. The cloth evolved with the 

development of nanotechnology. It can be used as an easy-tohandle swab or wiper capable of picking up and identifying 

biohazards on surfaces or in liquids. 

Portable Inspection Devices That Detect Food-Safety and 

Quality Problems. Portable inspection devices have the potential 

to significantly increase the accuracy and efficiency of food safety 

inspection in meat, poultry and perhaps eventually fruits and 

vegetables. USDA scientists have developed prototype portable 

inspection devices by adapting optical technology used for remote 

sensing of Earth. Prototypes include binoculars with lenses that 

detect fecal matter on meat, produce or processing equipment. 

The lenses can also detect diseases or quality defects. 

Salmonella — USDA categorizes processing plants as 

Category 1, Category 2 or Category 3 based on their 

consistency in process control for Salmonella 

reduction, with Category 1 being the most consistent. 

USDA has exceeded the performance goal of 

increasing the percentage of industry in Category 1 

from 46 percent in 2006 to 71 percent in 2007. The 

U.S. Department of Health and Human Services has 

incorporated the target of 6.8 cases of 

salmonellosis/100,000 persons into its Healthy People 

2010 objectives. USDA recognizes these objectives as 

appropriate guidance for its strategy to strengthen 

public health protection. For these reasons, the 

Department decided to redirect its Salmonella 

verification sampling program to encourage 

establishments to reassess their food safety systems to 

achieve and maintain consistent process control. 

As more establishments attain Category 1 status, 

USDA believes that fewer people will be exposed to 

Salmonella from raw classes of Department-regulated 

products. Consequently, as more establishments gain 

greater control over Salmonella, the goal of halving the 

number of people infected with Salmonella from all 

sources, including broilers, is more likely to be 

achieved. The Department is particularly focused on 

the boiler industry because of a three-year upward 

trend in the percentage of Salmonella-positive samples 

in its regulatory tests. Broilers are of particular interest 
ANNUAL PERFORMANCE REPORT 

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FY 2007 Performance and Accountability Report 

because of all the classes of carcasses (e.g., beef, hogs, 

broilers), the percentage of positive broiler samples is 

more than four times that of the next highest class 

(hog carcasses) based on the most recent calendar year 

data. To ensure that the broiler industry adequately 

increases its control for the presence of Salmonella by 

2010, the Department further stated that the 

timeframe for broiler establishments to gain better 

control would be expedited. 

The Department is establishing the baseline year as 

calendar year 2006, which is 46 percent of plants in 

Category 1. Each year thereafter, until 2010, an 

additional percentage (in the range of 10 percent) of 

establishments must achieve and maintain Category 1 

status to reach at least 90 percent of all establishments 

in Category 1 by 2010. 

Listeria monocytogenes—USDA has met the 

performance goal of decreasing the overall percent 

positive rate for Listeria monocytogenes (Lm) in readyto-eat products in 2007. The annual target of 0.65 

percent was significantly exceeded. The goal’s purpose 

is to reduce the overall public exposure to Lm in readyto-eat meat and poultry products, which reduces the 

incidence of foodborne listeriosis. The Healthy People 

goals for national health promotion and disease 

prevention called on Federal food safety agencies to 

reduce foodborne listeriosis to the level of 0.25 

cases/100,000 by the year 2010. USDA contributes to 

this goal by: 

 Issuing a Listeria interim final rule to control Lm

in ready-to-eat meat and poultry products, Lm

verification sampling and reporting; 

 Conducting FSAs in establishments with product 

that tests positive for Lm; 

 Issuing compliance guidelines to provide industry 

with guidance on steps to control Lm; and 

 Reacting to product recalls to ensure that 

consumers are alerted and that product testing 

positive for Lm is removed from the marketplace. 

USDA’s risk-based verification program for Lm

samples higher risk establishments more frequently 

than lower risk establishments. The Department 

doubled the number of ready-to-eat products sampled. 

It focused its sampling program on establishments that 

use sanitation only or sanitation combined with 

antimicrobial agents or processes as their primary 

methods to control for Lm. When positive Lm samples 

are found in the establishment, USDA investigates 

using the FSA. Testing of product, food contact and 

environmental surfaces is repeated until the 

establishment’s products test negative. The 

Department has developed a checklist to determine the 

rigor of establishments’ validation of their Lm control 

program; inspection personnel use the list every time 

they conduct an FSA. Results from the completed 

checklist will be included in the risk ranking of 

establishments. 

Information about the causes of positive tests will be 

incorporated into compliance guidelines, which will be 

shared with industry through regulatory education 

sessions. USDA is issuing supplementary guidance to 

the industry on the application of antimicrobial 

programs. The Department will also issue guidance to 

inspection program personnel on evaluating these 

programs. USDA will continue its strategies to reduce 

the overall public exposure to Lm and reduce the 

incidence of foodborne illness related to ready-to-eat 

products. 

E. coli O157:H7—USDA has met the performance 

goal of decreasing the overall positive rate for E. coli 

O157:H7 on food products in 2007. The Healthy 

People 2010 goals for national health promotion and 

disease prevention called on Federal food safety 

agencies to reduce E. coli O157:H7 illness to the level 

of 1.0 cases/100,000 by 2010. The Department began 

a microbiological testing program to detect E. coli

O157:H7 in raw ground beef. The program is also 

designed to stimulate industry action. Since the 

initiation of the USDA testing program, many 

grinders and suppliers of raw ground beef components 

have instituted programs to test for E. coli O157:H7. 
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FY 2007 Performance and Accountability Report 

The Department is also increasing sample size and 

adopting new and more sensitive testing methods. 

USDA also conducts FSAs in establishments with 

positive tests for E. coli O157:H7, issues compliance 

guidelines to industry and reacts to product recalls to 

ensure consumers are alerted and contaminated 

products are removed from the marketplace. 

In FY 2007, USDA issued two notices to expand its E. 

coli O157:H7 testing program: USDA Notice 17-07, 

Follow-Up Sampling of Certain Ground Beef 

Products After an FSIS Verification Sample Tests 

Positive for E. coli O157:H7, and USDA Notice 18-

07, Routine Testing of Beef Manufacturing 

Trimmings Intended for Use in Raw Ground Beef. 

The Department is also reviewing information from 

recent recalls. USDA will conduct more follow-up 

sampling in response to positive test results. 

Exhibit 42: Pathogen Reduction (Food Inspection) 

Fiscal Year 2007 

Annual Performance Goals and Indicators Target Actual Result 

4.1.1 Reduce overall public exposure to generic Salmonella from 

broiler carcasses using existing scientific standards 

55% of industry 

in Category 1 

71% Exceeded 

4.1.2 Decrease the percentage of ready-to-eat meat and poultry 

products testing positive for Listeria Monocytogenes

0.65% 0.31% Exceeded 

4.1.3 Reduce the prevalence of E. coli O157:H7 on ground beef 0.20% 0.21% Met 

Exhibit 43: Trends in Pathogen Reduction (Food Inspection) 

Fiscal Year 2007 

Trends 2003 2004 2005 2006 2007 

4.1.1 Reduce overall public exposure to generic 

Salmonella from broiler carcasses using 

existing scientific standards 

NA NA NA 45% of 

industry in 

Category 1

71% of 

industry in 

Category 1

4.1.2 Decrease the percentage of ready-to-eat 

meat and poultry products testing positive for 

Listeria Monocytogenes

0.90% 0.89% 0.70% 0.60% 0.31% 

4.1.3 Reduce the prevalence of E. coli O157:H7 on 

ground beef 

0.37% 0.19% 0.17% 0.16% 0.21% 
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FY 2007 Performance and Accountability Report 

OBJECTIVE 4.2: REDUCE THE NUMBER AND SEVERITY OF 

AGRICULTURAL PEST AND DISEASE OUTBREAKS

Overview 

The National Animal Diagnostic Network and Plant 

Diagnostic Network Centers ensure timely disease 

detection. They also enhance the process of producing 

and maintaining a timely, comprehensive database of 

pest and disease outbreak occurrences. Accurately 

identifying new or uncommon pests and diseases will 

allow USDA, in conjunction with the States, to 

expedite initial control responses, verify the physical 

boundaries of an outbreak and initiate regional or 

national containment strategies. The ultimate 

performance measure for these networks is their 

disease-detection preparation. The networks will 

continue to study new diseases regularly to protect the 

Nation from accidental or deliberate introduction of 

diseases. 

Key Outcome 

Improve Animal and Plant Diagnostic 

Laboratory Capabilities 

Analysis of Results 

The performance goal was met. Limited trend data are 

available since the effort began in FY 2003 (plant) and 

FY 2004 (animal). Detection criteria have been 

developed for soybean rust, sudden oak death, Ralstonia 

stem rot, plum pox virus, pink hibiscus mealybug, potato 

wart and huanglongbing (citrus greening). Soybean rust is 

a fungal disease that attacks the foliage of a soybean 

plant, causing its leaves to drop prematurely. Sudden 

oak death is a plant disease that attacks many types of 

plants and trees common to the Pacific Northwest. 

Plum pox virus browns the flesh and deforms stone 

fruit, making it unmarketable. Pink hibiscus mealybug is 

a serious insect threat to agricultural, ornamental and 

horticultural plants in tropical and sub-tropical areas. 

Potato wart creates ugly, warty outgrowths on potato 

plants. Huanglongbing (citrus greening) causes infected 

citrus trees to yellow, decline, and possibly die within a 

few years of infection. 

Animal disease-detection criteria have been developed 

for the following eight high-consequence diseases. 

Foot-and-Mouth Disease is a severe, highly contagious 

viral disease of cattle and swine. Exotic Newcastle 

disease is a contagious and fatal viral disease affecting 

all birds. Classical Swine Fever, or hog cholera, is a 

highly contagious viral disease of swine. Highly 

Pathogenic avian influenza and Low Pathogenic avian 

influenza are viruses that can cause varying amounts of 

clinical illness in poultry. In 2006, the National 

Animal Health Laboratory Network (NAHLN) 

worked with National Research Initiative funded wild 

bird sampling and other wildlife surveillance efforts to 

provide additional cooperative detection capabilities 

for various strains of the two aforementioned viruses. 

NAHLN is part of a national strategy to coordinate 

the Nation’s Federal, State and university laboratory 

resources. Bovine spongiform encephalopathy is a chronic 

degenerative disease that affects the central nervous 

system of cattle. Scrapie is a fatal, degenerative disease 

affecting the central nervous system of sheep and 

goats. Chronic wasting disease attacks the central 

nervous system of deer and elk. 

USDA agencies partner with State agencies and 

universities to achieve a high level of agricultural 

biosecurity. This process is done through the early 

detection, response and containment of outbreaks of 

pests and diseases. The diagnostic laboratories, 

adequately staffed and stocked with cutting-edge 

technology, are essential to accomplishing this 

mission. 

Future challenges to improving laboratory capabilities 

include making non-Federal funding available. This 

funding could be used to expand laboratory links in 

each State, increase the number of screened diseases 

and their detection criteria and ensure that more 

strategically located laboratories are prepared to deal 

with geographically relevant disease threats. 
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FY 2007 Performance and Accountability Report 

Exhibit 44: Ensure the Capabilities of Plant and Diagnostic Laboratories are Improved 

Fiscal Year 2007 

Annual Performance Goals and Indicators Target Actual Result 

4.2.1 The cumulative number of specific plant diseases labs are prepared to 

detect 

7 7 Met 

4.2.2 The cumulative number of specific animal diseases labs are prepared to 

detect 

8 8 Met 

Exhibit 45: Trends Improving the Capabilities of Diagnostic Laboratories 

Fiscal Year 2007 

Trends 2003 2004 2005 2006 2007 

4.2.1 The cumulative number of specific plant 

diseases labs are prepared to detect 

2 3 5 6 7

4.2.2 The cumulative number of specific animal 

diseases labs are prepared to detect 

NA 6 7 8 8

NA = Not Available 

Selected Results in Research, Extension and Statistics 

Increasing a Plant’s Resistance to Parasites. Root-knot 

nematodes, the world’s most economically important group of 

plant-parasitic nematodes, attack nearly every food and fiber crop 

grown. USDA-supported scientists identified a gene in the rootknot nematode essential for it to infect crops. The researchers 

turned the nematode’s biology against itself, creating a process 

that shuts down the specific gene when the nematode begins to 

feed on the plant’s roots. It disrupts the nematode’s ability to infect 

the plant. Thus, the modified plant becomes resistant to the 

nematode. The resistance gene is effective against the four most 

common species of root-knot nematodes. 

A Rift Valley Fever Outbreak Successfully Predicted. In 

October 2006, USDA research predicted that Rift Valley fever 

would strike within three months in sub-Saharan Africa, the first 

such prediction. Rift Valley fever is transmitted by mosquitoes 

produced during periods of heavy rainfall. It causes disease and 

death in domestic animals and humans. A warning was sent to 

the United Nations Food and Agriculture and World Health 

Organizations, which passed the warning to Kenya, Ethiopia, 

Tanzania, Uganda and Somalia. The early warning allowed the 

countries most likely to be in harm’s way to step up surveillance 

and control of insect vectors for the disease. The model can also 

predict outbreaks of other diseases of livestock and people, such 

as malaria and cholera. 

Substance From Catnip Could Help Growers Guard Crops 

and Gardens Against Aphids and Mites. USDA scientists have 

developed a method to extract a key compound from catnip oil. 

The compound naturally attracts lacewings, a beneficial predator 

that eats destructive aphids and mites. The method offers an 

economical way to make large amounts of this insect “cologne.” A 

commercial formulation of the compound could eliminate the need 

for farmers to repeatedly buy and release beneficial insect larvae. 

Overview 

USDA works to provide a secure agricultural 

production system and healthy food supply for U.S. 

consumers. This work is designed to reduce the 

number and severity of agricultural pest and disease 

outbreaks. It includes: 

 Safeguarding animal and plant resources against 

the introduction of foreign agricultural pests and 

diseases, while meeting international trade 

obligations; 

 Detecting and quickly responding to new invasive 

pests and diseases, and emerging agricultural 

health situations; 

 Managing existing agricultural pests and diseases 

and wildlife damage effectively; and 
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 Developing and applying scientific methods that 

benefit agricultural producers and consumers, 

protect the health of animal and plant resources, 

and sustain agricultural ecosystems. 

Key Outcome 

A Secure Agricultural Production 

System and Healthy Food Supply 

USDA’s efforts in FY 2007 prevented the introduction 

of foreign animal diseases which could have spread 

beyond the original area of introduction or become 

established across the country. Such a spread could 

cause severe economic or environmental damage, 

threaten animal health or even compromise public 

health. 

The Department’s programs are designed to reduce 

the number and severity of pest and disease outbreaks 

in plants and animals. They also contribute to the 

good life Americans enjoy. Due in part to the 

protection afforded by these programs, U.S. consumers 

receive an abundance of food and fiber. Consumers 

also remain relatively free of diseases that may be 

transmitted by animals or other pests. 

Protecting the Nation’s plant and animal resources 

provides many Americans with employment in the 

agricultural sector. It also gives them a livelihood 

serving farmers with needed tools, supplies, technical 

knowledge and money. USDA’s efforts help to ensure 

that such allied industries as the food-processing and 

pharmaceutical industries, and grocery distributors 

receive the raw materials they need to produce their 

products and services. Its efforts also help maintain 

public and private landholders’ investments. By 

protecting U.S. plant and animal resources from pest 

and disease outbreaks, USDA ensures domestic 

agricultural resources can move in international trade. 

The North American ecosystem depends in part on 

USDA’s efforts to reduce the number and severity of 

pest and disease outbreaks. The global ecosystem 

depends upon international efforts to minimize the 

movement of harmful species. USDA participates in 

these efforts as a world leader, benefiting citizens in 

many countries. 

Challenges for the Future 

USDA faces important challenges in its efforts to 

reduce the number of pest and disease outbreaks. One 

is to prevent harmful pests and diseases from entering 

the country. If such pests and diseases enter, USDA 

must know early enough to reduce their spread and 

eradicate them before they do damage. The 

Department creates and continually updates pest and 

disease information and monitors and conducts surveys 

in cooperation with States and industry. Survey data 

are essential for initiating and directing programs. 

They also result in better pest and disease 

management. USDA will continue monitoring and 

surveillance activities. This will include identifying 

potential pathways for animal and plant pests and 

diseases. In addition to early detection, the spread of 

animal and plant pests and diseases can be prevented 

by regulatory enforcement. 

Once foreign pest or disease is reported, USDA 

responds immediately by investigating and taking 

emergency action, if necessary. Substantial costs are 

incurred, but USDA seeks to reduce these costs 

through enhanced, science-based, early-detection and 

rapid-response efforts. 

USDA continues to enhance emergency-coordination 

efforts and emergency-response capabilities. USDA 

agencies are also participating with a Governmentwide team created to develop and implement an avian 

influenza (AI) response plan. AI is a virus that infects 

wild birds (such as ducks, gulls and shorebirds) and 

domestic poultry (such as chickens, turkeys, ducks and 

geese). 

A final challenge is to minimize the economic impact 

of specific harmful diseases and pests where 

eradication is either not feasible or will take many 

years to achieve. To address this challenge, USDA 

monitors endemic diseases and pests through surveys. 

The Department also conducts inspections to prevent 
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their spread into non-infested parts of the country. 

Additionally, USDA works to prevent the spread of 

diseases that can be passed by animals, such as rabies. 

It also protects American agriculture from detrimental 

predators through identification, demonstration and 

application of the most appropriate control methods. 

USDA has several groups of programs that focus on 

reducing the number and severity of pest and disease 

outbreaks. As indicators of success in reducing the 

number and severity of these outbreaks, USDA has 

selected two key performance measures to represent 

the entire range of activities conducted by these 

programs (see the Annual Performance Goals and 

Indicators exhibit below). 

The Animal Health Monitoring and Surveillance 

(AHMS) Program conducts monitoring and 

surveillance activities. These activities are designed to 

detect incursions of foreign and emerging diseases 

rapidly, evaluate and enhance surveillance for current 

disease control and eradication programs, monitor 

domestic and international disease trends and threats 

and provide timely and accurate animal health 

information. 

The Emerging Plant Pest (EPP) Program maintains 

USDA’s ability to respond quickly to any emerging 

plant pest problem. This program targeted a variety of 

pests and plant diseases during FY 2007, which will be 

discussed below. 

Analysis of Results 

USDA met the target related to animal disease 

outbreaks in FY 2007 because of the successful effort 

of AHMS program components. This continued a 

record of six years of success, broken only by the 

outbreak of Exotic Newcastle Disease (END), a 

contagious and fatal viral disease affecting all species of 

birds and which is considered one of the world’s most 

infectious poultry diseases. By meeting these goals, the 

Department provided for a continually secure 

agricultural production system and healthy food supply 

for consumers, minimized production losses and 

maintained market viability for U.S. livestock. 

An example of successful AHMS program efforts 

involve the discovery of contagious equine metritis 

(CEM) found in three Lipizzaner stallions. CEM is a 

highly contagious venereal disease of horses that 

results typically in aborted pregnancies. This finding 

marked the first U.S. detection of the disease outside a 

CEM quarantine facility in more than 20 years. State 

and USDA officials traced all possible exposed animals 

and high-risk materials. They successfully contained 

the outbreak and closed the case before the disease 

caused severe economic damage. 

Another example of successful AHMS program efforts 

is seen in the National Animal Health Surveillance 

System (NAHSS). NAHSS strives to meet the 

requirements of the Animal Health Safeguarding 

Review and Homeland Security Presidential Directive 

9 (HSPD-9). The Animal Health Safeguarding 

Review provides a foundation for USDA to build a 

national safeguarding system for the health of 

domestic animals. HSPD-9 establishes a national 

policy to defend the agriculture and food system 

against terrorist attacks, major disasters and other 

emergencies. In FY 2007, the Department continued 

to work with other Federal agencies and coordinate 

with States to prepare for a potential AI outbreak. 

USDA also continued to focus on developing efficient 

and effective targeted surveillance plans. Following 

these targeted plans allows Federal and State officials 

to document the health status of domestic livestock 

and poultry populations efficiently and effectively. As 

an example, USDA has completed a draft swine 

surveillance plan that, once finalized, will be used to 

modify future comprehensive swine surveillance 

programs implemented in cooperation with State and 

industry partners. 
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Exhibit 46: Strengthen the Effectiveness of Pest and Disease Surveillance and Detection Systems 

Fiscal Year 2007 

Annual Performance Goals and Indicators Target Actual Result 

4.2.3 Number of significant introductions of foreign animal diseases and pests 

that spread beyond the original area of introduction and cause severe 

economic or environmental damage, or damage to the health of animals 

0 0 Met 

4.2.4 Number of emerging plant pest (EPP) programs where an outbreak has 

not been contained within the quarantine area 

1 of 5 

programs 

1 of 5 

programs 

Met 

Exhibit 47: Trends in Strengthening the Effectiveness of Pest and Disease Surveillance and Detection Systems 

Fiscal Year 2007 

Trends 2003 2004 2005 2006 2007 

4.2.3 Number of significant introductions of foreign 

animal diseases and pests that spread 

beyond the original area of introduction and 

cause severe economic or environmental 

damage, or damage to the health of animals 

0 0 1 0 0

4.2.4 Number of emerging plant pest (EPP) 

programs where an outbreak has not been 

contained within the quarantine area 

4 3 2 3 1 of 5 

programs

USDA continued to focus on the National Veterinary 

Accreditation Program (NVAP) and certifying private 

veterinary practitioners to work cooperatively with 

Federal veterinarians and State animal health officials. 

Accredited veterinarians greatly enhance Federal and 

State surveillance efforts, especially in identifying 

foreign or emerging animal diseases. Currently, the 

Department is finalizing a proposed rule on veterinary 

accreditation. The rule will provide the option of two 

categories of accreditation based on animal species 

expertise. It will also require an established amount of 

supplemental education to maintain accredited status. 

USDA has also been partnering with a variety of 

stakeholders in animal health surveillance, emergency 

response and public health to develop online training 

modules that will provide accredited veterinarians 

easily accessible information needed to maintain their 

accredited status. 

The National Animal Identification System (NAIS) 

became a fully operational system in FY07. NAIS will 

allow USDA to work with States and the private 

sector to determine more quickly and effectively the 

scope of a disease or animal health event, and locate 

infected animals. 

USDA also met its FY 2007 target related to EPP 

programs. These programs cover Asian Longhorned 

Beetle (ALB), Glassy-winged Sharpshooter (GWSS), 

the Citrus Health Response Plan (CHRP), P. 

ramorum and Emerald Ash Borer (EAB). The ALB, 

GWSS, CHRP, and P. ramorum programs prevented 

significant pest outbreaks beyond quarantine areas at 

the beginning of FY 2007. The EAB program did not 

meet its target. 

ALB infests such hardwood tree species as maple, 

birch, horse chestnut, poplar, willow, elm and ash. The 

beetle can kill host tree species and, if left unchecked, 

will threaten North America’s forests, parks, cities and 

trade. Overall, the Department’s ALB program 

successfully contained and is moving towards 

eradicating infestations in Illinois, New Jersey and 

New York in FY 2007. In Illinois, ALB detections 

have not occurred in the Chicago area since November 

2003. Additionally, none of the State is regulated for 
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the pest. While New Jersey has had no detections since 

August 2006, ALB detections took place in the 

Brooklyn, Queens, Prall’s Island and Staten Island 

areas of New York City. The detections in Prall’s 

Island and Staten Island occurred outside of previously 

quarantined areas. While they caused concern, the 

detections did not constitute a significant outbreak 

based on their size or economic and environmental 

impacts. USDA and cooperators took appropriate 

action to ease ALB’s impact and spread, including 

additional surveys, tree removal, quarantines and 

treatments. 

GWSS carries the bacterium Xylella fastidios. This 

bacterium causes a variety of plant diseases that affect 

such economically valuable crops as citrus and grapes. 

Recently, two GWSS adults were detected in a trap 

less than a mile outside of the quarantined area. While 

these detections raised concern, they did not cause a 

significant outbreak based on their size or economic 

and environmental impacts. In response, area-wide 

treatments were applied within the affected area. This 

treatment included a half-mile buffer beyond the 

detection sites to suppress GWSS populations. This 

treatment area covered approximately 2,064 acres of 

citrus. State-regulated inspections of nursery stock for 

GWSS continue to be conducted to prevent the 

artificial movement of the pest via host nursery plants. 

These inspections are conducted both in the county of 

the nursery stock’s origin and in the destination 

county. Throughout FY 2007, GWSS interceptions 

among nursery shipments helped prevent the artificial 

spread of this pest and related diseases. 

Citrus canker is a highly contagious bacterial disease of 

citrus trees. It has become so widespread throughout 

Florida that the entire State is quarantined for the 

disease. Despite the quarantine, USDA worked with 

State regulatory agencies and citrus scientists to 

develop CHRP. This program is designed to protect 

other citrus-producing States from the disease and all 

domestic production from other harmful citrus pests 

and diseases. CHRP coordinates multiple pest survey 

and detection programs within citrus-producing 

States. It promotes citrus-production practices that 

lower citrus pest and disease risks. In FY 2007, the 

administration of the CHRP and the Federal 

regulatory framework effectively prevented outbreaks 

of citrus pests and diseases in U.S. citrus-producing 

States outside of Florida. For example, CHRP funds 

were used to conduct citrus commodity surveys for 

several exotic citrus pests and diseases in Arizona, 

California, Hawaii, Louisiana and Texas. CHRP 

resources also were used to support diagnostic 

screenings for citrus greening in all U.S. citrusproducing States. 

P. ramorum is a pathogen that causes sudden oak death 

in oak trees. It also causes diseases in a wide variety of 

other plant species. P. ramorum has killed oak trees in 

14 California and 1 Oregon counties. Currently, all of 

these counties are under quarantine. P. ramorum also 

threatens many other plant species in California, 

Oregon and, within nursery venues, Washington. 

USDA establishes and implements domestic 

quarantines on counties upon disease detection. Thus 

far, these regulations have prevented the artificial 

establishment of P. ramorum and its occurrence outside 

the quarantined areas on the West Coast. An 

exception to this success occurred in early March 2007 

when the Oregon Department of Agriculture 

identified an outbreak of P. ramorum approximately 

1.5 miles north of the quarantine area in Curry 

County, Oregon. A State quarantine was established, 

covering a 24.25-square-mile area in Curry County. 

USDA and the State of Oregon are working together 

to eradicate the detection. This detection is not a 

significant outbreak based on its size or overall 

economic and environmental impact. 

EAB is an exotic beetle that feeds on the inner bark of 

ash trees. The beetle disrupts the tree’s ability to 

transport water and nutrients, which can kill it. EAB 

threatens U.S. ash tree resources, potentially impacting 

the Nation’s nursery, landscaping, timber, recreation 

and tourism industries. EAB infests more than 

175,000 square miles in the U.S. On June 26, 2007, 

USDA confirmed EAB detection in the Cranberry 
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Township of Butler County, Pennsylvania. 

Department personnel discovered it while inspecting 

for ash decline along Pennsylvania’s Interstate 76 

corridor in proximity to the Ohio border. This 

discovery followed the June 20, 2007, confirmed 

detection of EAB five miles into the Ohio side of the 

border. This is the first EAB detection to occur in 

Pennsylvania. EAB’s extension beyond USDA’s 

quarantine boundaries as of the beginning of FY 2007 

is significant and continuing. USDA is working with 

Federal, State, local, Tribal and industry cooperators to 

enforce regulatory restrictions on the movement of 

EAB host wood products and materials, especially 

firewood. They also look to raise public awareness 

about their potential to spread the pest further. 

Strategic Goal 5: Improve the Nation’s Nutrition 

and Health 

USDA made strides in promoting access to a 

nutritious diet and healthy eating behaviors for 

everyone in the U.S. Through its leadership of Federal 

nutrition-assistance programs, the Department made a 

healthier diet available for millions of children and 

low-income families. The Center for Nutrition Policy 

and Promotion used interactive tools to motivate 

Americans to make positive dietary behavioral 

changes. These interactive tools were designed to help 

consumers establish and maintain healthy diets and 

lifestyles, consistent with the Dietary Guidelines for 

Americans and the President’s HealthierUS initiative. 

Key 2007 accomplishments include: 

 Promoting Access to the Food Stamp Program (FSP)—

Food stamp benefits help low-income families and 

individuals purchase nutritious food. FSP also 

provides nutrition education to help influence 

healthy food choices and more active lives. It is the 

Nation’s largest nutrition assistance program, 

serving more than 26 million people monthly in 

FY 2007. 

 Promoting the MyPyramid Food Guidance System—

MyPyramid offers the American public an 

individualized approach to nutritional well-being 

and active living. MyPyramid.gov’s Web-based 

educational tools help Americans assess and 

personalize their diet and physical activity plans. 

Consumers continue to respond enthusiastically to 

this educational approach. To date, there have 

been more than 3.5 billion visits to 

MyPyramid.gov. Additionally, there have been 

more than 2.7 million registrations on the 

MyPyramid Tracker; and 

 Continuing to ensure that Food Stamp Benefits are 

Accurately Issued—The FSP payment accuracy rate 

for FY 2006—the most recent year for which data 

is available—was 94.01 percent. This figure marks 

the third straight year the accuracy rate has been 

greater than 94 percent. This strong performance 

reflects effective partnerships with State 

administering agencies. It also shows the extensive 

use of policy options provided in the 2002 Farm 

Bill that streamline program administration while 

improving access for working families. 

USDA continued to improve the quality of Americans’ 

diets through research-based enhancements to the 

Nation’s food supply. The Department also pushed for 

better knowledge and education to promote healthier 

food choices. Four of the top 10 causes of death in the 

U.S. (cardiovascular disease, cancer, stroke and 

diabetes) are associated with diet quality—those too 

high in calories, total fat, saturated fat and cholesterol, 

or too low in fruits and vegetables, whole grains and 

fiber. The Nation is experiencing an obesity epidemic 

due to a number of causes. These causes include a 

“more is better” mindset, a sedentary lifestyle and the 

ready availability of fat- and sugar-laden, high-calorie 

foods. Consumers are looking for foods that taste 

good, offer nutrition and other health benefits, and are 

convenient to prepare and consume. Science-based 

dietary guidance and promotion can help them 

integrate these choices into a diet that promotes longterm health. USDA pursued national policies and 

programs to ensure that everyone has access to a 

healthy diet regardless of income, and that the 
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information is available to support and encourage good 

nutrition choices. 

The Department’s success in promoting public health 

through good nutrition and the effectiveness of its 

nutrition programs relies heavily on research. The 

research reveals what consumers should eat to stay 

healthy and how the public can be educated in a 

manner that leads to dietary changes. Research also 

supports development of new food products. 

OBJECTIVE 5.1: IMPROVE ACCESS TO NUTRITIOUS FOOD

Overview 

USDA’s nutrition assistance programs represent the 

Federal Government’s core effort to reduce hunger and 

improve nutrition. These programs aided one in five 

people in the U.S. during FY 2007. They promote 

better health, support the transition to self-sufficiency 

for low-income working families and support 

children’s readiness to learn in school. A wellnourished population is healthier, more productive and 

better able to fulfill its potential. 

By working in partnership with States, USDA 

continues to implement effective nutrition assistance 

programs and deliver program benefits to eligible 

participants. The programs ensure access to a 

nutritious food for those with little income and few 

resources. For a variety of reasons, many individuals 

and families eligible to participate in these programs 

do not. In FY 2007, USDA focused on increasing the 

rate of participation among people eligible for food 

stamps and expanding access to the School Breakfast 

Program (SBP). SBP is not as widely available as the 

National School Lunch Program. 

The Department continued to work with States to 

implement FSP provisions from the 2002 Farm Bill. 

These provisions provide States with options to 

simplify administration of the program. USDA also 

continued to implement outreach efforts to educate 

eligible low-income populations—especially seniors, 

legal immigrants and the working poor—about the 

benefits of food stamps. USDA continued a media 

campaign to inform low-income people of their 

potential eligibility. Additionally, the Department 

provided technical assistance, outreach and 

participation grants and guidance to faith- and 

community-based organizations to encourage FSP 

participation. 

Under SBP, USDA continued to provide cash 

assistance to States to operate breakfast programs in 

schools and residential child care institutions. On an 

average school day, while more than 49 million 

children have access to school lunch and nearly 30 

million children chose to eat a program lunch, only 

about 10 million children received a school breakfast. 

The Department identified opportunities to promote 

SBP by raising awareness of the program’s availability 

with State and civic leaders, and supporting and 

celebrating National School Breakfast Week. Each 

year, USDA recognizes National School Breakfast 

Week to highlight SBP’s benefits through events, 

posters and student activities that show the importance 

of a good breakfast—either at home or served through 

the program—in being ready for school. 

The Department continued to serve those eligible for 

the Special Supplemental Nutrition Program for 

Women, Infants and Children Program (WIC) who 

wish to participate within authorized funding levels. 

WIC helps safeguard the health of low-income 

women, infants and children up to age 5 who are at 

nutritional risk. The program provides nutritious foods 

to supplement diets, information on healthy eating and 

referrals to health care. About 8.2 million pregnant 

women, new mothers and their young children 

benefited monthly from WIC. 

USDA also continues to partner with a variety of 

faith-based and community organizations to deliver 

program benefits and services, and encourage access to 

the programs. 
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Selected Results in Research, Extension and Statistics 

Healthier Food Research. Recent USDA-supported studies have 

linked greater soy intake with lower breast cancer risk for women. 

One interpretation has attributed this link to higher production of 

cancer-preventative substances when a woman consumes more 

soy. Conjugated inoleic acid is a fatty acid found in soy. It is anticarcinogenic, or prevents or inhibits cancer, at far lower dosages 

than many other anti-carcinogens that occur naturally. The 

ultimate goal of this research is to improve human dietary patterns 

and reduce the risk of disease. 

Using Orange Cauliflower to Make Other Food Crops More 

Nutritious. Scientists are using an unusual cauliflower to identify 

genes and define the molecular mechanisms that regulate 

nutrients in plant-based foods. A particular gene—dubbed Or for 

the color orange—induces high levels of beta-carotene in food 

crops. Beta-carotene is a pigment found in animal fat and some 

plants that humans convert into vitamin A. USDA scientists 

worked with Cornell University colleagues to isolate Or in the 

cauliflower. The research could potentially resolve the vitamin A 

deficiency reported to affect some 250 million children worldwide. 

In cauliflower, Or promotes high beta-carotene accumulation in 

various plant tissues that normally do not have the 

aforementioned pigment. 

Watermelon an Excellent Source of the Amino Acid Citrulline. 

USDA scientists have shown that watermelon stores abundant 

and readily usable citrulline. The human body uses citrulline to 

make another important amino acid—arginine—which plays a key 

role in cell division, wound healing and the removal of ammonia 

from the body. Medical researchers are evaluating arginine as a 

possible treatment for high blood pressure, elevated glucose 

levels and the vascular complications associated with sickle-cell 

disease. Sickle-cell disease is a form of anemia found mostly in 

blacks. 

Challenges for the Future 

Studies and analyses show that there continue to be 

large numbers of eligible people who do not participate 

in Federal nutrition assistance programs. While recent 

changes in FSP have made more low-income people 

eligible, many may remain unaware of the opportunity 

to receive these benefits. USDA looks to improve 

access to and promote awareness of these programs 

with continued outreach and information strategies. 

USDA’s ability to achieve this objective depends partly 

on adequate legislative authority for policies and 

program initiatives. These initiatives would promote 

effective access to nutrition assistance and funding to 

support program participation for all eligible people 

who seek service. The quality of program delivery by 

third parties—hundreds of thousands of State and 

local Government workers and their cooperators—is 

critical to Department efforts to reduce hunger and 

improve nutrition. Economic changes can affect both 

the number of people eligible and the ability of 

cooperators to provide services. 

Key Outcome 

Reduce hunger and improve nutrition 

USDA is committed to providing access to nutritious 

food through the major nutrition assistance programs 

for all eligible people who wish to participate. Average 

FSP and WIC participation reached expected levels. 

While it was slightly lower than expected in the school 

meals programs, participation remained well within 

performance thresholds. 

Analysis of Results

In general, nutrition assistance program participation 

reached projected levels. As program participation is 

voluntary, participation projections are estimates based 

on economic and other factors that impact the likely 

behavior of eligible populations. An analysis of the 

most recent information available follows. 

Food Stamp Program—The program served 

approximately 26 million participants monthly, a 

decrease of almost 1.5 percent from the FY 2006 

average. Despite the decrease, it should be noted that 

the FY 2006 average was increased substantially by 

heavy participation early in the year due to the ongoing 

impact of Gulf hurricanes and disaster response. 

USDA efforts to support and encourage food stamp 

participation in FY 2007 included: 
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FY 2007 Performance and Accountability Report 

 Awarding food stamp outreach grants totaling $1 

million to 14 community and faith-based 

organizations to implement and study effective 

food stamp outreach strategies; 

 Continuing the national media campaign with 

English and Spanish radio ads in dozens of 

locations promoting the benefits of food stamps, 

and a Spanish television ad in 9 locations; 

 Launching an effort to implement communitybased food stamp outreach activities in Spanish 

and promote the use of Spanish public service 

announcements; 

 Making materials and resources available to State 

and local cooperators to assist them in food stamp 

outreach. These materials include posters, 

brochures, copyright free photographs, radio and 

television public service announcements, and tool 

kits with easy-to–follow, step-by-step instructions, 

sample materials and templates to customize. 

Additionally, food stamp information materials in 

nearly 3 dozen languages continued to be available; 

 Continuing to support a toll-free number which 

provides general information about food stamp 

benefits in English and Spanish; 

 Maintaining a pre-screening tool in English and 

Spanish which allows users to obtain an estimate 

of their eligibility and benefit amount; and 

 Supporting the Food Stamp Outreach Coalition 

which serves as a way to convene national, State 

and local leaders to share ideas. The coalition 

continued to support the annual Hunger 

Champions competition. This competition 

recognizes local food stamp offices that excel in 

customer service and outreach. The coalition also 

launched the Golden Grocer Program to recognize 

authorized retailers who engage in outreach. 

USDA also measured the number of people eligible for 

the program to determine the rate at which eligible 

people are participating. The most recent data indicate 

that approximately 25 million of the 38 million 

individuals eligible for food stamp benefits in an 

average month in 2005 participated— a 65 percent 

participation rate (2005 is the most recent year for 

which such figures are available.). 

National School Lunch Program (NSLP)—NSLP 

participation levels reached 30.6 million in FY 2007, 

up slightly from FY 2006 and continuing the trend of 

increases in recent years. NSLP provides nutritious 

meals to millions of children at school. Approximately 

95,000 schools operated the program. 

School Breakfast Program (SBP)—SBP participation 

levels reached 10.1 million in FY 2007, up 3 percent 

from a year ago and continuing a trend of recent 

increases. The program makes healthy, nutritious 

meals available to millions of children each school day. 

More than 80,000 institutions operated the program in 

FY 2007. USDA continued to support and encourage 

SBP participation in FY 2007 by: 

 Promoting it through such activities as School 

Breakfast Week; 

 Working with various organizations and partners 

to help develop strategies for program expansion; 

 Developing school breakfast outreach materials for 

schools and parents; and 

 Continuing to advance the implementation of the 

Child Nutrition/WIC Reauthorization Act of 

2004. This act requires all schools participating in 

School Lunch and School Breakfast Programs to 

establish wellness policies. Such policies establish 

appropriate goals for nutrition education, physical 

activity and other school-based activities designed 

to promoted student wellness. 

Trend data also indicate that the proportion of 

children enrolled in schools who participate in SBP 

has risen slowly but steadily in recent years. This 

growth reflects USDA’s continuing efforts to 

encourage schools to operate the program. 

Women, Infants and Children (WIC)—In FY 2007, 

approximately 8.2 million participants received WIC 

benefits. USDA addresses the health and nutritional 
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FY 2007 Performance and Accountability Report 

needs of at risk, low-income pregnant, breastfeeding 

and postpartum women, and those with infants and 

children up to 5 years old. The Department provides 

them with supplemental food packages, nutrition 

education and health and social services referrals. 

USDA continued to support and encourage WIC 

participation and improve benefits and services by: 

 Continuing work on regulatory changes to amend 

the WIC food packages based on 

recommendations from the Institute of Medicine 

in its report, WIC Food Packages: Time For A 

Change. USDA analyzed more than 46,000 

comments received in response to the proposed 

rule published in August 2006. The Department is 

working to develop an interim final rule that will 

be published in the fall of 2007; 

 Providing training and technical assistance to 

States in implementing the Value-Enhanced 

Nutrition Assessment (VENA) initiative. VENA 

provides a process for completing a comprehensive 

WIC nutrition assessment, including the content 

of such an assessment and an outline of the 

necessary staff competencies. USDA initiated the 

development of a 6-hour, train-the trainer 

DVD and 3 on-line training modules; 

 Continuing to support the State Agency Model 

(SAM), an initiative to develop model WIC 

information systems (IS) through multiple State 

agency consortia. SAM also transfers these models 

to other WIC State agencies to eliminate 

duplication and streamline the IS procurement 

process. SAM is consistent with USDA’s 5-year 

technology plan to improve WIC system 

functionality by replacing automated legacy 

systems; and 

 Providing technical assistance to State agencies in 

implementing cost containment strategies. Savings 

generated by actions such as competitive bidding, 

rebates, least-cost brands and use of economicallypriced package sizes are used by State agencies to 

provide benefits to more participants using the 

same budget. Due to cost saving measures, 

average-per-person WIC food costs have grown 

much more slowly than general food inflation 

during the last 16 years—the average monthly 

food cost has increased by approximately 23 

percent since FY 1990, while general food 

inflation as measured by the Thrifty Food Plan 

(TFP) has increased 53 percent. TFP serves as a 

national standard for a nutritious diet at minimal 

cost. It is intended as a guide to food shopping for 

low-income households. 

Exhibit 48: Improve Access to Nutritious Food 

Fiscal Year 2007 

Annual Performance Goals and Indicators Target Actual Result 

5.1.1 Improve Access to Nutritious Food: 

 Food Stamp Program Avg. Monthly Participation (millions of 

people) 26.3 26.3 

 National School Lunch Program Avg. Daily Participation (millions 

of people) 31.0 30.6 

 School Breakfast Program Avg. Daily Participation (millions of 

people) 10.4 10.1* 

 Special Supplemental Nutrition Program for Women, Infants and 

Children (WIC) Monthly Participation (millions of people) 8.2 8.2 

*The performance threshold allows for a “met” finding in the 9.8 to 10.9 million range. 

Met 
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Exhibit 49: Trends in Improving Access to Nutritious Food 

Fiscal Year 2007 

Trends 2003 2004 2005 2006 2007 

5.1.1 Improve Access to Nutritious Food: 

 Food Stamp Program Avg. Monthly 

Participation (mil) 21.3 23.9 25.7 26.7 26.3 

 National School Lunch Program Avg. Daily 

Participation 28.3 28.9 29.6 30.0 30.6 

 School Breakfast Program Avg. Daily 

Participation (mil) 8.4 8.9 9.3 9.8 10.1 

 WIC Program Monthly Participation (mil) 7.6 7.9 8.0 8.1 8.2 

OBJECTIVE 5.2: PROMOTE HEALTHIER EATING HABITS 

AND LIFESTYLES

Overview 

Healthful eating is vital to reducing the risk of death 

or disability due to heart disease, certain cancers, 

diabetes, stroke, osteoporosis and other chronic 

illnesses. Despite this, a large gap remains between 

recommended dietary patterns and what people in the 

U.S. actually eat. USDA uses Federal nutrition policy 

and nutrition education, both for the general public 

and those served by the nutrition assistance programs, 

to provide scientifically based information about 

healthful diets and lifestyles. The Department uses, for 

example, the Dietary Guidelines for Americans and 

MyPyramid to help people in the U.S. make wise 

choices related to food and physical activity. The 

Guidelines provide advice about food choices that 

promote health and prevent disease. MyPyramid 

provides the educational tools to help Americans take 

the necessary “Steps to a Healthier You.” These steps 

are part of a concept that offers a personalized eating 

plan with the foods and amounts that are right for a 

given individual. 

Key Outcome 

Promote More Healthful Eating and Physical 

Activity across the Nation 

Diet-related health conditions such as being 

overweight or obese are serious risk factors for 

premature death and disability in the U.S. Improved 

diets can help with weight management and reduce 

the risk of chronic diseases including certain types of 

cancers and type 2 diabetes. Thus, USDA’s efforts 

focus on updating nutrition policy, providing 

information and promoting behavioral changes that 

can help to prevent and, over time, reduce obesity and 

other diet-related health conditions. 

Science has established strong links between diet and 

health. Researchers attribute about 300,000 premature 

deaths annually to poor diets. The total costs 

attributed to overweight and obesity are estimated to 

be nearly $120 billion annually. Even small 

improvements in the average diet would yield large 

health and economic benefits to individuals and society 

as a whole. 

The Department will continue promoting diets and 

behaviors as a vital public-health issue. The Dietary 

Guidelines for Americans is the cornerstone of Federal 

nutrition guidance. USDA uses the 2005 Dietary 

Guidelines and MyPyramid, the Guidelines’ 

educational tool, to continue its leadership role of 

providing advice people in the U.S. can follow to 

improve overall health through proper nutrition. 

Challenges for the Future 

While USDA’s goal of reducing obesity levels begins 

with understanding what constitutes a healthy diet and 

the appropriate balance of exercise, success requires 

individuals to change their diets by modifying their 
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FY 2007 Performance and Accountability Report 

eating behavior. Crafting more effective messages and 

nutrition education programs to help people make 

better food choices requires understanding their 

current choices and the relationships between these 

choices and their attitudes, knowledge and awareness 

of diet/health links. Accomplishing this understanding 

requires data that link behavior and consumption 

decisions for diverse individuals. While data exist 

nationally, current survey sample sizes do not yield 

reliable information for population subgroups. 

While updated Federal nutrition guidance is an 

important step in helping Americans develop and 

maintain healthier diets and lifestyles, using this 

guidance to motivate Americans to change remains 

challenging because of the limited resources available 

for nutrition promotion. USDA will continue to 

explore ways to devote significant long-term resources 

to develop consumer-friendly and cost-effective 

nutrition education materials. The Department will 

also use partnerships and “information multipliers” to 

maximize the reach and impact of these materials 

(“Information multipliers” are people used to share 

information, such as shopkeepers who post public 

service messages in their shops, or school teachers who 

tell their students important information they have 

learned about nutrition.). Promotional materials will 

be used both within Federal nutrition-assistance 

programs and with the general public. 

More broadly, attaining performance outcomes in this 

area depends partly on the emphasis that the Nation 

places on healthier eating, including products and 

practices in the food marketplace. Additionally, 

physical activity and other lifestyle issues significantly 

impact body weight and health. 

USDA promotes healthful eating through its 

comprehensive nutrition assistance research and 

education programs. Efforts are targeted to nutrition 

assistance program participants and the general public. 

For each target audience, the challenge is to find 

effective ways to translate research into working 

knowledge to understand what people eat, and to find 

effective strategies to reach target populations with 

promotional information and messages. 

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, USDA assesses the effect of 

these efforts with the Healthy Eating Index (HEI), a 

summary measure of diet quality developed by 

USDA’s Center for Nutrition Policy and Promotion. 

The Department sets targets for improvement in the 

HEI both for the U.S. population as a whole and 

among people with incomes at or below 130 percent of 

poverty. 

Analysis of Results 

To meet the needs of the general population, USDA 

continued its leadership role in the promotion of 

nutrition guidance through educational tools designed 

to motivate people to live healthier: 

 Usage level of nutrition guidance tools was 

substantial, with more than 2 billion pieces of 

nutrition guidance materials distributed via the 

Web and print materials. Additionally, 

registrations continue to increase for the 

MyPyramid Tracker, an on-line diet and physical 

activity assessment tool. The tracker has logged 

2.7 million registrations since 2005; and 

 Consumers using the MyPyramid Food Guidance 

System personalize the information they receive 

via the electronic educational tools at 

MyPyramid.gov. For example, throughout the 

year, 61 to 77 percent of the consumers who 

responded to a satisfaction questionnaire at the site 

indicated that its information prompted them to 

take action regarding their health. These actions 

included changing their diet or their family’s diet, 

monitoring what they ate, reducing unhealthful 

eating practices, obtaining a personalized eating 

plan or setting a physical activity goal. 
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Exhibit 50: Promoting Healthier Eating Habits and Lifestyles 

Fiscal Year 2007 

Annual Performance Goals and Indicators Target Actual Result 

5.2.1 Application and usage level of nutrition guidance tools 

pieces* of nutrition guidance distributed 

2.0 billion pieces* of 

nutrition guidance 

distributed 

2.6 billion Exceeded 

*Represents number of hits to MyPyramid.gov links and number of print materials distributed. 

Exhibit 51: Trends to Promote Healthier Eating Habits and Lifestyles 

Fiscal Year 2006 

Trends 2003 2004 2005 2006 2007 

5.2.1 Application and usage level of nutrition 

guidance tools NA NA NA 1.5 billion 2.6 billion 

Selected Results in Research, Extension and Statistics 

Possible Implications for U.S. Agriculture From Adoption of 

Select Dietary Guidelines. To help Americans meet nutritional 

requirements while staying within caloric recommendations, 

USDA’s 2005 Dietary Guidelines for Americans encourage 

consumption of fruits, vegetables, whole-grain products, and fatfree or low-fat milk or milk products. A November 2006 

Department report provides one view of the potential implications 

for U.S. agriculture if Americans changed their current 

consumption patterns to meet some of those guidelines. For 

Americans to meet the fruit, vegetable and whole-grain 

recommendations, domestic crop acreage would need to increase 

by an estimated 7.4 million harvested acres, or 1.7 percent of total 

U.S. cropland in 2002. To meet the dairy guidelines, consumption 

of milk and milk products would have to increase by 66 percent. 

An increase of that magnitude likely would require an increase in 

the number of dairy cows, feed grains and, possibly, acreage 

devoted to dairy production. 

OBJECTIVE 5.3: IMPROVE FOOD PROGRAM 

MANAGEMENT AND CUSTOMER SERVICE

Overview 

USDA is committed to ensuring that nutritionassistance programs serve those in need at the lowest 

possible costs and contain a high level of customer 

service. Managing Federal funds for nutrition 

assistance effectively, including prevention of program 

error and fraud, is a key component of the President’s 

Management Agenda. The Department focused on 

maintaining strong performance in the food stamp 

payment-accuracy rate as its key performance goal in 

this area. 

Key Outcome 

Maintain a High Level of Integrity in the 

Nutrition Assistance Programs 

Challenges for the Future 

Some improper payment risks are inherent to the 

legislatively mandated program structure. This 

structure is intended and designed to be easily 

accessible to people in special circumstances and 

settings. USDA must shape its management approach 

in light of the need to make services convenient and 

accessible to participants. State and local Governments 

also bear direct responsibility for delivering the 

programs. Thus, the Department must work with 

these groups to address improper payment problems 

through monitoring and technical assistance. This 

approach requires adequate numbers of trained staff 

supported by a modernized information technology 
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FY 2007 Performance and Accountability Report 

infrastructure to ensure full compliance with national 

program standards and prevent or minimize error, 

waste and abuse. 

To meet the challenge of continued improvements in 

Food Stamp Program payment accuracy, USDA 

continues to dedicate resources to this area. Despite 

this strategy, two significant challenges will impact 

future success. Congressional action has changed the 

quality control process, lowering the risk of penalties 

for poor State agency performance. However, State 

agencies have, for the most part, risen to the challenge 

and continue to achieve a high level of payment 

accuracy. Additionally, 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 changing program environment. 

While 2007 data are not yet available, food stamp 

payment accuracy remained strong in 2006. This factor 

reflects State and Federal efforts helping to reduce 

errors significantly during the past several years. Even 

small changes in the food stamp error rate can save 

millions of dollars. 

Selected Results in Research, Extension and Statistics 

A New Economic Model of Monthly Income Dynamics. Reporting 

requirements and recertification periods are important tools for 

managing the Food Stamp Program (FSP) caseload. These tools 

provide access for eligible households while minimizing participation 

by ineligible households at a reasonable administrative cost. This 

project expands capabilities for examining month-to-month effects of 

policy options on reporting and recertification. It develops a new 

economic model that follows a panel of households over time. The 

project also examines their interaction with FSP to help assess 

tradeoffs between participation and administrative activities. The 

first output from the project, The MID-SIPP Model: A Simulation 

Approach for Projecting Impacts of Changes in the Food Stamp 

Program, introduces the Monthly Income Dynamics, Survey of 

Income and Program Participation (MID-SIPP) model. MID-SIPP 

was developed to simulate the effects of rule changes in 

FSP eligibility, participation and cost. The model also tracks 

administrative activity associated with certification and reporting 

requirements. The simulation indicated that total FSP benefits paid 

quarterly would be $17.1 billion, or $1 billion more than through 

monthly reporting. Quarterly reporting results in an estimated 37 

percent reduction in the total number of administrative reports. 

Analysis of Results 

The FY 2007 Food Stamp Payment Accuracy Rate 

will become available in June 2008. It will be reported 

in the FY 2008 Performance and Accountability Report. 

The FY 2006 Food Stamp Payment Accuracy Rate 

was 94.01 percent, the third consecutive year of a 

payment accuracy rate greater than 94 percent. 

Performance highlights include: 

 Twenty-five States with a payment accuracy rate 

greater than 94 percent; and 

 The number of top-performing States and 

their performance level increased between 

2005 and 2006: 

 In 2006, 13 States had payment accuracy rate 

greater than 96 percent—a more than 50 

percent increase from 2005, when only 8 

States reached that level; and 

 The lowest State performance level that merited a 

performance bonus for best payment accuracy in 

FY 2006 was 96.6 percent. This figure is an 

increase from the FY 2005 “cutoff” level of 95.6 

percent, reflecting a greater concentration of highperforming States at the very highest accuracy 

rates. 

Such USDA efforts as an enhanced Partner Web (an 

Intranet for State Food Stamp agencies) and the 

National Payment Accuracy Work Group (consisting 

of representatives from USDA headquarters and 

regional offices) contributed significantly to this 

success. The group is comprised of program experts to 

ensure continued error reduction through increased 

monitoring and analysis of error rate data, 

improvements in State corrective actions, and 
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FY 2007 Performance and Accountability Report 

increased technical assistance to States. These efforts 

made timely and useful payment accuracy-related 

information and tools available across the country. 

Additionally, the Department continued to use an 

early detection system to target States that may be 

experiencing a higher incidence of errors based on 

preliminary quality control (QC) data. Actions then 

are taken by regional offices to address these situations 

in the individual States. 

USDA’s close working relationship with its State 

partners during the last several years, along with 

program changes to simplify rules and reduce the 

potential for error, has resulted in consistent increases 

in the Food Stamp Payment Accuracy Rate. One of 

the most important factors in maintaining improved 

performance in this area is the need for State partners 

to continue and renew their leadership commitment to 

excellence in payment accuracy. To support State 

improvement, the Department will continue efforts 

with the National Payment Accuracy Work Group to 

share best-practice methods and strategies. USDA will 

also continue to resolve QC liabilities through 

settlements, which require States to invest in specific 

program improvements. 

Exhibit 52: Increase Efficiency in Food Management 

Fiscal Year 2007 

Annual Performance Goals and Indicators Target Actual Result 

5.3.1 Improve Food Program Management and Customer Service 

 Increase Food Stamp Payment Accuracy Rate 94.2% NA Deferred* 

*Food Stamp data will become available in June 2008. Results will be reported in the FY08PAR. 

Exhibit 53: Trends in Increased Efficiency in Food Management 

Fiscal Year 2007 

Trends 2003 2004 2005 2006 2007 

5.3.1 Increase Food Stamp Payment Accuracy 

Rate 93.4% 94.1% 94.2% 94.0% NA* 

*Food Stamp data will become available in June 2008. Results will be reported in the FY08PAR. 
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FY 2007 Performance and Accountability Report 

Strategic Goal 6: Protect and Enhance the 

Nation’s Natural Resource Base and 

Environment 

OBJECTIVE 6.1: PROTECT WATERSHED HEALTH TO 

ENSURE CLEAN AND ABUNDANT WATER

Overview 

Agricultural land and forest land produce food, feed, 

fiber, forest products and energy necessary to supply 

the Nation’s needs. Proper management of agricultural 

and forest land is important. Without proper 

management, water resources may become degraded. 

Application of conservation systems enables both 

productive use of natural resources and protection of 

natural resource quality. 

Key Outcome 

Clean and Abundant Water 

Many production practices have the potential to cause 

damage if they are not well managed. For example, 

tilling the soil and leaving it without plant cover for 

extended periods can accelerate soil erosion. Residues 

of chemical fertilizers and pesticides may wash off the 

field into streams or leach through the soil into 

groundwater. Irrigation can move salt and other 

dissolved minerals to surface water. Livestock 

operations produce large amounts of manure which, if 

not managed properly, can threaten human health and 

contribute to excess nutrient problems in wells, 

streams, rivers, lakes, and estuaries. When pollutants 

impair water quality, ecosystems are degraded and 

costs are imposed on those who rely on water for 

drinking and household use, recreational opportunities 

and economic livelihoods. Individuals, communities 

and the environment bear the consequences and the 

costs for degraded water quality. 

The quality of water resources can be protected by 

preventing the movement of sediments, nutrients and 

chemicals from agricultural lands. Conservation 

practices designed to prevent the transport of these 

materials from farmland can significantly reduce the 

movement of pollutants into groundwater, rivers, and 

lakes. These include conservation practices that reduce 

topsoil erosion, manage nutrients, and control runoff. 

In addition, vegetated buffers between farmland and 

water sources improve water quality and habitat for 

fish and wildlife populations by intercepting sediment, 

nitrogen and phosphorus in runoff before these 

pollutants enter lakes, ponds, wetlands, and waterways. 

Forested buffers also provide shade—thereby cooling 

streams and rivers—and provide conservation cover 

and improved wildlife habitats. 

Good management of water by agricultural producers 

is important to water supply as well as water quality. 

Agricultural irrigation accounts for a third of the water 

withdrawn from surface water and groundwater. 

USDA helps agricultural producers develop 

environmentally sound management practices for 

irrigation water management. The assistance includes 

information on soil quality, water management and 

quality, plant materials, resource management and 

wildlife habitat. The Department provided assistance 

to producers to improve irrigation water management 

on over 2.0 million acres in FY 2007. 

The Department provides technical and financial 

assistance to agricultural producers to promote good 

stewardship of agricultural land. In addition to 

assistance on working lands, financial assistance 

includes payments to agricultural producers for taking 

environmentally sensitive land out of production and 

planting it to long-term resource-conserving 

groundcover. Land owners and managers who receive 

technical assistance and cost-share or incentive 

payments are more likely to plan, apply and maintain 

conservation systems that support agricultural 

production and environmental quality as compatible 

goals. 

In addition to assistance to producers, USDA helps 

communities work together to protect community 

natural resources. USDA assistance focuses on areas 
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FY 2007 Performance and Accountability Report 

where conservation is expected to have the greatest 

positive effect. Assistance includes advice on drought 

and flood control management, collection and 

dissemination of natural resource data, and cost-share 

and technical guidelines. The assistance provided to 

State and local government entities, Tribes and 

private-sector organizations helps them protect the 

environment and improve the standard of living and 

quality of life for the people they represent. 

USDA provides a portfolio of services to help protect 

and enhance the Nation’s water resources. The 

portfolio includes technical assistance in planning and 

applying conservation, technical information on water 

resources, and financial assistance to apply 

conservation practices. 

In 2007, USDA conservation experts assisted people in 

writing or updating conservation plans on private land 

for more than 15.4 million acres of working cropland 

and 26.5 million acres of grazing lands. Conservation 

plans provide producers with information on the 

capability of their soil, condition of their grazing lands 

and woodlands, irrigation water management, wildlife 

habitat needs, and measures to improve or protect soil, 

water and air quality. These plans serve as a land-use 

management tool to support healthy soil, water, plant, 

animal, and human communities. The Department 

assisted agricultural producers with implementing 

planned practices on 15.9 million acres of cropland 

and 28.0 million acres of grazing lands. Of these acres, 

more than 32 million acres benefited from 

conservation practices selected to improve water 

quality. 

Much of USDA’s assistance for water quality is 

directed towards livestock producers to reduce the risk 

of nutrients entering waterways from animal 

operations. USDA worked with agricultural producers 

to develop comprehensive nutrient management plans 

(CNMPs) on more than 5,200 livestock operations 

and to complete implementation of plans on 4,400 

livestock operations. These plans include 

considerations for the collection, storage, and handling 

of wastes; nutrient management; land treatment 

practices for erosion control; and vegetated buffers to 

protect water bodies. 

The environmental benefits of USDA’s efforts to 

protect watersheds by controlling and managing 

agricultural runoff include healthier streams, rivers, 

estuaries, and lakes. These benefits also lead to 

improved ecosystems and wildlife habitats. Studies 

about the benefits of water-pollution reduction suggest 

that the annual benefits from improving water quality 

could total tens of billions of dollars. According to a 

2003 USDA report on agricultural resources and 

environmental indicators, water-quality benefits from 

erosion control on cropland alone could total more 

than $4 billion annually. Improved water resources 

reduce water treatment costs and mean safer drinking 

water supplies for communities. 

During FY 2007, USDA provided assistance to local 

groups and governments to develop watershed and 

area-wide plans. These plans address a wide range of 

water resources concerns. The Department also helped 

local communities complete the installation of 200 

flood-prevention or mitigation measures. In addition, 

the 13 dams determined to be at or nearing the end of 

their 50-year design life were rehabilitated or removed. 

Upgrading and removing these dams eliminated 

threats to life and property, mitigated flood damages, 

enhanced wetlands and wildlife, and created 

recreational benefits. 

USDA also provided producers with financial 

assistance. These incentives helped offset the cost of 

installing conservation practices and riparian and 

grassland buffers and maintained sound conservation. 

Major programs providing financial assistance for 

water resources included: 

 Environmental Quality Incentives Program 

(EQIP) provided nearly $453 million in cost-share 

and incentives for water conservation and water 

quality in FY 2007. EQIP assistance is provided 

for improving management on working land. In 

addition, EQIP funded grants to help partners 
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FY 2007 Performance and Accountability Report 

identify and solve regional, State and local natural 

resources concerns; 

 Conservation Reserve Program (CRP) is the 

nation’s largest private-lands conservation financial 

assistance program, with over 36 million acres 

enrolled. Producers enrolled in the program plant 

long-term, resource-conserving covers such as 

grasses and trees. In return, USDA provides 

participants with rental payments and cost-share 

assistance. Producers enter into 10-to-15-year 

contracts. The program gives equal consideration 

for soil erosion, water quality, and wildlife 

concerns, providing environmental and economic 

benefits both on and off the farm. 

Reduced soil erosion and fertilizer applications on 

CRP enrolled acreage improve water quality. 

Permanent vegetative cover reduces runoff, while 

conservation buffers filter runoff. By reducing water 

runoff and filtering nutrients and sediment, CRP 

enrolled acreage protects groundwater and helps 

improve the condition of lakes, rivers, ponds and 

streams. A study by the Food and Agricultural Policy 

Research Institute estimated the impact of CRP 

enrollment on nitrogen, phosphorus and erosion 

leaving field edge and root zones and showed 

significant reductions. These reductions mean that 

fewer pollutants enter water resources. CRP also 

assists in reversing the loss of wetlands, grassland and 

wildlife habitat that has occurred historically as lands 

were converted to agricultural use. 

A key USDA strategy for increasing conservation is 

facilitating the growth of market-based opportunities 

that encourage the private sector to invest in 

conservation on private lands. In FY 2007, USDA 

entered into a partnership agreement with the U.S. 

Environmental Protection Agency to establish and 

promote water quality credit trading markets through 

cooperative conservation. The agreement features a 

pilot project within the Chesapeake Bay basin to 

showcase the effectiveness of environmental markets. 

Water quality credit trading uses a market-based 

approach that offers incentives to farmers and ranchers 

who implement conservation practices that improve 

water quality. 

USDA provides essential information about water 

supply in the western states. Users accessed the 

National Water and Climate Center Web site millions 

of times. The site, http://www.wcc.nrcs.usda.gov/,

hosts data on snowpack, hydroclimate, and soil 

moisture, which helps agricultural producers effectively 

use limited water supplies for agricultural production. 

The data also assist Federal, State and local agencies to 

manage water compacts and treaties, and mitigate 

drought and flood damages. Officials from 

municipalities can visit the site for information on 

operating reservoirs and supporting fish and wildlifemanagement activities associated with species 

protection. This site also provides data to the scientific 

community. 

USDA’s Web-based energy awareness tools continue 

to attract farmers, ranchers, and others from across the 

U.S. and around the world. These tools are designed 

to help agricultural producers reduce energy costs and 

assist producers in identifying ways to manage their 

operations more efficiently. In FY 2007, USDA 

released the Energy Estimator for Animal Housing, 

which helps producers estimate energy savings for 

poultry, swine, and dairy operations. This new tool 

joins the Energy Estimator for Tillage, Energy 

Estimator for Nitrogen Fertilizer and Energy 

Estimator for Irrigation, which were released in FY 

2006. These tools help protect water resources and 

reduce energy costs. 
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FY 2007 Performance and Accountability Report 

Selected Results in Research, Extension and Statistics 

Diet Change in Animals Can Reduce Air and Water Pollution. 

Agriculture is the primary source of ammonia in the atmosphere in 

the U.S. Once in the atmosphere, ammonia can be converted to fine 

particulate matter, one of the six U.S. Environmental Protection 

Agency criteria pollutants. It can pollute bodies of water, as well. A 

study evaluated the effect on air emissions of feeding swine and 

broiler chickens reduced crude protein diets. The impact was a 40-

to-50 percent reduction in ammonia emissions with no negative 

performance effects in either species. 

Less Greenhouse Gas—and More Carbon Credits Per Pig. This 

achievement marks the latest environment-friendly benefits being 

credited to an innovative hog waste-management system invented 

by USDA scientists in South Carolina. The system turns hog waste 

into material for soil amendments and fertilizers. Simultaneously, the 

process removes almost all suspended solids, phosphorus and 

ammonia from wastewater. The researchers found that replacing 

conventional anaerobic lagoon practices with the new system 

reduced greenhouse gas emissions by 97 percent. In turn, this 

reduction cut annual emissions from 4,972 tons of carbon dioxide 

equivalents to just 153 tons. These numbers indicate that the 

system may assist the fledgling carbon dioxide trading market. 

Farmers then would be able to earn money based on how much 

carbon dioxide and other greenhouse gases they can prevent from 

entering the atmosphere using alternative technologies. 

Online Cropland Data Layers (CDL). CDL combines remote 

sensing imagery and USDA survey data to produce supplemental 

acreage estimates for a given State’s major commodities. The entire 

CDL inventory produced by the Department was posted on its 

GeoSpatial Gateway at 

http://datagateway.nrcs.usda.gov/GatewayHome.html. There, 

interested users will be able to browse, query and download the 

CDL inventory. In the past, the data have been used for watershed 

and water quality monitoring, grain transportation and storage 

planning, crop rotation pattern analysis across years, quality control 

for other Government or commercial land use categorizations, 

prairie water pothole monitoring, and agribusiness planning for 

processing plant location. Data users include commercial entities, 

such as crop insurance, seed, fertilizer and chemical and equipment 

companies. Educational institutions, Governmental agencies and 

not-for-profits also use the information.

Challenges for the Future 

External factors present challenges to accomplishing 

the conservation goals set by USDA. If market prices 

are favorable, agricultural producers may be enticed 

into leaving targeted, environmentally sensitive 

cropland in crop production rather than establishing 

long-term conservation covers or buffers. High fuel 

prices affect farmers and ranchers by increasing 

overhead costs. Landowners may be more reluctant to 

enroll in new programs, implement new conservation 

practices or adopt new technologies that could 

decrease their bottom line. Additionally, natural 

disasters and prolonged drought conditions may also 

reduce the effectiveness of USDA’s conservation 

programs. 

Analysis of Results 

In FY 2007, USDA made significant progress towards 

protecting watershed health to ensure clean and 

abundant water. 

In FY2007 targets were set for the Conservation 

Technical Assistance Program (CTA) and 

Environmental Quality Incentives Program (EQIP) 

for helping livestock producers apply comprehensive 

nutrient management plans (CNMPs). These systems 

include conservation practices implemented for waste 

collection and storage, nutrient management, land 

treatment practices for erosion control, and vegetated 

buffers to protect water bodies. These actions enable 

agriculture to meet long-term goals for clean water. 

USDA met its FY 2007 target for CTA, but did not 

meet its target for EQIP. CNMPs are complex 

systems that require substantial investment of technical 

assistance, financial resources, and management. As 

animal agriculture has become more concentrated, 

public concern has increased about the potential for 

damage to the environment. USDA has focused on 

helping producers comply with State and local 

regulations and minimize the potential that their 

operations might damage water or air resources. 

However, uncertainty over the Concentrated Animal 

Feeding Operation Rule may have had an impact on 

the implementation of CNMPs. 

The long-term goal for USDA conservation programs 

is to protect and enhance the Nation’s natural 

resources and environment to meet the needs of 

current and future generations. The USDA Strategic 

Plan for FY 2005-2010 set a strategy of helping 

producers increase the number of riparian and grass 
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FY 2007 Performance and Accountability Report 

buffers on agricultural lands. These buffer areas 

intercept sediment and nutrients before they reach 

surface waters. As one indicator of its performance in 

achieving this strategy, USDA monitors acreage of 

agricultural lands to be enrolled as buffer zones in 

CRP. During the past five years, the number of acres 

set aside as buffer areas under the CRP program has 

increased steadily. However, the performance target of 

2 million acres was missed by approximately .05 

million acres this fiscal year. One main reason for the 

missed target was the dramatic increase in commodity 

prices in recent months. For example, in November 

2006, prices for corn, wheat, and soybeans increased 

96, 25, and 15 percent respectively. These higher 

values have increased what farmers can get for their 

crops and reduced the incentive to take their farmland 

out of production and enroll it into the CRP. 

Additionally, expected land rental rate adjustments are 

creating some market uncertainty leading eligible 

producers to delay enrollment in the program. 

Currently, producers have set aside approximately 1.95 

million acres as CRP buffer areas. Total CRP 

enrollment now stands at 36.7 million acres. The last 

available data indicate that the program has assisted in 

reducing soil erosion by 454 million tons annually, 

reducing nitrogen, phosphorus and sediment leaving 

the field by more than 85 percent, and sequestering 

more than 48 million metric tons of carbon. 

External factors present challenges to accomplishing 

the conservation goals set by USDA. If market prices 

are favorable, agricultural producers may choose to 

continue to crop environmentally sensitive land rather 

than establishing long-term conservation covers or 

buffers. High fuel prices affect farmers and ranchers by 

increasing overhead costs. Landowners may be more 

reluctant to participate in new programs, implement 

new conservation practices or adopt new technologies 

that could affect their bottom line. Natural disasters 

and prolonged drought conditions may also reduce 

producers’ ability to participate in USDA’s 

conservation programs.

Exhibit 54: Healthy Watersheds, High Quality Soils and Sustainable Ecosystems 

Fiscal Year 2007 

Annual Performance Goals and Indicators Target Actual Result 

6.1.1 Number of Comprehensive Nutrients Management Plans applied 

 Conservation Technical Assistance 1,900 1,9111

 Met 

 Environmental Quality Incentives Program 3,000 2,490 2

 Unmet 

6.1.2 Increase Conservation Reserve Program (CRP) acres of riparian 

and grass buffers 

2.0 million 

acres3

1.95 million 

acres3

Unmet 

1

 Data assessment metrics to meet the target allow for an actual number in the range 1,710 - 2,090. 

2

 Data assessment metrics to meet the target allow for an actual number in the range 2,700 – 3,300. 

3

 Cumulative. 

Exhibit 55: Trends in Application of Comprehensive Nutrient Management Plans and CRP Riparian and Grass Buffers 

Fiscal Year Actual 

Trends 2003 2004 2005 2006 2007 

6.1.1 Number of Comprehensive Nutrient 

Management Plans applied 

 

 Conservation Technical Assistance 2,132 2,372 2,420 2,269 1,911 

 Environmental Quality Incentives 

Program 

948 1,055 2,032 2,774 2,490 

6.1.2 Increase Conservation Reserve Program 

(CRP) acres of riparian and grass buffers 

1.45 million 

acres1

1.65 million 

acres1

1.75 million 

acres1

1.86 million 

acres1

1.95 million 

acres1

1

 Cumulative. 
ANNUAL PERFORMANCE REPORT 

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FY 2007 Performance and Accountability Report 

Objective 6.2: Enhance Soil Quality to Maintain 

Productive Working Cropland 

Overview 

High quality soils are the foundation of productive 

croplands, forest lands and grasslands. Soil quality 

management focuses on sustaining and enhancing soil 

condition to provide both agricultural and 

environmental benefits. Intensively used soils, such as 

those used for the production of annual crops, are most 

vulnerable to degradation. 

Key Outcome 

Enhanced Soil Quality 

High quality soils are also the foundation of a healthy 

environment, benefiting water, air, plants and animals. 

In terms of water quality, soils provide for the efficient 

cycling of nutrients and breakdown of pesticides, 

preventing unwanted materials from entering surface 

and ground water. Healthy soils also sequester carbon. 

This process reduces atmospheric carbon dioxide levels 

that contribute to climate change. High quality soils 

also sustain plant and animal life through increased 

water holding capacity and improved filtration ―

reducing the negative impacts of drought, flood and 

disease. 

Soil quality is affected by management—it can be 

degraded by poor management or maintained and even 

improved by good management. Conservation 

practices, such as residue-tillage management, cover 

crops, crop rotations, strip-cropping and irrigationwater management reduce soil erosion and 

compaction, increase soil organic matter and improve 

its water-holding capacity. 

USDA has set a long-term objective for improving 

cropland soil condition. The soils most vulnerable to 

damage are those in such intensive uses as annual 

cropping. In 2003, 60 percent of the Nation’s cropland 

was farmed under systems that maintained or 

improved soil condition and its capacity to sequester 

carbon. By 2010, the goal is to increase that number to 

70 percent. 

USDA helps producers plan and apply conservation 

practices to enhance soil health. The most widely 

applied practices were conservation crop rotations and 

residue-tillage management. These practices protect 

soil quality by reducing erosion and increasing organic 

matter and carbon. 

Land managers who receive the Department’s 

technical assistance are more likely to plan, apply and 

maintain conservation systems that support 

agricultural production and environmental quality as 

compatible goals. Thus, producers can be good 

stewards of the Nation’s resource base. Their good 

management ensures that the Nation will continue to 

have a quality soil-resource base. Such a resource base 

enables the sustained production of a safe, healthy and 

abundant food supply. 

High quality soils support the efficient production of 

crops for food, fiber and energy. Proper soil 

management maximizes agricultural production and 

improves the environment. By helping producers 

reduce erosion, minimize compaction and increase soil 

organic matter, USDA helps producers enhance the 

quality of cropland soils. 

Information on soil properties is the essential basis for 

protecting and enhancing soil quality. In FY 2007, 

USDA mapped or updated soil surveys for 36.4 

million acres. Additionally, 96 legacy surveys were 

published, covering about 52 million acres. The 

surveys are available at 

http://websoilsurvey.nrcs.usda.gov/app/WebSoilSurve

y.aspx. A recent customer-satisfaction poll ranks the 

Web soil survey as a top Internet destination. The site 

boasts almost 24,000 visits per week. Soil surveys offer 

local information on the capabilities and conservation 

treatment needs of soils within a given region. They 

provide basic information for conservation planning. 

The surveys also represent the foundation to sound 

land use planning and agricultural production. USDA 

provides the scientific expertise to enable a uniform 
ANNUAL PERFORMANCE REPORT 

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FY 2007 Performance and Accountability Report 

system of mapping and assessing soil resources across 

the Nation. Historically, the Department has produced 

soil surveys along geo-political boundaries. Future 

efforts will be directed toward developing dynamic, 

seamless national soil survey coverage. 

USDA helped producers develop or update 

conservation plans covering 15.4 million acres of 

cropland and 24.3 million acres of grazing land 

recorded in its national conservation plan database. 

Additionally, technical consultations helped land 

managers with other decisions not recorded as a final 

plan in the database. To develop plans for good 

stewardship of soil resources, Department conservation 

planners helped land managers work through a 

structured process to analyze and work with complex 

natural processes in definable and measurable terms. 

Conservation plans for individual fields and farms are 

designed in the context of the larger landscape. They 

enable the producer to meet economic and 

environmental goals. 

USDA helps producers implement conservation 

practices on their land that meet established technical 

standards and specifications. Most quantitative 

performance measures that the Department has 

established for its conservation programs are for 

practices implemented. Implementation feeds directly 

into achieving long-term outcome goals. In FY 2007, 

USDA assisted in applying conservation practices on 

14.2 million acres of cropland. 

USDA provides financial assistance to encourage 

producers to adopt land treatment practices proven to 

provide significant public benefits. In FY 2007, 

financial assistance for practices applied primarily to 

address soil quality issues included $349 million in 

Environmental Quality Incentives Program (EQIP) 

cost-shares, or incentives for adopting structural 

measures or management practices to reduce erosion 

and protect cropland. 

Analysis of Results 

USDA met its targets for helping producers apply 

conservation practices to improve soil quality on 

cropland. This performance measure includes all 

cropland and hay land on which USDA-assisted 

producers apply conservation measures to maintain or 

enhance soil quality, and enable sustained production 

of safe, healthy and abundant food supply. Targets are 

set only for the Conservation Technical Assistance 

Program (CTA) and the Environmental Quality 

Incentives Program (EQIP). CTA provides assistance 

for the most widely-used, economically feasible 

practices such as residue-tillage management. USDA 

exceeded the target for assistance provided with CTA. 

EQIP provides cost shares for capital-intensive 

practices needed to solve difficult problems on 

environmentally sensitive land or comply with local or 

State regulations. Small acreages also are protected 

through other programs. Because conservation plans 

and practices may be applied with assistance from 

more than one program, some acres reported for one 

program also may be included in those reported for 

another program. 

The Conservation Security Program (CSP) is a 

voluntary program that provides financial and 

technical assistance to promote conservation on 

working agricultural lands. The CSP supports ongoing 

natural resource stewardship by identifying and 

rewarding those farmers and ranchers meeting the very 

highest standards of conservation and creating 

powerful incentives for other producers to meet those 

same standards. CSP provides payments for 

enhancement activities, which are management 

measures that exceed the sustainability level for a given 

resource, concern, or go beyond the minimum 

requirements of a management practice. Performance 

measures for CSP reflect new conservation 

enhancement activities applied on cropland. In 

FY2007 USDA met its CSP targets. 

Application of conservation practices that improve soil 

quality is considered the best indicator of 

accomplishments that link directly to the long-term 
ANNUAL PERFORMANCE REPORT 

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FY 2007 Performance and Accountability Report 

objective of increasing the acreage under soilenhancing management. Farming is dynamic because 

producers frequently change crops, equipment and 

management practices. Thus, they need help in 

adjusting conservation systems even on land well 

protected through the previous system. The 

Department helped producers apply conservation 

practices in plans covering 15.9 million acres of 

cropland and 23.6 million acres of grazing land. The 

majority of this basic soil protection was planned 

through CTA and applied with assistance through the 

program and EQIP. 

Economics and weather can impact producers’ 

willingness to adopt conservation measures that 

improve soil condition on cropland. Market conditions 

and rising energy costs could affect producers’ abilities 

to invest their own funds and willingness to take any 

risk associated with changing management. Natural 

disasters and prolonged unfavorable weather 

conditions also could reduce the opportunities for 

producers to implement conservation practices. As it 

relates to the soil data collection and dissemination, 

budget and staffing constraints in partnering Federal 

and State agencies and universities could reduce the 

number of acres mapped and the total number of soil 

surveys updated. 

USDA, in cooperation with other Federal, State, 

Tribal and local agencies, and private organizations, 

will work to provide producers with information and 

other resources they need to adopt applicable 

conservation measures. USDA will face challenges 

associated with soil data collection and dissemination. 

The Department will seek to strengthen partnerships 

and form new ones with entities having common 

interests. It will also use technology to improve datacollection efficiency. 

Exhibit 56: Enhanced Soil Quality 

Fiscal Year 2007 

Annual Performance Goals and Indicators Target Actual Result 

6.2.1 Cropland with conservation applied to improve soil quality, millions 

of acres 

Met 

 Conservation Technical Assistance Program 6.0 7.3 

 Environmental Quality Incentives Program 5.0 5.3 

 Conservation Security Program 0.14 0.14 

Exhibit 57: Trends in Soil Quality Protection 

Fiscal Year Actual 

Trends 2003 2004 2005 2006 2007 

6.2.1 Cropland with conservation applied to 

improve soil quality, millions of acres 

 Conservation Technical Assistance N/A1 N/A1 6.0 6.4 7.3 

 Environmental Quality Incentives 

Program 

N/A1 N/A1 2.2 3.4 5.3 

 Conservation Security Program N/A 1.3 7.2 1.4 0.14 1

This measure is new for the Department in FY 2007, but relates to the prior year measure for Cropland Soils Protected from Excessive 

Erosion. The measure has been designed to provide a better indicator of soil quality and includes all cropland and hay land on which 

USDA assisted producers to apply conservation measures to maintain or enhance soil quality and enable sustained production of safe, 

healthy, and abundant food supply. Performance data for FY2006 and FY2005 have been provided to indicate the prior year performance 

had this measure been employed at that time. 
ANNUAL PERFORMANCE REPORT 

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FY 2007 Performance and Accountability Report 

Selected Results in Research, Extension and Statistics 

Improving Wine Grapes by Measuring Soil Moisture. Thanks 

to a USDA-supported research project, ground-penetrating radar 

was used to map soil moisture down to a one-centimeter grid to 

varying depths in a commercial vineyard. This allows vineyard 

operators to refine their irrigation strategies to improve grape 

quality. Wine grapes are dependent on slight water stress. This 

new technology could increase both yield and quality, factors 

often inversely related in wine making, while also saving water. 

Sustaining the Soil for Shallow-rooted Vegetable Crop 

Systems. Heavily fertilized crops with shallow roots, such as 

potatoes, that leave small amounts of crop residue are susceptible 

to erosion and nitrate leaching. Studies by USDA scientists 

determined that nitrate leaching was minimized and soil nitrogen 

recovery improved significantly when a shallow-rooted crop was 

followed with a deep-rooted winter cover crop like winter rye, 

malting barley or winter wheat. 

OBJECTIVE 6.3: PROTECT FORESTS AND GRASSLANDS

Overview 

Key Outcome 

Sustainable Forest and Grassland Ecosystems 

Healthy forests and grasslands are essential to our 

quality of life. Comprising half of the Nation’s land, 

these areas provide timber and livestock forage. They 

also contribute to the health and well-being of the 

Nation’s water supply, air and wildlife. To ensure these 

resources are protected, USDA looks to reduce fire 

danger, minimize the threat of invasive species and 

apply conservation practices that reduce erosion and 

improve water quality. 

USDA serves as an active manager of 193 million acres 

of national forests and grasslands and a technical 

assistance provider on non-Federal forests and 

grasslands. The latter comprises almost half of the 

continental U.S. As an active manager of Federal 

lands, the Department protects and manages national 

forests and grasslands so they support multiple uses. 

Using technical and financial assistance, USDA also 

helps landowners and operators address the risks on 

privately owned land, using conservation practices. 

Conservation practices applied with Department 

assistance include prescribed grazing, integrated pest 

management, brush management, forest stand 

improvement and tree planting. These practices, alone 

and in combination, create and maintain productive 

and environmentally beneficial landscapes. 

Four serious threats pose an increasing risk to the 

values, goods and services provided by public and 

private forestland and grassland. These threats include 

wildland 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, 

with a focus on the whole landscape. 

USDA’s forest protection performance measure 

focuses on reducing the risks of catastrophic wildland 

fire. Its performance measure for grazing land and 

non-Federal forestland focuses on increasing the 

amount of land under conservation management that 

will protect ecosystem health and reduce susceptibility 

to damage by drought, invasive species and wildfire. 

Challenges for the Future 

Challenges include ensuring public and firefighter 

safety while protecting public lands and assets still 

threatened by fire in forests dense with ever-increasing 

vegetation and fuel. Additional challenges are the 

continued drought conditions throughout much of the 

Nation and the expansion of communities into 

previously uninhabited wildlands. This expansion 

makes up what is known as the wildland urban 

interface. The historical trend shows increasing impact 

from wildland fire. As drought continues and 

communities expand into forested areas, the potential 

increases for even more deadly and damaging fires. 

Another challenge is the cost of containing wildfires. 
ANNUAL PERFORMANCE REPORT 

113 

FY 2007 Performance and Accountability Report 

The 2002 coarse scale assessment of wildland fuels 

determined that approximately 56 percent of all acres 

managed by USDA have missed 2 or more expected 

fire cycles and are at elevated risk from wildland fire. 

The finer scale data available from LANDFIRE is 

expected to show an even greater departure from 

expected conditions in the Nation’s forests and 

woodlands. Commercial utilization of excess 

vegetation has been identified as one way to lower the 

cost of Government forest fuel-reduction and 

restoration treatments. A barrier to expanding forest 

biomass utilization is the limited market for this 

material because of reduced forest products processing 

capacity in many Western States. Much of this 

material is small diameter and non-traditional species. 

This factor presents a further barrier to utilization 

where forest products processing capacity remains. 

Title II of Healthy Forests Restoration Act of 2003 

(HFRA) authorizes measures to further commercial 

use of biomass. A significant challenge for USDA and 

DOI is to expand the acreage of hazardous fuel and 

restoration treatments with available funding by 

increasing the commercial utilization of hazardous 

fuel. The Departments are developing a strategy to 

encourage greater biomass utilization, including as a 

domestic source of energy. 

With regard to private land, producers’ willingness and 

ability to implement the conservation measures that 

would achieve this outcome are affected by economic 

conditions, drought and invasive species. Much of 

USDA’s activities on private forestland and rangeland 

are taken in cooperation with State agencies. Thus, 

State-level budget constraints that limited the 

assistance available from State programs would hamper 

USDA efforts to meet the goal for non-Federal 

grazing land. 

Both forest and grasslands are subject to land 

fragmentation pressures. Private forest land is the 

major source of newly developed acres. Increasing 

fragmentation of forest and grassland landscapes will 

increase the risk of invasive species and wildfires. It 

may also threaten the overall health of forest and 

grassland ecosystems. To minimize problems, USDA 

will make more information and better planning tools 

available to local communities. This assistance will 

help them plan comprehensively for growth and 

resource protection. 

USDA, in cooperation with other Federal, State, 

Tribal and local agencies and private organizations, 

will work to provide producers with information and 

other resources they need to adopt applicable 

conservation measures. 

Reducing the Risk of Wildfire 

More than 21 million acres of National Forest lands 

burned during the FY 2007 fire season. Nationwide, 

wildfires consumed more than 9 million acres of public 

and private land. USDA and the U.S. Department of 

the Interior (DOI) are using tools and authorities 

provided by the President’s Healthy Forests Initiative 

(HFI) and the HFRA to promote project planning 

and implementation to reduce fire hazards and restore 

forests and grasslands. HFI was launched in 2002 to 

reduce administrative process delays. HFRA provides 

improved statutory processes for hazardous fuel 

reduction projects. It also provides other authorities 

direction to help reduce hazardous fuel and restore 

healthy forest and rangeland conditions on lands of all 

ownerships. The USDA-DOI projects largely consist 

of removing excess vegetation and prescribed burning 

(collectively, hazardous fuel reduction) to reduce the 

risk from wildfires. 

Removing excess vegetation decreases fire hazards, 

which improves firefighter and public safety. USDA 

treated more than 3 million acres to remove excess 

vegetation. Approximately 1.7 million of these acres 

were treated specifically to reduce hazardous fuels. On 

an additional 0.8 million acres, hazardous fuel levels 

were reduced through watershed restoration and 

wildlife habitat rehabilitation treatments. The 

Department also achieved management objectives on 

more than 250,000 acres when naturally ignited fires 

met management prescriptions. 
ANNUAL PERFORMANCE REPORT 

114 

FY 2007 Performance and Accountability Report 

USDA’s efforts to reduce the risks of wildfire are 

conducted in collaboration with Federal, State, tribal 

and local Governments, and non-Governmental 

organizations. USDA participated actively in 

Cooperative Conservation, promoting full partnership 

in the conservation of natural resources and the 

environment. Cooperative Conservation is a voluntary 

program established to foster conservation partnerships 

that focus technical and financial resources on 

conservation priorities in watersheds and airsheds of 

special significance. The Department is working with 

communities to develop Community Wildfire 

Protection Plans (CWPP). CWPPs identify wildland 

fire hazards in areas within and surrounding 

communities. They also identify high-priority 

hazardous fuels to treat for USDA. Additionally, 

CWPPs assist private citizens in understanding better 

the role fire plays in ecosystem health, interacting 

positively with Federal land managers and creating 

business opportunities. 

In addition to working on CWPPs, the Department 

has updated the National Fire Plan’s 10-year 

Comprehensive Strategy Implementation Plan, in 

cooperation with DOI, State and local Governments, 

and non-Governmental partners. This plan identifies a 

collaborative approach for reducing wildland fire risks 

to communities and the environment. Goals 

established in the original 10-Year Comprehensive 

Strategy Implementation Plan were met in FY 2006, 

just five years after the National Fire Plan’s 

establishment. 

Other 2007 accomplishments in addressing hazardous 

fuel conditions and reducing the impacts of wildfire 

include: 

 Developing new fire and fuels performance 

measures to more effectively measure the impact of 

treatments on the landscape; 

 Investing more than 60 percent of the dollars 

available for hazardous fuel treatments in the 

wildland urban interface near communities; 

 Continuing development of LANDFIRE, an 

interagency landscape-scale fire, ecosystem and 

vegetation-mapping project, and completed 

mapping the western United States. LANDFIRE 

is designed to help land managers make informed 

decisions for treatments to reduce wildland fire 

risks across landscapes; 

 Increasing wildland fire use (allowing natural 

ignitions to burn to meet resource objectives in 

areas designated in Fire Management Plans if they 

meet predetermined conditions) on more than 

250,000 acres; 

 Enhancing the Hazardous Fuel Prioritization and 

Allocation System to help USDA managers 

identify and display national priorities 

geographically. This system incorporates 

Geographic Information System data across a wide 

range of emphasis areas, from wildfire potential to 

wildland-urban interface areas at risk from 

catastrophic wildfires; and 

 Developing a Fire Program Analysis prototype. 

This prototype incorporates initial response 

simulation and large fire statistical models with a 

decision support system to be used to assist 

managers allocate fire preparedness funding. 

Protecting communities and restoring forests and 

grasslands involves the integration of several key 

USDA programs that manage vegetation. The 

hazardous fuel reduction program is a key piece of this 

effort, along with treatments to improve timber and 

range productivity, wildlife habitat, forest health, and 

watershed quality. USDA and DOI are working 

together to implement a seven-step framework for the 

Strategic Placement of Treatments (SPOTS). This 

approach to designing treatment patterns at landscape 

scales specifically to reduce fire size and severity and 

alter problem fire behavior while also benefiting other 

resources is a way to leverage funds and align multiple 

management objectives into a single plan for 

interventions tailored to site-specific needs and 

challenges. SPOTS approaches will support and 
ANNUAL PERFORMANCE REPORT 

115 

FY 2007 Performance and Accountability Report 

increase the Department’s ability to protect 

communities and resources through active 

management of forests and rangelands. 

Improving Grazing Land Condition 

Non-Federal lands in forest and grassland ecosystems 

make up almost half of the continental United States. 

USDA helped landowners apply conservation practices 

on more than 27 million acres of privately managed 

grazing and forest lands. The practices protect soil 

quality, prevent soil erosion and provide sustainable 

forage and cover for livestock and wildlife. 

To help achieve the targets for non-Federal forestland 

and grazing lands, USDA provided a portfolio of 

products and services, including: 

 Conservation Planning and Technical Consultation—

USDA helped producers develop or update 

conservation plans covering 26.5 million acres of 

grazing lands. The Department also provided 

technical advice to Tribes, communities and other 

Federal land management agencies; 

 Conservation Implementation—USDA assisted in 

applying conservation practices on almost 28.0 

million acres of non-Federal grazing lands. These 

lands included rangeland, pastureland, grazed 

forest and native pasture; and 

 Financial Assistance—The Department provided 

financial assistance to encourage producers to 

adopt land treatment practices proven to benefit 

the public. Financial assistance for practices 

applied primarily to protect and enhance grazing 

land and forestland included $113 million in 

Environmental Quality Incentives Program 

(EQIP) cost-shares or incentives for adoption of 

structural measures or management practices. 

EQIP provide a voluntary conservation program 

for farmers and ranchers that promotes agricultural 

production and environmental quality as 

compatible national goals. 

Selected Results in Research, Extension and Statistics 

Protecting Grasslands and Pastures from Invasive Weeds. In 

Oregon, a conservative estimate of the economic impact of the 

State’s 12 worst noxious weeds is $67 million annually. Through 

USDA-supported research, ragwort (Senecio jacobaea), a weed of 

roadsides, pastures and grasslands, has been successfully 

controlled by biological methods. Assuming that at least half of the 

benefits calculated for controlling ragwort at its peak can be 

attributed to this research, the annual benefits to Oregon growers 

and livestock producers amount to $3 million. 

Plant Can Remove Cadmium and Other Heavy Metals from 

Contaminated Soils. USDA scientists have shown that a simple 

plant called alpine pennycress (Thlaspi caerulescens) can remove 

cadmium and other heavy metals from contaminated soils. This soilremediation process is known as phytoextraction. The Department 

has led the way in using metal-accumulating plants to clean 

contaminated soil. Scientists demonstrated that the plant genus T. 

caerulescens can concentrate up to about 8,000 parts-per-million of 

toxic cadmium in its leaves. Harvesting the aboveground vegetation 

annually makes it possible to reduce the concentration of cadmium 

in soil to safe levels in 3 to 10 years. Phytoextraction costs about 

$250 to $1,000 per acre per year, while the alternative clean-up 

method—removal and replacement with clean soil—costs about $1 

million per acre. 

Analysis of Results 

USDA exceeded its performance goals for protecting 

the health of the Nation’s forests and grasslands 

against the risk of fire in all but one performance 

measure. Adjustments made in the third quarter of the 

fiscal year allowed managers to address potential 

shortfalls in many parts of the country due to resources 

redirected to wildfire suppression activities. In Florida 

and Georgia, for example, USDA support of 

suppression operations in the Okefenokee Swamp fire 

limited prescribed fire operations elsewhere in the 

region. 

USDA tracked hazardous fuel treatment with a single 

performance measure for all treatment activities prior 

to FY 2001 and the National Fire Plan’s launch. In FY 

2003, an additional performance measure based on fire 

regime condition class was established to track 

treatment on forests more susceptible to catastrophic 

wildland fire because of excess vegetation resulting 

from fire exclusion. 
ANNUAL PERFORMANCE REPORT 

116 

FY 2007 Performance and Accountability Report 

Nationwide drought conditions, community expansion 

into previously uninhabited wildlands and densely 

vegetated forests increases the chances of more deadly 

and damaging wildfires. The 2002 coarse scale 

assessment of wildland fuels determined that 

approximately 56 percent of all acres managed by 

USDA have missed 2 or more expected fire cycles. It 

also showed that the acres are at elevated risk from 

wildland fire. The finer scale data available from 

LANDFIRE is expected to show an even greater 

departure from expected conditions in the Nation’s 

forests and woodlands. 

Another challenge is the cost of containing wildfires. 

Commercial utilization of excess vegetation has been 

identified as one way to lower the cost of Government 

forest fuel-reduction and restoration treatments. A 

barrier to expanding forest biomass utilization is the 

limited market for this material. This barrier is 

attributed to the reduced capacity of forest product 

processing in many western States. Even where 

processing capacity exists, utilization is limited because 

much of this material is of small diameter and is from 

non-traditional species. Title II of HFRA authorizes 

measures to further commercial use of biomass. USDA 

and DOI are developing a strategy to encourage 

greater biomass utilization, including as a domestic 

source of energy. 

Protecting communities and restoring forests and 

grasslands involves combining several key USDA 

programs that manage vegetation. These programs 

include hazardous fuel reduction and treatments to 

improve timber and range productivity, wildlife 

habitat, forest health and watershed quality. USDA 

and DOI are working together to implement a sevenstep framework for the Strategic Placement of 

Treatments (SPOTS). This approach involves 

designing treatment patterns at landscape scales 

specifically to reduce fire size and severity. It also 

would alter problem fire behavior while also benefiting 

other resources. SPOTS can leverage funds and align 

multiple management objectives into a single plan for 

interventions tailored to site-specific needs and 

challenges. Its approaches will support and increase the 

Department’s ability to protect communities and 

resources through active management of forests and 

rangelands. 

USDA exceeded its 2007 targets for CTA and EQIP 

for assisting in the protection and enhancement of 

non-Federal grazing land. USDA met its targets for 

the CSP. In 2000, an estimated 288 million acres of 

non-Federal grazing land were in minimal or 

degrading condition. The Department’s long-term 

goal is to reduce that by 100 million acres by 2010. 

The measure of acres of grazing land treated is an 

indicator of progress toward the goal of improved 

condition. A surrogate annual measure is needed 

because improvement in condition resulting from 

improved management generally happens slowly. 

Response to changed management is slow because the 

moisture available to support plant growth is limited in 

rangeland ecosystems. The measure includes all land 

on which producers applied a conservation practice in 

the fiscal year with USDA technical or financial 

assistance. The conservation applied includes a wide 

range of practices tailored to the resource conditions 

and producer’s operation and goals on the specific site. 

The conservation practices applied help protect the 

resource base against on-site damage. They also 

prevent damage to off-site soil, water and air. High 

priority was given to activities to achieve the reduction 

of non-point source pollution in impaired watersheds, 

reduction of emissions to meet ambient air quality 

standards, reduction of soil erosion below the tolerable 

rate and the promotion of habitat for at-risk species. 

EQIP provided financial and technical assistance in 

implementing capital-intensive measures. 

Conservation Technical Assistance was provided for 

measures that producers financed entirely with their 

own funds or with assistance from non-USDA 

sources. 

A key component of the assistance USDA provided 

was expertise to develop comprehensive site-specific 

conservation plans. These plans are designed to enable 
ANNUAL PERFORMANCE REPORT 

117 

FY 2007 Performance and Accountability Report 

producers to meet their economic and environmental 

goals. Department technical assistance for planning 

enables resource managers to focus on the natural 

systems and ecological processes that maintain the 

natural resource base. This comprehensive approach 

considers all of the aspects of a site and sees it as a part 

of a larger landscape. The approach is essential to the 

sustainable, productive use of natural resources. 

To increase the effectiveness of its ongoing efforts to 

help people protect and enhance plant and animal 

communities, USDA is working to improve the 

technology for measuring conditions. The Department 

also is projecting the results of management options on 

grazing lands. Activities include accelerating the 

development of methodologies to measure and 

monitor grazing land health, developing plants with a 

natural resistance to pests and working with partners 

to address grazing land health, including efforts to 

control invasive species. 

With regard to private land, producers’ willingness and 

ability to implement the conservation measures that 

would achieve this outcome are affected by economic 

conditions, drought and invasive species. USDA, in 

cooperation with other Federal, State, Tribal and local 

agencies and private organizations, will work to 

provide producers with information and other 

resources they need to adopt needed conservation 

measures. 

Since much of USDA’s activities on private forestland 

and rangeland occur in cooperation with State 

agencies, State-level budget constraints may hamper 

USDA efforts to meet the goal for non-Federal 

grazing land.

Exhibit 58: Hazardous Fuel Reduction 

Fiscal Year 2007 

Annual Performance Goals and Indicators Target Actual Result 

6.3.1 Number of acres of hazardous fuel treated that are in the wildland 

urban interface 

1,400,000 1,139,000 Unmet* 

6.3.2 Number of acres of hazardous fuel treated that are in condition 

Classes 2 or 3 in Fire Regimes I, II, or III outside the wildlandurban interface 

350,000 528,000 Exceeded 

6.3.3 Number of acres in Condition Class 2 or 3 in Fire Regimes I, II, or 

III treated by all land management activities that improve Condition 

Class 

1,100,000 1,301,000 Exceeded 

Actual accomplishments are as of the close of FY 2007 for these measures 

Exhibit 59: Trends in Treatment of Hazardous Fuel 

Fiscal Year Actual (thousand acres) 

Trends 2003 2004 2005 2006 2007 

6.3.1 Number of acres of hazardous fuel treated that are in 

the wildland urban interface 

1,114 1,311 1,094 1,045 1,139

6.3.2 Number of acres of hazardous fuel treated that are in 

condition Classes 2 or 3 in Fire Regimes I, II, or III 

outside the wildland-urban interface 

339 492 470 409 528 

6.3.3 Number of acres in Condition Class 2 or 3 in Fire 

Regimes I, II, or III treated by all land management 

activities that improve Condition Class 

N/A 758 1,058 1,093 1,301 
ANNUAL PERFORMANCE REPORT 

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FY 2007 Performance and Accountability Report 

Exhibit 60: Sustainable Forests and Grasslands 

Fiscal Year 2007 

Annual Performance Goals and Indicators Target Actual Result 

6.3.4 Grazing and forest land with conservation applied to protect and 

improve the resource base, millions of acres 

 

 Conservation Technical Assistance 8.0 14.2 

 Environmental Quality Incentives Program 13.0 16.5 

 Conservation Security Program 0.06 0.07 

Exceeded 

Exhibit 61: Trends in Protection of Non-federal Forests and Grasslands 

Fiscal Year Actual 

Trends 2003 2004 2005 2006 2007 

6.3.4 Grazing lands and forestland with conservation applied 

to protect the resource base and environment, 

Conservation Technical Assistance, millions of acres 

 

 Conservation Technical Assistance N/A1 N/A1 7.5 11.8 14.2 

 Environmental Quality Incentives Program N/A1

 N/A1 8.0 12.2 16.5 

 Conservation Security Program N/A 0.40 2.30 1.30 0.07 

1

This measure has been re-defined and expanded in FY 2007 to include all private grazing or forest land on which the Department assisted producers to 

apply conservation measures to maintain or improve long-term vegetative condition and protect the resource base. Lands on which conservation 

measures may be applied include grazed range, grazed forest, native and naturalized pasture, and forest. Non-federal grazing and forest land accounts 

for the majority of the Nation’s private lands. The conservation applied includes a wide range of practices tailored to the resource conditions and 

producer’s operation and goals on the land unit. The conservation practices applied help to protect the resource base against damage on-site and 

prevent damage to soil, water, and air off-site. Performance data for FY2006 and FY2005 have been provided to indicate the prior year performance had 

this measure been employed at that time. 

OBJECTIVE 6.4: PROTECT AND ENHANCE WILDLIFE 

HABITAT TO BENEFIT DESIRED, AT-RISK AND DECLINING 

SPECIES

Overview 

Protecting the Nation’s wildlife requires overseeing the 

interacting relationships between plant and animal 

species within a given ecosystem. It also requires 

sustaining the health and vigor of such a system. 

Protecting specific ecosystems and landscapes ―

including wetlands, riparian areas, grasslands, 

floodplains, open water areas and certain types of 

forests ― can help support wildlife and aquatic species 

and provide economic and recreational benefits to 

people. Fragmentation and loss of habitat resulting 

from urban and suburban development and intensive 

agricultural uses have contributed to the population 

declines of many species. Invasive species are second 

only to habitat destruction as the cause of native 

species declines. Improving the habitat for declining 

and at-risk species is key to preventing further 

declines. It also ensures the continued survival of those 

species and the overall health of the ecosystems to 

which they belong. 

Key Outcome 

ved Wildlife Habitat Quality Supporting Desired 

Species and Species of Concern 

(At-Risk and Declining Species) 

USDA’s efforts to improve habitat on private lands 

include providing technical and financial assistance to 

landowners and managers. This assistance helps them 

manage working lands and waters to sustain wildlife, 
ANNUAL PERFORMANCE REPORT 

119 

FY 2007 Performance and Accountability Report 

aquatic species and plant communities. The 

Department also acquires and manages easements to 

improve and restore grassland, rangeland and forest 

ecosystems, and wetlands and their associated upland 

buffers. These actions are designed to create 

productive, diverse and resilient habitat. 

USDA assisted individuals and groups to apply 

management that will maintain or improve habitat on 

14 million acres of non-Federal land. The land treated 

included 13.5 million acres of upland wildlife habitat 

management and more than 500,000 acres of wetland 

wildlife habitat management. Department 

conservationists provide on-site assistance to producers 

and other landowners in controlling invasive species, 

adopting practices to improve grassland or forest 

habitat and managing water levels in wetlands to 

control vegetation. These plans consider wildlife needs 

for shelter, access to water, food in proper amounts, 

locations and times to sustain wildlife populations that 

inhabit the area during a portion of their life cycle. 

Actions to sustain and enhance aquatic habitat include 

applying conservation practices that filter potential 

pollutants and moderate stream temperatures. USDA 

is supporting efforts to achieve the President’s goal to 

restore, create, enhance and protect 3 million acres of 

wetlands by 2010. The Department assisted in 

creating, restoring or enhancing 285,000 wetland acres 

on non-Federal lands. Its goal is to address 1.5 million 

acres by 2010. 

Fragmentation and loss of habitat have contributed to 

declines in populations of many terrestrial and aquatic 

species. Invasive species are second only to habitat 

destruction as the cause of native species declines. 

These adverse landscape impacts negatively affect both 

human and wildlife populations. Loss of habitat means 

fewer wildlife recreational opportunities for humans, 

less open space and poorer air and water quality. The 

development that fragments wildlife habitat can result 

in a landscape with a greater susceptibility to flooding. 

The frequency and severity of drought conditions also 

may increase. 

Improving watershed health for wildlife species also 

improves conditions for the human population. 

Humans will benefit from improved water and air 

quality, control of invasive species, reduced flood 

damage, more open space and an increased 

opportunity for educational recreation. Additionally, 

keeping wildlife populations healthy and sustainable 

minimizes the need for regulatory action to protect 

threatened and endangered species on privately owned 

land. 

Challenges for the Future 

The ability of agricultural producers to restore, 

improve and protect habitat is impacted by their 

immediate economic situation, market conditions, 

weather and personal cost/benefit analyses. Weakness 

in the economy could affect producers’ abilities to 

invest their own funds and their willingness to take any 

risk associated with changing management. Many 

wildlife projects are supported by a combination of 

Federal, State and local funds. State and local budget 

constraints would impact project implementation. 

USDA, in cooperation with other Federal, State, 

Tribal and local agencies, and private organizations, 

will work to provide producers with information and 

other resources to adopt applicable conservation 

measures. USDA will also facilitate the development 

and implementation of landscape-scale habitat 

protection plans that provide at-risk and declining 

species access to water, food, shelter and corridors for 

seasonal migration. 

Analysis of Results 

USDA did not meet its target for the creation, 

restoration or enhancement of wetlands. The 

performance measure for wetlands includes land on 

which conservation practices were applied to 

Department standards with USDA assistance in FY 

2007. It does not indicate the cumulative total of 

wetland acres enrolled in USDA programs contracts. 

For this performance measure, targets were set for 

USDA’s Conservation Technical Assistance (CTA), 

Wetlands Reserve (WRP) and Conservation Reserve 
ANNUAL PERFORMANCE REPORT 

120 

FY 2007 Performance and Accountability Report 

(CRP) Programs. On wetlands where USDA provided 

technical assistance through CTA, no financial 

assistance was provided by Department programs. In 

some cases, financial assistance may have been 

provided through non-USDA sources. 

WRP and CRP are voluntary conservation programs 

that offer landowners the means and opportunity to 

protect, restore and enhance wetlands on their 

property. WRP participants sign an easement or 

agreement with USDA. CRP protects wetlands using 

long-term rental agreements. 

In 2003, there were 111 million wetland acres on nonFederal lands in the continental U.S. In 2004, the 

President set a national goal to go beyond no net loss – 

to restore, create, enhance and protect 3 million acres 

of wetlands by 2010. In support, USDA established a 

long-term goal of 1.5 million acres created, restored or 

enhanced by 2010. Reaching the target levels 

established for WRP, CRP, and CTA will contribute 

significantly toward meeting the long-term goal. 

When 2005-2007 results for this measure are 

combined, more than 903,000 acres of wetlands have 

been restored, representing 60 percent of the USDA 

goal. 

USDA uses the acreage of wetlands created, restored 

or enhanced as an indicator of progress toward 

improved habitat for many species. Acreage is used as 

an indicator because there is no feasible, widely 

accepted methodology for documenting the quality of 

habitat developed or the suitability of the habitat for 

the target species. The Department is participating in 

cooperative efforts to quantify the results of its 

conservation practices for wildlife habitat. 

In FY 2007, USDA entered into a partnership 

agreement with the U.S. Fish and Wildlife Service and 

the Association of Fish and Wildlife Agencies. The 

agreement is designed to establish and promote habitat 

credit trading markets through cooperative 

cooperation. It features developing uniform standards 

and establishing multiple pilot projects nationwide to 

showcase the effectiveness of these environmental 

markets. Habitat credit trading uses a market-based 

approach that offers incentives to farmers and ranchers 

who agree to set aside and maintain portions of their 

land for wildlife habitat. 

The ability of agricultural producers to restore, 

improve and protect habitat is impacted by their 

immediate economic situation, market conditions, 

weather and personal cost/benefit analyses. These 

factors could affect producers’ abilities to invest their 

own funds and their willingness to take any risk 

associated with changing management. Many wildlife 

projects are supported by a combination of Federal, 

State and local funds. State and local budget 

constraints would impact project implementation. 

USDA, in cooperation with other Federal, State, 

Tribal and local agencies, and private organizations 

will work to provide producers with information and 

other resources to adopt applicable conservation 

measures. USDA will also facilitate the development 

and implementation of landscape-scale habitat 

protection plans. These plans would provide at-risk 

and declining species access to water, food, shelter and 

corridors for seasonal migration. 

Selected Results in Research, Extension and Statistics 

Understanding the Importance of Species Diversity in 

Protecting the Nation’s Forests and Wildlife. The species 

composition of the central hardwood forest in the Appalachian 

region is changing such that fewer species are regenerating 

naturally. This loss of species diversity influences the quality of 

wildlife habitat and decreases the economic values of the forest. 

USDA-funded researchers studied the changes and calculated 

species diversity indices before and after clear-cutting. The 

result of this research emphasizes the need for such preemptive treatments as cleaning to maintain species diversity. 

The research also shows that cleaning needs to occur at about 

10 years post-harvest and not the previously standard 12-to-20 

year time frame. 
ANNUAL PERFORMANCE REPORT 

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FY 2007 Performance and Accountability Report 

Exhibit 62: Improved Wildlife Habitat 

Fiscal Year 2007 

Annual Performance Goals and Indicators Target Actual Result 

6.4.1 Wetlands created, restored or enhanced, acres 

 Conservation Technical Assistance 51,300 62,092 Exceeded1

 Wetlands Reserve Program 156,000 149,326 Met2

 Conservation Reserve Program 58,500 68,834 Exceeded3

1

 Data assessment metrics to meet the target allow for an actual number in the range 46,170 – 56,430. 

2

 Data assessment metrics to meet the target allow for an actual number in the range 140,400 – 171,600. 

3

 Data assessment metrics to meet the target allow for an actual number in the range 52,650 – 64,350. 

Exhibit 63: Trends in Wildlife Habitat Enhancement 

Fiscal Year Actual 

Trends 2003 2004 2005 2006 2007 

6.4.1 Wetlands created, restored or enhanced, 

acres 

 

 Conservation Technical Assistance 43,525 59,293 53,498 65,345 62,092 

 Wetlands Reserve Program 137,151 123,363 180,358 181,979 149,326 

 Conservation Reserve Program 63,874 57,036 50,934 61,279 68,834 

Program Assessment Rating Tool (PART) Evaluations 

The Program Assessment Rating Tool (PART) was 

developed to assess and improve program performance 

so that the Federal government can achieve better 

results. The PART reviews of USDA programs help 

identify a program’s strengths and weaknesses to 

inform funding and management decisions aimed at 

making the program more effective. The PART 

therefore looks at all factors that affect and reflect 

program performance including program purpose and 

design; performance measurement, evaluations, and 

strategic planning; program management; and 

program results. Because the PART includes a 

consistent series of analytical questions, it allows 

programs to show improvements over time, and allows 

comparisons between similar programs. 

The summaries below represent programs PARTed in 

fiscal year 2007, including programs that were 

reassessed because the programs’ previous ratings were 

unsatisfactory. The programs are summarized by 

Strategic Objective. Further detail on USDA’s 

PARTed programs can be found at 

http://www.whitehouse.gov/omb/budget/fy2006/part.html.
ANNUAL PERFORMANCE REPORT 

122 

FY 2007 Performance and Accountability Report 

Strategic Objective 2.3 Provide Risk Management and Financial Tools to Farmers and Ranchers 

Program Name Agricultural Marketing Loan Payments 

Current Rating • Adequate 

Lead Agency • Farm Service Agency (FSA) 

Major Findings/ 

Recommendations 

• The Marketing Loan Program has been proven to successfully provide short-term financing, 

however, the program has a high percentage of improper payments. A large percentage of the 

improper payments were caused by noncompliance with administrative procedures. This may not 

have caused payments to be disbursed in error, though it is not possible to confirm whether 

payments are appropriate without proper documentation. 

Actions Taken/Planned • FSA is implementing policies to reduce improper payments while conducting more frequent external 

audits of program effectiveness. In addition, the agency is working to make the delivery of services to 

producers consistent across county offices. 

Strategic Objective 3.1 Expand Economic Opportunities by Using USDA Financial Resources to Leverage 

Private Sector Resources and Create Opportunities for Growth 

Program Name Rural Development Broadband Loan and Loan Guarantee Program 

Current Rating • Adequate 

Lead Agency • Rural Business-Cooperative Service (RBS) 

Major Findings/ 

Recommendations 

• The Broadband program has a clear purpose, to provide loans for broadband, and good program 

management. This results in increasing the provision of broadband services to rural residents. 

However, the program is flawed as seen by the under utilization of two loan types. Though there are 

still rural areas that do not have broadband, neither the 4 percent nor guaranteed loan types are 

utilized by borrowers. 

Actions Taken/Planned • RBS is reviewing program operations and community/constituent/borrower needs to identify program 

improvements to increase program efficiency and demand for under utilized loan types. In addition, 

RBS is implementing a process for conducting periodic independent reviews that assess the 

program's performance. 

Strategic Objective 3.1 Expand Economic Opportunities by Using USDA Financial Resources to Leverage 

Private Sector Resources and Create Opportunities for Growth 

Program Name Rural Business Enterprise Grant Program 

Current Rating • Adequate 

Lead Agency • Rural Business-Cooperative Service (RBS) 

Major Findings/ 

Recommendations 

• Though the program is well designed, it is not unique. The program targets businesses both by size 

and geography. However, the Economic Development Administration, Appalachian Regional 

Commission, and Small Business Administration all provide similar economic development grant 

programs or technical assistance to small businesses in urban and rural areas. 

Actions Taken/Planned • RBS is creating long term performance measures that will incorporate long term business or job 

stability. 

• USDA is Improving efficiencies within Rural Development administration, decreasing the amount of 

time it takes to get Notice of Funding Availability documents out and grants awarded 

• RBS is increasing the number of RBEG awards to communities that have high rates of poverty or 

unemployment. 
ANNUAL PERFORMANCE REPORT 

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FY 2007 Performance and Accountability Report 

Strategic Objective 3.2 Improve the Quality of Life Through USDA Financing of Quality Housing, Modern 

Utilities, and Needed Community Facilities 

Program Name Single Family Housing Loan Guarantees 

Current Rating • Effective 

Lead Agency • Rural Housing Service (RHS) 

Major Findings/ 

Recommendations 

• The program is well targeted using both income and location for criteria. However, there is 

redundancy with other Federal guaranteed home loan programs. It is not considered extensive, and 

the Administration has proposed changes to this program's authorization to reduce the redundancy 

with the other Federal home loan guarantee programs in situations where the lender happens to offer 

them all. 

• The program is free of design flaws. In the past, lenders using the program threatened to not 

participate if the funding for the program ran out prior to the end of the fiscal year. The program has 

corrected this flaw by designing controls that will better ensure steady funding and access to the 

program throughout the fiscal year. 

Actions Taken/Planned • The Rural Housing Service is working with the Congress to change this program's authorization to 

help reduce any redundancy with other Federal home loan guarantee programs. 

• In addition, RHS is evaluating the controls that ensure steady funding and access to the program by 

the lenders to make sure they are adequate to retain lenders in the face of limited funding in any 

given year. 

Strategic Objective 3.2 Improve the Quality of Life Through USDA Financing of Quality Housing, Modern 

Utilities, and Needed Community Facilities 

Program Name Rural Distance Learning and Telemedicine Loan and Grant Program 

Current Rating • Adequate 

Lead Agency • Rural Utilities Service (RUS) 

Major Findings/ 

Recommendations 

• The program has a clear purpose, to provide loans and grants to improve rural telemedicine and 

distance learning service. This results in increased access to learning opportunities and improved 

medical care in rural areas. 

• Performance measures, baselines and targets have been established and progress in meeting 

performance goals was demonstrated. However, there are no periodic independent evaluations of 

the program's performance. 

Actions Taken/Planned • RUS is determining how and when to implement periodic independent reviews, focusing on how well 

the program is accomplishing its mission, and meeting its long-term goals. RUS is also collecting 

and reviewing grantee performance information in order to make adjustments to the assumptions 

used to develop budget estimates of loan program costs. 

Strategic Objective 4.2 Reduce the Number and Severity of Agricultural Pest and Disease Outbreaks 

Program Name Animal Welfare 

Current Rating • Moderately Effective 

Lead Agency • Animal and Plant Health Inspection Service (APHIS) 

Major Findings/ 

Recommendations 

• The program has a clearly stated purpose, which is to protect and promote the welfare of animals 

covered by the Animal Welfare Act (AWA) and the Horse Protection Act (HPA). It is also the only 

program that has authority over the interstate movement of animals that are subject to the AWA. 

APHIS is instituting several new performance measures, but currently does not have baseline data 

for those measures. 

Actions Taken/Planned • APHIS is collecting baseline data for new performance measures, and adjusting targets if 

appropriate. In addition, APHIS is customizing outreach activities provided to licensees and 

registrants to support the goal of ensuring the humane care and use of animals protected by the 

Animal Welfare Act. 
ANNUAL PERFORMANCE REPORT 

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FY 2007 Performance and Accountability Report 

Strategic Objective 4.2 Reduce the Number and Severity of Agricultural Pest and Disease Outbreaks 

Program Name Pesticide Data Program 

Current Rating • Adequate 

Lead Agency • Agricultural Marketing Service (AMS) 

Major Findings/ 

Recommendations 

• The Pesticide Data Program supplies data to the Environmental Protection Agency (EPA) to reflect 

pesticide residues on fruits and vegetables in the U.S. food supply. This data is used by EPA to 

assist in regulatory decisions that affect agricultural production and in pesticide registration and reregistration process. The program should develop long-term outcome measures that demonstrate 

what outcome results from the use of this data. 

Actions Taken/Planned • AMS is evaluating the methodology used to establish program performance targets for long-term and 

annual measures. In addition, the agency is developing additional annual and long-term performance 

measures that demonstrate progress toward a long-term programmatic outcome. 

Strategic Objective 5.2 Promote Healthier Eating Habits and Lifestyles 

Program Name Food Stamp Program Nutrition Education 

Current Rating • Results Not Demonstrated 

Lead Agency • Food and Nutrition Service (FNS) 

Major Findings/ 

Recommendations 

• There are no standardized performance measures across State programs to gauge progress. The 

scope of nutrition education efforts varies widely, making it difficult to establish meaningful outcome 

measures to capture the program's progress. While States collect some data on participation, the 

data collected is limited and ambiguous and varies across programs. 

Actions Taken/Planned • FNS is developing efficiency measures to assess program effectiveness related to its goals. 

• In addition, FNS is developing a plan to increase the use of evidence-based food and nutrition 

education initiatives across States. 

Strategic Objective 6.1, 

6.2, 6.3 

Protect and Enhance the Nation’s Natural Resource Base and Environment 

Program Name Environmental Quality Incentives Program 

Current Rating • Moderately Effective 

Lead Agency • Natural Resources Conservation Service (NRCS) 

Major Findings/ 

Recommendations 

• Budget requests are explicitly tied to the accomplishment of goals and objectives and NRCS has 

strengthened the program's budget and performance integration. NRCS will make further 

improvements by revising its state funding allocation formula to better reflect program priorities. 

Actions Taken/Planned • NRCS is working to improve financial management practices, particularly the timely resolution of 

open obligations and the consistency of contract modifications. 

Strategic Objective 6.3 Protect Forests and Grasslands 

Program Name National Forest Improvement and Maintenance 

Current Rating • Results Not Demonstrated 

Lead Agency • Forest Service 

Major Findings/ 

Recommendations 

• The Forest Service has made strides in meeting program objectives, but cannot demonstrate overall 

program performance in key areas such as safety, condition sustainability and environmental 

suitability, utilization, and mission dependency. 

• The Forest Service is unable to accurately and completely determine the current condition of 

facilities, roads, and trails and the estimated cost to correct any deficiencies. In addition, the Forest 

Service lacks a strategy to prioritize program improvements, particularly in a 388,000-mile road 

system which continues to expand even as decommissioning is required to reduce large deferred 

maintenance backlogs. 
ANNUAL PERFORMANCE REPORT 

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FY 2007 Performance and Accountability Report 

Strategic Objective 6.3 Protect Forests and Grasslands 

Program Name National Forest Improvement and Maintenance 

Actions Taken/Planned • The Forest Service is working to improve overall data quality and ensure that accurate condition 

assessment surveys drive management decisions regarding construction, use, maintenance or 

decommissioning, and disposal of assets. 

• In addition, the Forest Service is developing a strategy to prioritize road, facility and trail 

improvements that reflect investment strategies as a common criteria for reducing the deferred 

maintenance backlog. 

Program Evaluations 

Objective Title Findings and Recommendations/Actions Availability 

1.4.1 OIG-05801-03-KC, Financial 

Management Controls over 

Reinsured Companies 

Findings: Both OIG and GAO concluded that RMA 

had not identified the financial deficiencies of the 

failed reinsured company primarily because RMA 

emphasized past compliance and financial data, 

rather than future financial forecasts. OIG closed this 

review without recommendations because the 

problematic issues identified were raised in a 

December 3, 2003, memorandum to RMA prior to its 

2005 SRA negotiations with reinsured companies, 

and that their findings overlapped those reported by 

GAO in their June 1, 2004, report. 

Actions: RMA completed actions necessary to 

address the issues identified in the above 

referenced documents. 

Report is available at 

http://www.usda.gov/oig/rptsa

uditsrma.htm 

OIG-05601-13-Te, New Crop 

Products Submitted by Companies 

Findings: RMA needs to establish written 

procedures to monitor and review the 

implementation and performance of section 508(h) 

products. 

Recommendations/Actions: RMA completed the 

actions recommended by OIG to address this 

matter. 

Report is available at 

http://www.usda.gov/oig/rptsa

uditsrma.htm 

 OIG-05099-11-SF, Prevented 

Planting Payments For Cotton Due 

to Failure of the Irrigation Water 

Supply in California and Arizona 

Crop Year 2003

Findings: OIG found none of the cotton producers in 

their sample improperly sold their water service 

rights, and nothing came to their attention to indicate 

that the pertinent controls were not operating as 

prescribed. However, four cotton producers in 

California did not meet program eligibility 

requirements. 

Actions: RMA is reviewing the four producers to 

determine whether loss payments were improperly 

paid to these individuals. 

Report is available at 

http://www.usda.gov/oig/rptsa

uditsrma.htm

3.1.1 Business Programs Assessment 

Reviews 

(BPARs) 

Findings: The BPAR evaluates the Fundamental 

Risk Component characteristics in each State 

through ongoing on-site and off-site monitoring and 

review activities. The reviews are completed with the 

assistance of the Farm Credit Administration, 

through a memorandum of understanding, which 

provides a commissioned bank examiner’s 

evaluation and inherent risk. In FY 2007, 10 State 

office operations and portfolio management were 

reviewed. 

Actions: Findings, causes and recommendations 

vary widely State to State. 

Each State office undertakes corrective actions in 

response to the BPAR. 

While banking information 

and borrower data are 

protected under Federal Bank 

Secrecy Laws, redacted 

reports are available to the 

public through the Freedom 

of Information Act. 
ANNUAL PERFORMANCE REPORT 

126 

FY 2007 Performance and Accountability Report 

Objective Title Findings and Recommendations/Actions Availability 

4.1 Automated Targeting System (ATS) 

evaluation 

Findings: The FSIS Office of Program Evaluation, 

Enforcement, and Review (OPEER), Program 

Evaluation and Improvement Staff (PEIS) evaluated 

data from the ATS pilot conducted at the ports of 

Philadelphia and Houston to test the targeting and 

handling of FSIS regulated shipments potentially at 

high risk from intentional contamination. The final 

report, issued May 29, 2007, contains 

recommendations for improving the accuracy and 

efficiency of the ATS. 

Actions: FSIS continues to take action to improve 

the ATS.

Information may be 

requested from the USDA 

Food Safety Inspection 

Service—Office of Program 

Evaluation, Enforcement and 

Review, Program Evaluation 

and Improvement Staff 

USDA-FSIS (202) 720-6735 

4.1 Technical Service Center (TSC) 

Customer Service Evaluation 

Findings: PEIS collected and analyzed data from 

FSIS employees and the general public regarding 

the technical assistance, advice, and guidance 

provided by the TSC and made recommendations 

for improving customer service. The final report, 

issued November 7, contains recommendations for 

improving TSC customer service. 

Actions: FSIS has taken action to address the 

findings.

Information may be 

requested from the USDA 

Food Safety Inspection 

Service—Office of Program 

Evaluation, Enforcement and 

Review, Program Evaluation 

and Improvement Staff 

USDA-FSIS (202) 720-6735 

4.2.2 “Avian Influenza: USDA Has Taken 

Important Steps to Prepare for 

Outbreaks, but Better Planning 

Could Improve Response”, GAO-07-

652, US General Accountability 

Office, June, 2007 

Findings: While USDA has made important strides, 

incomplete planning at the Federal and State levels, 

and several unresolved issues could slow response. 

First, USDA is not planning for the lead coordinating 

role that the Department of Homeland Security 

(DHS) would assume if an outbreak among poultry 

occurred that is sufficient in scope to warrant various 

Federal disaster declarations. GAO’s prior work has 

shown that roles and responsibilities must be 

defined and understood clearly to facilitate rapid and 

effective decision making. Moreover, USDA 

response plans do not identify the capabilities 

needed to execute the critical tasks associated with 

an outbreak scenario—that is, the entities 

responsible for executing them, the resources 

needed and the provider of those resources. 

Additionally, some State plans lack important 

components that could facilitate rapid avian 

influenza (AI) containment. These omissions are 

problematic because States typically lead initial 

response efforts. Finally, there are several 

unresolved issues that, absent advance 

consideration, could hinder response. For example, 

controlling an outbreak among birds raised in 

backyards, such as for hobby, remains particularly 

difficult because Federal and State officials generally 

do not know the numbers and locations of these 

birds. USDA also has not estimated the amount of 

antiviral medication that it would need during an 

outbreak or resolved how to provide such supplies in 

a timely manner. According to Federal guidance, 

poultry workers responding to an outbreak of highly 

pathogenic AI should take antiviral medication to 

protect them from infection. 

The report is available: 

http://www.gao.gov/new.item

s/d07652.pdf 
ANNUAL PERFORMANCE REPORT 

127 

FY 2007 Performance and Accountability Report 

Objective Title Findings and Recommendations/Actions Availability 

 GAO recommended that USDA and DHS develop a 

memorandum of understanding to clarify their roles 

during certain emergencies. It added that USDA 

should take several steps to improve its planning 

and that of the States.

Actions: USDA agreed with all recommendations 

except for the use of a memorandum of 

understanding to clarify roles. The Secretary wrote 

that, “The report is a comprehensive look at our 

HPAI efforts, but it does not take into account 

several aspects that we believe are critical 

components of successful foreign animal disease 

planning efforts that are the result of our extensive 

experience with animal disease eradication over the 

course of many decades.” USDA believes GAO did 

not emphasize one of the most important aspects of 

AI surveillance—the veterinary infrastructure that is 

the foundation of USDA’s foreign disease 

monitoring. The complete response can be found on 

p. 48 of the hard copy in the Web site.

4.2.2 “Efforts to Forestall Onset Are Under 

Way; Identifying Countries at 

Highest Risk Entails Challenges” 

GAO-07-604, US General 

Accountability Office, June, 2007 

Findings: Assessments by U.S. agencies and 

international organizations have identified 

widespread environmental and preparednessrelated risks in many countries. While the U.S. has 

designated priority countries for assistance, gaps in 

available information limit the capacity for 

comprehensive, well-informed comparisons of risk 

levels by country. 

Actions: There were no recommendations for 

USDA. The Department found the report accurate in 

its description of its role and involvement in the 

global strategy.

The report is available at: 

http://www.gao.gov/new.item

s/d07604.pdf 

4.2.2 “National Animal Identification 

System: USDA Needs to Resolve 

Several Key Implementation Issues 

to Achieve Rapid and Effective 

Disease Traceback” GAO-07-592, 

US General Accountability Office, 

June, 2007 

Findings: USDA has taken some steps to address 

issues identified by livestock industry groups, market 

operators, State animal health officials and others. 

Nonetheless, the agency has not addressed 

effectively several issues that, if left unresolved, 

could undermine the program’s ability to achieve the 

goal of rapid and effective animal disease traceback. 

GAO made several recommendations. 

Actions: While USDA concurred with most of GAO’s 

recommendations, it also provided points of 

clarification to several and a discussion about parts 

of recommendations that conflict with established 

Departmental policies. Details are provided on 

pages 78 through 82 of the report available on the 

Web. 

The report is available at: 

http://www.gao.gov/new.item

s/d07592.pdf 

5.1 Food Stamp Participation Rates 

2005 

Findings: This report presents the latest in a series 

on participation rates based on Current Population 

Survey and national participation rates for FY 2005. 

The findings indicate that 65 percent of the 

individuals eligible for food stamp benefits choose to 

participate. The program provided 80 percent of the 

benefits that all eligible individuals could receive, 

suggesting that the Food Stamp Program (FSP) 

appears to be reaching the neediest eligible 

individuals.

Actions: The report contained no recommendations 

for action by USDA. 

Available on the FNS Web 

site at 

http://www.fns.usda.gov/oan

e/menu/Published/FSP/FILE

S/Participation/Trends1999-

2005Sum.pdf
ANNUAL PERFORMANCE REPORT 

128 

FY 2007 Performance and Accountability Report 

Objective Title Findings and Recommendations/Actions Availability 

 Reaching Those In Need: State 

Food Stamp 

Participation Rates in 2004 

Findings: This report presents estimates of State 

participation rates for eligible low-income 

households. The data shows that the working poor 

have participated at rates substantially below those 

for all eligible people. 

Actions: The report contained no recommendations 

for action by USDA. 

Available on the FNS Web 

site at: 

http://www.fns.usda.gov/oan

e/menu/Published/FSP/FILE

S/Participation/reaching2004

.pdf 

Food Stamp Program: Use of 

Alternative Methods to Apply for and 

Maintain Benefits Could Be 

Enhanced by Additional Evaluation 

and Information on Promising 

Practices 

Findings: The report describes States’ use of 

alternatives to the traditional face-to-face FSP 

application and re-certification process. These 

alternatives include mail-in procedures, call centers 

and on-line services. The Government 

Accountability Office (GAO) found that all States use 

mail and about half use, or have begun developing, 

on-line services and call centers to provide access 

to FSP. Despite these findings, insufficient 

information is available to determine the results of 

using alternative methods. 

Actions: GAO has recommended that FNS work 

with ERS to determine the effects of alternative FSP 

methods; analyze data from States that have 

implemented waivers or have conducted 

demonstration projects that waived the face-to-face 

interview; and disseminate and update information 

on promising practices States are using to 

implement alternative methods.

Available on the GAO Web 

site at: 

http://www.gao.gov/new.item

s/d07573.pdf

 Food Stamp Program: FNS Could 

Improve Guidance and Monitoring to 

Help Ensure Appropriate Use of 

Noncash Categorical Eligibility

Findings: In this review, GAO sought to estimate 

how the elimination of Temporary Assistance to 

Needy Families (TANF) noncash categorical 

eligibility might affect Food Stamp Program (FSP) 

participation, administration and State administrative 

costs. GAO’s analysis shows that a vast majority of 

TANF noncash households potentially would remain 

eligible for food stamps because their income and/or 

assets levels are within FSP eligibility requirements.

Actions: GAO has recommended that FNS provide 

guidance and technical assistance to States 

clarifying which TANF noncash services they must 

use to confer categorical eligibility for food stamps. 

States also should monitor their compliance with 

categorical eligibility requirements.

Available on the GAO Web 

site at: 

http://www.gao.gov/new.item

s/d07219.pdf

5.2 Nutrition Education Research 

Summary: Message Framing, use 

of Interactive Technology to Tailor 

Messages and Intervention Intensity 

Findings: This research review was intended to 

document how key features of nutrition messages 

and interventions influence the likelihood of 

promoting more healthful food choices as a guide to 

improve program-based nutrition education 

strategies. 

Actions: This report does not contain 

recommendations for action by USDA. 

Nutrition Education Research 

Summary: Message 

Framing, use of Interactive 

Technology to Tailor 

Messages and Intervention 

Intensity 

 Food Stamp 

Nutrition Education System Review: 

Summary 

Findings: This report presents a comprehensive 

and systematic national description of food stamp 

nutrition education operations in FY 2004. 

Actions: This report does not contain 

recommendations for action by USDA. 

Food Stamp 

Nutrition Education System 

Review: Summary 
ANNUAL PERFORMANCE REPORT 

129 

FY 2007 Performance and Accountability Report 

Objective Title Findings and Recommendations/Actions Availability 

Middle School Lunch Consumption: 

Impact of National School Lunch 

Meal and Competitive Foods 

Findings: This report documents the impact of the 

National School Lunch Program (NSLP) meal to 

middle school student’s dietary consumption. It also 

supports findings reported in the first School 

Nutrition Dietary Assessment Study. This study 

confirmed that NSLP students consumed 

significantly more of the nutrients and food groups 

related to healthier choices. 

Actions: This report does not contain 

recommendations for action by USDA. 

Middle School Lunch 

Consumption: 

Impact of National School 

Lunch Meal and Competitive 

Foods 

5.3 The Effect of Simplified Reporting 

on Food Stamp Payment Accuracy 

Findings: This analysis suggests that the simplified 

reporting policies adopted by States in 2004 could 

have lowered error rates by 1.2 to 1.5 percentage 

points. Thus, if all States adopted the policy of 

simplified reporting, the payment error rate might 

improve further. 

Actions: This report does not contain 

recommendations for action by USDA. 

Available on the FNS Web 

site at: 

http://www.fns.usda.gov/oan

e/MENU/Published/FSP/FIL

ES/ProgramIntegrity/Simplifi

edReporting.pdf 

Direct Verification Study: First Year 

Report 

Findings: In the first year of the study, the process of 

direct verification with Medicaid data is technically 

feasible. School districts also may verify directly a 

substantial percentage of sampled NSLP 

applications. 

Actions: This report does not contain 

recommendations for action by USDA. 

Available on the FNS Web 

site at: 

http://www.fns.usda.gov/oan

e/menu/Published/CNP/FILE

S/DirectVerificationYear1_Su

mmary.pdf

 Food and Nutrition Service Financial 

Statements for Fiscal Years 2005 

and 2006 

Findings: The Office of the Inspector General (OIG) 

reviewed FNS’ financial statements for FY 2005 and 

FY 2006. FNS’ statements received an unqualified 

opinion. FNS’ 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. 

Available on the USDA/OIG 

Web site at: 

http://www.usda.gov/oig/web

docs/27401-31-HY.pdf

Hurricanes Katrina and Rita: Federal 

Actions Could Enhance 

Preparedness of Certain StateAdministered Federal Support 

Programs 

Findings: The report describes the disaster 

assistance provided by the Social Security, SSI, 

Food Stamp, UI and TANF programs because of 

Hurricanes Katrina and Rita. The report assesses 

the challenges faced, factors that helped or hindered 

programs’ efforts, areas that warrant further 

attention, and actions that are being taken to 

improve programs’ disaster response. 

Actions: The report does not contain 

recommendations for action by USDA. 

Available on the GAO Web 

site at: 

http://www.gao.gov/new.item

s/d07219.pdf

 Accuracy of SFA Processing of 

School Lunch Applications Regional 

Office Review of Applications 2006 

Findings: The second of series of annual reports 

assessing administrative errors associated with 

School Food Authorities approval of applications for 

free and reduce-prices school meals. The 

percentage of students who apply for NSLP free or 

reduced-price meal benefits and are approved or 

denied incorrectly due to administrative errors 

remains relatively low. 

Actions: This report does not contain 

recommendations for action by USDA. 

Available on the FNS Web 

site at: 

http://www.fns.usda.gov/oan

e/menu/Published/CNP/FILE

S/rora2006.pdf
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130 

FY 2007 Performance and Accountability Report 

Objective Title Findings and Recommendations/Actions Availability 

Food Stamp Trafficking: FNS Could 

Enhance Program Integrity by Better 

Targeting Stores Likely to Traffic 

and Increasing Penalties 

Findings: The report states that, while FNS 

estimates suggest trafficking has declined to a low of 

1.0 cent on the dollar (from 3.8) and use of 

electronic benefits transfer transaction data is 

improving efforts to identify and disqualify trafficking 

retailers, FSP remains vulnerable to trafficking. 

Actions: GAO has recommended that USDA take 

additional steps to target and monitor those stores 

most likely to traffic, increase penalties for trafficking, 

work with the OIG as needed and promote State 

efforts to pursue USDA benefit recipients suspected 

of trafficking. 

Available on the GAO Web 

site at: 

http://www.gao.gov/new.item

s/d0753.pdf

 Special Supplemental Nutrition 

Program for Women, Infants, and 

Children—Puerto Rico 

Findings: OIG found numerous problems with 

validation of food instruments, vendor monitoring, 

foods authorized, implementation of vendor cost 

containment requirements and use of in-store credit 

by vendors. While many of these problems had been 

identified in previous FNS management reviews, the 

Puerto Rico Health Department had not taken 

sufficient corrective action. 

Actions: OIG has recommended that FNS invoke its 

statutory authority to withhold funding if the audit 

findings are not corrected satisfactorily. 

Available on the USDA/OIG 

website at: 

http://www.usda.gov/oig/web

docs/27004-04-AT.pdf

6.3.1 

6.3.2 

6.3.3 

OIG Audit, September 2006, GAO 

08601-06-AT - FS Implementation of 

Healthy Forest Initiatives 

Findings: Develop and implement specific national 

guidance for assessing the risks from wildland fires 

and determining the benefits of fuels treatment and 

restoration projects. These processes should be 

able to be applied on a consistent basis between 

regions, forests and districts, so the FS may be able 

to prioritize and fund the most beneficial and cost 

effective fuels reduction projects. 

Actions: Forest Service implemented all OIG audit 

recommendations pending final OIG close-out. 

Findings: Establish controls to ensure that the 

process and methodology to identify and prioritize 

the most effective fuels reduction projects can be 

utilized at all levels. 

Actions: Forest Service implemented all OIG audit 

recommendations pending final OIG close-out. 

Findings: Establish controls to ensure funds are 

distributed according to where the highest 

concentrations of priority projects are located 

nationally. 

Actions: Forest Service implemented all OIG audit 

recommendations pending final OIG close-out. 

Findings: Develop and implement a more 

meaningful and outcome-oriented performance 

measure for reporting metrics, such as acres with 

“risk reduced” or “area protected.” FS should also 

direct that implementing effective integrated 

treatments is more important than solely meeting 

acreage targets. FS should also use annual targets 

assigned as a multi-year average rather than a firm 

fiscal year total. 

Actions: Forest Service implemented all OIG audit 

recommendations pending final OIG close-out. 

Report is available at 

http://www.usda.gov/oig/web

docs/08601-6-AT.pdf
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131 

FY 2007 Performance and Accountability Report 

Objective Title Findings and Recommendations/Actions Availability 

Findings: Improve accomplishment reporting by 

including more detailed information, such as 

breaking down accomplishments by region, noting 

changes in condition class, and differentiating 

between initial and maintenance treatments and 

multiple treatments on the same acres. 

Actions: Forest Service implemented all OIG audit 

recommendations.

6.2 and 

6.3 

OIG Report, November 20, 2006, 

OIG/50601-10-Hq – Saving the 

Chesapeake Bay Watershed 

Requires Better Coordination of 

Environmental and Agricultural 

Resources 

Findings: OIG recommends that EPA execute a new 

Memorandum of Agreement with USDA that 

identifies specifically tasks and timeframes for 

meeting mutually shared goals in the Bay cleanup 

process. Additionally, the two agencies should agree 

to a method to track progress. Also, EPA, USDA and 

the States, with assistance from land grant 

universities and agricultural organizations, should 

revisit State tributary strategies to ensure that an 

effective and cost-efficient combination of 

conservation practices is adopted and implemented. 

USDA should assign a senior-level official to 

coordinate with EPA’s Chesapeake Bay Program 

and review the feasibility of targeting USDA funds 

geographically. 

Actions: USDA secretary has delegated Under 

Secretary for NRE as the USDA Leadership for 

Chesapeake Bay Coordination (signed February 18, 

2007). Thus, the recommendation is closed. 

Report is available at 

http://www.usda.gov/oig/rptsa

udits.htm 
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FY 2007 Performance and Accountability Report 
133 

FY 2007 Performance and Accountability Report 

III. 

Financial Statements, Notes, Supplemental and 

Other Accompanying Information 

Message from the Chief Financial Officer 

USDA programs and activities affect every American, every day, by providing a safe and 

stable food supply, nutrition assistance, renewable energy, rural economic development, 

care for forest and conservation lands, and global opportunities for farm and forest 

products. To successfully accomplish its mission, USDA operates more than 300 programs 

worldwide through an extensive network of Federal, State, and local cooperators. 

USDA is committed to the performance and accountability mandates put forward by the 

President and Congress and is keenly aware of the pivotal role of sound financial 

management —knowing how resources are spent, having the confidence that programs 

and services are operating in efficient ways, and possessing a clear sense of challenges. 

This year, USDA’s audit opinion refers to an issue concerning two of the credit models in Rural Development. 

The two credit models are for single family housing and the Federal Financing Bank. This year, these credit 

models, which produce the subsidy calculation, received an extensive overhaul that doubled the number of key 

input variables. In addition, the government-wide cash calculator for credit programs also received an extensive 

change. The release of these new, more complex models was delayed slightly from the original timeline. The 

additional complexity in the models, changes in the cash calculator, and sight delays created a myriad of events in 

which significant lines in the financial statement could not be fully audited to the complete satisfaction of the 

auditors. The Office of the Chief Financial Officer did a complete review of the reasonableness of the current year 

subsidy amount. This review entailed a five year normalized trend analysis and five year average of the subsidy 

amounts; we concluded that the amounts appear to be reasonable. In the same respect, the Office of the Chief 

Financial Officer understands that there may be other unique factors which may not be calculated into a credit 

subsidy. These include deflation in general home prices due to a slowdown in home sales or an increase in rural 

property values due to healthy commodity prices in the world market. 

In all cases, we take the management of the eighth largest loan portfolio in the United States and the second 

largest loan portfolio in the Federal Government seriously and will take the steps necessary to have a complete 

evaluation and audit of the credit models in the next 90 days. 

It is important that the audit opinion of the department does not overshadow the individual leadership and 

collaborative efforts of USDA managers, employees, business partners and other stakeholders. In 2007, we made 

significant strides in advancing the Department’s record of excellence in financial management. Here are some 

highlights: 
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134 

FY 2007 Performance and Accountability Report 

 Through the A-123 process, USDA reduced or eliminated material weaknesses in Financial 

Accounting/Reporting Accruals and USDA County Office Operations; 

 Our A-123 process identified and started the remediation on a management declared material weakness in 

Unliquidated Obligations; 

 Transfer of the government-wide financial systems to a new primary computing center from the Hurricane 

Katrina disaster recover site; 

 Full evaluation and selection of a core financial system to replace USDA’s nine general ledger systems, which 

have not been supported by their vendors for three years (the new system will provide the financial 

transactions to facilitate the programs); 

 Reduction in total improper payments from $4.6 billion in FY 2006 to $4.4 billion in FY 2007 while adding 

to the measurement two additional nutrition assistance programs; 

 Development and implementation of a Lean Six Sigma program to facilitate better service to the customer 

while reducing time and resources to execute formal business processes – estimated cost saving equal $13 

million which is needed to meet the cost of inflation during stable budget years; 

 Development and implementation of a “department-wide” Lean Six Sigma processes in the area of vendor 

transaction processing and grants; 

 Improvement in financial system security; 

 Improvement in controls in the County Offices; 

 Review and removal of unobligated balances; 

 Detailed analysis and revision of the department’s travel policy to insure greater oversight of travel and 

conference expenditures; 

 Increased security and efficiencies in the government-wide financial and information technology services 

located at USDA; and 

 Once again reduced the number of open audits. 

While we continue to make progress in financial management, we cannot yet give unqualified assurance of 

compliance with the Federal Managers’ Financial Integrity Act or the financial systems requirements of the 

Federal Financial Management Improvement Act. We continue to make this a focus in the coming year. 

Our employees are dedicated to protecting and managing the substantial resources entrusted to them by Congress 

and the American people to perform the important work of this Department. We are proud of our 

accomplishments for FY2007 and the hard working employees at USDA. USDA is committed to providing 

sound management of the resources under our stewardship and to communicating the effectiveness of our efforts 

to all Americans through this Performance and Accountability Report.

Charles R. Christopherson 

Chief Financial Officer 

November 15, 2007 
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FY 2007 Performance and Accountability Report 

CONSOLIDATED BALANCE SHEET 

As of September 30, 2007 and 2006 

(in millions) 

2007 2006

Assets:

Intragovernmental:

Fund Balance with Treasury (Note 3) 47,340 $ 42,191 $ 

Investments (Note 5) 94 81 

Accounts Receivable, Net (Note 6) 364 246 

Total Intragovernmental 47,798 42,518 

Cash and Other Monetary Assets (Note 4) 218 224 

Investments (Note 5) 3 3 

Accounts Receivable, Net (Note 6) 8,854 8,635 

Direct Loan and Loan Guarantees, Net (Note 7) 80,348 77,791 

Inventory and Related Property, Net (Note 8) 185 55 

General Property, Plant, and Equipment, Net (Note 9) 4,931 4,905 

Other (Note 11) 151 98 

Total Assets (Note 2) 134,229 142,488 

Stewardship PP&E (Note 10)

Liabilities:

Intragovernmental:

Accounts Payable 12 7 

Debt (Note 13) 75,101 83,447 

Other (Note 15) 13,753 14,080 

Total Intragovernmental 88,866 97,534 

Accounts Payable 4,360 4,170 

Loan Guarantee Liability (Note 7) 1,258 1,296 

Federal Employee and Veterans Benefits 775 808 

Environmental and Disposal Liabilities (Note 14) 105 63 

Other (Notes 15 & 16) 19,417 20,082 

Total Liabilities (Note 12) 123,953 114,781 

Commitments and Contingencies (Note 17)

Net Position:

Unexpended Appropriations - Earmarked Funds (Note 18) 1,113 976 

Unexpended Appropriations - Other Funds 29,824 25,409 

Cumulative Results of Operations - Earmarked Funds (Note 18) 803 518 

Cumulative Results of Operations - Other Funds (4,033) (16,627) 

Total Net Position 10,276 27,707 

Total Liabilities and Net Position $ 134,229 142,488 $ 

The accompanying notes are an integral part of these statements. 
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166 

FY 2007 Performance and Accountability Report 

CONSOLIDATED STATEMENT OF NET COST 

For the Years Ended September 30, 2007 and 2006 

(in millions) 

2007 2006

Enhance International Competitiveness

of American Agriculture:

Gross Cost 2,099 $ 1,152 $ 

Less: Earned Revenue 615 748 

Net Cost 1,484 404 

Enhance the Competitiveness and Sustainability

of Rural and Farm Economies:

Gross Cost 21,424 30,689 

Less: Earned Revenue 6,325 6,231 

Net Cost 15,099 24,458 

Support Increased Economic Opportunities and 

Improved Quality of Life in Rural America:

Gross Cost 6,952 7,048 

Less: Earned Revenue 4,750 3,980 

Net Cost 2,202 3,068 

Enhance Protection and Safety of the Nation's

Agriculture and Food Supply:

Gross Cost 3,271 3,629 

Less: Earned Revenue 762 649 

Net Cost 2,509 2,980 

Improve the Nation's Nutrition and Health:

Gross Cost 53,991 53,064 

Less: Earned Revenue 43 36 

Net Cost 53,948 53,028 

Protect and Enhance the Nation's 

Natural Resource Base and Environment:

Gross Cost 11,824 12,592 

Less: Earned Revenue 745 1,104 

Net Cost 11,079 11,488 

Total Gross Costs 99,561 108,174 

Less: Total Earned Revenues 13,240 12,748 

Net Cost of Operations (Note 19) $ 95,426 86,321 $ 

The accompanying notes are an integral part of these statements. 
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167 

FY 2007 Performance and Accountability Report 

CONSOLIDATED STATEMENT OF CHANGES IN NET POSITION 

For the Year Ended September 30, 2007 

(in millions) 

Earmarked All Other Consolidated

Funds Funds Eliminations Total

Cumulative Results of Operations:

Beginning Balances 518 $ (16,627) $ - $ (16,109) $ 

Changes in Accounting Principles (Note 30) (59) 1,020 - 961 

Beginning Balance, as Adjusted 459 (15,607) - (15,148) 

 Budgetary Financing Sources:

Appropriations Used 4,116 89,175 - 93,291 

Non-exchange Revenue - 12 - 12 

Donations and Forfeitures of Cash and Equivalents 1 - - 1 

Transfers In (Out) without Reimbursement 882 3,504 - 4,386 

 Other Financing Sources (Non-Exchange):

Transfers In (Out) without Reimbursement - (460) - (460) 

Imputed Financing 52 3,480 (2,527) 1,005 

Other - 4 - 4 

Total Financing Sources 5,055 95,711 (2,527) 98,239 

Net Cost of Operations (4,711) (84,137) 2,527 (86,321) 

Net Change 344 11,574 - 11,918 

 Cumulative Results of Operations, Ending (4,033) 803 - (3,230) 

Unexpended Appropriations:

Beginning Balances 976 25,409 - 26,385 

Changes in Accounting Principles (Note 30) - (209) - (209) 

 Beginning Balance, as Adjusted 976 25,200 - 26,176 

 Budgetary Financing Sources:

 Appropriations Received 4,392 94,999 - 99,391 

 Appropriations Transferred In (Out) (5) 15 - 10 

 Other Adjustments (134) (1,215) - (1,349) 

 Appropriations Used (4,116) (89,175) - (93,291) 

Total Budgetary Financing Sources 137 4,624 - 4,761 

Unexpended Appropriations, Ending 29,824 1,113 - 30,937 

Net Position $ 25,791 1,916 $ - $ 27,707 $ 

The accompanying notes are an integral part of these statements. 
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168 

FY 2007 Performance and Accountability Report 

CONSOLIDATED STATEMENT OF CHANGES IN NET POSITION 

For the Year Ended September 30, 2006 

(in millions) 

Earmarked All Other Consolidated

Funds Funds Eliminations Total

Cumulative Results of Operations:

Beginning Balances 964 $ (20,476) $ - $ (19,512) $ 

 Budgetary Financing Sources:

Appropriations Used 3,184 91,765 - 94,949 

Non-exchange Revenue - 2 - 2 

Donations and Forfeitures of Cash and Equivalents 1 - - 1 

Transfers In (Out) without Reimbursement 915 2,694 - 3,609 

 Other Financing Sources (Non-Exchange):

Transfers In (Out) without Reimbursement - (544) - (544) 

Imputed Financing 43 3,113 (2,349) 807 

Other - 5 - 5 

Total Financing Sources 4,148 97,030 (2,349) 98,829 

Net Cost of Operations (4,594) (93,181) 2,349 (95,426) 

Net Change (446) 3,849 - 3,403 

 Cummulative Results of Operations, Ending (16,627) 518 - (16,109) 

Unexpended Appropriations:

Beginning Balances 923 20,567 - 21,490 

 Budgetary Financing Sources:

 Appropriations Received 3,308 97,832 - 101,140 

 Appropriations Transferred In (Out) (5) 103 - 98 

 Other Adjustments (66) (1,328) - (1,394) 

 Appropriations Used (3,184) (91,765) - (94,949) 

Total Budgetary Financing Sources 53 4,842 - 4,895 

Unexpended Appropriations, Ending 25,409 976 - 26,385 

Net Position $ 8,782 1,494 $ - $ 10,276 $ 

The accompanying notes are an integral part of these statements. 
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169 

FY 2007 Performance and Accountability Report 

COMBINED STATEMENT OF BUDGETARY RESOURCES 

For the Years Ended September 30, 2007 and 2006 

(in millions) 

Non-Budgetary Non-Budgetary

Credit Reform Credit Reform

Budgetary Financing Accounts Budgetary Financing Accounts

Budgetary Resources:

Unobligated balance, brought forward, October 1 21,282 $ 3,715 $ 19,170 $ 6,828 $ 

Recoveries of prior year unpaid obligations 3,175 1,445 9,071 941 

Budget Authority -

Appropriation 108,428 - 109,856 - 

Borrowing Authority (Notes 22 & 23) 41,185 12,478 44,465 12,608 

Earned -

Collected 26,158 8,513 23,265 7,864 

Change in receivables from Federal Sources (1,069) 4 (129) (29) 

Change in unfilled customer orders -

Advances received (170) - 299 - 

Without advance from Federal Sources 96 8 70 11 

Expenditure transfers from trust funds 934 - 1,050 - 

Nonexpenditure transfers, net, anticipated and actual (336) - (342) - 

Temporarily not available pursuant to Public Law (36) - - - 

Permanently not available (57,635) (6,257) (55,745) (8,798) 

Total Budgetary Resources 142,012 19,906 151,030 19,425 

Status of Budgetary Resources:

Obligations Incurred (Note 21) -

Direct 83,743 14,698 87,185 15,710 

 Reimbursable 30,513 - 42,563 - 

Unobligated Balance -

 Apportioned 8,794 1,917 7,818 1,625 

Exempt from Apportionment 1,351 5 771 - 

Unobligated balance not available 17,611 3,286 12,693 2,090 

Total Status of Budgetary Resources 142,012 19,906 151,030 19,425 

Change in Obligated Balances:

Obligated Balance, net, brought forward October 1 26,537 18,900 26,555 18,202 

Obligations incurred 114,256 14,698 129,748 15,710 

Gross outlays (113,118) (14,034) (120,756) (14,089) 

Recoveries of prior year unpaid (3,175) (1,445) (9,071) (941) 

Change in uncollected payments from Federal Sources 973 (12) 59 18 

Obligated balance, net, end of period -

Unpaid obligations (Note 27) 26,844 18,940 28,881 19,722 

Uncollected customer payments from Federal Sources (1,372) (833) (2,344) (822) 

Obligated Balance, net, end of period 25,472 18,107 26,537 18,900 

Net Outlays:

Gross outlays 113,118 14,034 120,756 14,089 

Offsetting collections (26,921) (8,514) (24,612) (7,864) 

Distributed offsetting receipts (1,303) (464) (1,708) (987) 

Net Outlays 84,894 $ 5,056 $ 94,436 $ 5,238 $ 

2007 2006

The accompanying notes are an integral part of these statements. 
FINANCIAL STATEMENTS, NOTES, SUPPLEMENTAL AND OTHER ACCOMPANYING INFORMATION

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FY 2007 Performance and Accountability Report 

Notes to the Consolidated Financial Statements 

As of September 30, 2007 and 2006 

(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) 

 Cooperative State Research, Education, and 

Extension Service (CSREES) 

 Economic Research Service (ERS) 

 National Agricultural Statistics Service (NASS) 

Rural Development 

 Rural Development (RD) 

 Rural Telephone Bank (RTB) – a corporation 

 Alternative Agricultural Research and 

Commercialization Corporation (AARC) 

With the passage of the 2006 Agriculture, Rural 

Development, Food and Drug Administration, and 

Related Agencies Appropriation Act, Public Law No. 

109-97, the legal restriction on redeeming 

Government-owned Class A stock was removed for 

RTB. As a result of this change, the process of 

liquidation and dissolution of the RTB began. During 

FY 2008 RTB will be dissolved in its entirety and will 

no longer be a reportable entity. 

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. 

Effective for FY 2007, the Statement of Financing will 

be presented as a note per Office of Management and 

Budget’s (OMB) authority under Statement of Federal 

Financial Accounting Standards (SFFAS) 7 and will 

no longer be considered a Basic Statement. The 

Statement of Financing will now be a display in the 
FINANCIAL STATEMENTS, NOTES, SUPPLEMENTAL AND OTHER ACCOMPANYING INFORMATION

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FY 2007 Performance and Accountability Report 

notes and referred to as “Reconciliation of Net Cost of 

Operations to Budget.” 

Reclassifications 

Certain reclassifications have been made to prior year 

amounts to conform to the current year presentation. 

The FY 2006 Statement of Net Cost was reclassified 

to reflect the six strategic goals outlined in USDA’s 

Strategic Plan for FY 2005-2010. Earmarked funds 

with total assets less than $50 million were 

summarized as “other” in the earmarked fund note for 

FY 2006. 

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. 

Direct loans obligated and loan guarantees committed 

before fiscal 1992 are valued using the present-value 

method. Under the present-value method, the 

outstanding principal of direct loans is reduced by an 

allowance equal to the difference between the 

outstanding principal and the present value of the 

expected net cash flows. The liability for loan 
FINANCIAL STATEMENTS, NOTES, SUPPLEMENTAL AND OTHER ACCOMPANYING INFORMATION

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FY 2007 Performance and Accountability Report 

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 post-employment benefits is the 

present value of future payments. 

Earmarked Funds 

In accordance with SFFAS 27, Identifying and 

Reporting Earmarked Funds, which became effective 

in FY 2006, 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, 

was issued in July 2005. SFFAS 29 reclassified all 

heritage assets and stewardship land information as 

basic except for condition information, which is 

classified as RSI. The reclassification as basic is being 

phased in per SFFAS 29. Heritage assets and 

stewardship land information that was previously 

reported in RSSI will temporarily shift to RSI until it 

moves to a note on the balance sheet as basic 

information. The phase-in of disclosure requirements 

being reported as basic information provides that 

SFFAS 29 will be fully implemented for reporting 

periods beginning after September 30, 2008. 

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 
FINANCIAL STATEMENTS, NOTES, SUPPLEMENTAL AND OTHER ACCOMPANYING INFORMATION

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FY 2007 Performance and Accountability Report 

(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 

Interior, Department of Defense, Department of 

Housing and Urban Development, U.S. Agency for 

International Development and the Small Business 

Agency. The Department receives allocation transfers, 

as the child, from the Department of Labor, 

Department of Transportation, Department of 

Interior, Economic Development Administration, 

Appalachian Regional Commission and the Delta 

Regional Authority. 

Limitations of the Financial Statements 

The financial statements report the financial position 

and results of operations of the entity, pursuant to the 

requirements of 31 U.S.C. 3515(b). 

While the statements have been prepared from the 

books and records of the entity in accordance with the 

formats prescribed by the OMB, they also are 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. Thus, liabilities 

cannot be liquidated without enabling legislation that 

provides resources to do so. 
FINANCIAL STATEMENTS, NOTES, SUPPLEMENTAL AND OTHER ACCOMPANYING INFORMATION

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FY 2007 Performance and Accountability Report 

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, 

property taxes and insurance for single family housing, interest, fines and penalties. 

FY 2007 FY 2006

Intragovernmental:

Fund balance with Treasury 106 $ 37 $ 

Accounts Receivable - 17 

Subtotal Intragovernmental 106 54 

With the Public:

Cash and other monetary assets 109 98 

Accounts receivable 47 32 

Subtotal With the Public 156 130 

Total non-entity assets 262 184 

Total entity assets 142,226 134,045 

Total Assets 142,488 $ 134,229 $ 

NOTE 3.FUND BALANCE WITH TREASURY

Other Fund Types include deposit and clearing accounts. Clearing Account Balances, including suspense 

accounts are awaiting disposition or reclassification. 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. 

FY 2007 FY 2006

Fund Balances:

 Trust Funds 449 $ 551 $ 

 Special Funds 1,498 1,352 

 Revolving Funds 6,395 5,227 

 General Funds 38,977 35,107 

 Other Fund Types 21 (46) 

Total 47,340 42,191 

Status of Fund Balance with Treasury:

Unobligated Balance:

 Available 12,067 10,213 

 Unavailable 20,897 14,652 

Obligated Balance not yet Disbursed 43,471 44,451 

Borrowing Authority not yet Converted to Fund Balance (29,162) (27,141) 

Non-Budgetary Fund Balance with Treasury:

 Clearing Account Balances 67 16 

Total 47,340 $ 42,191 $ 
FINANCIAL STATEMENTS, NOTES, SUPPLEMENTAL AND OTHER ACCOMPANYING INFORMATION

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FY 2007 Performance and Accountability Report 

NOTE 4. CASH AND OTHER MONETARY ASSETS

In fiscal 2007 and 2006, cash includes Federal crop insurance escrow amounts of $79 million and $90 million, 

funds held in escrow for single family housing borrowers of $109 million and $98 million, and other receipts of 

$30 million and $36 million, respectively. 

FY 2007 FY 2006

Cash $ 224 218 $ 

NOTE 5. INVESTMENTS

FY 2007 Unamortized Market

Amortization Premium/ Investments, Value

Method Cost (Discount) Net Disclosure

Intragovernmental:

Non-marketable

Par value 88 $ - $ 88 $ - $ 

Market-based Straight Line 6 - 6 6 

Total 94 $ - $ 94 $ 6 $ 

With the Public:

AARC 3 $ - $ 3 $ 3 $ 

Total 3 $ - $ 3 $ 3 $ 

FY 2006 Unamortized Market

Amortization Premium/ Investments, Value

Method Cost (Discount) Net Disclosure

Intragovernmental:

Non-marketable

Par value 76 $ - $ 76 $ - $ 

Market-based Straight Line 5 - 5 5 

Total 81 $ - $ 81 $ 5 $ 

With the Public:

AARC 3 $ - $ 3 $ 3 $ 

Total 3 $ - $ 3 $ 3 $ 
FINANCIAL STATEMENTS, NOTES, SUPPLEMENTAL AND OTHER ACCOMPANYING INFORMATION

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FY 2007 Performance and Accountability Report 

NOTE 6. ACCOUNTS RECEIVABLE, NET

FY 2007

Accounts 

Receivable, 

Gross

Allowance for 

Uncollectible 

Accounts

Accounts 

Receivable, 

Net

Intragovernmental 364 $ - $ 364 $ 

With the Public 8,899 45 8,854 

Total 9,263 $ 45 $ 9,218 $ 

FY 2006

Accounts 

Receivable, 

Gross

Allowance for 

Uncollectible 

Accounts

Accounts 

Receivable, 

Net

Intragovernmental 246 $ - $ 246 $ 

With the Public 8,732 97 8,635 

Total 8,978 $ 97 $ 8,881 $ 

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 2007 was $80,348 million compared to $77,791 

million at the end of FY 2006. Loans exempt from the 

Federal Credit Reform Act of 1990 represent $779 

million of the total compared to $1,381 million in FY 

2006. Table 1 illustrates the overall composition of the 

Department’s credit program balance sheet portfolio 

by mission area and credit program for FY 2007 and 

2006. 

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 $5,090 million to $4,334 

million during FY 2007, a decrease of $756 million. 
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FY 2007 Performance and Accountability Report 

Table 2 shows the reconciliation of subsidy cost 

allowance balances from FY 2006 to FY 2007. 

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 loans. 

Total direct loan subsidy expense in FY 2007 was 

negative $32 million compared to $717 million in FY 

2006. Table 3 illustrates the breakdown of total 

subsidy expense for FY 2007 and 2006 by program. 

Direct loan volume decreased from $8,875 million in 

FY 2006 to $8,274 million in FY 2007. 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 2007 

were $34,482 million in outstanding principal and 

$30,648 million in outstanding principal guaranteed, 

compared to $33,419 and $29,643 million, respectively 

at the end of FY 2006. 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 $1,296 million to $1,258 million during 

FY 2007, a decrease of $38 million. The post-1991 

liability moved from $1,294 million to $1,256 million, 

a decrease of $38 million. Table 7 shows the 

reconciliation of loan guarantee liability post-1991 

balances and the 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 2007 was negative $192 million 

compared to negative $64 million in FY 2006. Table 8 

illustrates the breakdown of total subsidy expense for 

FY 2007 and 2006 by program. 

Guaranteed loan volume increased from $7,394 

million in FY 2006 to $7,434 million in FY 2007. 

Volume distribution between mission area and 

program is shown in Table 9. 

Credit Program Discussion and Descriptions 

The Department offers direct and guaranteed loans 

through credit programs in the FFAS mission area 

through the FSA and the CCC, and in the RD 

mission area. 

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. 
FINANCIAL STATEMENTS, NOTES, SUPPLEMENTAL AND OTHER ACCOMPANYING INFORMATION

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FY 2007 Performance and Accountability Report 

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 reestablish their credit worthiness. The Departments of 

State and Treasury lead the U.S. Delegation and 

negotiations for all U.S. Agencies. 

Farm and Foreign Agricultural Service List of Programs 

Farm Service Agency Commodity Credit Corporation 

Direct Farm Ownership 

Direct Farm Operating 

Direct Emergency Loans 

Direct Indian Land Acquisition 

Direct Boll Weevil Eradication 

Direct Seed Loans to Producers 

Guaranteed Farm Operating 

Subsidized/Unsubsidized 

Agricultural Resource Demonstration 

Fund 

Bureau of Reclamation Loan Fund 

Guaranteed Farm Ownership 

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

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FY 2007 Performance and Accountability Report 

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-forprofit 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 

Home Ownership Direct Loans 

Home Ownership Guaranteed Loans 

Home Improvement and Repair Direct Loans 

Home Ownership and Home Improvement and 

Repair Nonprogram Loans 

Rural Housing Site Direct Loans 

Farm Labor Housing Direct Loans 

Rural Rental and Rural Cooperative Housing 

Loans 

Rental Housing Guaranteed Loans 

Multi-family Housing–Nonprogram–Credit 

Sales 

Community Facilities Direct Loans 

Community Facilities Guaranteed Loans 

Business and Industry Direct Loans 

Business and Industry Guaranteed 

Loans 

Intermediary Relending Program 

Direct Loans 

Rural Economic Development Direct 

Loans 

Water and Environmental Direct Loans 

Water and Environmental Guaranteed 

Loans 

Electric Direct Loans 

Electric Guaranteed Loans 

Telecommunications Direct Loans 

Federal Financing BankTelecommunications Guaranteed 

Distance Learning and Telemedicine Direct 

Broadband Telecommunications Services 
FINANCIAL STATEMENTS, NOTES, SUPPLEMENTAL AND OTHER ACCOMPANYING INFORMATION

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FY 2007 Performance and Accountability Report 

Discussion of Administrative Expenses, Subsidy Costs 

and Subsidy Rates 

Administrative Expenses 

Consistent with the Federal Credit Reform Act of 

1990 as amended, subsidy cash flows exclude direct 

Federal administrative expenses. Administrative 

expenses for FY 2007 and 2006 are shown in Table 10. 

Reestimates, Default Analysis, and Subsidy Rates 

The Federal Credit Reform Act of 1990 as amended 

governs the proprietary and budgetary accounting 

treatment of direct and guaranteed loans. The longterm 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. 

RD’s cash flow models are tailored for specific 

programs based on unique program characteristics. 

The models utilized are housing, guaranteed, electric 

underwriters, FFB modifications and a direct model 

that covers the remaining portfolio with similar 

characteristics. In FY 2007, reestimates using 

projected fiscal year activity were recorded in the 

current fiscal year. In prior years, several programs 

used an approximator method for financial statement 

purposes, which lagged one year behind actual 

budgetary reestimates. 

The annual reestimate process updates the budget 

assumptions with actual portfolio performance, 

interest rates and updated estimates for future loan 

performance. The FY 2007 reestimate process 

resulted in a $397 million reduction in the post 1991 

estimated cost of the direct loan portfolio and a $379 

million reduction in the post 1991 estimated cost of 

the guaranteed loan portfolio. 

Table 3 discloses the direct loan subsidy expense 

including the $397 million decrease due to reestimates. 

The decrease was most affected by a $140 million 

decrease in the farm program, a $108 million decrease 

in the telecommunications program, and a $75 million 

decrease in the housing program. 

Table 8 discloses the loan guarantee subsidy expenses 

including the $379 million reduction due to 

reestimate. The reduction was most impacted by the 

$389 million reduction in the export programs. After 

analyzing foreign credits governmentwide, OMB 

determined that actual performance on foreign credits 

was better than had been previously forecast and 

therefore mandated a change to the default calculation 

methodology. This is a major contributor to the 

downward subsidy reestimates for the export 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 the OMB in order 

to do its calculations and analysis. 

The Inter-agency Country Risk Assessment System 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. Sovereign and 

non-sovereign lending risks are sorted into risk 

categories, each associated with a default estimate. 

The CCC delinquent debt is estimated at a 100-

percent allowance for losses. When the foreign 

borrower reschedules their debt and renews their 

commitment to repay CCC, the allowance is estimated 

at less than 100 percent. 

Subsidy rates are used to compute each year's subsidy 

expenses as disclosed above. The subsidy rates 

disclosed in Tables 11 and 12 pertain only to the FY 

2007 and 2006 cohorts. These rates cannot be applied 
FINANCIAL STATEMENTS, NOTES, SUPPLEMENTAL AND OTHER ACCOMPANYING INFORMATION

181 

FY 2007 Performance and Accountability Report 

to the direct and guaranteed loans disbursed during the 

current reporting year to yield the subsidy expense. 

The subsidy expense for new loans reported in the 

current year could result from disbursements of loans 

from both current year cohorts and prior-year cohorts. 

The subsidy expense reported in the current year also 

includes reestimates. 

As a result of new guidance, CCC chose to reflect 

interest on downward reestimates in the Statement of 

Changes in Net Position as other financing sources for 

FY 2007 and 2006, respectively. The remainder of 

USDA credit programs chose to reflect downward 

reestimates in earned revenue on the Statement of Net 

Cost. Both methodologies are accepted alternatives 

that have been promulgated by Treasury. 

Foreclosed Property 

Property is acquired largely through foreclosure and 

voluntary conveyance. Acquired properties associated 

with loans are reported at their market value at the 

time of acquisition. The projected future cash flows 

associated with acquired properties are used in 

determining the related allowance (at present value). 

As of September 30, 2007 and 2006, foreclosed 

property consisted of 591 and 530 rural single-family 

housing dwellings, with an average holding period of 

23 and 27 months, respectively. As of September 30, 

2007 and 2006, FSA-Farm Loan Program properties 

consist primarily of 61 and 78 farms, respectively. The 

average holding period for these properties in 

inventory for FY 2007 and 2006 was 68 and 58 

months, respectively. Certain properties can be leased 

to eligible individuals. 

Non-performing Loans 

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. 

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. 

In FY 2007, RD modified several loan programs. The 

multiple-family housing direct loan program 

modifications related to the revitalization project, 

which began in FY 2006, continued throughout FY 

2007. The revitalization project is used to rehabilitate 

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 2006, electric program direct loans were 

modified for two borrowers due to damage caused by 

the hurricanes which occurred during the 2005 

calendar year. One borrower’s loans were modified to 

defer principal payments for three years and to extend 

the loan term for three years. The other modification 

was made to defer principal and interest for five years 

and to extend the maturity by five years. One 

modification in the direct electric program occurred in 

FY 2007 related to the 2005 hurricanes. 

In the Federal Financing Bank (FFB) electric 

program, loan extension modifications were granted 

for two borrowers in FY 2007. 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 third quarter net present value 

discount factor from the FY 2007 President’s Budget 

relative to the effective date of the loan extension 

modifications. 
FINANCIAL STATEMENTS, NOTES, SUPPLEMENTAL AND OTHER ACCOMPANYING INFORMATION

182 

FY 2007 Performance and Accountability Report 

The Debt Reduction Fund is used to account for 

CCC's "modified debt." Debt is considered to be 

modified if the original debt has been reduced or the 

interest rate of the agreement changed. In contrast, 

when debt is "rescheduled," only the date of payment 

is changed. Rescheduled debt is carried in the original 

fund until paid. All outstanding CCC modified debt is 

carried in the Debt Reduction Fund and is governed 

by the Federal Credit Reform Act of 1990 as 

amended. 

Interest Credit 

Approximately $17,800 million and $17,900 million of 

Rural Housing Service (RHS) unpaid loan principal as 

of September 30, 2007, and 2006 were receiving 

interest credit, respectively. If those loans receiving 

interest credit had accrued interest at the fullunreduced rate, interest income would have been 

approximately $1,000 million higher for FY 2007 and 

2006. 

Restructured Loans 

At the end of FY 2007 and 2006, the RD portfolio 

contained approximately 76,500 and 81,000 

restructured loans with an outstanding unpaid 

principal balance of $2,500 million. At the end of FY 

2007 and 2006, the farm loan portfolio contained 

approximately 22,000 and 23,000 restructured loans 

with an outstanding unpaid principal balance of 

$1,200 million and $1,300 million, respectively. 

Direct credit and credit guarantee principal receivables 

in the food aid and export programs under 

rescheduling agreements as of September 30, 2007 and 

2006, were $3,400 million and $4,200 million, 

respectively. 
FINANCIAL STATEMENTS, NOTES, SUPPLEMENTAL AND OTHER ACCOMPANYING INFORMATION

183 

FY 2007 Performance and Accountability Report 

Table 1. Direct Loan and Loan Guarantees, Net 

FY 2007 Loans Present Value of Assets

Direct Loans Receivable, Interest Foreclosed Value Related to

Gross Receivable Property Allowance Direct Loans

Obligated Pre-1992

Farm 1 $ 115 ,679 $ 10 $ $ 1 (129) $ ,675

Export - - - - - Food Aid 5 31 ,204 - 2 (2,365) ,870

Housing 118 11,014 21 6 (5,040) ,113

Electric 10 88 ,045 - 8 (1,373) ,760

Telecommunications 1 2 ,047 - 1 (24) ,025

Water and Environmental 1 12 ,438 - 1 (182) ,268

Business and Industry - - - - - Economic Development 44 - - 24 (20) Pre-1992 Total 30 366 ,471 31 21 (9,133) ,735

Obligated Post-1991

Farm 4 161 ,877 4 4 (440) ,602

Export - - - - - Food Aid 2 33 ,414 - 1 (1,192) ,255

Housing 81 16,023 24 14 (2,090) ,038

Electric 26 170 ,006 - 26 (42) ,134

Telecommunications 2 6 ,936 - 328 3 ,270

Water and Environmental 7 70 ,839 - 7 (638) ,271

Business and Industry - 51 - 13 (38) Economic Development 509 2 - 343 (168) Post-1991 Total 60 523 ,655 28 56 (4,280) ,926

Total Direct Loan Program Receivables 91 889 ,126 59 78 (13,413) ,661

Defaulted Guarantee Loans

Pre-1992

Farm 8 - - 3 (5) Export 349 5 - 240 (114) Food Aid - - - - - Housing - - - - - Electric - - - - - Telecommunications - - - - - Water and Environmental - - - - - Business and Industry 1 3 - - 4 Economic Development - - - - - Pre-1992 Total 360 6 - 247 (119) 

Post-1991

Farm 49 2 - 19 (32) Export 630 16 - 532 (114) Food Aid - - - - - Housing - 23 - 1 (22) Electric - - - - - Telecommunications - - - - - Water and Environmental - - - - - Business and Industry 3 118 - 109 (12) Economic Development - - - - - Post-1991 Total 820 21 - 661 (180) Total Defaulted Guarantee Loans 1 27 ,180 - 908 (299) 

Loans Exempt from Credit Reform Act:

Commodity Loans 744 15 - - 759 Other Foreign Receivables 21 - - 20 (1) Total Loans Exempt 765 15 - 779 (1) 

Total Direct Loan and Loan Guarantees, Net 80 $ ,348
FINANCIAL STATEMENTS, NOTES, SUPPLEMENTAL AND OTHER ACCOMPANYING INFORMATION

184 

FY 2007 Performance and Accountability Report 

Table 1. Direct Loan and Loan Guarantees, Net (cont’d) 

FY 2006 Loans Present Value of Assets

Direct Loans Receivable, Interest Foreclosed Value Related to

Gross Receivable Property Allowance Direct Loans

Obligated Pre-1992

Farm 1 $ 13 ,981 $ 13 3 $ $ 1 (174) $ ,953

Export - - - - - Food Aid 5 6 ,600 - 8 3 (2,570) ,098

Housing 101 11,666 16 6 (5,212) ,571

Electric 11 2 ,969 - 5 10 (1,460) ,534

Telecommunications 1 2 ,239 - 1 (79) ,162

Water and Environmental 1 1 ,568 - 6 1 (216) ,368

Business and Industry 1 1 - 1 (1) Economic Development 44 - - 22 (22) 

Pre-1992 Total 34 34 ,068 29 6 24 (9,734) ,709

Obligated Post-1991

Farm 4 152 ,692 4 4 (642) ,206

Export - - - - - Food Aid 2 3 ,548 - 4 1 (1,249) ,333

Housing 8 15,145 16 7 13 (2,099) ,149

Electric 22 ,237 - 3 22 (240) ,000

Telecommunications 2 ,718 - 5 7 2 7 ,800

Water and Environmental 7 7 ,104 - 3 6 (663) ,514

Business and Industry - 70 - 3 (67) Economic Development 488 2 - 328 (162) Post-1991 Total 55 35 ,002 20 6 50 (5,045) ,333

Total Direct Loan Program Receivables 89 702 ,070 49 75 (14,779) ,042

Defaulted Guarantee Loans

Pre-1992

Farm 8 - - 2 (6) 

Export 516 - 7 386 (137) Food Aid - - - - - Housing - - - - - Electric - - - - - Telecommunications - - - - - 

Water and Environmental - - - - - Business and Industry - - - - - Economic Development 4 - - - 4 Pre-1992 Total 528 - 7 392 (143) 

Post-1991

Farm 36 1 - 15 (22) Export 1 2 ,189 - 0 803 (406) Food Aid - - - - - 

Housing - 17 - 3 (14) Electric - - - - - Telecommunications - - - - - Water and Environmental - - - - - 

Business and Industry 2 162 - 155 (9) Economic Development - - - - - 

Post-1991 Total 1 2 ,404 - 3 976 (451) Total Defaulted Guarantee Loans 1 3 ,932 - 0 1 (594) ,368

Loans Exempt from Credit Reform Act:

Commodity Loans 1 - ,493 - 1 (132) ,361

Other Foreign Receivables 62 - - 20 (42) Total Loans Exempt 1 - ,555 - 1 (174) ,381

Total Direct Loan and Loan Guarantees, Net 77 $ ,791
FINANCIAL STATEMENTS, NOTES, SUPPLEMENTAL AND OTHER ACCOMPANYING INFORMATION

185 

FY 2007 Performance and Accountability Report 

Table 2. Schedule for Reconciling Subsidy Cost Allowance Balances (Post-1991) Direct Loans 

FY 2007 FY 2006

Beginning balance of the subsidy cost allowance 5,080 $ 4,674 $ 

Add: Subsidy expense for direct loans disbursed during the year by component

Interest rate differential costs (56) (119) 

Default costs (net of recoveries) 142 120 

Fees and other collections (3) (3) 

Other subsidy costs 337 286 

Total subsidy expense prior to adjustments and reestimates 369 335 

Adjustments

Loan modifications 27 (3) 

Fees received 22 29 

Loans written off (276) (274) 

Subsidy allowance amortization (467) (78) 

Other 32 (2) 

Total subsidy cost allowance before reestimates 4,732 4,736 

Add or subtract subsidy reestimates by component

Interest rate reestimate 12 97 

Technical/default reestimate (410) 257 

Total reestimates 354 (398) 

Ending balance of the subsidy cost allowance 4,334 $ 5,090 $ 
FINANCIAL STATEMENTS, NOTES, SUPPLEMENTAL AND OTHER ACCOMPANYING INFORMATION

186 

FY 2007 Performance and Accountability Report 

Table 3. Direct Loan Subsidy Expense by Program and Component 

FY 2007

Interest Fees and Other Subtotal Total Rate Technical 

Differential Defaults Collections Other Subsidy Modifications Reestimates Reestimates 

Direct Loan Programs

Farm 23 $ 73 $ - $ (6) $ 90 $ - $ (64) $ (76) $ 

Export - - - - - - - - Food Aid 4 1 - - 5 - (29) (12) 

Housing (154) 61 (3) 306 210 1 (76) 1 

Electric (26) 5 - (10) (31) (4) 122 (108) 

Telecommunications 1 2 - (1) 2 - 16 (124) 

Water and Environmental 75 1 - (4) 72 - 31 (66) 

Business and Industry - - - - - - - (13) Economic Development 20 - - - 20 - 12 (11) 

Total Direct Loan Subsidy Expense (57) $ 143 $ (3) $ 285 $ 368 $ (3) $ 12 $ (409) $ 

.

FY 2006

Interest Fees and Other Subtotal Total Rate Technical 

Differential Defaults Collections Other Subsidy Modifications Reestimates Reestimates 

Direct Loan Programs

Farm 12 $ 73 $ - $ (4) $ 81 $ - $ 5 $ (18) $ 

Export - - - - - - - - 

Food Aid 18 4 - - 22 26 - (89) Housing (178) 31 (3) 360 210 - 337 461 Electric (45) 9 - (14) (50) 1 (214) (39) 

Telecommunications (1) 2 - (1) - - (6) (43) 

Water and Environmental 53 1 - (3) 51 - (29) (4) 

Business and Industry - - - - - - 3 (9) 

Economic Development 23 - - - 23 - - (2) 

Total Direct Loan Subsidy Expense (118) $ 120 $ (3) $ 338 $ 337 $ 27 $ 96 $ 257 $ 

.
FINANCIAL STATEMENTS, NOTES, SUPPLEMENTAL AND OTHER ACCOMPANYING INFORMATION

187 

FY 2007 Performance and Accountability Report 

Table 4. Total Amount of Direct Loans Disbursed (Post-1991) 

FY 2007 FY 2006

Direct Loan Programs

Farm 1,069 $ 1,041 $ 

Export - - 

Food Aid 9 16 

Housing 1,856 1,790 

Electric 3,814 4,802 

Telecommunications 503 485 

Water and Environmental 969 675 

Business and Industry - - 

Economic Development 54 66 

Total Direct Loans Disbursed 8,274 $ 8,875 $ 
FINANCIAL STATEMENTS, NOTES, SUPPLEMENTAL AND OTHER ACCOMPANYING INFORMATION

188 

FY 2007 Performance and Accountability Report 

Table 5. Loan Guarantees Outstanding 

Pre - 1992 Post - 1991 Total Pre - 1992 Post - 1991 

FY 2007 Outstanding Principal, Outstanding Principal, Outstanding Principal, Outstanding Principal, Outstanding Principal, 

Face Value Face Value Face Value Guaranteed Guaranteed 

Loan Guarantee Programs

Farm $ 66 $ 10,045 $ 10,111 $ 58 $ 9,027 Export - 2,371 2,371 - 2,312 Food Aid - - - - - Housing 8 17,872 17,880 7 16,075 Electric 184 218 402 184 218 Telecommunications - - - - - Water and Environmental - 37 37 - 30 Business and Industry 14 3,667 3,681 10 2,727 Economic Development - - - - - 

Total Guarantees Disbursed $ 272 $ 34,210 $ 34,482 $ 259 $ 30,389 

Pre - 1992 Post - 1991 Total Pre - 1992 Post - 1991 

FY 2006 Outstanding Principal, Outstanding Principal, Outstanding Principal, Outstanding Principal, Outstanding Principal, O

Face Value Face Value Face Value Guaranteed Guaranteed G

Loan Guarantee Programs

Farm $ 86 $ 10,069 $ 10,155 $ 76 $ 9,046 $ Export - 3,022 3,022 - 2,925 Food Aid - - - - - 

Housing 12 15,889 15,901 10 14,286 Electric 167 222 389 167 222 Telecommunications - - - - - Water and Environmental - 34 34 - 28 Business and Industry 23 3,892 3,915 17 2,863 Economic Development 3 - 3 3 - 

Total Guarantees Disbursed $ 291 $ 33,128 $ 33,419 $ 273 $ 29,370 $ 
FINANCIAL STATEMENTS, NOTES, SUPPLEMENTAL AND OTHER ACCOMPANYING INFORMATION

189 

FY 2007 Performance and Accountability Report 

Table 6. Liability for Loan Guarantees (Present Value Method for Pre-1992 Guarantees) 

FY 2007

Liabilities for 

Losses on Pre1992 

Guarantees 

Present Value

Liabilities for Loan 

Guarantees on 

Post-1991 

Guarantees 

Present Value

Total Liabilities for 

Loan Guarantees

Loan Guarantee Programs

Farm 1 $ 126 $ 127 $ 

Export - 184 184 

Food Aid - - - 

Housing - 655 655 

Electric - - - 

Telecommunications - - - 

Water and Environmental - - - 

Business and Industry 1 291 292 

Economic Development - - - 

Total Liability for Loan Guarantees 2 $ 1,256 $ 1,258 $ 

FY 2006

Liabilities for 

Losses on Pre1992 

Guarantees 

Present Value

Liabilities for Loan 

Guarantees on 

Post-1991 

Guarantees 

Present Value

Total Liabilities for 

Loan Guarantees

Loan Guarantee Programs

Farm 1 $ 121 $ 122 $ 

Export - 220 220 

Food Aid - - - 

Housing - 624 624 

Electric - - - 

Telecommunications - - - 

Water and Environmental - - - 

Business and Industry 1 329 330 

Economic Development - - - 

Total Liability for Loan Guarantees 2 $ 1,294 $ 1,296 $ 
FINANCIAL STATEMENTS, NOTES, SUPPLEMENTAL AND OTHER ACCOMPANYING INFORMATION

190 

FY 2007 Performance and Accountability Report 

Table 7. Schedule for Reconciling Loan Guarantee Liability 

FY 2007 FY 2006

Beginning balance of the loan guarantee liability 1,293 $ 1,209 $ 

Add:Subsidy expense for guaranteed loans disbursed during the year by component

Interest rate differential costs 33 35 

Default costs (net of recoveries) 280 290 

Fees and other collections (126) (118) 

Other subsidy costs - - 

Total of the above subsidy expense components 187 207 

Adjustments

Loan modifications - - 

Fees received 95 105 

Interest supplements paid (10) (6) 

Claim payments to lenders (107) (154) 

Interest accumulation on the liability balance (29) 127 

Other 84 195 

Ending balance of the subsidy cost allowance before reestimates 1,634 1,562 

Add or subtract subsidy reestimates by component:

Interest rate reestimate 57 (64) 

Technical/default reestimate (315) (326) 

Total of the above reestimate components (379) (269) 

Ending balance of the loan guarantee liability 1,255 $ 1,293 $ 
FINANCIAL STATEMENTS, NOTES, SUPPLEMENTAL AND OTHER ACCOMPANYING INFORMATION

191 

FY 2007 Performance and Accountability Report 

Table 8. Guarantee Loan Subsidy Expense by Program and Component 

FY 2007

Interest 

Interest Fees and Other Total Rate Technical 

Loan Guarantee Programs Supplement Defaults Collections Other Subtotal Modifications Reestimates Reestimates 

Farm 21 $ 51 $ (17) $ - $ 55 $ - $ - $ (37) $ 

Export - 48 (7) - 41 - (95) (294) 

Food Aid - - - - - - - - 

Housing 12 126 (80) - 58 - 12 (25) 

Electric - - - - - - - - 

Telecommunications - - - - - - - - 

Water and Environmental - - - - - - (1) 1 

Business and Industry - 55 (22) - 33 - 21 39 

Economic Development - - - - - - - - 

Total Loan Guarantee Subsidy Expense $ 33 $ 280 $ (126) $ - $ 187 $ - $ (63) $ (316) 

FY 2006

Interest 

Interest Fees and Other Total Rate Technical Tota

Loan Guarantee Programs Supplement Defaults Collections Other Subtotal Modifications Reestimates Reestimates Reestim

Farm 25 $ 58 $ (17) $ - $ 66 $ - $ 1 $ 18 $ 

$ 

Export - 78 (9) - 69 - 23 (371) (3

 

Food Aid - - - - - - - - 

 

Housing 10 97 (68) - 39 - 20 31 

 

Electric - - - - - - - - 

 

Telecommunications - - - - - - - - 

 

Water and Environmental - - - - - - - - 

 

Business and Industry - 56 (25) - 31 - 13 (4) 

 

Economic Development - - - - - - - - 

 

Total Loan Guarantee Subsidy Expense $ 35 $ 289 $ (119) $ - $ 205 $ - $ 57 $ (326) $ (2
FINANCIAL STATEMENTS, NOTES, SUPPLEMENTAL AND OTHER ACCOMPANYING INFORMATION

192 

FY 2007 Performance and Accountability Report 

Table 9. Guaranteed Loans Disbursed 

Principal, 

Face Value 

Disbursed

Principal, 

Guaranteed 

Disbursed

Principal, Face 

Value 

Disbursed

Principal, 

Guaranteed 

Disbursed

Loan Guarantee Programs

Farm 2,110 $ 1,896 $ 2,146 $ 1,928 $ 

Export 1,086 1,037 1,568 1,451 

Food Aid - - - - 

Housing 3,643 3,275 3,187 2,864 

Electric - - 3 3 

Telecommunications - - - - 

Water and Environmental 7 6 1 1 

Business and Industry 588 459 489 382 

Economic Development - - - - 

Total Guaranteed Loans Disbursed 7,434 $ 6,673 $ 7,394 $ 6,629 $ 

FY 2007 FY 2006

Table 10. Administrative Expenses 

FY 2007 FY 2006

Direct Loan Programs 527 $ 535 $ 

Guaranteed Loan Programs 230 253

Total Administrative Expenses 757 $ 788 $ 
FINANCIAL STATEMENTS, NOTES, SUPPLEMENTAL AND OTHER ACCOMPANYING INFORMATION

193 

FY 2007 Performance and Accountability Report 

Table 11. Subsidy Rates for Direct Loans (percentage) 

FY 2007 Interest 

Differential Defaults

Fees and 

Other 

Collections Other Total

Direct Loan Programs

Farm Operating 1.02 10.49 - 0.18 11.69 

Indian Land Acquisition 5.49 15.66 - - 21.15 

Emergency Disaster 12.38 0.08 - (0.69) 11.77 

Boll Weevil Eradication 2.85 (0.95) - - 1.90 

Farm Ownership 3.88 0.43 - (0.12) 4.19 

Farm Storage Facility Loan Program 0.03 7.27 (0.11) (6.81) 0.38 

Sugar Storage Facility Loan Program 0.63 7.40 - (10.74) (2.71) 

Community Facility Loans 7.04 0.18 - (0.81) 6.41 

Water and Waste Disposal Loans 10.31 0.09 - (0.44) 9.96 

Distance Learning and Telemedicine Loans (0.72) 1.35 - - 0.63 

Broadband Treasury Loans - 2.19 - (0.04) 2.15 

Electric Hardship Loans 2.25 - - (0.11) 2.14 

Municipal Electric Loans 1.26 - - 0.25 1.51 

FFB Electric Loans (1.21) 0.02 - - (1.19) 

Telecommunication Hardship Loans 0.36 0.01 - - 0.37 

FFB Telecommunications Loans (1.21) 0.02 - (0.30) (1.49) 

Treasury Telecommunication Loans - 0.03 - - 0.03 

FFB Guaranteed Underwriting (1.24) 0.80 - - (0.44) 

Single-Family Housing Credit Sales 9.56 (16.88) - 7.80 0.48 

Multi-Family Housing Credit Sales 0.11 (19.19) - 64.41 45.33 

Section 502 Single-Family Housing 5.37 (14.99) - 19.65 10.03 

Section 504 Housing Repair 30.08 1.47 - (2.00) 29.55 

Section 515 Multi-Family Housing (18.32) 0.07 - 63.92 45.67 

Section 523 Self-Help Site Development 2.47 - - - 2.47 

Section 524 Site Development (2.59) 0.93 - - (1.66) 

Section 514 Farm Labor Housing 45.52 0.21 - 2.22 47.95 

Multi-Family Housing Relending Program 47.81 - - 0.01 47.82 

Intermediary Relending Program 44.93 - - (0.86) 44.07 

Rural Economic Development Loans 23.45 0.18 - (1.79) 21.84 
FINANCIAL STATEMENTS, NOTES, SUPPLEMENTAL AND OTHER ACCOMPANYING INFORMATION

194 

FY 2007 Performance and Accountability Report 

FY 2006 Interest 

Differential Defaults

Fees and 

Other 

Collections Other Total

Direct Loan Programs

Farm Operating 1.62 8.05 - 0.28 9.95 

Indian Land Acquisition 5.87 (1.86) - - 4.01 

Emergency Disaster 5.02 6.25 - (0.33) 10.94 

Boll Weevil Eradication 0.51 (18.74) - 0.14 (18.09) 

Farm Ownership 0.63 2.49 - 2.00 5.12 

Farm Storage Facility Loan Program 0.04 6.76 (0.11) (7.31) (0.62) 

Sugar Storage Facility Loan Program 0.36 0.90 - - 1.26 

Community Facility Loans 3.59 0.24 - (0.48) 3.35 

Water and Waste Disposal Loans 7.14 0.09 - (0.32) 6.91 

Distance Learning and Telemedicine Loans - 1.63 - (0.13) 1.50 

Broadband 4% Loans 5.83 2.13 - (0.01) 7.95 

Broadband Treasury Loans - 2.22 - (0.07) 2.15 

Electric Hardship Loans 0.69 0.02 - 0.21 0.92 

Municipal Electric Loans 4.68 0.02 - 0.35 5.05 

FFB Electric Loans (0.49) 0.02 - (0.01) (0.48) 

Treasury Electric Loans - 0.02 - (0.01) 0.01 

Telecommunication Hardship Loans (1.84) 0.02 - 0.02 (1.80) 

FFB Telecommunications Loans (1.03) 0.02 - (0.56) (1.57) 

Treasury Telecommunication Loans - 0.03 - 0.02 0.05 

Single-Family Housing Credit Sales 1.16 (19.35) - 3.66 (14.53) 

Multi-Family Housing Credit Sales 0.12 (19.82) - 65.10 45.40 

Section 502 Single-Family Housing 2.32 (16.77) - 25.84 11.39 

Section 504 Housing Repair 27.00 2.45 - (0.20) 29.25 

Section 515 Multi-Family Housing (17.86) 0.04 (0.05) 63.75 45.88 

Section 523 Self-Help Site Development 1.03 - - - 1.03 

Section 524 Site Development (4.30) 0.79 - - (3.51) 

Section 514 Farm Labor Housing 44.91 0.03 - (0.35) 44.59 

Intermediary Relending Program 43.84 - - (0.82) 43.02 

Rural Economic Development Loans 21.40 0.07 - 1.50 22.97 

Electric Underwriting (2.09) 0.83 - - (1.26) 

MFH Preservation 46.76 - - - 46.76 

P. L. 480 Direct Credits 44.39 11.01 - - 55.40 

Table 12. Subsidy Rates for Loan Guarantees (percentage) 

FY 2007 Interest

Fees and

Other

Differential Defaults Collections Other Total

Guaranteed Loan Programs

CCC Export Loan Guarantee Program - 9.28 (1.35) - 7.93 

Farm Operating—Unsubsidized - 3.37 (0.90) - 2.47 

Farm Operating—Subsidized 7.59 2.48 - - 10.07 

Farm Ownership—Unsubsidized - 1.48 (0.90) - 0.58 

Community Facility Loans - 4.52 (0.86) - 3.66 

Water and Waste Disposal Loans - - (0.90) - (0.90) 

Section 502 Single-Family Housing Purchase - 3.21 (2.00) - 1.21 

Section 502 Single-Family Housing Refinance - 1.00 (0.50) - 0.50 

538 Multi-Family Housing-Subsidized 14.59 0.50 (7.35) - 7.74 

Renewable Energy - 8.03 (1.54) - 6.49 
FINANCIAL STATEMENTS, NOTES, SUPPLEMENTAL AND OTHER ACCOMPANYING INFORMATION

195 

FY 2007 Performance and Accountability Report 

FY 2006 Interest

Fees and

Other

Differential Defaults Collections Other Total

Guaranteed Loan Programs

CCC Export Loan Guarantee Program - 9.50 (0.57) - 8.93 

Farm Operating—Unsubsidized - 3.93 (0.90) - 3.03 

Farm Operating—Subsidized 9.24 3.26 - - 12.50 

Farm Ownership—Unsubsidized - 1.38 (0.90) - 0.48 

Business and Industry Loans - 8.20 (3.41) - 4.79 

Guaranteed Business & Industry NadBank Loans - 13.76 (3.28) (0.01) 10.47 

Community Facility Loans - 1.21 (0.85) - 0.36 

Water and Waste Disposal Loans - - (0.90) - (0.90) 

Electric Guaranteed Loans - 0.90 - - 0.90 

Guaranteed Broadband Loans (Discretionary) - 3.82 - - 3.82 

Guaranteed Broadband Loans (Mandatory) - 3.82 - - 3.82 

Section 502 Single-Family Housing Purchase - 3.16 (2.00) - 1.16 

Section 502 Single-Family Housing Refinance - 0.79 (0.50) - 0.29 

538 Multi-Family Housing-Subsidized 12.28 0.57 (7.44) 0.01 5.42 

Renewable Energy - 8.20 (1.75) - 6.45 

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, 2007 and 2006 were $77 million and $106 million, 

respectively. Estimated future commodity donations are expected to be $12 million. 
FINANCIAL STATEMENTS, NOTES, SUPPLEMENTAL AND OTHER ACCOMPANYING INFORMATION

196 

FY 2007 Performance and Accountability Report 

Inventories 1 $ 1 $ 

Commodities: Volume 

(in millions) Amount

Volume 

(in millions) Amount

Corn (In Bushels):

On hand at the beginning of the year 1 2 1 2 

Acquired during the year 4 12 289 561 

Disposed of during the year

Sales (4) (12) (288) (558)

Donations - - (1) (3)

Other - - - - 

On hand at the end of the year 1 2 1 2 

Wheat (In Bushels):

On hand at the beginning of the year 43 159 47 171 

Acquired during the year 35 182 56 240 

Disposed of during the year

Sales (30) (179) (28) (134)

Donations (7) (12) (32) (118)

Other (2) - (6) - 

On hand at the end of the year 39 144 43 159 

Nonfat Dry Milk (In Pounds):

On hand at the beginning of the year 49 40 104 94 

Acquired during the year - - 62 50 

Disposed of during the year

Sales (1) (1) (27) (25)

Donations (34) (36) (82) (76)

Other - 10 (8) (3)

On hand at the end of the year 14 13 49 40 

Other:

On hand at the beginning of the year 24 37 

Acquired during the year 5,274 5,140 

Disposed of during the year

Sales (5,223) (5,085)

Donations (46) (68)

Other - (4) 

On hand at the end of the year 25 24 

Allowance for losses - (171)

Total Commodities 184 54 

Total Inventory and Related Property, Net 185 $ 55 $ 

FY 2007 FY 2006
FINANCIAL STATEMENTS, NOTES, SUPPLEMENTAL AND OTHER ACCOMPANYING INFORMATION

197 

FY 2007 Performance and Accountability Report 

NOTE 9. GENERAL PROPERTY, PLANT, AND EQUIPMENT, NET

FY 2007 Useful Net

Life Accumulated Book

Category (Years) Cost Depreciation Value

Land and Land Rights 77 $ - $ 77 $ 

Improvements to Land 10 - 50 5,028 2,823 2,205 

Construction-in-Progress 884 - 884 

Buildings, Improvements and Renovations 15 - 30 1,903 1,161 742 

Other Structures and Facilities 15 - 50 1,685 1,248 437 

Equipment 5 - 20 1,687 1,359 328 

Assets Under Capital Lease 3 - 20 70 34 36 

Leasehold Improvements 10 63 38 25 

Internal-Use Software 5 - 8 482 311 171 

Internal-Use Software in Development 23 1 22 

Other General Property, Plant and Equipment 5 - 15 4 - 4 

Total $ 6,975 11,906 $ 4,931 $ 

FY 2006 Useful Net

Life Accumulated Book

Category (Years) Cost Depreciation Value

Land and Land Rights 75 $ - $ 75 $ 

Improvements to Land 10 - 50 4,986 2,711 2,275 

Construction-in-Progress 828 - 828 

Buildings, Improvements and Renovations 15 - 30 1,815 1,099 716 

Other Structures and Facilities 15 - 50 1,604 1,194 410 

Equipment 5 - 20 1,711 1,375 336 

Assets Under Capital Lease 3 - 20 44 16 28 

Leasehold Improvements 10 50 34 16 

Internal-Use Software 5 - 8 442 263 179 

Internal-Use Software in Development 38 - 38 

Other General Property, Plant and Equipment 5 - 15 4 - 4 

Total $ 6,692 11,597 $ 4,905 $ 

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 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 multiuse 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, with required supplementary information providing the physical quantity information for the multiuse heritage assets. 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 are held by the FS, NRCS, and ARS consisting mainly of buildings and structures. 
FINANCIAL STATEMENTS, NOTES, SUPPLEMENTAL AND OTHER ACCOMPANYING INFORMATION

198 

FY 2007 Performance and Accountability Report 

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. The FS manages public land, the 

majority of which is classified as stewardship land. The NRCS manages several conservation easement programs. 

NOTE 11. OTHER ASSETS

In fiscal 2007 and 2006, other assets include investments in trust for loan asset sales of $37 million. 

FY 2007 FY 2006

With the Public:

Advances to Others 114 60 

Prepayments - 1 

Other Assets 37 37 

Total Other Assets 151 $ 98 $ 

NOTE 12. LIABILITIES NOT COVERED BY BUDGETARY RESOURCES

In fiscal 2007 and 2006, other intragovernmental liabilities not covered by budgetary resources include accruals for 

Federal Employee Compensation Act (FECA) of $162 million and $159 million, respectively, and contract 

disputes claims payable to Treasury’s Judgment Fund of $15 million and $13 million, respectively. 

In fiscal 2007 and 2006, other liabilities with the public not covered by budgetary resources include, accruals for 

rental payments under the Conservation Reserve Program (CRP) of $1,810 million and $1,779 million, unfunded 

leave of $592 million and $589 million, Payments to States $394 million and $398 million, and contingent 

liabilities of $48 million and $15 million, respectively. In fiscal 2007 and 2006, CCC reported a liability in the 

amount of $5,380 and $6,137 million under the Tobacco Transition Payment Program (TTPP), respectively. In 

fiscal 2006, other liabilities included future funded indemnity costs of $296 million. 
FINANCIAL STATEMENTS, NOTES, SUPPLEMENTAL AND OTHER ACCOMPANYING INFORMATION

199 

FY 2007 Performance and Accountability Report 

FY 2007 FY 2006

Intragovernmental:

Other 178 $ 173 $ 

Subtotal Intragovernmental 178 173 

With the Public:

Federal employee and veterans' benefits 775 808 

Environmental and disposal liabilities 105 63 

Other 8,222 9,216 

Subtotal With the Public 9,102 10,087 

Total liabilities not covered by budgetary resources 9,280 10,260 

Total liabilities covered by budgetary resources 105,501 113,693 

Total Liabilities 114,781 $ 123,953 $ 

NOTE 13. DEBT

Beginning 

Balance Net Borrowing

Ending 

Balance

FY 2007

Intragovernmental

Debt to the Treasury 58,187 $ (8,990) $ 49,197 $ 

Debt to the Federal Financing Bank 25,260 644 25,904 

Total Intragovernmental 83,447 (8,346) 75,101 

Agency Debt:

Held by the Public - - - 

Total Debt 83,447 $ (8,346) $ 75,101 $ 

FY 2006 Beginning 

Balance Net Borrowing

Ending 

Balance

Intragovernmental

Debt to the Treasury 60,708 $ (2,521) $ 58,187 $ 

Debt to the Federal Financing Bank 22,807 2,453 25,260 

Total Intragovernmental 83,515 (68) 83,447 

Agency Debt:

Held by the Public 1 (1) - 

Total Debt 83,516 $ (69) $ 83,447 $ 
FINANCIAL STATEMENTS, NOTES, SUPPLEMENTAL AND OTHER ACCOMPANYING INFORMATION

200 

FY 2007 Performance and Accountability Report 

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 

2007, the FS and CCC estimate the liability for total cleanup costs for sites known to contain hazardous waste to 

be $97 million and $8 million respectively, $53 million for FS and $10 million for CCC in FY 2006, 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. This liability is not covered by budgetary resources. 

NOTE 15. OTHER LIABILITIES

As of September 30, 2006, other intragovernmental liabilities include credit reform reestimates of $202 million. 

In fiscal 2007, other liabilities with the public include estimated losses on crop insurance claims of $2,579 million, 

estimated underwriting gains on crop insurance of $1,509 million, crop insurance premium subsidy deficiency 

reserve of $565 million, Payments to States of $394 million, credit reform programs of $12 million, undistributed 

credits for insured loans of $11 million and estimated program delivery cost to reinsurer of $9 million. 

In fiscal 2006, other liabilities with the public include estimated losses on crop insurance claims of $2,328 million, 

estimated underwriting gains on crop insurance of $652 million, crop insurance premium subsidy deficiency 

reserve of $431 million, Payments to States of $398 million, credit reform programs of $47 million, undistributed 

credits for insured loans of $16 million, peanut/tobacco programs of $10 million and estimated program delivery 

cost to reinsurer of $3 million. 

FY 2007 Non-Current Current Total

Intragovernmental:

Other Accrued Liabilities 15 $ 550 $ 565 $ 

Employer Contributions and Payroll Taxes - 45 45 

Unfunded FECA Liability - 162 162 

Advances from Others - 35 35 

Liability for Deposit Funds, Clearing Accounts - (29) (29) 

Resources Payable to Treasury - 12,921 12,921 

Custodial Liability - 54 54 

Subtotal Intragovernmental 15 13,738 13,753 

With the Public:

Other Accrued Liabilities - 12,944 12,944 

Accrued Funded Payroll and Leave - 44 44 

Unfunded Leave - 550 550 

Other Unfunded Employment Related Liability - 41 41 

Advances from Others - 63 63 

Deferred Credits - 406 406 

Liability for Deposit Funds, Clearing Accounts - 205 205 

Contingent Liabilities 11 37 48 

Capital Lease Liability 32 4 36 

Custodial Liability - 2 2 

Other Liabilities 20 5,058 5,078 

Subtotal With the Public 63 19,354 19,417 

Total Other Liabilities 78 $ 33,092 $ 33,170 $ 
FINANCIAL STATEMENTS, NOTES, SUPPLEMENTAL AND OTHER ACCOMPANYING INFORMATION

201 

FY 2007 Performance and Accountability Report 

FY 2006 Non-Current Current Total

Intragovernmental:

Other Accrued Liabilities 49 $ 549 $ 598 $ 

Employer Contributions and Payroll Taxes 1 44 45 

Unfunded FECA Liability - 159 159 

Advances from Others - 8 8 

Liability for Deposit Funds, Clearing Accounts - (136) (136) 

Liability for Subsidy Related to Undisbursed Loans - 9 9 

Resources Payable to Treasury - 13,158 13,158 

Custodial Liability - 37 37 

Other Liabilities - 202 202 

Subtotal Intragovernmental 50 14,030 14,080 

With the Public:

Contract Holdbacks - - - 

Other Accrued Liabilities 23 14,869 14,892 

Accrued Funded Payroll and Leave 2 43 45 

Unfunded Leave 8 581 589 

Other Unfunded Employment Related Liability - - - 

Advances from Others - 58 58 

Deferred Credits - 311 311 

Liability for Deposit Funds, Clearing Accounts - 231 231 

Contingent Liabilities 5 10 15 

Capital Lease Liability 26 2 28 

Custodial Liability - 27 27 

Other Liabilities 19 3,867 3,886 

Subtotal With the Public 83 19,999 20,082 

Total Other Liabilities 133 $ 34,029 $ 34,162 $ 
FINANCIAL STATEMENTS, NOTES, SUPPLEMENTAL AND OTHER ACCOMPANYING INFORMATION

202 

FY 2007 Performance and Accountability Report 

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, South Building and 

Cotton Annex) 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 $57 million. 

This agreement is still in effect and as a result, USDA activities located in the Headquarter complex are not billed 

for rental costs. 

Effective September 30, 2007, the Department released the Cotton Annex to GSA and no longer occupies the 

building. 

FY 2007

Capital Leases:

Summary of Assets Under Capital Leases

Land and Building 68 $ 

Machinery and Equipment 2 

Accumulated Amortization 34

Future Payments Due:

Land & Buildings Machinery & 

Equipment Other Totals

Fiscal Year

2008 11 - - 11 

2009 10 - - 10 

2010 10 - - 10 

2011 10 - - 10 

2012 10 - - 10 

After 5 Years 65 - - 65 

Total Future Lease Payments 116 - - 116 

Less: Imputed Interest 55 - - 55 

Less: Executory Costs 25 - - 25 

Less: Lease Renewal Options - - - - 

Net Capital Lease Liability 36 - - $ 36 

Lease liabilities covered by budgetary resources 36 

Operating Leases:

Future Payments Due:

Fiscal Year Land & Buildings Machinery & 

Equipment Other Totals

2008 82 1 - 83 

2009 73 - - 73 

2010 68 - - 68 

2011 62 - - 62 

2012 56 - - 56 

After 5 Years 441 1 - 442 

Total Future Lease Payments 782 $ 2 $ - $ 784 $ 
FINANCIAL STATEMENTS, NOTES, SUPPLEMENTAL AND OTHER ACCOMPANYING INFORMATION

203 

FY 2007 Performance and Accountability Report 

FY 2006

Capital Leases:

Summary of Assets Under Capital Leases

Land and Building 41 $ 

Machinery and Equipment 3 

Accumulated Amortization 16

Future Payments Due:

Land & Buildings Machinery & 

Equipment Other Totals

Fiscal Year

2007 7 - - 7 

2008 7 - - 7 

2009 7 - - 7 

2010 7 - - 7 

2011 7 - - 7 

After 5 Years 52 - - 52 

Total Future Lease Payments 87 - - 87 

Less: Imputed Interest 54 - - 54 

Less: Executory Costs 5 - - 5 

Less: Lease Renewal Options - - - - 

Net Capital Lease Liability 28 - - $ 28 

Lease liabilities covered by budgetary resources 28 

Operating Leases:

Future Payments Due:

Fiscal Year Land & Buildings Machinery & 

Equipment Other Totals

2007 80 - 5 85 

2008 - 75 4 79 

2009 - 68 4 72 

2010 - 61 4 65 

2011 54 - 3 57 

After 5 Years 368 - 42 410 

Total Future Lease Payments 706 $ - $ 62 $ 768 $ 

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, $48 million and $15 million has been 

accrued in the financial statements as of September 30, 

2007 and 2006, 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 $2,867 million to 

$2,969 million as of September 30, 2007, compared to 

$2,890 million to $2,900 million as of September 30, 

2006. 

CRP rental payments are estimated to be $1,900 

million annually through FY 2016. Commitments to 

extend loan guarantees are estimated to be $2,719 

million and $2,300 million in fiscal 2007 and 2006, 

respectively. 
FINANCIAL STATEMENTS, NOTES, SUPPLEMENTAL AND OTHER ACCOMPANYING INFORMATION

204 

FY 2007 Performance and Accountability Report 

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 includes 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 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 Farm Bill of 1990, 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 to 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). 
FINANCIAL STATEMENTS, NOTES, SUPPLEMENTAL AND OTHER ACCOMPANYING INFORMATION

205 

FY 2007 Performance and Accountability Report 

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 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 Payments to States, National Forest Fund receives 

receipts from the National Forest Fund. These 

monies are generated from the sale of goods and 

services at the national forests. Annually, revenuesharing payments are made 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 Act of May 23, 

1908, as amended (16 U.S.C. 500), authorized the 

Payments to States, National Forest Fund program. 

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 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). 

Timber Roads, Purchaser Election 

The Timber Roads fund receives deposits from small 

business timber purchasers who elect to pay the USDA 

Forest Service to construct or reconstruct any road or 

bridge required by their respective timber sale. These 

collections are used to finance only those forest 

development roads constructed or reconstructed under 

the terms and conditions of the timber sale contract(s) 

involved, and only to a standard necessary to harvest 

and remove the timber and other products covered by 

the particular sale(s). The Timber Roads, Purchaser 

Election program is authorized by 16 USC 472(I) (2).

Expenses, Brush Disposal 

Deposits from timber purchasers are used to cover the 

cost required to dispose of slash, brush, and other 

debris resulting from timber cutting operations and for 

supplemental protection of the cutover areas in lieu of 

actual disposal. The Expenses, Brush Disposal 

program is authorized by 16 U.S.C. 490-498.

State, Private, and International Forestry Land and 

Water Conservation Fund 

The Fiscal Year 2004 Department of Interior and 

Related Agencies Appropriation Act (Public Law 108-

108) authorizes the Forest Service to receive a transfer 

of receipts from the Department of 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 not real property will 

be procured or constructed.
FINANCIAL STATEMENTS, NOTES, SUPPLEMENTAL AND OTHER ACCOMPANYING INFORMATION

206 

FY 2007 Performance and Accountability Report 

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)) provides that any moneys 

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 moneys 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 7 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 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.

Cooperative State Research Education and Extension 

Service 

Native American Institutions Endowment Fund 

The Native American Institutions Endowment Fund 

is authorized by Public Law 103-382 (7 U.S.C. 301 

note). This program provides for an endowment for 

the 1994 land-grant institutions (31 Tribally 

controlled colleges) to strengthen the infrastructure of 

these institutions and develop Indian expertise for the 

food and agricultural sciences and businesses and their 

own communities. At the termination of each fiscal 

year, the Secretary shall withdraw the income from the 

endowment fund for the fiscal year, and after making 

adjustments for the cost of administering the fund, 

distribute the adjusted income on a formula basis to 

the 1994 land-grant institutions. 

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 

Animal Plant Health Inspection Service 

Miscellaneous Contributed Funds 
FINANCIAL STATEMENTS, NOTES, SUPPLEMENTAL AND OTHER ACCOMPANYING INFORMATION

207 

FY 2007 Performance and Accountability Report 

Forest Service 

Fees, Operations and Maintenance of Recreation 

Facilities 

Federal Highway Trust Fund 

Roads and Trails for States, National Forest Fund 

National Forest Fund Receipts 

Reforestation Trust Fund 

Payments to Counties, National Grasslands 

Timber Sales Pipeline Restoration Fund 

Southern Nevada Public Lands Management 

Operation and Maintenance of Forest Service 

Quarters 

Agricultural Research Service 

Miscellaneous Contributed Funds 

Rural Development 

Alternative Agricultural Research and 

Commercialization Revolving Fund 
FINANCIAL STATEMENTS, NOTES, SUPPLEMENTAL AND OTHER ACCOMPANYING INFORMATION

208 

FY 2007 Performance and Accountability Report 

Earmarked Funds

RMA AMS AMS APHIS FS FS FS 

Balance Sheet As of September 30, 2007

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 

States, Natio

Forests Fu

12X4085 12X5209 12X8015 12X5161 12X8028 12X5004 12X5201 

Fund Balance with Treasury 2,344 $ 560 $ 48 $ 135 $ 338 $ 17 $ 

$ 

Investments - - - - - - 

 

Other Assets 2,459 296 35 5 24 50 

 

Total Assets 4,803 856 83 140 362 67 

 

Other Liabilities 5,196 2 58 8 58 1 

 

Total Liabilities 5,196 2 58 8 58 1 

 

Unexpended Appropriations 642 302 - 129 - - 

 

Cumulative Results of Operations (1,035) 552 25 3 304 66 

 

Total Liabilities and Net Position 4,803 856 83 140 362 67 

 

Statement of Net Cost For the PeriodEnded September 30, 2007Gross program costs 4,869 926 163 176 171 55 

 

Less Earned Revenues 1,018 1 141 472 97 - 

 

Net Cost of Operations 3,851 925 22 (296) 74 55 

 

Statement of Changes in Net PositionFor the period Ended September 30, 2007Net Position Beginning of Period (782) 682 15 123 378 89 

 

Changes in Accounting Principles - - - - - - 

 

Beginning Balance, as Adjusted (782) 682 15 123 378 89 

 

Non-Exchange Revenue 4,240 1,097 2 (287) - 32 

 

Other Financing Sources - - 30 - - - 

 

Net Cost of Operations (3,851) (925) (22) 296 (74) (55) 

 

Change in net Position 389 172 10 9 (74) (23) 

 

Net Position End of Period (393) $ 854 $ 25 $ 132 $ 304 $ 66 $ 

$ 
FINANCIAL STATEMENTS, NOTES, SUPPLEMENTAL AND OTHER ACCOMPANYING INFORMATION

209 

FY 2007 Performance and Accountability Report 

Earmarked Funds

FS FS FS FS FS FS CSREES

Balance Sheet As of September 30, 2007

Timber Roads, 

Purchaser 

Elections

Expenses, Brush 

Disposal

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 

12X5202 12X5206 12X5367 12X5268 12X5215 12X5216 12X5205

Fund Balance with Treasury 29 $ 40 $ 101 $ 149 $ 41 $ 48 $ 9 $ 

$ 

Investments - - - - - - 88 

 

Other Assets 2 1 2 5 10 17 1 

 

Total Assets 31 41 103 154 51 65 98 

 

Other Liabilities - 1 3 3 - 1 - 

 

Total Liabilities - 1 3 3 - 1 - 

 

Unexpended Appropriations - - - - - - 37 

 

Cumulative Results of Operations 31 40 100 151 51 64 61 

 

Total Liabilities and Net Position 31 41 103 154 51 65 98 

 

Statement of Net Cost For the PeriodEnded September 30, 2007Gross program costs 2 13 41 57 (9) 5 3 

 

Less Earned Revenues 7 10 - 60 16 20 5 

 

Net Cost of Operations (5) 3 41 (3) (25) (15) (2) 

 

Statement of Changes in Net PositionFor the period Ended September 30, 2007Net Position Beginning of Period 66 56 84 135 25 45 84 

 

Changes in Accounting Principles - - - - - - - 

 

Beginning Balance, as Adjusted 66 56 84 135 25 45 84 

 

Non-Exchange Revenue (40) (13) 57 13 1 4 12 

 

Other Financing Sources - - - - - - - 

 

Net Cost of Operations 5 (3) (41) 3 25 15 2 

 

Change in net Position (35) (16) 16 16 26 19 14 

 

Net Position End of Period 31 $ 40 $ 100 $ 151 $ 51 $ 64 $ 98 $ 

$ 
FINANCIAL STATEMENTS, NOTES, SUPPLEMENTAL AND OTHER ACCOMPANYING INFORMATION

210 

FY 2007 Performance and Accountability Report 

Earmarked Funds

RMA AMS AMS APHIS FS FS F

Balance Sheet As of September 30, 2006

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

Paym

States, 

Fores

12X4085 12X5209 12X8015 12X5161 12X8028 12X5004 12X

Fund Balance with Treasury 1,431 $ 202 $ 58 $ 122 $ 412 $ 40 $ 

$ 

Investments - - - - - - 

 

Other Assets 1,714 483 19 10 22 50 

 

Total Assets 3,145 685 77 132 434 90 

 

Other Liabilities 3,927 3 61 9 57 1 

 

Total Liabilities 3,927 3 61 9 57 1 

 

Unexpended Appropriations 510 302 - 130 - - 

 

Cumulative Results of Operations (1,292) 380 16 (7) 377 89 

 

Total Liabilities and Net Position 3,145 685 77 132 434 90 

 

Statement of Net Cost For the PeriodEnded September 30, 2006Gross program costs 4,584 1,087 171 162 173 83 

 

Less Earned Revenues 1,100 1 132 424 116 1 

 

Net Cost of Operations 3,484 1,086 39 (262) 57 82 

 

Statement of Changes in Net PositionFor the period Ended September 30, 2006Net Position Beginning of Period (529) 591 25 102 594 134 

 

Non-Exchange Revenue 3,230 1,177 (3) (240) (159) 37 

 

Other Financing Sources - - 31 - - - 

 

Net Cost of Operations (3,484) (1,086) (39) 262 (57) (82) 

 

Change in net Position (254) 91 (11) 22 (216) (45) 

 

Net Position End of Period (783) $ 682 $ 14 $ 124 $ 378 $ 89 $ 

$ 
FINANCIAL STATEMENTS, NOTES, SUPPLEMENTAL AND OTHER ACCOMPANYING INFORMATION

211 

FY 2007 Performance and Accountability Report 

FS FS FS FS FS FS CSREES

Balance Sheet As of September 30, 2006

Timber Roads, 

Purchaser 

Elections

Expenses, Brush 

Disposal

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 Othe

12X5202 12X5206 12X5367 12X5268 12X5215 12X5216 12X5205

Fund Balance with Treasury 64 $ 55 $ 85 $ 132 $ 21 $ 35 $ 8 $ 

$ 

Investments - - - - - - 76 

 

Other Assets 2 1 2 7 4 11 - 

 

Total Assets 66 56 87 139 25 46 84 

 

Other Liabilities - - 3 4 - 1 - 

 

Total Liabilities - - 3 4 - 1 - 

 

Unexpended Appropriations - - - - - - 24 

 

Cumulative Results of Operations 66 56 84 135 25 45 60 

 

Total Liabilities and Net Position 66 56 87 139 25 46 84 

 

Statement of Net Cost For the PeriodEnded September 30, 2006Gross program costs 1 13 47 50 10 3 2 

 

Less Earned Revenues 7 12 - 54 15 25 3 

 

Net Cost of Operations (6) 1 47 (4) (5) (22) (1) 

 

Statement of Changes in Net PositionFor the period Ended September 30, 2006Net Position Beginning of Period 70 58 74 131 20 13 70 

 

Non-Exchange Revenue (10) - 57 - - 10 13 

 

Other Financing Sources - - - - - - - 

 

Net Cost of Operations 6 (1) (47) 4 5 22 1 

 

Change in net Position (4) (1) 10 4 5 32 14 

 

Net Position End of Period 66 $ 57 $ 84 $ 135 $ 25 $ 45 $ 84 $ 

$ 
FINANCIAL STATEMENTS, NOTES, SUPPLEMENTAL AND OTHER ACCOMPANYING INFORMATION

212 

FY 2007 Performance and Accountability Report 

NOTE 19.

SUBORGANIZATION 

PROGRAM 

COSTS/PROGRAM 

COSTS BY 

SEGMENT

FY 2007

Intragovernmental With the Public Intragovernmental With the Public Intragovernmental With the Public

Enhance International Competitiveness andthe Sustainability of Rural and Farm Economies:Gross Cost - $ - $ 176 $ 1,537 $ 67 $ 290 $ 

Less: Earned Revenue - - 320 232 106 (44)

Net Cost - - (144) 1,305 (39) 334

Enhance the Competitiveness and Sustainabilityof Rural and Farm Economies:Gross Cost 918 1,423 1,482 11,313 - -

Less: Earned Revenue 220 485 13 4,402 - -

Net Cost 698 938 1,469 6,911 - -

Support Increased Economic Opportunities andImproved Quality of Life in Rural America:Gross Cost - - - - - -

Less: Earned Revenue - - - - - -

Net Cost - - - - - -

Enhance Protection and Safety of the Nation'sAgriculture and Food Supply: - - - - - -

Gross Cost - - - - - -

Less: Earned Revenue - - - - - -

Net CostImprove the Nation's Nutrition and Health:Gross Cost - - - - - -

Less: Earned Revenue - - - - - -Net Cost - - - - - -Protect and Enhance the Nation's Natural ResourceBase and Environment:Gross Cost - - 245 1,913 - -Less: Earned Revenue - - - 1 - -Net Cost - - 245 1,912 - -Total Gross Costs 1,423 918 1,903 14,763 67 290

Less: Total Earned Revenues 485 220 333 4,635 106 (44)

Net Cost of Operations $ 938 698 $ 1,570 $ 10,128 $ (39) $ 334 $ 

FSA CCC FAS
FINANCIAL STATEMENTS, NOTES, SUPPLEMENTAL AND OTHER ACCOMPANYING INFORMATION

213 

FY 2007 Performance and Accountability Report 

FY 2007

Intragovernmental With the Public Intragovernmental With the Public Intragovernmental With t

Enhance International Competitiveness andthe Sustainability of Rural and Farm Economies:Gross Cost - $ - $ - $ - $ - $ 

$ 

Less: Earned Revenue - - - - - 

Net Cost - - - - - 

Enhance the Competitiveness and Sustainabilityof Rural and Farm Economies:Gross Cost 54 4,904 - - - 

Less: Earned Revenue 1 1,017 - - - 

Net Cost 53 3,887 - - - 

Support Increased Economic Opportunities andImproved Quality of Life in Rural America:Gross Cost - - - - - 

Less: Earned Revenue - - - - - 

Net Cost - - - - - 

Enhance Protection and Safety of the Nation'sAgriculture and Food Supply: - - - - 275 

Gross Cost - - - - 2 

Less: Earned Revenue - - - - 273 

Net CostImprove the Nation's Nutrition and Health:Gross Cost - - 838 53,509 - 

Less: Earned Revenue - - 2 22 - 

Net Cost - - 836 53,487 - 

Protect and Enhance the Nation's Natural ResourceBase and Environment:Gross Cost - - - - - 

Less: Earned Revenue - - - - - 

Net Cost - - - - - 

Total Gross Costs 4,904 54 838 53,509 275 

Less: Total Earned Revenues 1,017 1 2 22 2 

Net Cost of Operations $ 3,887 53 $ 836 $ 53,487 $ 273 $ 

$ 

RMA FNS FSIS
FINANCIAL STATEMENTS, NOTES, SUPPLEMENTAL AND OTHER ACCOMPANYING INFORMATION

214 

FY 2007 Performance and Accountability Report 

FY 2007

Intragovernmental With the Public Intragovernmental With the Public Intragovernmental W

Enhance International Competitiveness andthe Sustainability of Rural and Farm Economies:Gross Cost - $ - $ - $ - $ 18 $ 

Less: Earned Revenue - - - - - 

Net Cost - - - - 18 

Enhance the Competitiveness and Sustainabilityof Rural and Farm Economies:Gross Cost 195 1,046 - - 17 

Less: Earned Revenue 9 194 - - - 

Net Cost 186 852 - - 17 

Support Increased Economic Opportunities andImproved Quality of Life in Rural America:Gross Cost - - - - - 

Less: Earned Revenue - - - - - 

Net Cost - - - - - 

Enhance Protection and Safety of the Nation'sAgriculture and Food Supply: - - 309 1,132 - 

Gross Cost - - 131 555 - 

Less: Earned Revenue - - 178 577 - 

Net CostImprove the Nation's Nutrition and Health:Gross Cost - - - - - 

Less: Earned Revenue - - - - - 

Net Cost - - - - - 

Protect and Enhance the Nation's Natural ResourceBase and Environment:Gross Cost - - - - - 

Less: Earned Revenue - - - - - 

Net Cost - - - - - 

Total Gross Costs 1,046 195 309 1,132 35 

Less: Total Earned Revenues 194 9 131 555 - 

Net Cost of Operations $ 852 186 $ 178 $ 577 $ 35 $ 

AMS APHIS GIPSA
FINANCIAL STATEMENTS, NOTES, SUPPLEMENTAL AND OTHER ACCOMPANYING INFORMATION

215 

FY 2007 Performance and Accountability Report 

FY 2007

Intragovernmental With the Public Intragovernmental With the Public Intragovernmental 

Enhance International Competitiveness andthe Sustainability of Rural and Farm Economies:Gross Cost - $ - $ - $ - $ - $ 

Less: Earned Revenue - - - - - 

Net Cost - - - - - 

Enhance the Competitiveness and Sustainabilityof Rural and Farm Economies:Gross Cost - - - - 85 

Less: Earned Revenue - - - - 29 

Net Cost - - - - 56 

Support Increased Economic Opportunities andImproved Quality of Life in Rural America:Gross Cost - - - - - 

Less: Earned Revenue - - - - - 

Net Cost - - - - - 

Enhance Protection and Safety of the Nation'sAgriculture and Food Supply: - - - - 82 

Gross Cost - - - - 28 

Less: Earned Revenue - - - - 54 

Net CostImprove the Nation's Nutrition and Health:Gross Cost - - - - 18 

Less: Earned Revenue - - - - 6 

Net Cost - - - - 12 

Protect and Enhance the Nation's Natural ResourceBase and Environment:Gross Cost 1,203 5,112 515 2,636 49 

Less: Earned Revenue 143 455 60 93 17 

Net Cost 1,060 4,657 455 2,543 32 

Total Gross Costs 5,112 1,203 515 2,636 234 

Less: Total Earned Revenues 455 143 60 93 80 

Net Cost of Operations $ 4,657 1,060 $ 455 $ 2,543 $ 154 $ 

FS NRCS AR
FINANCIAL STATEMENTS, NOTES, SUPPLEMENTAL AND OTHER ACCOMPANYING INFORMATION

216 

FY 2007 Performance and Accountability Report 

FY 2007

Intragovernmental With the Public Intragovernmental With the Public Intragove

Enhance International Competitiveness andthe Sustainability of Rural and Farm Economies:Gross Cost - $ 5 $ 6 $ 10 $ 

$ 

Less: Earned Revenue - - - - 

 

Net Cost - 5 6 10 

 

Enhance the Competitiveness and Sustainabilityof Rural and Farm Economies:Gross Cost 12 541 11 18 

 

Less: Earned Revenue 12 - - - 

 

Net Cost - 541 11 18 

 

Support Increased Economic Opportunities andImproved Quality of Life in Rural America:Gross Cost 5 231 2 4 

 

Less: Earned Revenue 6 - - - 

 

Net Cost (1) 231 2 4 

 

Enhance Protection and Safety of the Nation'sAgriculture and Food Supply: 6 276 2 3 

 

Gross Cost 7 - - - 

 

Less: Earned Revenue (1) 276 2 3 

 

Net CostImprove the Nation's Nutrition and Health:Gross Cost 4 182 7 12 

 

Less: Earned Revenue 5 - - - 

 

Net Cost (1) 182 7 12 

 

Protect and Enhance the Nation's Natural ResourceBase and Environment:Gross Cost 5 248 3 5 

 

Less: Earned Revenue 6 - - - 

 

Net Cost (1) 248 3 5 

 

Total Gross Costs 1,483 32 31 52 

 

Less: Total Earned Revenues - 36 - - 

 

Net Cost of Operations $ 1,483 (4) $ 31 $ 52 $ 

$ 

CSREES ERS 
FINANCIAL STATEMENTS, NOTES, SUPPLEMENTAL AND OTHER ACCOMPANYING INFORMATION

217 

FY 2007 Performance and Accountability Report 

FY 2007

Intragovernmental With the Public Intragovernmental With the Public Intragovernmental 

Enhance International Competitiveness andthe Sustainability of Rural and Farm Economies:Gross Cost - $ - $ 14 $ 24 $ 281 $ 

Less: Earned Revenue - - 20 - 446 

Net Cost - - (6) 24 (165) 

Enhance the Competitiveness and Sustainabilityof Rural and Farm Economies:Gross Cost - - 152 278 2,963 

Less: Earned Revenue - - 213 3 512 

Net Cost - - (61) 275 2,451 

Support Increased Economic Opportunities andImproved Quality of Life in Rural America:Gross Cost 4,120 2,561 50 93 4,190 

Less: Earned Revenue 314 4,431 71 1 396 

Net Cost 3,806 (1,870) (21) 92 3,794 

Enhance Protection and Safety of the Nation'sAgriculture and Food Supply: - - 70 128 745 

Gross Cost - - 98 1 266 

Less: Earned Revenue - - (28) 127 479 

Net CostImprove the Nation's Nutrition and Health:Gross Cost - - 48 88 915 

Less: Earned Revenue - - 69 - 82 

Net Cost - - (21) 88 833 

Protect and Enhance the Nation's Natural ResourceBase and Environment:Gross Cost - - 88 162 2,109 

Less: Earned Revenue - - 123 2 350 

Net Cost - - (35) 160 1,759 

Total Gross Costs 2,561 4,120 422 773 11,203 

Less: Total Earned Revenues 4,431 314 594 7 2,052 

Net Cost of Operations $ (1,870) 3,806 $ (172) $ 766 $ 9,151 $ 

RD DO TOT
FINANCIAL STATEMENTS, NOTES, SUPPLEMENTAL AND OTHER ACCOMPANYING INFORMATION

218 

FY 2007 Performance and Accountability Report 

FY 2007 Intradepartmental

Eliminations GRAND TOTAL

Enhance International Competitiveness andthe Sustainability of Rural and Farm Economies:Gross Cost (80) $ 2,099 $ 

Less: Earned Revenue (39) 615Net Cost (41) 1,484Enhance the Competitiveness and Sustainabilityof Rural and Farm Economies:Gross Cost (1,582) 21,424Less: Earned Revenue (322) 6,325Net Cost (1,260) 15,099Support Increased Economic Opportunities andImproved Quality of Life in Rural America:Gross Cost (160) 6,952Less: Earned Revenue (79) 4,750Net Cost (81) 2,202Enhance Protection and Safety of the Nation'sAgriculture and Food Supply: (191) 3,271Gross Cost (219) 762Less: Earned Revenue 28 2,509Net CostImprove the Nation's Nutrition and Health:Gross Cost (803) 53,991Less: Earned Revenue (64) 43Net Cost (739) 53,948Protect and Enhance the Nation's Natural ResourceBase and Environment:Gross Cost (597) 11,824Less: Earned Revenue (163) 745Net Cost (434) 11,079Total Gross Costs 99,561 (3,413)Less: Total Earned Revenues 13,240 (886)

Net Cost of Operations $ 86,321 (2,527) $ 
FINANCIAL STATEMENTS, NOTES, SUPPLEMENTAL AND OTHER ACCOMPANYING INFORMATION

219 

FY 2007 Performance and Accountability Report 

FY 2006

Intragovernmental With the Public Intragovernmental With the Public Intragovernmental With the P

Enhance International Competitiveness andthe Sustainability of Rural and Farm Economies:Gross Cost - $ - $ 197 $ 654 $ 64 $ 

$ 

Less: Earned Revenue - - 237 433 75 

Net Cost - - (40) 221 (11) 

Enhance the Competitiveness and Sustainabilityof Rural and Farm Economies:Gross Cost 901 1,266 1,604 21,222 - 

Less: Earned Revenue 314 378 9 4,316 - 

Net Cost 587 888 1,595 16,906 - 

Support Increased Economic Opportunities andImproved Quality of Life in Rural America:Gross Cost - - - - - 

Less: Earned Revenue - - - - - 

Net Cost - - - - - 

Enhance Protection and Safety of the Nation'sAgriculture and Food Supply:Gross Cost - - - - - 

Less: Earned Revenue - - - - - 

Net Cost - - - - - 

Improve the Nation's Nutrition and Health:Gross Cost - - - - - 

Less: Earned Revenue - - - - - 

Net Cost - - - - - 

Protect and Enhance the Nation's Natural ResourceBase and Environment:Gross Cost - - 284 2,082 - 

Less: Earned Revenue - - - 35 - 

Net Cost - - 284 2,047 - 

Total Gross Costs 1,266 901 2,085 23,958 64 

Less: Total Earned Revenues 378 314 246 4,784 75 

Net Cost of Operations $ 888 587 $ 1,839 $ 19,174 $ (11) $ 

$ 

FSA CCC FAS
FINANCIAL STATEMENTS, NOTES, SUPPLEMENTAL AND OTHER ACCOMPANYING INFORMATION

220 

FY 2007 Performance and Accountability Report 

FY 2006

Intragovernmental With the Public Intragovernmental With the Public Intragovernmental 

Enhance International Competitiveness andthe Sustainability of Rural and Farm Economies:Gross Cost - $ - $ - $ - $ - $ 

Less: Earned Revenue - - - - - 

Net Cost - - - - - 

Enhance the Competitiveness and Sustainabilityof Rural and Farm Economies:Gross Cost 45 4,626 - - - 

Less: Earned Revenue - 1,100 - - - 

Net Cost 45 3,526 - - - 

Support Increased Economic Opportunities andImproved Quality of Life in Rural America:Gross Cost - - - - - 

Less: Earned Revenue - - - - - 

Net Cost - - - - - 

Enhance Protection and Safety of the Nation'sAgriculture and Food Supply:Gross Cost - - - - 273 

Less: Earned Revenue - - - - 3 

Net Cost - - - - 270 

Improve the Nation's Nutrition and Health:Gross Cost - - 785 52,666 - 

Less: Earned Revenue - - 3 18 - 

Net Cost - - 782 52,648 - 

Protect and Enhance the Nation's Natural ResourceBase and Environment:Gross Cost - - - - - 

Less: Earned Revenue - - - - - 

Net Cost - - - - - 

Total Gross Costs 4,626 45 785 52,666 273 

Less: Total Earned Revenues 1,100 - 3 18 3 

Net Cost of Operations $ 3,526 45 $ 782 $ 52,648 $ 270 $ 

RMA FNS FSI
FINANCIAL STATEMENTS, NOTES, SUPPLEMENTAL AND OTHER ACCOMPANYING INFORMATION

221 

FY 2007 Performance and Accountability Report 

FY 2006

Intragovernmental With the Public Intragovernmental With the Public Intragovernmental W

Enhance International Competitiveness andthe Sustainability of Rural and Farm Economies:Gross Cost - $ - $ - $ - $ 15 $ 

Less: Earned Revenue - - - - 1 

Net Cost - - - - 14 

Enhance the Competitiveness and Sustainabilityof Rural and Farm Economies:Gross Cost 467 929 - - 14 

Less: Earned Revenue 9 190 - - - 

Net Cost 458 739 - - 14 

Support Increased Economic Opportunities andImproved Quality of Life in Rural America:Gross Cost - - - - - 

Less: Earned Revenue - - - - - 

Net Cost - - - - - 

Enhance Protection and Safety of the Nation'sAgriculture and Food Supply:Gross Cost - - 271 1,483 - 

Less: Earned Revenue - - 400 471 - 

Net Cost - - (129) 1,012 - 

Improve the Nation's Nutrition and Health:Gross Cost - - - - - 

Less: Earned Revenue - - - - - 

Net Cost - - - - - 

Protect and Enhance the Nation's Natural ResourceBase and Environment:Gross Cost - - - - - 

Less: Earned Revenue - - - - - 

Net Cost - - - - - 

Total Gross Costs 929 467 271 1,483 29 

Less: Total Earned Revenues 190 9 400 471 1 

Net Cost of Operations $ 739 458 $ (129) $ 1,012 $ 28 $ 

AMS APHIS GIPSA
FINANCIAL STATEMENTS, NOTES, SUPPLEMENTAL AND OTHER ACCOMPANYING INFORMATION

222 

FY 2007 Performance and Accountability Report 

FY 2006

Intragovernmental With the Public Intragovernmental With the Public Intragovernmental 

Enhance International Competitiveness andthe Sustainability of Rural and Farm Economies:Gross Cost - $ - $ - $ - $ - $ 

Less: Earned Revenue - - - - - 

Net Cost - - - - - 

Enhance the Competitiveness and Sustainabilityof Rural and Farm Economies:Gross Cost - - - - 84 

Less: Earned Revenue - - - - 24 

Net Cost - - - - 60 

Support Increased Economic Opportunities andImproved Quality of Life in Rural America:Gross Cost - - - - - 

Less: Earned Revenue - - - - - 

Net Cost - - - - - 

Enhance Protection and Safety of the Nation'sAgriculture and Food Supply:Gross Cost - - - - 84 

Less: Earned Revenue - - - - 24 

Net Cost - - - - 60 

Improve the Nation's Nutrition and Health:Gross Cost - - - - 16 

Less: Earned Revenue - - - - 5 

Net Cost - - - - 11 

Protect and Enhance the Nation's Natural ResourceBase and Environment:Gross Cost 1,106 5,831 540 2,472 49 

Less: Earned Revenue 386 649 119 (15) 14 

Net Cost 720 5,182 421 2,487 35 

Total Gross Costs 5,831 1,106 540 2,472 233 

Less: Total Earned Revenues 649 386 119 (15) 67 

Net Cost of Operations $ 5,182 720 $ 421 $ 2,487 $ 166 $ 

FS NRCS AR
FINANCIAL STATEMENTS, NOTES, SUPPLEMENTAL AND OTHER ACCOMPANYING INFORMATION

223 

FY 2007 Performance and Accountability Report 

FY 2006

Intragovernmental With the Public Intragovernmental With the Public Intragovernmental 

Enhance International Competitiveness andthe Sustainability of Rural and Farm Economies:Gross Cost - $ 4 $ 5 $ 10 $ - $ 

Less: Earned Revenue - - - - - 

Net Cost - 4 5 10 - 

Enhance the Competitiveness and Sustainabilityof Rural and Farm Economies:Gross Cost 11 367 13 22 35 

Less: Earned Revenue 9 - 1 (1) 11 

Net Cost 2 367 12 23 24 

Support Increased Economic Opportunities andImproved Quality of Life in Rural America:Gross Cost 5 160 3 5 10 

Less: Earned Revenue 4 - - - 3 

Net Cost 1 160 3 5 7 

Enhance Protection and Safety of the Nation'sAgriculture and Food Supply:Gross Cost 8 268 2 3 1 

Less: Earned Revenue 7 - - - - 

Net Cost 1 268 2 3 1 

Improve the Nation's Nutrition and Health:Gross Cost 4 123 4 7 - 

Less: Earned Revenue 3 - - - - 

Net Cost 1 123 4 7 - 

Protect and Enhance the Nation's Natural ResourceBase and Environment:Gross Cost 6 189 4 7 1 

Less: Earned Revenue 5 - - - - 

Net Cost 1 189 4 7 1 

Total Gross Costs 1,111 34 31 54 47 Less: Total Earned Revenues - 28 1 (1) 14 Net Cost of Operations $ 1,111 6 $ 30 $ 55 $ 33 $ 

CSREES ERS NASS
FINANCIAL STATEMENTS, NOTES, SUPPLEMENTAL AND OTHER ACCOMPANYING INFORMATION

224 

FY 2007 Performance and Accountability Report 

FY 2006

Intragovernmental With the Public Intragovernmental With the Public Intragovernmental 

Enhance International Competitiveness andthe Sustainability of Rural and Farm Economies:Gross Cost - $ - $ 10 $ 16 $ 291 $ 

Less: Earned Revenue - - 12 - 325 

Net Cost - - (2) 16 (34) 

Enhance the Competitiveness and Sustainabilityof Rural and Farm Economies:Gross Cost - - 171 286 3,345 

Less: Earned Revenue - - 201 6 578 

Net Cost - - (30) 280 2,767 

Support Increased Economic Opportunities andImproved Quality of Life in Rural America:Gross Cost 3,133 3,709 58 94 3,209 

Less: Earned Revenue 348 3,632 69 1 424 

Net Cost 2,785 77 (11) 93 2,785 

Enhance Protection and Safety of the Nation'sAgriculture and Food Supply:Gross Cost - - 86 140 725 

Less: Earned Revenue - - 103 3 537 

Net Cost - - (17) 137 188 

Improve the Nation's Nutrition and Health:Gross Cost - - 49 79 858 

Less: Earned Revenue - - 57 1 68 

Net Cost - - (8) 78 790 

Protect and Enhance the Nation's Natural ResourceBase and Environment:Gross Cost - - 112 181 2,102 

Less: Earned Revenue - - 135 1 659 

Net Cost - - (23) 180 1,443 

Total Gross Costs 3,709 3,133 486 796 10,530 

Less: Total Earned Revenues 3,632 348 577 12 2,591 

Net Cost of Operations $ 77 2,785 $ (91) $ 784 $ 7,939 $ 

RD DO TOTA
FINANCIAL STATEMENTS, NOTES, SUPPLEMENTAL AND OTHER ACCOMPANYING INFORMATION

225 

FY 2007 Performance and Accountability Report 

FY 2006 Intradepartmental

Eliminations GRAND TOTAL

Enhance International Competitiveness andthe Sustainability of Rural and Farm Economies:Gross Cost (104) $ 1,152 $ 

Less: Earned Revenue (44) 748

Net Cost (60) 404

Enhance the Competitiveness and Sustainabilityof Rural and Farm Economies:Gross Cost (1,904) 30,689

Less: Earned Revenue (368) 6,231

Net Cost (1,536) 24,458

Support Increased Economic Opportunities andImproved Quality of Life in Rural America:Gross Cost (156) 7,048

Less: Earned Revenue (78) 3,980

Net Cost (78) 3,068

Enhance Protection and Safety of the Nation'sAgriculture and Food Supply:Gross Cost (197) 3,629

Less: Earned Revenue (497) 649

Net Cost 300 2,980

Improve the Nation's Nutrition and Health:Gross Cost (747) 53,064

Less: Earned Revenue (53) 36

Net Cost (694) 53,028

Protect and Enhance the Nation's Natural ResourceBase and Environment:Gross Cost (511) 12,592

Less: Earned Revenue (231) 1,104

Net Cost (280) 11,488

Total Gross Costs 108,174 (3,619)

Less: Total Earned Revenues 12,748 (1,271)

Net Cost of Operations $ 95,426 (2,348) $ 
FINANCIAL STATEMENTS, NOTES, SUPPLEMENTAL AND OTHER ACCOMPANYING INFORMATION

226 

FY 2007 Performance and Accountability Report 

NOTE 20. COST OF STEWARDSHIP PP&E

The acquisition cost of stewardship land in FY 2007 and FY 2006 was $236 million and $291 million, 

respectively. 

NOTE 21. APPORTIONMENT CATEGORIES OF OBLIGATIONS INCURRED

FY 2007

Direct Reimbursable Total

Apportionment by Fiscal Quarter 69,018 $ 932 $ 69,950 $ 

Apportionment for Special Activities 28,400 29,573 57,973 

Exempt from Apportionment 1,023 8 1,031 

Total Obligations Incurred 98,441 $ 30,513 $ 128,954 $ 

FY 2006

Direct Reimbursable Total

Apportionment by Fiscal Quarter 70,503 $ 1,336 $ 71,839 $ 

Apportionment for Special Activities 30,857 41,166 72,023 

Exempt from Apportionment 1,535 61 1,596 

Total Obligations Incurred 102,895 $ 42,563 $ 145,458 $ 

NOTE 22. AVAILABLE BORROWING AUTHORITY,END OF 

PERIOD

Available borrowing authority at September 30, 2007 

and 2006 was $44,200 million and $29,700 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 
FINANCIAL STATEMENTS, NOTES, SUPPLEMENTAL AND OTHER ACCOMPANYING INFORMATION

227 

FY 2007 Performance and Accountability Report 

repayment. Interest is paid on these borrowings based 

on weighted average interest rates for the cohort, to 

which the borrowings are associated. Interest is earned 

on the daily balance of uninvested funds in the credit 

reform financing funds maintained at Treasury. The 

interest income is used to reduce interest expense on 

the underlying borrowings. 

USDA has authority to borrow from the 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. 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 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, 
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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 25. LEGAL ARRANGEMENTS AFFECTING USE OF 

UNOBLIGATED BALANCES

Unobligated budget authority is the difference between 

the obligated balance and the total unexpended 

balance. It represents that portion of the unexpended 

balance unencumbered by recorded obligations. 

Appropriations are provided on an annual, multi-year, 

and no-year basis. An appropriation expires on the last 

day of its period of availability and is no longer 

available for new obligations. Unobligated balances 

retain their fiscal-year identity in an expired account 

for an additional five fiscal years. The unobligated 

balance remains available to make legitimate obligation 

adjustments, i.e., to record previously unrecorded 

obligations and to make upward adjustments in 

previously underestimated obligations for five years. At 

the end of the fifth year, the authority is canceled. 

Thereafter, the authority is not available for any 

purpose. 

Any information about legal arrangements affecting 

the use of the unobligated balance of budget authority 

is specifically stated by program and fiscal year in the 

appropriation language or in the alternative provisions 

section at the end of the appropriations act. 

NOTE 26. DIFFERENCES BETWEEN THE STATEMENT OF 

BUDGETARY RESOURCES AND THE BUDGET OF THE UNITED 

STATES GOVERNMENT

The differences between the fiscal 2006 Statement of 

Budgetary Resources and the fiscal 2006 actual 

numbers presented in the fiscal 2008 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: 

NRCS –Correction of errors on intra departmental 

entries for recording the wrong fiscal year on a transfer 

document and making a duplicate entry for an unobligated balance transfer. 

CCC – Difference in the net outlays is a result of a 

timing difference of a Parent-child relationship with 

another governmental agency. 

AMS – A recovery of prior year unpaid obligations was 

incorrectly recorded as a de-obligation of a prior year 

obligation. 

Unavailable collections for the Native American 

Institution Endowment Fund were included as 

budgetary resources in the Statement of Budgetary 

Resources. 

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 mainly consist of balances in suspense 

accounts and differences due to rounding that are 

excluded from the Budget. 

A comparison between the fiscal 2007 Statement of 

Budgetary Resources and the fiscal 2007 actual 

numbers presented in the fiscal 2009 Budget cannot be 

performed as the fiscal 2009 Budget is not yet 

available. The fiscal 2009 Budget is expected to be 

published in February 2008 and will be available from 

the Government Printing Office. 
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FY 2007 Performance and Accountability Report 

FY 2006

Budgetary 

Resources

Obligations 

incurred

Distributed 

offsetting 

receipts Net Outlays

Combined Statement of Budgetary Resources $ 170,455 $ 145,458 $ 2,695 $ 99,674

Reconciling items:

 Expired accounts (7,911) (3,007) - - 

 Adjustment - NRCS - 70 - - 

 Adjustment - CCC - - 47 - 

 Adjustment - AMS 60 60 - - 

 Native American Institutions (29) (4) (2) - 

 Milk Market Orders Fund 72 72 27 - 

 Other 8 (1) (5) 5 

Budget of the United States Government $ 142,648 162,655 $ 2,700 $ 99,741 $ 

NOTE 27. UNDELIVERED ORDERS AT THE END OF THE PERIOD

Budgetary resources obligated for undelivered orders as of September 30, 2007 and 2006 was $34,878 million and 

$35,204 million, respectively. 

NOTE 28. 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 2007 FY 2006

Sources of Collections:

Miscellaneous $ 65 75 $ 

Total Cash Collections 65 75 

Accrual Adjustments (11) (4) 

Total Custodial Revenue 71 54 

Disposition of Collections:

Transferred to Others:

Treasury (46) (63) 

( Increase )/Decrease in Amounts Yet to be Transferred (8) (8) 

Net Custodial Activity $ - - $ 
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FY 2007 Performance and Accountability Report 

NOTE 29. RECONCILIATION OF NET COST OF OPERATIONS (PROPRIETARY) TO BUDGET (FORMERLY THE STATEMENT OF 

FINANCING)

 

2007 2006

Resources Used to Finance Activities:

Budgetary Resources Obligated -

Obligations Incurred $ 145,458 128,954 $ 

Less: Spending authority from offsetting collections and recoveries 39,094 42,413 

Obligations net of offsetting collections and recoveries 89,860 103,045 

Less: Offsetting receipts 2,695 1,767 

Net Obligations 100,350 88,093 

Other Resources -

Transfers in(out) without reimbursement (460) (544) 

Imputed financing from costs absorbed by others 1,005 807 

Other 5 4 

Net other resources used to finance activities 549 268 

Total resources used to finance activities 100,618 88,642 

Resources Used to Finance Items not Part of the Net Cost of Operations:

Change in undelivered orders (840) 501 

Resources that fund expenses recognized in prior periods (649) (812) 

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 13,534 12,067 

Change in Unfilled Customer Orders 320 967 

Decrease in exchange revenue receivable from public 6,810 6,866 

Other 625 (287) 

Resources that finance the acquisition of assets (27,000) (28,444) 

Other resources or adjustments to net obligated resources that do not affect net cost of operations (1,412) (1,860) 

Total resources used to finance items not part of the net cost of operations (7,536) (12,078) 

Total resources used to finance the net cost of operations 88,540 81,106 

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 43 3 

Increase in environmental and disposal liability 44 35 

Upward/Downward reestimates of credit subsidy expense (293) 650 

Increase in exchange revenue receivable from the public - (377) 

Other 95 926 

Total components of Net Cost of Operations that will require or generate

 resources in future periods 446 680 

Components not Requiring or Generating Resources -

Depreciation and amortization 375 433 

Revaluation of assets or liabilities (53) (176) 

Other Components not Requiring or Generating Resources:

Bad Debt Expense (495) (1,256) 

Cost of Goods Sold 5,340 5,413 

Other 1,273 121 

Total components of Net Cost of Operations that will not require or generate resources 4,535 6,440 

Total components of Net Cost of Operations that will not require or generate

 resources in the current period 6,886 5,215 

Net Cost of Operations $ 95,426 86,321 $ 
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FY 2007 Performance and Accountability Report 

NOTE 30. CHANGES IN ACCOUNTING PRINCIPLES

Effective for FY 2007, OMB Circular A-136, requires the parent to report all budgetary and proprietary 

allocation transfer activity in its financial statements, whether material to the child, or not. The cumulative effect 

of the change on prior periods should be reported as a “change in accounting principle”, consistent with SFFAS 

21 Reporting Corrections of Errors and Changes in Accounting Principles. 

Adjustments of $961 million to the beginning balance of Cumulative Results of Operations and negative $209 

million to the beginning balance of Unexpended Appropriations reflected in the Statement of Changes in Net 

Position were made to comply with reporting requirements for allocation transfers.
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FY 2007 Performance and Accountability Report 

Required Supplementary Stewardship Information 

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. 

Stewardship Investments (in millions)

FY 2007 FY 2006 FY 2005 FY 2004 FY 2003

Expense Expense Expense Expense Expense

Non-Federal Physical Property:

Food and Nutrition Service

Food Stamp Program 20 $ 21 $ 22 $ 36 $ 39 $ 

Special Supplemental Nutrition Program 15 12 17 8 16 

Cooperative State Research, Education, and Extension Service

Extension 1890 Facilities Program 17 17 17 15 15 

Total Non-Federal Property $ 50 52 $ 56 $ 59 $ 70 $ 

Human Capital:

Cooperative State Research, Education, and Extension Service

Higher Education and Extension Programs 524 $ 525 $ 507 $ 502 $ 511 $ 

Food and Nutrition Service

Food Stamp Program 51 66 49 75 99 

Agricultural Research Service

National Agricultural Library 22 22 21 21 21 

Risk Management Agency

Risk Management Education 11 10 10 7 4 

Total Human Capital $ 623 608 $ 587 $ 605 $ 635 $ 

Research and Development:

Agricultural Research Service

Plant Sciences - $ - $ - $ - $ 394 $ 

Commodity Conversion and Delivery - - - - 185 

Animal Sciences - - - - 194 

Soil, Water, and Air Sciences - - - - 110 

Human Nutrition 86 85 84 83 78 

Integration of Agricultural Systems - - - - 43 

Collaborative Research Program 3 7 6 5 6 

Product Quality/Value Added 106 107 105 104 - 

Livestock Production 85 85 84 82 - 

Crop Production 202 201 197 194 - 

Food Safety 105 105 103 96 - 

Livestock Protection 83 90 78 64 - 

Crop Protection 198 199 193 183 - 

Environmental Stewardship 224 223 219 216 - 

Homeland Security - - - 21 - 

Cooperative State Research, Education, and Extension Service

Land-grant University System 661 661 645 610 601 

Forest Service 261 318 295 312 233 

Economic Research Service 

Economic and Social Science 75 75 74 71 69 

National Agricultural Statistics Service 

Statistical 6 5 5 5 5 

Total Research and Development $ 2,161 2,095 $ 2,088 $ 2,046 $ 1,918 $ 
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FY 2007 Performance and Accountability Report 

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 Food Stamp Program. The total 

Food Stamp Program Expense for ADP Equipment & 

Systems has been reported as of the date of FNS’ 

financial statements. FNS’ 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. 

Cooperative State Research, Education and 

Extension Service 

The Extension 1890 facilities program supports the 

renovation of existing buildings and the construction 

of new facilities that permit faculty, students, and 

communities to benefit fully from the partnership 

between USDA and the historically African-American 

land-grant universities. 

Human Capital 

Cooperative State Research, Education and 

Extension Service 

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. CSREES also supports 

extension-related work at 1862 and 1890 land-grant 

institutions throughout the country through formula 

and competitive programs. CSREES 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 Food Stamp Program. The 

E&T program requires recipients of food stamp 

benefits to participate in an employment and training 

program as a condition to food stamp eligibility. 

Outcome data for the E&T program is only available 

through the third quarter. As of this period, FNS’ 

E&T program has placed 703,927 work registrants 

subject to the 3 - month Food Stamp Program 

participant limit and 1,152,744 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. The 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. 

The 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, the NAL serves as the U.S. center 

for the international agricultural information system, 
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FY 2007 Performance and Accountability Report 

coordinating and sharing resources and enhancing 

global access to agricultural data. The NAL collection 

of over 3.5 million items and its leadership role in 

information services and technology applications 

combine to make it the foremost agricultural library in 

the world. 

Risk Management Agency 

In response to the Secretary’s 1996 Risk Management 

Education (RME) initiative, and as mandated by the 

Federal Agricultural Improvement and Reform Act of 

1996, the FCIC has formed new partnerships with the 

CSREES, the Commodity Futures Trading 

Commission, the USDA National Office of Outreach, 

Economic Research Service, and private industry to 

leverage the federal government’s funding of its RME 

program by using both public and private 

organizations to help educate their members in 

agricultural risk management. The RME effort was 

launched in 1997 with a Risk Management Education 

Summit that raised awareness of the tools and 

resources needed by farmers and ranchers to manage 

their risks. RMA has built on this foundation 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 2007 and 2006, 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 49,000 in fiscal year 2007 and 48,000 in 

fiscal year 2006. 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 $11 million for fiscal year 2007 and $10 

million for fiscal year 2006. The following table 

summarizes the RME initiatives since fiscal year 2003: 

(dollars in millions) 2007 2006 2005 2004 2003 

RME Obligations $ 11 10 9.4 10 9 

Number of producers attending RME sessions 49,000 48,000 47,000 46,000 62,000 
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FY 2007 Performance and Accountability Report 

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 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 is in the process of revising its Strategic Plan to 

align it with the Department’s new Strategic Plan. 

ARS’ major program areas are being aligned as 

follows: 

GOAL: Enhance the Competitiveness and 

Sustainability of Rural and Farm Economies.

 Product Quality/Value Added—Many agricultural 

products are marketed as low value commodities; 

harvested commodities often suffer losses due to 

spoilage or damage during shipping, storage, and 

handling. Biobased products represent a 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. 

Healthy foods are often not convenient and/or are 

not widely accepted by many consumers. 

Currently, the agency has active research programs 

designed to address these new product/product 

quality issues and concerns. 

 Livestock Production—Producers need new scientific 

information and technologies to increase 

production efficiency; safeguard the environment; 

improve animal well-being; reduce production 

risks and product losses; and understand the 

relationships between nutrients, reproduction, 

growth, and conversion to and marketability of 

animal products. In addition, new research is 

needed to identify genes that are responsible for 

economically important traits; to maintain and 

develop improved germplasm and use genetic 

resources to optimize and safeguard genetic 

diversity; to understand biological mechanisms; 

and to promote viable, vigorous production 

systems. Currently, ARS has active research 

programs designed to address these livestock 

production issues and concerns. 

 Crop Production—Producers need new scientific 

information and technologies to increase 

production efficiency; safeguard the environment; 

reduce production risks and product losses; and 

understand the relationships between nutrients, 

reproduction, growth, and conversion to and 

marketability of plant products. In addition, new 

research is needed to identify genes that are 

responsible for economically important traits; to 

maintain and develop improved germplasm and 

use genetic resources to optimize and safeguard 

genetic diversity; to understand biological 

mechanisms; and to promote viable, vigorous 

production systems. Currently, ARS has active 

research programs designed to address these crop 

production issues and concerns. 

GOAL: Enhance Protection and Safety of the 

Nation’s Agriculture and Food Supply. 

 Food Safety—For the Nation to have affordable 

and safe food, the food system must be protected 

at each step from production to consumption. 

The production and distribution system for food 
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FY 2007 Performance and Accountability Report 

in the United States has been a diverse, extensive, 

and easily accessible system. This open system is 

vulnerable to the introduction of pathogens and 

toxins through natural processes, global commerce, 

and by intentional means. The food supply must 

be protected during production, processing, and 

preparation from pathogens, toxins, and chemical 

contamination that cause diseases in humans. 

Currently, the agency has active research programs 

designed to develop new on-farm preharvest 

systems, practices, and products to reduce 

pathogen and toxin contamination of animal and 

plant derived foods; and to develop and transfer to 

Federal and State agencies and the private sector 

technologies that rapidly and accurately detect, 

identify, and differentiate the most critical and 

economically important foodborne pathogenic 

bacteria and viruses. 

 Livestock Protection—Economic sustainability of 

livestock production systems in domestic and 

global markets is limited by the disease status of 

the animals. Many factors affect the likelihood of 

diseases in livestock. These include globalization 

and international commerce, presence of pathogen 

vectors, industrialization of agriculture, availability 

of vaccines and protection systems, movements of 

animals during production, emergence of new 

diseases, genetic resistance, and the availability of 

trained animal health specialists. Livestock 

production systems are in transition from open 

and extensive systems to more closely monitored 

intensive management systems which remain 

vulnerable to accidental and intentional exposure 

to pathogens. Many of these pathogens are 

zoonotic and impact public health. Currently, the 

agency has active research programs designed to 

protect animals from pests and infectious diseases; 

identify, develop, and release to the U.S. 

agricultural community genetic markers, genetic 

lines, breeds, or germplasm that result in food 

animals with improved pest and disease resistance 

traits; and to provide producers of agriculturally 

important animals, scientific information and 

technologies to control, monitor, and manage 

invasive insects and pathogens. 

 Crop Production—Economic sustainability of 

agricultural crop production in domestic and 

global markets is limited by the disease status of 

crops. Many factors affect the likelihood of 

diseases to crops including, globalization and 

international commerce, presence of pathogen 

vectors, availability of protection systems, 

emergence of new diseases, genetic resistance, and 

the availability of trained plant health specialists. 

Crop systems have limited diversity and remain 

more vulnerable to intentional exposure to 

pathogens. Currently, the agency has active 

research programs designed to protect plants from 

pests (including weeds) and diseases; identify, 

develop, and release to the U.S. agricultural 

community genetic markers, genetic lines, or 

germplasm that result in plants with improved pest 

and disease resistance traits; to provide producers 

of agriculturally important plants, scientific 

information and technologies to control, monitor, 

and manage invasive insects, weeds, and 

pathogens; and to conduct biologically-based 

integrated and area-wide management of key 

invasive species. 

GOAL: Improve the Nation’s Nutrition and Health.

 Human Nutrition—Improving the Nation’s health 

requires enhancing the quality of the American 

diet. The United States is experiencing an obesity 

epidemic resulting from multifaceted causes 

including a “more is better” mindset, a sedentary 

lifestyle, and the selection of readily available high 

calorie foods. Four of the top ten causes of death 

in the United States – cardiovascular disease, 

cancer, stroke, and diabetes – are associated with 

the quality of our diets, diets too high in calories, 
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FY 2007 Performance and Accountability Report 

total fat, saturated fat, cholesterol, or too low in 

fiber. Americans want fresh foods that taste good, 

are convenient to prepare and consume, and yet, 

offer nutrition and health benefits. Building a 

strong connection between agriculture and human 

health is an important step to providing a 

nutritionally enhanced food supply. Promoting 

healthier food choices and educating Americans to 

balance caloric intake with sufficient daily physical 

activity are vital steps to preventing obesity and 

decreasing risk for chronic disease. 

Currently, the agency has active research programs 

designed to address food consumption patterns; 

and dietary intervention strategies and programs to 

prevent obesity and promote healthy dietary 

behavior. Research is being conducted to 

implement the combined "What We Eat in 

America" dietary survey; and to update and revise 

Dietary Reference Intake and the National 

Nutrient Database of nutrient content of foods. 

Research is also being conducted to provide 

information, technology, services, and data from 

the National Nutrient Database, and from the 

“What We Eat in America” survey to USDA 

agencies and the private sector to support revision 

of the Dietary Guidelines. 

GOAL: Protect and Enhance the Nation’s Natural 

Resource Base and Environment.

 Environmental Stewardship— Agriculture relies on a 

natural resource base whose sustainability depends 

on sound, science-based production practices. 

The management of the Nation’s renewable 

natural resources often seems to be a continuous 

balancing of conflicting and competing goals and 

concerns. While this is often the case, particularly 

in the short-term, longer-term management 

strategies combined with adequate knowledge of 

the complex natural systems can yield maximum 

sustainable benefits from the country’s resources 

that can satisfy most competing concerns. ARS 

research in the broad area of environmental 

stewardship is designed to address specific issues 

relating to agriculture’s impact on the environment 

and the environment’s impact on agriculture. 

EPA estimates that only 70 percent of the rivers, 

68 percent of the estuaries, and 60 percent of the 

lakes now meet legislatively mandated goals. Dust 

emissions from agricultural operations and 

ammonia emissions from animal feeding 

operations pose a threat to environmental quality 

and human health. Approximately half of the 

rangelands have been significantly degraded by 

fire, invasive weeds, environmental changes, and 

poor grazing management. Approximately 500 

million acres of cropland and grazing land have 

been degraded by various causes, including 

erosion, loss of organic matter, compaction, 

salinity, and soil acidification. Increases in the 

atmospheric concentration of greenhouse gases 

and related increases in weather variability affect 

the physiology and ecology of plants on croplands 

and rangelands in often unpredictable ways. 

Currently, ARS has active research programs 

designed to respond to these environmental issues 

and concerns. 

Management Initiative: Provide Agricultural Library and 

Information Services to USDA and the Nation via the 

National Agricultural Library. 

The National Agricultural Library (NAL), the world’s 

primary agricultural library, has two legislative 

mandates, to serve the Nation as one of four national 

libraries of the United States, and to be USDA’s 

library. NAL, whose vision statement is “advancing 

access to global information for agriculture,” serves its 

customers by identifying, collecting, providing access 

to, and preserving agricultural information. NAL’s 

collections, programs, and services support USDA 

agencies as well as multiple client audiences which 

include scientists, researchers, practitioners, 

policymakers, teachers, and students. 
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FY 2007 Performance and Accountability Report 

Management Initiative: Provide Adequate Federal 

Facilities Required to Support the Research Mission of 

ARS. 

ARS has over 100 laboratories, primarily located 

throughout the United States. ARS’ facilities program 

is designed to meet the needs of its scientists and 

support personnel to accomplish the agency’s mission 

Cooperative State Research, Education, and 

Extension Service Program 

CSREES participates in a nationwide land-grant 

university system of agriculture related research and 

program planning and coordination between State 

institutions and USDA. It assists in maintaining 

cooperation among the State institutions, and between 

the State institutions and their Federal research 

partners. CSREES administers grants and formula 

payments to State institutions to supplement State and 

local funding for agriculture research. 

Forest Service 

FS Research and Development (R&D) provides 

reliable, science-based information that is incorporated 

into natural resource decision making. Responsibilities 

include developing new technology and then adapting 

and transferring this technology to facilitate more 

effective resource management. Some major research 

areas include the following: 

 Fire 

 Invasives 

 Recreation 

 Research Management and Use 

 Water and Air 

 Fish and Wildlife 

 Research Data and Analysis 

 Research staff is involved in all areas of the FS, 

supporting agency goals by providing more 

efficient and effective methods where applicable. 

A representative summary of FY 2007 

accomplishments include the following: 

 41 new interagency agreements and contracts 

 17 interagency agreements and contracts 

continued 

 1,336 articles published in journals 

 1,846 articles published in all other publications 

 3 patents granted 

Economic Research Service 

ERS provides economic and other social science 

research and analysis for public and private decisions 

on agriculture, food, natural resources, and rural 

America. Research results and economic indicators on 

these important issues are fully disseminated through 

published and electronic reports and articles; special 

staff analyses, briefings, presentations, and papers; 

databases; and individual contacts. ERS’ objective 

information and analysis helps public and private 

decision makers attain the goals that promote 

agricultural competitiveness, food safety and security, a 

well-nourished population, environmental quality, and 

a sustainable rural economy. 

National Agricultural Statistics Service 

Statistical research and service is conducted to improve 

the statistical methods and related technologies used in 

developing U.S. agricultural statistics. The highest 

priority of the research agenda is to aid the NASS 

estimation program through development of better 

estimators at lower cost and with less respondent 

burden. This means greater efficiency in sampling and 

data collection coupled with higher quality data upon 

which to base the official estimates. In addition, new 

products for data users are being developed with the 

use of technologies such as remote sensing and 

geographic information systems. Continued service to 

users will be increasingly dependent upon 

methodological and technological efficiencies. 
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Required Supplementary Information 

STEWARDSHIP PROPERTY, PLANT AND EQUIPMENT

Heritage Assets 

Forest Service 

The Forest Service estimates that more than 350,000 

heritage assets are on land that it manages. Some of 

these assets are listed on the National Register of 

Historic Places, and some are designated as National 

Historic Landmarks. Collection assets held at 

museums and universities are managed by those 

entities, and not the Forest Service. 

The historic structures are works consciously created to 

serve some human purpose, such as buildings, 

monuments, logging and mining camps, and ruins. 

Heritage assets designated as National Historic 

Landmarks are sites, buildings, or structures that 

possess exceptional value in commemorating or 

illustrating the history of the United States, and 

exceptional value or quality in illustrating and 

interpreting the heritage of the United States. The 

Secretary of the Interior is the official designator of 

National Historic Landmarks. 

Heritage assets listed in the National Register of 

Historic Places include properties, buildings, and 

structures that are significant in U.S. history, 

architecture, and archaeology, and in the cultural 

foundation of the Nation. Sites formally determined as 

eligible for the National Register by the Keeper of the 

National Register, or documented through 

consultation with State Historic Preservation Offices, 

are considered potentially eligible for the National 

Register. 

The Forest Service heritage resource specialists on the 

155 national forests maintain separate inventories of 

heritage assets. Most assets not used for administrative 

or public purposes receive no annual maintenance. A 

long-term methodology to better assess the extent and 

condition of these assets is being formulated to comply 

with Executive Order 13287, Preserve America. Most 

heritage asset data is captured and managed in 

INFRA’s heritage module, before being used for 

management decisions on heritage assets. A smaller 

number of heritage assets are reported through FRPP 

or are in the INFRA buildings module. 

Recent changes in accounting standards for heritage 

assets have altered the reporting timeline from that of 

calendar yearend—as mandated by the annual DOI 

report to Congress—to fiscal yearend. 

In the past Performance and Accountability Reports, 

the Forest Service reported the previous calendar year’s 

additions, withdrawals, and total assets. For FY 2006 

the agency reported a calendar year 2005 total. In FY 

2007, the column labeled, “2006 Final Sites” is actually 

the 2005 total, with additions and withdrawals 

occurring in FYs 2006 and 2007. Major FS heritage 

assets by category and condition for FY 2007 are 

shown below: 

Category 

2006 

Final 

Sites Additions Withdrawals

FY 2007 

Ending 

Balance Condition 

Total heritage assets 342,361 6,591 0 348,952 Poor – Fair 

Eligible for the National Register of Historic 

Places 53,962 603 0 54,565 Poor – Fair 

Listed on the National Register 3,478 5 0 3,483 Fair 

Sites with structures listed on the National 

Register 1,956 0 0 1,956 Poor – Fair 

National Historic Landmarks 20 0 0 20 Fair – Good 
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FY 2007 Performance and Accountability Report 

The Forest Service 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 can 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.” 

Natural Resources Conservation Service 

NRCS currently owns one heritage asset, the Tucson 

Plant Materials Center (TPMC). It was listed in the 

National Register of Historic Places (NRHP) on July 

2, 1997. 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. It provides technical 

assistance to NRCS field offices, RC& D groups, 

Conservation districts, federal, state, and tribal 

agencies, and private landowners throughout the 

greater Southwest. 

Agricultural Research Service 

ARS has approximately 60 heritage assets at three 

locations under its custody and control. These 

locations include: (1) the U.S. National Arboretum, 

Washington, D.C.; (2) the Grazinglands Research 

Laboratory (GRL), El Reno, Oklahoma; and (3) the 

Fort Keogh Livestock and Range Research 

Laboratory, Miles City, Montana. 

Established in 1927 by an Act of Congress, the 

mission of the U.S. National Arboretum is to serve the 

public need for scientific research, education, and 

gardens that conserve and showcase plants to enhance 

the environment. 

GLR was established by Public Law 80-494, 62 Stat. 

197 on April 21, 1948, and includes 6,737-acres of 

withdrawn public land. The mission of the GRL is to 

provide new technologies and management strategies 

which increase the profitability of forage and livestock 

production, reduce risks associated with management 

decisions, promote sustainability, and conserve the 

productivity of grazing land resources of the Great 

Plains. 

The Fort Keogh Livestock and Range Research 

Laboratory was established by an Act of Congress in 

1924 and includes 55,767 acres within the original area 

of the Fort Keogh Military Reservation just west of 

Miles City, Montana. The mission of the Fort Keogh 

Livestock and Range Research Laboratory is to 

research and develop ecologically and economically 

sustainable range animal management systems that 

ultimately meet consumers’ needs. The Fort Keogh 

Military Reservation, which was established by an Act 

of Congress in 1876, was placed on the National 

Register of Historic Places in March of 1978. 

The National Agricultural Library (NAL) is the 

largest collection of materials devoted to agriculture in 

the world. NAL houses and provides access to over 

3.5 million volumes of books and periodicals. The 

overwhelming number of these items were published 

more than 25 years ago and almost all of them are outof-print and unavailable for purchase. 

Special Collections of the NAL collects, preserves and 

provides access to manuscripts, rare books, 

photographs, posters, oral histories and other unique 

materials. The collection includes approximately 

15,000 rare books and over 340 manuscript collections. 
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FY 2007 Performance and Accountability Report 

Stewardship Land 

Description FY 2007 Balance Additions (+) Withdrawals (-) FY 2006 Balance

National Forest System Land (In acres):

National Forests 143,933,175 - (123,140) 144,056,315 

National Forests Wilderness Areas 34,872,673 56,445 - 34,816,228 

National Forests Primitive Areas 173,762 - - 173,762 

National Wild and Scenic River Areas 931,314 - - 931,314 

National Recreation Areas 2,912,762 186 - 2,912,576 

National Scenic–Research Areas 265,840 128,354 - 137,486 

National Game Refuges and Wildlife Preserve Areas 1,198,099 - - 1,198,099 

National Monument Areas 3,834,106 65 - 3,834,041 

National Grasslands 3,843,037 5,167 - 3,837,870 

Purchase Units 374,593 - (156) 374,749 

Land Utilization Projects 1,876 - - 1,876 

Other Areas 453,436 - (59,061) 512,497 

Total National Forest System Land 192,794,673 190,217 (182,357) 192,786,813 

Conservation Easements (In acres):

Natural Resources Conservation Service

Wetlands Reserve Program 1,680,374 149,189 - 1,531,185 

Grassland Reserve Program 88,853 45,951 - 42,902 

Emergency Wetlands Reserve Program 92,159 - - 92,159 

Emergency Wetlands Reserve Program 120,242 25,843 - 94,399 

Farm and Ranch Land Protection Program 24,882 24,882 - - 

Total Conservation Easements 2,006,510 245,865 - 1,760,645 

Description FY 2006 Balance Additions (+) Withdrawals (-) FY 2005 Balance

National Forest System Land (In acres):

National Forests 144,056,315 - (403,999) 144,460,314 

National Forests Wilderness Areas 34,816,228 - (140,850) 34,957,078 

National Forests Primitive Areas 173,762 - - 173,762 

National Wild and Scenic River Areas 931,314 681 - 930,633 

National Recreation Areas 2,912,576 94,308 - 2,818,268 

National Scenic–Research Areas 137,486 196 - 137,290 

National Game Refuges and Wildlife Preserve Areas 1,198,099 - - 1,198,099 

National Monument Areas 3,834,041 - - 3,834,041 

National Grasslands 3,837,870 - (296) 3,838,166 

Purchase Units 374,749 4,718 - 370,031 

Land Utilization Projects 1,876 - - 1,876 

Other Areas 512,497 2,640 - 509,857 

Total National Forest System Land 192,786,813 102,543 (545,145) 193,229,415 

Conservation Easements (In acres):

Natural Resources Conservation Service

Wetlands Reserve Program 1,531,185 135,486 - 1,395,699 

Grassland Reserve Program 42,902 29,190 - 13,712 

Emergency Wetlands Reserve Program 92,159 - - 92,159 

Emergency Watershed Protection Program 94,399 50 - 94,349 

Total Conservation Easements 1,760,645 164,726 - 1,595,919 
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FY 2007 Performance and Accountability Report 

National Forest System 

The FS manages an estimated 193 million acres of 

public land, most of which are classified as stewardship 

assets. These stewardship assets are valued for the 

following reasons: 

 Environmental resources;

 Recreational and scenic values;

 Cultural and paleontological resources;

 Vast open spaces; and

 Resource commodities and revenue they provide 

to the Federal Government, States, and counties. 

The Land and Water Conservation Fund (L&WCF) 

Land Acquisition Program acquires land for the 

National Forest System of the Forest Service. 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, 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 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. 

The Forest Legacy program also protects 

environmentally sensitive forestlands, but such lands 

remain in private ownership. 

National Forests 

The national forests are formally established and 

permanently set aside and reserved for national forest 

purposes. The following categories of NFS lands have 

been set aside for specific purposes in designated areas: 

 National Wilderness Areas. Areas designated by 

Congress as part of the National Wilderness 

Preservation System. 

 National Primitive Areas. Areas designated by the 

Chief of the Forest Service as primitive areas. 

They are administered in the same manner as 

wilderness areas, pending studies to determine 

sustainability as a component of the National 

Wilderness Preservation System. 

 National Wild and Scenic River Areas. Areas 

designated by Congress as part of the National 

Wild and Scenic River System.

 National Recreation Areas. Areas established by 

Congress for the purpose of assuring and 

implementing the protection and management of 

public outdoor recreation opportunities.

 National Scenic Research Areas. Areas established 

by Congress to provide use and enjoyment of 

certain ocean headlands and to ensure protection 

and encourage the study of the areas for research 

and scientific purposes. 

 National Game Refuges and Wildlife Preserve 

Areas. Areas designated by Presidential 

proclamation or Congress for the protection of 

wildlife. 

 National Monument Areas. Areas including 

historic landmarks, historic and prehistoric 
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FY 2007 Performance and Accountability Report 

structures, and other objects for historic or 

scientific interest, declared by Presidential 

proclamation or Congress.

National Grasslands 

National Grasslands are designated by the Secretary of 

Agriculture and permanently held by the USDA under 

Title III of the Bankhead-Jones Farm Tenant Act. 

Purchase Units 

Purchase units are land designated by the Secretary of 

Agriculture or previously approved by the National 

Forest Reservation Commission for purposes of 

Weeks Law acquisition. The law authorizes the 

Federal Government to purchase lands for stream flow 

protection and maintain the acquired lands as national 

forests. 

Land Utilization Projects 

Land utilization projects are reserved and dedicated by 

the Secretary of Agriculture for forest and range 

research and experimentation. 

Research and Experimental Areas 

Research and experimental areas are reserved and 

dedicated by the Secretary of Agriculture for 

forest and range research experimentation. 

Other Areas 

There are areas administered by the FS that are not 

included in one of the above groups. 

Condition of NFS Lands 

The condition of NFS lands varies by purpose and 

location. The FS monitors the condition of NFS lands 

based on information compiled by two national 

inventory and monitoring programs—Forest Inventory 

and Analysis (FIA) and Forest Health Monitoring 

(FHM). 

The FIA program conducts annual inventories of 

forest status and trends. FIA has historic inventory 

data in all 50 States and is currently collecting annual 

inventory data in 46 States, including 38 of the 41 

States containing NFS land. Active throughout all 50 

States, FHM provides surveys and evaluations of forest 

health conditions and trends. 

Although most of the estimated 193 million acres of 

NFS forest lands continue to produce valuable benefits 

(i.e., clean air, clean water, habitat for wildlife, and 

products for human use), significant portions are at 

risk to pest outbreaks or catastrophic fires. There are 

25 million acres of NFS forestlands at risk to future 

mortality from insects and diseases, based on the 2007 

Insect and Disease Risk Map. Invasive species of 

insects, diseases, and plants continue to affect our 

native ecosystems by causing mortality to, or 

displacement of, native vegetation. The FS completed 

insect and disease prevention and suppression 

treatments on over 43,300 acres of NFS lands in FY 

2007. 

By 2009, a map of fire fuels conditions across the 

United States will be provided by LANDFIRE. 

LANDFIRE is a set of over 20 digital layers of 

vegetation, fuels and departure from historic 

conditions covering all ownerships at a 30-meter pixel 

resolution. LANDFIRE creates standardized 

comprehensive products across the United States as it 

integrates relational databases, remote sensing, systems 

ecology, gradient modeling, and landscape simulation. 

Products will be delivered incrementally through 2009, 

although layers are currently available for the 11 

western States, Florida, North Carolina, Alabama, 

Mississippi and parts of Texas. The project is on 

schedule and within budget for completion of the 

continental United States in FY 2008, with Alaska and 

Hawaii completed in FY 2009. 

Conservation Easements 

The Natural Resources Conservation Service (NRCS) 

agency mission statement is “Helping people help the 

land”. This mission statement reflects that NRCS’ 

products and services enable people to be better 

stewards of the Nation’s soil, water and related natural 

resources. NRCS provides cost share and monetary 

incentives to encourage the adoption of new and cost 

prohibitive land treatment practices that have been 

proven to provide significant public benefits. Financial 
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FY 2007 Performance and Accountability Report 

assistance is awarded to participants who voluntarily 

enter into easements to conserve natural resources. 

NRCS easement purchase programs include Wetlands 

Reserve Program, Emergency Wetlands Reserve 

Program, Emergency Watershed Protection Program 

– Floodplain Easements, Grassland Reserve Program, 

Farm and Ranch Land Protection Program, and 

Healthy Forest Reserve Program. NRCS is recorded 

on the deed for the purchase of these easements. For 

financial statement reporting purposes, the acres 

represent acres perfected. 

Wetlands Reserve Program 

The Wetlands Reserve Program (WRP) is authorized 

under Section 1237 of the Food Security Act of 1985 

(P.L. 99-198), as amended, by the Food, Agriculture, 

Conservation and Trade Act of 1990 (P.L. 101-624), 

the Federal Agriculture Improvement and Reform Act 

of 1996 (P.L. 104-127), and the Farm Security and 

Rural Investment Act of 2002 (P.L. 107-171) (“2002 

Farm Bill”). The Secretary of Agriculture delegated 

the authority for WRP to the Chief of the Natural 

Resources Conservation Service (NRCS), who is a vice 

president of the Commodity Credit Corporation 

(CCC). WRP is a voluntary program offering 

landowners the opportunity to restore, protect, and 

enhance wetlands on agricultural land. Participants in 

the program may sell a conservation easement with 

CCC/NRCS in order to restore and protect wetlands. 

The program provides many benefits for the entire 

community, such as better water quality, enhanced 

habitat for wildlife, reduced erosion, reduced flooding, 

and better water supply. 

To be eligible for WRP, land must be restorable and 

suitable for wildlife benefits. Once land is enrolled in 

the program, the landowner continues to control 

access to the land-and may lease the land- for hunting, 

fishing, and other undeveloped recreational activities. 

Easements can be either permanent or 30-year 

duration. Once enrolled, the land is monitored to 

ensure compliance with program requirements. At any 

time, a landowner may request the evaluation of 

additional activities (such as cutting hay, grazing 

livestock, or harvesting wood products) to determine if 

there are other compatible uses for the site. 

Compatible uses are allowed if it is fully consistent 

with the protection and enhancement of the wetland. 

The condition of the land is immaterial as long as the 

easement on the land meets the eligibility 

requirements of the program. 

Withdrawals from the program are rare. The 

Secretary of Agriculture has the authority to terminate 

contracts, with agreement from the landowner, after 

an assessment of the effect on public interest, and 

following a 90-day notification period of the House 

and Senate agriculture committees. 

Grassland Reserve Program 

The Grassland Reserve Program (GRP) is authorized 

by Section 1238n or Title XII, of Food Security Act of 

1985, as amended by section 2401 of the 2002 Farm 

Bill. The Secretary of Agriculture delegated the 

authority for GRP to the Chief of the Natural 

Resources Conservation Service (NRCS), who is a vice 

president of the Commodity Credit Corporation 

(CCC). GRP assists landowners in restoring and 

protecting grassland; including rangeland, pastureland, 

and certain other lands, while maintaining the lands 

suitability for grazing. The emphasis of the program is 

to support grazing operations, plant and animal 

biodiversity, and grassland and land containing shrubs 

or forbs under the greatest threat of conversion. 

Land is eligible if it is privately owned or tribal land 

and it is: 1) grassland that contains forbs or shrubs 

(including rangeland and pastureland); or 2) located in 

an area that has been historically dominated by 

grassland, forbs, or shrubs; and has potential to provide 

habitat for animal or plant populations of significant 

ecological value if the land is retained in the current 

use; or restored to a natural condition. Incidental 

lands may be included to allow for the efficient 

administration of an agreement or easement. 
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FY 2007 Performance and Accountability Report 

NRCS develops a conservation plan with the 

landowners eligible for the program. The plan 

specifies the management options available on the 

grasslands with the goal of maintaining the viability 

for the grassland’s resources. Easements can be 

permanent, 30-year, or the maximum duration 

permitted based on State or Tribal law. NRCS 

continues to provide assistance to the landowner after 

the acres are enrolled. GRP easements prohibit the 

production of crops (other than hay), fruit trees, and 

vineyards that require breaking the soil surface and 

other activity that would permanently disturb the 

surface of the land, except for appropriate land 

management activities included in the grassland 

conservation plan. Withdrawals from the program are 

not permitted. 

Emergency Wetlands Reserve Program 

The Emergency Wetlands Reserve Program (EWRP) 

administered by NRCS was established as part of the 

emergency restoration package following the flooding 

of the Mississippi River and its tributaries in 1993. 

EWRP provides landowners an alternative to restoring 

agricultural production lands that previously were 

wetlands. The program is patterned after the WRP. 

Participants in the program sell a conservation 

easement to USDA in order to restore and protect 

wetlands. The landowner voluntarily limits the future 

use of the land, yet retains private ownership. 

To be eligible, the land must have been damaged by a 

natural disaster and be restorable as a wetland. Once 

the land is enrolled in the program, the landowner 

continues to control access to the land. Easements 

purchased under EWPR are permanent in duration. 

The land is monitored to ensure that the wetland is in 

compliance with contract requirements, including 

compatible uses, such as recreational activities or 

grazing livestock. 

Easements purchased under this program meet the 

definition of stewardship land. NRCS records an 

expense for the acquisition cost of purchasing 

easements plus any additional costs such as closing, 

survey, and restoration costs. In exchange for 

establishing a permanent easement, the landowner 

receives payment based on agricultural value of the 

land, a geographic land payment cap, or the landowner 

offer. Easement values are assessed on pre-disaster 

conditions. The landowner may receive up to 100 

percent of restoring the wetland. There are no 

provisions in the easement to terminate the purchase. 

Emergency Watershed Protection Program – 

Floodplain Easements 

The Emergency Watershed Protection Program 

(EWP) Floodplain Easements is authorized by the 

Federal Agriculture Improvement and Reform Act of 

1996, (P.L. 104-127) and administered by NRCS. 

Floodplain easements restore, protect, manage, 

maintain, and enhance the functions and values of the 

floodplains for runoff retardation and soil erosion 

prevention. The purpose of the easements is to 

conserve natural values including fish and wildlife 

habitat, water quality, flood water retention, ground 

water recharge, and open space; and safeguard lives 

and property from floods, drought, and products of 

erosion. A floodplain easement is purchased on flood 

prone lands to provide a more permanent solution to 

repetitive disaster assistance payments and achieve 

greater environmental benefits where the situation 

warrants when the affected landowner is willing to 

participate in the easement approach. 

Farm and Ranch Land Protection Program 

Farm and Ranch Land Protection Program (FRPP) is 

authorized by the Food Security Act of 1985, and 

reauthorized by Section 2503 of the 2002 Farm Bill. 

The Secretary of Agriculture delegated the authority 

for FRPP to the Chief of the Natural Resources 

Conservation Service (NRCS), who is a vice president 

of the Commodity Credit Corporation (CCC). FRPP 

is a voluntary program that helps farmers and ranchers 

keep their land in agriculture and prevents conversion 

of agricultural land to non-agricultural uses. 

The CCC, through NRCS, requests proposals from 

federally recognized Indian Tribes, States, units of 

local government, and non governmental organizations 

to cooperate in acquisition of conservation easements 

on farms and ranches. Once the entity is selected 

NRCS enters into a cooperative agreement with and 
FINANCIAL STATEMENTS, NOTES, SUPPLEMENTAL AND OTHER ACCOMPANYING INFORMATION

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FY 2007 Performance and Accountability Report 

obligates the money to the entity. The entity works 

with the landowner, processes the easement 

acquisition, and holds, manages, and enforces the 

easement. Beginning in FY 2006 NRCS is now 

included on the easement deed. In prior years, FRPP 

was not reported as Stewardship Land because NRCS 

did not hold the easements with the landowners. 

NRCS establishes partnerships with State, Tribal, or 

local governments or non-governmental organizations 

to leverage their purchase of development rights by 

providing matching funds not to exceed 50 percent of 

the appraised fair market value. They may apply for 

the FRPP funds if they have a farmland protection 

program that purchases conservation easements for the 

purpose of protecting topsoil by limiting conversion to 

nonagricultural uses of land, and if they have pending 

offers to potential landowners. Potential participating 

entities must provide written evidence of: Participants’ 

commitment to long-term conservation of agricultural 

lands through the use of legal instruments (i.e., rightto-farm laws, agricultural districts, zoning, or land use 

plans); the use of voluntary approaches to protect 

farmland from conversion to nonagricultural uses; the 

capability to acquire, manage, and enforce easement 

rights or other interests in land; and funds availability. 

The participating entity must provide a minimum of 

25 percent, in cash, of the appraised fair market value, 

or 50 percent of the conservation easement’s purchase 

price. Withdrawals from the program are not 

permitted. 

Healthy Forest Reserve Program 

The Healthy Forest Reserve Program (HFRP) is 

authorized by Title V of the Healthy Forests 

Restoration Act of 2003 (P.L. 108-148). HFRP is a 

voluntary program established to assist landowners in 

restoring and enhancing forest ecosystems to promote 

the recovery of threatened and endangered species, 

improve biodiversity, and enhance carbon 

sequestration. The program contributes positively to 

the economy of our nation, providing biodiversity of 

plant and animal populations, and improves 

environmental quality. 

To be eligible to enroll an easement in the HFRP, a 

person must be the landowner of eligible private land 

for which enrollment is sought and also agree to 

provide such information to the Natural Resources 

Conservation Service (NRCS) as the agency deems 

necessary or desirable to assist in its determination of 

eligibility for program benefits and for other program 

implementation purposes. 

NRCS in coordination with the Fish and Wildlife 

Service (FWS) and/or the National Marine Fisheries 

Service (MNFS), shall determine whether land is 

eligible for enrollment and whether, once found 

eligible, the lands may be included in the program 

based on the likelihood of successful restoration, 

enhancement, and protection of forest ecosystem 

functions and values when considering the cost of 

acquiring the easement and the restoration, protection, 

enhancement, maintenance, and management costs. 

Land shall be considered eligible for enrollment in the 

HFRP only if NRCS determines that such private 

land is capable of supporting habitat for a selected 

species listed under Section 4 of the Endangered 

Species Act of 1973 (ESA); and such private land is 

capable of supporting habitat for a selected species not 

listed under Section 4 of the ESA but is candidate for 

such listing, or the selected species is State-listed 

species, or is a species identified by the Chief for 

special consideration for funding. 

NRCS may also enroll land adjacent to the restored 

forestland if the enrollment of such adjacent land 

would contribute significantly to the practical 

administration of the easement area, but not more 

than it determines is necessary for such contribution. 

To be enrolled in the program, eligible land must be 

configured in a size and with boundaries that allow for 

the efficient management of the area for easement 

purposes and otherwise promote and enhance program 

objectives. Withdrawals from the program are not 

permitted. 
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FY 2007 Performance and Accountability Report 

DEFERRED MAINTENANCE

FY 2007 Cost to Return to 

Acceptable Condition

Cost of Critical 

Maintenance

Cost of Non-critical 

Maintenance

Asset Class

Forest Service

Bridges 123 $ 29 $ 94 $ 

Buildings 543 114 429 

Dam 21 7 14 

Minor Constructed Features 90 - 90 

Fence 324 324 - 

Handling Facility 23 23 - 

Heritage 17 5 12 

Road 8,134 3,675 4,459 

Trail Bridge 9 3 6 

Wastewater 32 17 15 

Water 89 54 35 

Wildlife, Fish, TES 6 4 2 

Trails 224 2 222 

General Forest Area - - - 

Total Forest Service 9,635 $ 4,257 $ 5,378 $ 

FY 2006 Cost to Return to 

Acceptable Condition

Cost of Critical 

Maintenance

Cost of Non-critical 

Maintenance

Asset Class

Forest Service

Bridges 116 $ 27 $ 89 $ 

Buildings 483 106 377 

Dam 21 8 13 

Minor Constructed Features 88 - 88 

Fence 403 403 - 

Handling Facility 24 24 - 

Heritage 32 9 23 

Road 4,054 748 3,306 

Trail Bridge 10 4 6 

Wastewater 31 17 14 

Water 85 47 38 

Wildlife, Fish, TES 6 4 2 

Trails 243 19 224 

General Forest Area - - - 

Total Forest Service 5,596 $ 1,416 $ 4,180 $ 
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FY 2007 Performance and Accountability Report 

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. 

Deferred maintenance is reported for general Property, 

Plant, and Equipment (PP&E), heritage assets, and 

stewardship assets. 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. 

The FS uses condition surveys to estimate deferred 

maintenance on all major classes of PP&E. No 

deferred maintenance exists for fleet vehicles and 

computers that 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. 

Currently, no comprehensive national assessment of 

FS property exists. Estimates of deferred maintenance 

for all assets are based on condition surveys. The 

agency’s deferred maintenance for roads 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. Five 

hundred roads were included in the FY 2007 sample. 

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. 

In previous years, the FS reported deferred 

maintenance estimates for General Forest Areas 

(GFA) and Developed Sites (Minor Constructed 

Features) in this exhibit. The new Heritage Assets and 

Stewardship Lands Standard (SFFAS 29) provides the 

FS the means to report these land units’ deferred 

maintenance by their respective individual asset, 

although deferred maintenance for the Minor 

Constructed Features located on the Developed Sites 

will remain in this exhibit. 

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 (BMP) for the 

nonpoint source provisions of the Clean Water 

Act from Environmental Protection Agency and 

States; 
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 Road management objectives developed through 

the National Forest Management Act (NFMA) 

forest planning process; 

 Forest Service Directives—Forest Service Manual 

(FSM) 7730, Operation and Maintenance 

(January 2003 amendment was superseded with 

August 25, 2005, 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, as determined by 

condition surveys. The overall condition of dams is 

below acceptable. 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 as 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 34 percent needing 

major repairs or renovations; approximately 11 percent 

of in fair condition; and 55 percent of the facilities in 

good condition. 

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 (CFR 36). 

Detailed management guidelines are contained in 

FSM 2330, Publicly Managed Recreation 

Opportunities, and forest-level 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 (TES) 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. 
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STATEMENT OF 

BUDGETARY 

RESOURCES

FY 2007 FSA CCC FAS RMA FNS FSIS AMS APH

Non-Budgetary Non-Budgetary

Financing Financing

Budgetary Accounts Budgetary Accounts Budgetary Budgetary Budgetary Budgetary Budgetary Budge

Budgetary Resources:Unobligated balance, brought forward, October 1: 370 $ 781 $ 1,165 $ 1,627 $ 296 $ 1,269 $ 12,418 $ 41 $ 248 $ 

$ 

Recoveries of prior year unpaid obligations 40 84 717 15 132 3 761 104 15 

Budget Authority:

Appropriation 4,480 - 25,873 - 346 4,456 51,313 901 7,262 1

Borrowing Authority (Notes 22 & 23) - 1,351 41,185 281 - - - - - 

Earned -

Collected 808 1,342 16,885 1,188 58 1,364 86 135 187 

Change in receivables from Federal Sources 6 - (963) 4 6 - - 6 (3) 

Change in unfilled customer orders -

Advances received - - (181) - - - (2) - - 

Without advance from Federal Sources - - - - 62 - (1) - - 

Expenditure transfers from trust funds - - 934 - - - - - - 

Nonexpenditure transfers, net, anticipated and actual - - (1,831) - 8 (6) 5,746 (1) (5,812) (

Temporarily not available pursuant to Public Law - - - - - - - - - 

Permanently not available (419) (286) (51,934) (69) (3) (3) (1,034) (17) (120) 

Total Budgetary Resources 5,285 3,272 31,850 3,046 905 7,083 69,287 1,169 1,777 1

Status of Budgetary Resources:Obligations Incurred (Note 21):

Direct 1,707 1,452 2,894 907 357 4,820 54,372 976 1,111 1

Reimbursable 413 - 27,352 - 161 1 24 136 63 

Unobligated Balance:

Apportioned 3,045 396 401 1,083 107 2,260 639 22 37 

Exempt from Apportionment - - 808 5 - - - - 539 

Unobligated balance not available 120 1,424 395 1,051 280 2 14,252 35 27 

Total Status of Budgetary Resources 5,285 3,272 31,850 3,046 905 7,083 69,287 1,169 1,777 1

Change in Obligated Balances:Obligated balance, net, brought forward October 1 245 462 8,006 (99) 38 276 4,165 96 107 

Obligations incurred 2,120 1,452 30,246 907 518 4,821 54,396 1,112 1,174 1

Gross outlays (2,104) (1,398) (30,764) (843) (346) (4,914) (53,648) (961) (1,155) (1

Recoveries of prior year unpaid (40) (84) (717) (15) (132) (3) (761) (104) (15) (

Change in uncollected payments from Federal Sources (6) - 963 (4) (68) - 1 (6) 3 

Obligated balance, net, end of period -

Unpaid obligations (Note 27) 235 446 8,046 125 117 180 4,154 160 115 

Uncollected customer payments from Federal Sources (20) (14) (312) (178) (106) - - (23) (3) 

Obligated balance, net, end of period 215 432 7,734 (53) 11 180 4,154 137 112 

Net Outlays:

Gross outlays 2,104 1,398 30,764 843 346 4,914 53,648 961 1,155 1

Offsetting collections (808) (1,343) (17,637) (1,189) (58) (1,364) (84) (135) (187) (

Distributed offsetting receipts (89) - - (464) - - 3 (7) (140) 

Net Outlays 1,207 $ 55 $ 13,127 $ (810) $ 288 $ 3,550 $ 53,567 $ 819 $ 828 $ 1

$ 
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FY 2007 GIPSA FS NRCS ARS CSREES ERS NASS RD DO 

Non-Budgetary 

Financing 

Budgetary Budgetary Budgetary Budgetary Budgetary Budgetary Budgetary Budgetary Accounts Budgetary 

Budgetary Resources:Unobligated balance, brought forward, October 1: 9 $ 1,809 $ 864 $ 308 $ 133 $ 1 $ 3 $ 1,818 $ 1,307 $ 172 $ 

Recoveries of prior year unpaid obligations 10 112 564 98 213 5 6 169 1,346 70 

Budget Authority:

Appropriation 38 5,586 874 1,148 1,208 75 148 2,821 - 558 

Borrowing Authority (Notes 22 & 23) - - - - - - - - 10,846 - 

Earned -

Collected 39 525 173 83 31 1 23 4,797 5,983 774 

Change in receivables from Federal Sources 1 (44) (21) (3) - - 1 (44) - (20) 

Change in unfilled customer orders -

Advance received - 5 - - 13 - - - - - 

Without advance from Federal Sources - (5) 6 (1) 13 - (6) - 8 28 

Expenditure transfers from trust funds - - - - - - - - - - 

Nonexpenditure transfers, net, anticipated and actual - 21 1,747 3 5 - - 14 - 5 

Temporarily not available pursuant to Public Law - - - - (36) - - - - - 

Permanently not available - - (1) (6) (2) - - (4,086) (5,902) (6) 

Total Budgetary Resources 97 8,009 4,206 1,630 1,578 82 175 5,489 13,588 1,581 

Status of Budgetary Resources:Obligations Incurred (Note 21):

Direct 45 6,048 3,000 1,336 1,388 78 151 3,790 12,339 616 

Reimbursable 39 289 159 84 64 1 19 517 - 798 

Unobligated Balance:

Apportioned 7 840 234 189 117 1 4 427 438 134 

Exempt from Apportionment - - 4 - - - - - - - 

Unobligated balance not available 6 832 809 21 9 2 1 755 811 33 

Total Status of Budgetary Resources 97 8,009 4,206 1,630 1,578 82 175 5,489 13,588 1,581 

Change in Obligated Balances:Obligated balance, net, brought forward October 1 9 1,950 3,484 538 1,365 30 13 5,652 18,537 114 

Obligations incurred net 84 6,337 3,159 1,420 1,452 79 170 4,307 12,339 1,414 

Gross outlays (78) (6,366) (2,918) (1,387) (1,181) (74) (166) (4,452) (11,793) (1,280) 

Recoveries of prior year unpaid (10) (112) (564) (98) (213) (5) (6) (169) (1,346) (70) 

Change in uncollected payments from Federal Sources (1) 49 15 4 (12) - 4 44 (7) (8) 

Obligated balance, net, end of period

Unpaid obligations (Note 27) 10 2,243 3,244 555 1,488 31 20 5,410 18,369 400 

Uncollected customer payments from Federal Sources (6) (384) (68) (77) (77) - (6) (29) (641) (232) 

Obligated Balance, net, end of period 4 1,859 3,176 478 1,411 31 14 5,381 17,728 168 

Net Outlays:

Gross outlays 78 6,366 2,918 1,387 1,181 74 166 4,452 11,793 1,280 

Offsetting collections (39) (530) (173) (83) (44) (1) (23) (4,798) (5,982) (773) 

Distributed offsetting receipts - (500) 6 (19) (3) - - (488) - (41) 

Net Outlays 39 $ 5,336 $ 2,751 $ 1,285 $ 1,134 $ 73 $ 143 $ (834) $ 5,811 $ 466 $ 
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FY 2007 Performance and Accountability Report 

FY 2006 FSA CCC FAS RMA FNS FSIS 

Non-Budgetary Non-Budgetary

Financing Financing

Budgetary Accounts Budgetary Accounts Budgetary Budgetary Budgetary Budgetary 

Budgetary Resources:Unobligated balance, brought forward, October 1: 343 $ 2,146 $ 1,299 $ 2,699 $ 175 $ 1,358 $ 7,108 $ 71 $ 

Recoveries of prior year unpaid obligations 43 77 4,945 4 754 4 797 177 

Budget Authority:

Appropriation 1,884 - 28,112 - 341 3,372 53,813 844 

Borrowing Authority (Notes 22 & 23) - 1,746 44,465 824 - - - - 

Earned -

Collected 979 1,483 15,068 1,174 81 1,208 85 132 

Change in receivables from Federal Sources (15) - 54 (29) 10 - - (10

 

Change in unfilled customer orders -

Advances received - - 259 - - - - (2

 

Without advance from Federal Sources (1) 1 - - - - 1 - 

Expenditure transfers from trust funds - - 891 - - - - - 

Nonexpenditure transfers, net, anticipated and actual (38) - (1,872) - 14 (5) 5,203 - 

Permanently not available (541) (2,862) (50,153) (1,690) (3) (2) (1,032) (23

 

Total Budgetary Resources 2,654 2,591 43,068 2,982 1,372 5,935 65,975 1,189 

Status of Budgetary Resources:Obligations Incurred (Note 21):

Direct 1,801 1,810 2,970 1,355 965 4,666 53,530 999 

Reimbursable 483 - 38,933 - 111 - 27 149 

Unobligated Balance:

Apportioned 260 361 363 748 101 1,266 3,160 7 

Exempt from Apportionment - - 533 - 1 - - 1 

Unobligated balance not available 110 420 269 879 194 3 9,258 33 

Total Status of Budgetary Resources 2,654 2,591 43,068 2,982 1,372 5,935 65,975 1,189 

Change in Obligated Balances:Obligated balance, net, brought forward October 1 168 483 8,428 (153) 77 268 3,940 82 

Obligations incurred 2,284 1,810 41,903 1,355 1,076 4,666 53,557 1,148 

Gross outlays (2,180) (1,752) (37,326) (1,325) (350) (4,653) (52,533) (968

 

Recoveries of prior year unpaid (43) (77) (4,945) (4) (754) (4) (797) (177

 

Change in uncollected payments from Federal Sources 16 (1) (53) 29 (10) - (1) 10 

Obligated balance, net, end of period -

Unpaid obligations (Note 27) 259 476 9,281 75 77 276 4,166 113 

Uncollected customer payments from Federal Sources (14) (14) (1,275) (174) (39) - (1) (17

 

Obligated balance, net, end of period 245 462 8,006 (99) 38 276 4,165 96 

Net Outlays:

Gross outlays 2,180 1,752 37,326 1,325 350 4,653 52,533 968 

Offsetting collections (979) (1,483) (16,217) (1,174) (81) (1,208) (85) (130

 

Distributed offsetting receipts (396) - - (987) 2 (3) (1) (12

 

Net Outlays 805 $ 269 $ 21,109 $ (836) $ 271 $ 3,442 $ 52,447 $ 826 $ 
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FY 2006 GIPSA FS NRCS ARS CSREES ERS NASS RD DO 

Non-Budgetary 

Financing 

Budgetary Budgetary Budgetary Budgetary Budgetary Budgetary Budgetary Budgetary Accounts Budgetar

Budgetary Resources:Unobligated balance, brought forward, October 1: 8 $ 2,429 $ 468 $ 412 $ 128 $ 1 $ 5 $ 4,498 $ 1,983 $ 173 $ 

Recoveries of prior year unpaid obligations 7 78 721 295 444 13 29 304 860 102 

Budget Authority:

Appropriation 38 5,362 1,358 1,330 1,221 76 141 3,298 - 612 

Borrowing Authority (Notes 22 & 23) - - - - - - - - 10,038 

 

Earned -

Collected 42 665 151 84 33 1 20 3,410 5,207 769 

Change in receivables from Federal Sources (2) (21) (48) (9) (8) (2) (2) (26) - (25

 

Change in unfilled customer orders -

Advance received - 19 - - - - - - - 

 

Without advance from Federal Sources - 37 30 13 7 - 2 2 10 (21

 

Expenditure transfers from trust funds - 159 - - - - - - - 

 

Nonexpenditure transfers, net, anticipated and actual - 3 1,741 6 5 - - 37 - 9 

Permanently not available (1) (65) (28) (20) (20) (1) (2) (3,755) (4,246) (42

 

Total Budgetary Resources 92 8,666 4,393 2,111 1,810 88 193 7,768 13,852 1,577 

Status of Budgetary Resources:Obligations Incurred (Note 21):

Direct 45 6,382 3,363 1,690 1,630 86 169 5,427 12,545 668 

Reimbursable 38 475 166 113 47 1 21 523 - 737 

Unobligated Balance:

Apportioned 1 1,052 527 278 104 - 1 244 516 120 

Exempt from Apportionment - - 3 15 25 - - - - 2 

Unobligated balance not available 8 757 334 15 4 1 2 1,574 791 50 

Total Status of Budgetary Resources 92 8,666 4,393 2,111 1,810 88 193 7,768 13,852 1,577 

Change in Obligated Balances:Obligated balance, net, brought forward October 1 7 1,561 3,565 442 1,268 28 16 6,022 17,872 85 

Obligations incurred net 83 6,857 3,529 1,803 1,677 87 190 5,950 12,545 1,405 

Gross outlays (76) (6,375) (2,907) (1,408) (1,136) (74) (163) (6,041) (11,012) (1,323

 

Recoveries of prior year unpaid (7) (78) (721) (295) (444) (13) (29) (304) (860) (102

 

Change in uncollected payments from Federal Sources 2 (15) 17 (4) 1 2 (1) 24 (10) 46 

Obligated balance, net, end of period

Unpaid obligations (Note 27) 13 2,383 3,567 619 1,430 30 23 5,725 19,171 339 

Uncollected customer payments from Federal Sources (4) (433) (83) (81) (65) - (10) (73) (634) (225

 

Obligated Balance, net, end of period 9 1,950 3,484 538 1,365 30 13 5,652 18,537 114 

Net Outlays:

Gross outlays 76 6,375 2,907 1,408 1,136 74 163 6,041 11,012 1,323 

Offsetting collections (42) (844) (151) (84) (33) (1) (20) (3,410) (5,207) (766

 

Distributed offsetting receipts - (457) (19) (22) (4) 1 - (688) - 50 

Net Outlays 34 $ 5,074 $ 2,737 $ 1,302 $ 1,099 $ 74 $ 143 $ 1,943 $ 5,805 $ 607 $ 
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255 

FY 2007 Performance and Accountability Report 

IV. 

Other Accompanying Information 

Appendix A—Management Challenges 
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UNITED STATES DEPARTMENT OF AGRICULTURE 

OFFICE OF INSPECTOR GENERAL 

Washington, D.C. 20250 

August 1, 2007 

MEMORANDUM FOR THE SECRETARY 

FROM: Phyllis K. Fong /signed/ 

 Inspector General 

SUBJECT: Management Challenges 

The Reports Consolidation Act of 2000 requires the Department of Agriculture (USDA), Office 

of Inspector General, to identify and report annually the most serious management challenges 

USDA and its agencies face. 

To identify Departmental challenges, we routinely examine issued audit reports where 

corrective actions have yet to be taken, assess ongoing investigative and audit work to identify 

significant vulnerabilities, and analyze new programs and activities that could pose significant 

challenges due to their range and complexity. We discussed our current challenges with USDA 

officials and considered all comments received. 

Last year we reported six major crosscutting challenges that we believed were the most 

significant management issues facing USDA. This year we removed one management 

challenge, as well as specific issues identified under three other challenges in recognition of the 

progress made or actions taken by the agencies. We found that, generally, USDA’s response to 

the 2005 hurricanes was timely and effective; therefore, we no longer consider it a management 

challenge. We have also incorporated the challenge relating to genetically engineered 

organisms into a new global trade challenge and added two additional challenges dealing with 

food safety and forest management. Unfortunately, because expected progress did not 

materialize, Civil Rights has again been identified as a challenge for USDA. 

In recognition of the actions taken by the agencies, the specific issues that will no longer be highlighted 

within our challenges are beef exports to Japan (Interagency Communications), the need for 

strengthened program risk assessments (Improper Payments), the development of an information system 

to track specified risk material noncompliance (Homeland Security), and security and accountability of 

explosives and munitions (Homeland Security). Further descriptions of actions taken on those issues no 

longer considered a Departmental challenge are noted on pages 4-5 of this report. 

 
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FY 2007 Performance and Accountability Report 

Memorandum for the Secretary 2

We look forward to working with the Department to address these management challenges. If 

you have any questions or would like to discuss these issues, please contact me at 

(202) 720-8001, or have a member of your staff contact either Mr. Robert W. Young, Assistant 

Inspector General for Audit, at (202) 720-6945 or Ms. Karen Ellis, Assistant Inspector General 

for Investigations, at (202) 720-3306. 

Attachment 

cc: 

Subcabinet Officials 

Agency Administrators 
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FY 2007 Performance and Accountability Report 

OFFICE OF INSPECTOR GENERAL 

MAJOR USDA MANAGEMENT CHALLENGES 

(August 2007) 

Current Challenges - Synopsis

(1) Interagency Communications, Coordination, and Program Integration Need Improvement

− Integrate the information management systems used to implement the crop insurance, 

conservation, and farm programs. 

− Increase organizational communication and understanding among the agencies that 

administer the farm and conservation programs. 

(2) Implementation of Strong, Integrated Management Control (Internal Control) Systems 

Still Needed 

− Develop Rural Housing Service controls over administering disaster housing assistance 

programs to ensure aid is provided to those in need and to avoid duplication of benefits. 

− Strengthen quality control, publish sanction procedures, and perform required reconciliation 

in the Federal Crop Insurance Program. 

− Prepare complete, accurate financial statements without extensive manual procedures and 

adjustments. 

− Improve Forest Service internal controls and management accountability in order to 

effectively manage its resources, measure its progress towards goals and objectives, and 

accurately report its accomplishments. 

− Capitalize on Farm Service Agency compliance activities to improve program integrity. 

(3) Continuing Improvements Needed in Information Technology (IT) Security Agencies need 

to: 

− Emphasize security program planning and management oversight and monitoring. 

− Establish an internal control program throughout a system’s lifecycle. 

− Identify, test, and mitigate IT security vulnerabilities (risk assessments). 

− Improve access controls. 

− Implement appropriate application and system software change control. 

− Develop disaster contingency (service continuity) plans. 

− Address computing problems and mitigate the impact to users. 

(4) Implementation of Improper Payments Information Act Requirements Needs 

Improvement

− Provide management oversight at all levels, programmatically within agencies and 

operationally at the State offices, in the improper payments elimination process. 

− Develop a supportable methodology/process to detect and estimate the extent of improper 

payments. 

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− Continue efforts to coordinate with the Department of Homeland Security in implementing 

effective control systems to ensure the safety and security of agricultural products entering 

the country. 

− Work with States in preparing for and handling avian influenza occurrences in live bird 

markets or other “off-farm” environments. 

− Ensure animal disease surveillance testing protocols are based on emerging science. 

− Continue to work with other USDA agencies to ensure effective coordination and 

implementation of Homeland Security Presidential Directive-9; e.g., develop animal and 

plant diagnostic and tracking networks. 

(6) Material Weaknesses Continue To Persist in Civil Rights Control Structure and 

Environment

− Develop a plan to process complaints timely and effectively. 

− Ensure integrity of complaint data in the system. 

− Develop procedures to control and monitor case file documentation and organization. 

NOTE: This issue was removed from the 2005 challenge list because a time-phased 

plan was developed to correct the weaknesses in Civil Rights management and 

complaint processing. However, expected improvements did not occur and material 

weaknesses continue to exist. 

(7) NEW CHALLENGE: USDA Needs To Develop a Proactive, Integrated Strategy To Assist 

American Producers To Meet the Global Trade Challenge 

− Continue to strengthen genetically engineered organism field testing controls to prevent 

inadvertent genetic mixing with agricultural crops for export. 

− Develop a global market strategy. 

− Strengthen trade promotion operations. 

(8) NEW CHALLENGE: Better Forest Service Management and Community Action Needed to 

Improve the Health of the National Forests and Reduce the Cost of Fighting Fires 

− Develop methods to improve forest health. 

− Establish criteria to reduce the threat of wildland fires. 

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(9) NEW CHALLENGE: Improved Controls Needed for Food Safety Inspection Systems 

− Complete corrective actions on prior recommendations. 

− Develop a time-phased plan to complete assessments of establishment food safety system 

control plans and production processes, including a review program that includes periodic 

reassessment. 

− Develop a process to accumulate, review, and analyze all data available to assess the 

adequacy of food safety systems. 

− Improve the accuracy of data available in the systems. 

− Continue to develop and implement a strategy for hiring and training inspectors. 

3
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Challenges Removed From the Fiscal Year 2006 List

One Departmental management challenge reported last year, Challenge 7 on the 2005 

hurricane season, was removed from this year’s list. Another, Challenge 6 on genetically 

engineered organisms, was incorporated into the new Global Trade Challenge. 

(Last Year’s Challenge 6) Departmentwide Efforts and Initiatives on Genetically Engineered 

Organisms Need To Be Strengthened 

In 2006, the United States was still the global leader in the number of acres grown with 

genetically engineered (GE) crops – 135 million acres or 53 percent of the global biotech area. 

In 2006, 89 percent of the total soybean acreage in the United States was planted with GE crops; 

for corn, 61 percent of the total acreage was planted with GE crops. These two agricultural 

commodities constitute a major part of the American agricultural commodities exported to other 

nations. One of the significant challenges facing American agriculture is the refusal by many 

nations to import GE crops due to the perceived health concerns involving the commodities. To 

add to this dilemma, in the last few years, GE strains not yet approved for commercial 

production or sale either in the United States or in importing nations were found in U.S. corn 

and rice crop productions, resulting in returned shipments or lost sales. Because of the 

challenges posed by GE agricultural commodities on trade and the economic risk of non-GE 

crops being exposed to GE strains, the Office of Inspector General (OIG) will track the 

Department’s action on genetically engineered organism (GEO) field permits in our new 

challenge on Global Trade because inadvertent exposure of GE traits to non-GE crops may have 

significant adverse trade impact. For example, the recent incident of unapproved GE rice strains 

in seeds for production impacted potential foreign markets worth around $247 million. 

(Last Year’s Challenge 7) USDA’s Response to the 2005 Hurricanes Needs Ongoing Oversight 

Since the hurricanes struck the Gulf Coast in September of 2005, OIG has performed audits and 

conducted oversight monitoring of USDA’s response to the devastation caused by the 

hurricanes. We have also conducted investigations of Government benefit fraud stemming from 

these disasters. OIG initiated 15 audits in response to this effort, the first of which began on 

October 31, 2005. As of August 1, 2007, six audit reports have been issued. The remaining 

audits and an overall assessment of lessons learned as a result of the 2005 hurricane season are 

scheduled to be released by the end of fiscal year (FY) 2007. These audits covered a myriad of 

agency programs providing assistance to those areas impacted by Hurricanes Katrina, Rita, and 

Wilma. They address housing relief, disaster food stamps, various producer disaster programs, 

controls over mission assignments, and conservation concerns. We found that, generally, 

USDA’s response to the hurricanes was timely and effective. We did, however, identify areas 

that can be improved in future disaster responses, such as developing more comprehensive 

disaster plans, sharing data to avoid duplicate payments, and improving overall coordination 

among the agencies and departments. 

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There has also been some significant progress in addressing specific issues identified under the 

following Departmental management challenges. 

Challenge (1)—Interagency Communications, Coordination, and Program Integration Need 

Improvement 

Improve communication and strengthen controls for beef exported to Japan. Both the 

Agricultural Marketing Service and the Food Safety and Inspection Service (FSIS) formulated 

and implemented procedures and controls to address the 12 actions announced by the Secretary 

and the recommendations made in our report to ensure compliance with the Beef Export 

Verification Program for Japan. The actions taken by the Department resulted in the resumption 

of trade with Japan. 

Challenge (4)—Implementation of Improper Payments Information Act Requirements 

Needs Improvement 

Strengthen program risk assessment methodology to identify and test the critical internal 

controls over program payments totaling over $100 billion. During FY 2006, USDA 

completed risk assessments for all programs. In addition, USDA is developing plans to measure 

improper payments for all high-risk programs and receive Office of Management and Budget 

approval. USDA agencies are in agreement with OIG’s findings and recommendations and 

corrective action plans are being developed to reduce improper payments and establish both 

reduction and recovery targets for all high-risk programs. 

Challenge (5)—Departmental Efforts and Initiatives in Homeland Security Need To Be 

Maintained

Develop an information system to better track noncompliance violations related to specified 

risk materials. This challenge area was removed based on actions taken by FSIS in response to 

our review of the controls over specified risk materials (SRM). FSIS developed and 

implemented an enhancement to its Performance Based Inspection System that records 

noncompliance related to SRM control requirements. FSIS began analyzing SRM 

noncompliance data in January 2006. 

Improve security and accountability of explosives and munitions. This challenge area was 

removed based on actions taken by the Forest Service (FS) in response to our followup review of 

security over explosives and munitions. FS officials concurred with our findings and have 

initiated actions to address previous open recommendations. FS has designated its Director of 

Safety and Occupational Health as having responsibility for the overall safety and security of the 

FS’ explosives/munitions program. OIG will continue to monitor FS’ progress in completing 

agreed-upon actions. 

 

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CHALLENGE: INTERAGENCY COMMUNICATIONS, COORDINATION, AND 

PROGRAM INTEGRATION NEED IMPROVEMENT 

SUMMARY: USDA’s work crosses jurisdictional lines within the Department and with other 

Federal agencies. USDA’s challenge is to develop and foster a unified approach to 

accomplishing the Department’s mission; the various agencies of the Department must 

understand and appreciate the interrelationships of their programs and work together to create a 

unified and integrated system of program administration that is greater than a simple totaling of 

the individual parts. Such an approach would increase organizational communication and 

information sharing, thus streamlining operations, reducing expenditures, and improving 

program efficiency, compliance, and integrity. This approach would enable USDA to speak 

with one cohesive voice and realize its vision of being “recognized as a dynamic organization 

that is able to efficiently provide the integrated program delivery needed to lead a rapidly 

evolving food and agriculture system.” 

OIG AUDIT/INVESTIGATION ACTIONS:

USDA Could Improve Crop Insurance, Conservation, and Farm Program Integrity and 

Efficiency Through Integration of the Agencies’ Information Management Systems. The 

Agricultural Risk Protection Act (ARPA) of 2000 requires the Farm Service Agency (FSA) and 

the Risk Management Agency (RMA), beginning with the 2000 crop year, to annually reconcile 

data received by the agencies from producers. In our September 2003 report on the 

implementation of ARPA, we reported that Departmental data reconciliation efforts on the 2001 

crop data were effectively negated by the hundreds of thousands of disparate records that were 

identified between the two agencies. Differences in the agencies’ definitions of basic terms, 

such as “producer” vs. “insured” and “farm” vs. “unit,” hamper any data reconciliation as well 

as data sharing. To date the agencies have been unable to complete the legislatively mandated 

data reconciliation for a single year. 

Since ARPA was enacted, section 10706 of the Farm Security and Rural Investment Act of 2002 

directed the Secretary of Agriculture to develop a comprehensive information management 

system (CIMS) to be used in implementing the programs administered by RMA and FSA. 

Under section 10706, all current RMA and FSA information is to be combined, reconciled, 

redefined, and reformatted in such a manner that the agencies can use the information 

management system. It was the sense of Congress that CIMS would lay valuable groundwork 

for further modernization of information technology systems of USDA agencies in the future 

and for the incorporation of those systems into CIMS. 

Since 1998, FSA’s ad hoc crop disaster programs (CDP) have been predicated on crop 

production data that is managed by RMA and downloaded to FSA. OIG’s audits of the 

1998-2002 CDPs have shown that FSA and RMA need to reconcile and redefine their data to 

better meet the needs of FSA in the administration of the CDPs. FSA and RMA are beginning to 

address inconsistencies in their data in the CIMS project. Specifically, our audits of CDP have 

disclosed instances in which improper payments occurred because data downloaded from RMA 

were not properly interpreted or used by FSA. In addition, FSA’s 2005 Hurricane Indemnity 

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Program (HIP), implemented in FY 2006, relied in part upon data provided by RMA: eligible 

producers who received a crop insurance indemnity for crop losses suffered due to the 2005 

hurricanes were eligible to receive HIP benefits equal to 30 percent of the crop insurance 

indemnity. (Note: HIP also provided benefits to producers who received FSA Noninsured Crop 

Disaster Assistance Program payments for production losses due to the hurricanes.) The 

necessary RMA data files for administering HIP were downloaded weekly to FSA. Since RMA 

data may change due to updated information, FSA manually generated periodic discrepancy 

reports to identify RMA data that no longer matched HIP data. The question remains as to how 

FSA will identify and handle such “mismatches” where RMA changes data after FSA has 

discontinued the RMA downloads1. If RMA’s and FSA’s systems were integrated, the 

downloads of data from RMA to FSA would be unnecessary; data necessary to properly 

administer the programs would be available in real time and with reduced risk of improper 

payment. In addition, more than just the crop insurance and disaster programs would benefit 

from such an integrated system—for example, production data in the system could also be used 

to determine whether quantities reported by producers for FSA price support program purposes 

were reasonable. 

USDA Could Reduce Improper Payments in Conservation and Farm Programs Through 

Improved Coordination Between Agencies. The Natural Resources Conservation Service 

(NRCS) purchases conservation easements on land in association with its conservation 

programs, while FSA provides farm subsidy payments on crop base acres under its Direct and 

Counter-Cyclical Payment Program (DCP). Producers are generally prohibited from receiving 

payments for both DCP and conservation easement on the same piece of ground. 

In our August 2005 audit of NRCS’ Wetland Reserve Program (WRP), we found that, even 

though the law required the owners and operators of land subject to WRP conservation 

easements to agree to the permanent retirement of any existing crop base acres for such land 

under any USDA program, NRCS occasionally purchased easements on land with base acres 

without ensuring that landowners permanently retire that base for FSA’s programs. NRCS had 

not issued any instructions requiring landowners to notify FSA to retire federally purchased crop 

base. In addition, we found that NRCS did not consistently notify FSA of conservation 

easements purchased. In reaching management decision, NRCS and FSA agreed to work 

together to develop mutually agreeable procedures to overcome these deficiencies. They 

anticipated achieving final action by September 2005. In an ongoing audit of crop bases on land 

with conservation easements in California, we continue to find examples where NRCS did not 

consistently notify FSA of a variety of conservation easements purchased. In 33 of the 53 WRP 

and Emergency Watershed Protection Program easements reviewed, FSA made $1.3 million in 

improper farm subsidy payments for crop bases on easement-encumbered lands. We have 

discussed this issue with both agencies. Because of weaknesses in interagency communication 

and program integration, USDA both compensated the producers for the value of the base acres 

under conservation programs and issued farm program payments on the base acres to the 

1

 The last RMA download for HIP was initially scheduled for May 7, 2007, but was subsequently extended to 

continue indefinitely when, as a result of our audit of HIP, reinsurance companies began reviewing and, in some 

cases, removing/correcting the causes of loss that made the crops eligible under HIP.

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producers under the DCP. The need for a more collaborative approach to the programs and better 

coordination between NRCS and FSA becomes more critical as Congress enacts more 

conservation programs in lieu of farm subsidies. Improved interagency communication and 

understanding of the linkages, interactions, and processes between the agencies and their 

programs will reduce instances in which one agency’s action adversely affects the other’s 

programs. 

DEPARTMENTAL/AGENCY ACCOMPLISHMENTS/PLANS: RMA and FSA established 

a working group to develop CIMS, which will combine the agencies’ separate program data (e.g., 

acreage, type of crop, producer, past claims, etc.). In addition to developing an integrated 

comprehensive information management system, this effort includes redefining data common to, 

and needed by, both agencies and data unique to each agency and developing a common format 

for such data. In January 2004, USDA awarded a contract to assist in the development of CIMS. 

The first component of CIMS to be developed is a database that contains select RMA and FSA 

data. This component will enable agency management, FSA county offices, RMA compliance 

and regional offices, approved insurance providers, company approved agents, and loss adjusters 

to access applicable producer information and crop acreage information from a single source. 

Users may then generate discrepancy and discovery reports of differences in RMA and FSA crop 

acreage data. RMA reports that, since July 2006, CIMS weekly has been loading selected RMA 

and FSA data. According to RMA, the system currently provides RMA and FSA electronic 

access to a centralized source of some common information and compares and identifies any 

differences in business entity types and acreage reported by a producer to both RMA and FSA. 

FSA has provided access to only its national office and a select few State and county offices to 

test applications. FSA State and county office employees will be granted access once the 

applications have been tested and a policy has been issued for CIMS. Approved insurance 

providers will have access to the system once the applicable System of Records is published, and, 

in the long term, NRCS will be invited to participate in CIMS. The success of this effort 

critically depends on a unified, integrated approach to program administration, information 

collection, and systems development. 

In response to our WRP audit, NRCS and FSA agreed to correct agency-specific findings and 

establish a working group to identify and remove all impairments that have prevented them from 

ensuring that landowners permanently reduce their existing crop base acres where appropriate. 

All parties agreed that these actions, when completed, along with implementation of the other 

recommendations, would significantly strengthen the program. NRCS and FSA both reported the 

working group created a mutually agreeable process, complete with forms and a clear delineation 

of responsibilities. On February 22, 2006, NRCS issued Circular 31, which, in addition to 

modifying real estate appraisal instructions, also mandated NRCS staff secure from the 

landowner a completed FSA form used to reduce crop base. On August 4, 2006, FSA, in 

consultation with NRCS, issued an amendment to its permanent directives regarding the 

reduction of base acres and when it was to occur. In addition to the FSA internal distribution, 

NRCS transmitted the FSA amendment (1-DCP, Amendment 38) to all the NRCS State offices 

for immediate coordination. Moreover, in a March 2007 conference call that included the FSA 

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and NRCS National and State offices, it was reiterated that each agency should share with the 

other information about jointly administered programs. During the call, NRCS agreed to 

provide to the FSA national office NRCS National Bulletins that affect work with FSA. The FSA 

national office will, in turn, provide the NRCS Bulletins to FSA county offices through FSA Common 

Management Notices. While issuance and sharing of procedures are positive steps, both NRCS and 

FSA need to assure communication and coordination are implemented at their field office 

locations.

ACTIONS NEEDED TO ADDRESS THE CHALLENGE: Top Departmental leadership is 

critical to effecting the cultural changes necessary to the success of a unified approach to USDA 

program administration. The Department must foster improved interagency communication and 

data sharing in order to increase efficiency and to preclude the agencies from inadvertently 

working at odds with one another. 

Farm Programs. To preclude errors and irregularities in one program from impacting program 

payments in another: 

• RMA, FSA, and NRCS should implement a comprehensive information management system to 

better share program data and eliminate duplicate reporting by producers. 

• RMA and FSA should implement a more effective data reconciliation process, as mandated by 

ARPA. Even if a comprehensive information management system is implemented, validity 

checks, i.e., data reconciliation, should be employed in that system, to the extent practicable, to 

identify apparent discrepancies in related data; and steps should be taken to resolve such 

discrepancies. 

• RMA, FSA, and NRCS should incorporate data mining techniques up front in the design of 

software used for program administration to detect data anomalies and potential improper 

payments. (Through data mining RMA has estimated $487 million in potential savings from 

crop year 2001 through crop year 2006. In 2006, to better identify fraud, waste, and abuse in the 

crop insurance program, FSA began sharing with RMA information on policyholders’ ownership 

interests. However, the agencies temporarily have since stopped sharing this information while 

issues related to producer privacy are resolved. NRCS could also benefit from data mining in its 

direct administration of conservation programs.) 

• NRCS and FSA should continue to integrate interagency communication and coordination in its 

program activities to ensure one agency’s actions do not adversely affect the other agency’s 

programs. 

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CHALLENGE: IMPLEMENTATION OF STRONG, INTEGRATED 

MANAGEMENT CONTROL (INTERNAL CONTROL) SYSTEMS 

STILL NEEDED 

SUMMARY: Office of Management and Budget (OMB) Circular No. A-123, Management’s 

Responsibility for Internal Control, was revised and became effective in FY 2006. The circular 

requires that agencies and individual Federal managers take systematic and proactive measures 

to develop and implement appropriate, cost-effective internal controls. USDA agencies have a 

history of reacting to individual control issues rather than addressing the overall weaknesses of 

their internal control systems. Some of the internal control weaknesses identified by OIG and 

discussed below are specific to individual agencies, while others represent Departmentwide 

weaknesses. 

Rural Housing Service Needs To Improve Controls Over Housing Assistance Provided to 

Victims of National Disasters. We reviewed the Rural Housing Service’s (RHS) response to 

Hurricanes Katrina and Rita and found that the agency needed to improve controls over the 

disaster assistance it was providing victims. We reviewed the assistance the agency provided 

through both its multifamily and single-family housing programs. While the agency should be 

commended for its quick response to these disasters, we found that the agency lacked internal 

controls to address the assistance it provides for major disasters. As a result of these 

weaknesses, we found cases where victims participating in the multifamily housing program 

received duplicate aid from multiple sources, including other Federal agencies and private 

charitable organizations. We also found cases in the single-family housing program where 

Rural Development (RD) was funding repairs to residences that were not related to hurricane 

damage. Since the funding RD receives for disasters is limited, it is critical RD provide funds 

to only those victims that were adversely impacted by the disaster. We noted in our audit of 

funds provided for single-family housing that sufficient funds were not available to fund all 

victims’ requests. 

Long-standing Issues Remain Uncorrected in Federal Crop Insurance Programs 

Regarding Quality Control Issues, Sanctions, and Reconciliation of Data. For the 2006 

crop year, indemnity payments totaled approximately $3.4 billion, and Government subsidies 

of insurance premiums totaled approximately $2.7 billion. To ensure quality and integrity in its 

programs, RMA relies on a number of complementary and/or independent control systems; 

these include quality control (QC) reviews by the approved insurance companies (AIP) and 

compliance activities by its own staff. Our audits and investigations have reported the need for 

RMA to strengthen its quality assurance and compliance activities to ensure compliance with 

program requirements. We have found through our audits and investigations that there is no 

reliable QC review system to evaluate private sector delivery of the Federal Crop Insurance 

Programs. As part of ARPA, RMA was provided expanded sanction authority for program 

noncompliance and fraud. Sanctions include civil fines; producer disqualification for up to 

5 years; and disqualification of other persons (agent, loss adjuster, AIP) for up to 5 years. 

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Although RMA has utilized sanctions to a limited degree, it has not issued a final rule on its 

expanded sanction authority. (However, RMA did issue a proposed rule on May 18, 2007, and 

the comment period closed on June 18, 2007.) Also, beginning with the 2001 crop year, ARPA 

required that RMA and FSA reconcile producer-derived information at least annually in order to 

identify and address any discrepancies. RMA has not attempted to performed this reconciliation 

of RMA and FSA data since crop year 2001. RMA believes that the development of CIMS, 

jointly with FSA, will meet the reconciliation requirements of ARPA.However, CIMS will not 

assist RMA in reconciling data from the 2001 crop year until CIMS is fully implemented, which 

is expected in 2012. 

Agencies Need To Improve Their Response to Audit Recommendations. USDA agencies 

need to improve their timeliness in developing and implementing corrective action plans in 

response to audit recommendations. As of August 1, 2007, there were 23 audit reports where 

OIG and the agencies had not reached management decision on the actions necessary to address 

the recommendations within the required 6-month time period. In addition, there were 

approximately 120 audits where agencies had not completed final action within 1 year of 

agreeing to implement corrective actions. Also, as of August 1, 2007, the U.S. Government 

Accountability Office’s (GAO) Website lists 74 audits with open recommendations for USDA. 

This includes 11 audits released in FY 2007 and 63 in prior years, with the oldest GAO audit 

being open since FY 2002. Developing and implementing effective corrective actions in 

response to audit recommendations is a key component to enhancing agency internal control 

systems. Many OIG and GAO findings deal directly with weaknesses in agencies’ internal 

control structures. 

Improved Controls Needed Over USDA Financial Processes. Although the Department has 

obtained unqualified audit opinions for 4 consecutive years, control weaknesses continue to 

impair the utility of the financial information reported. For example, OIG identified three 

reportable conditions, two of which—(1) needed improvements in overall financial management 

across USDA and (2) needed improvements in information technology security—were 

significant enough to warrant being reported as material weaknesses for the Department. 

Furthermore, agency stand alone financial audits identified 6 material weaknesses and 

16 reportable conditions. Although significant improvements have been made in this area, it 

nonetheless continues to represent a management challenge to the Department. 

Forest Service Needs Improvement in Policy, Process, and Internal Control Issues. Management 

issues within FS have proven resistant to change. We attribute part of this to the agency’s 

decentralized management structure. The agency delegates broad authority to its field units 

(regions, forests, and ranger districts) without having an adequate system of internal controls to 

ensure policies established by top management are followed. The use and accuracy of 

performance management information is severely limited. The usefulness of performance 

measures and the accuracy of reporting processes within FS are often flawed. This lack of 

timely and accurate information deprives FS management of tools needed to effectively measure 

the direction and progress of the agency. It also prevents oversight bodies and the public from 

being able to make informed decisions regarding the agency. These conclusions are based upon 

findings in OIG and GAO reports with which FS has concurred. 

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Another internal control issue discovered through OIG work is the need for FS to have better 

controls to ensure adequate oversight of national firefighting contract crews. Specific issues 

identified included the lack of adequate controls to monitor and ensure oversight in training 

continuity—ensuring adequate training of contract firefighters—and administration of vendors 

(i.e., vendors using illegal workers on the firefighting crews who may have language barriers), 

as well as contract crew member qualifications. 

FSA Needs To Use the Results of Its Compliance Reviews To Improve Internal Controls. 

Our audit of FSA compliance activities showed FSA generally does not capture or analyze the 

results of its various compliance and internal review activities to identify program weaknesses. 

Most of FSA’s compliance review results were not communicated beyond the individual FSA 

county offices that performed the reviews. FSA at the national level should collect and analyze 

the review results to (1) identify program weaknesses that FSA can remedy to preclude future 

improper payments and (2) identify systemic noncompliance trends and direct its limited 

compliance resources to known problem areas. 

OIG AUDIT/INVESTIGATION ACTIONS: OIG has taken specific actions to assist 

Departmental agencies in improving the overall management control structure. 

• OIG audit work has identified weaknesses in RHS internal controls when the agency is 

providing assistance during national disasters. Events of this magnitude provide significant 

challenges for the agency both in providing assistance to victims as well as ensuring only those 

individuals impacted by the disasters receive the assistance. We are working with RHS to 

identify internal control processes that can ensure that victims of disasters receive the 

appropriate level of assistance. 

• Our audit work has disclosed that RMA lacks an effective quality control review system to 

evaluate private sector delivery of the Federal Crop Insurance Program. We have an ongoing 

audit to evaluate RMA’s overall compliance activities. Additionally, through our investigative 

work, we will continue to address allegations of fraudulent schemes by insurance agents and 

adjusters. 

• OIG continues to work with USDA agencies to reach management decision on actions needed to 

address our audit recommendations. One of our primary goals is to ensure that the actions that 

are agreed to by the agency and OIG are achievable within the required 1-year period. 

We continue to focus our audits on the management control structure within FS. OIG audits, 

along with those from GAO and special reviews from outside contractors, find FS management 

has not implemented effective corrective action on reported problems. Some of these issues 

have been reported in multiple reports for over a decade, but their solutions are still in the study 

and evaluation process by FS. We plan to conduct an audit of the overall structure of FS 

management control systems. We hope to begin this work in FY 2007, depending on other 

priorities. 

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DEPARTMENTAL/AGENCY ACCOMPLISHMENTS/PLANS: Some of the actions 

being taken by the Department and USDA agencies to address management control 

weaknesses include the following.

• RD is actively engaged in discussions with the Federal Emergency Management Agency and 

other departments to develop working agreements in providing housing assistance to disaster 

victims to prevent and detect duplicate payments. RD is also developing procedures to monitor 

field office actions following disasters. 

• RMA has begun conducting AIP operations reviews to develop a “rolling” Program Error Rate. 

RMA plans to complete a review of all participating AIPs once every 3 years. These 

operational reviews are to assess the company’s compliance with Appendix IV (quality control) 

and other provisions in the Standard Reinsurance Agreement. The review guide has been 

developed, and the first round of these national operations reviews has been completed for the 

2004 reinsurance year. 

• USDA has continued to strengthen its financial management process. The Office of the Chief 

Financial Officer (OCFO) has worked closely with the agencies to improve control measures to 

mitigate errors in financial data and to improve the Department’s financial systems. 

• FS has reemphasized its management review process to assess its operations and provide 

management with information on how the agency’s internal controls are operating. The size 

and complexity of the FS operation will require a long-term commitment by agency 

management. 

• In response to our compliance audit, FSA formed a task force in August 2005 to examine its 

compliance activities. As part of its duties, the FSA compliance task force will make 

recommendations on how FSA can use the results of its compliance reviews to strengthen 

internal controls. 

ACTIONS NEEDED TO ADDRESS THE CHALLENGE: RD needs to complete working 

agreements with other agencies that provide disaster response and relief. It also needs to 

complete new RD procedures to monitor and control assistance in response to disasters. RMA 

needs to continue its effort to establish a consistent and comprehensive QC process for all 

reinsured companies, including a system to evaluate the overall effectiveness and reliability of 

QC reviews performed by the companies. USDA and its agencies need to ensure that their 

proposed management actions address audit recommendations and are structured so that they 

can be achieved within reasonable timeframes. USDA agencies need to continue to improve 

their financial systems with the goal that the financial information produced by these systems 

will allow them to prepare complete, accurate financial statements without extensive manual 

procedures and adjustments. FS needs to improve its management controls in order to 

effectively manage its resources, measure its progress towards goals and objectives, and 

accurately report its accomplishments. FSA needs to implement policies and procedures to 

analyze its compliance review results and use those results to identify program weaknesses and 

improve the corresponding systems of internal controls. 

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CHALLENGE: CONTINUING IMPROVEMENTS NEEDED IN INFORMATION 

TECHNOLOGY SECURITY 

SUMMARY: Like most entities throughout the Federal government, securing USDA’s vast 

array of networks and information technology (IT) resources is a major challenge coupled with 

significant risk. USDA depends on IT to efficiently and effectively deliver its programs and 

provide meaningful and reliable financial reporting. Despite progress, the Department’s 

systems and networks continue to be vulnerable. Furthermore, since FY 2003, the Department 

has consistently obtained a grade of “F” on the Report Card on Computer Security at Federal 

Departments and Agencies published by the House Committee on Oversight and Government 

Reform. Audits of the Department’s systems have continued to identify weaknesses that could 

seriously jeopardize operations and compromise the confidentiality, integrity, or availability of 

sensitive information. 

OIG AUDIT/INVESTIGATION ACTIONS: OIG continues to conduct IT security audits to 

monitor agencies’ compliance with Federal mandates as well as perform investigations of IT 

security breaches involving such activities as IT intrusions and equipment thefts. Our audits of 

compliance with the Federal Information Security Management Act, lost and stolen computers, 

and Office of the Chief Information Officer (OCIO) IT General Controls have found that, 

despite strong guidance provided by the OCIO, agencies’ implementation of IT security 

requirements continues to be problematic. We found inaccurate systems inventories; 

inadequate security plans, disaster recovery plans, and risk assessments; noncompliance with 

certification and accreditation requirements; inadequate change and patch management and 

nonperformance of vulnerability scans. Most recently, Departmental servers containing 

personal identity information in one agency were compromised through hacker intrusion. 

Although agencies have accelerated efforts to comply with Federal information security 

requirements, IT management and security continues to be a material weakness within USDA. 

DEPARTMENTAL/AGENCY ACCOMPLISHMENTS/PLANS: According to USDA’s 

OCIO, significant accomplishments to address IT security have been implemented. These 

accomplishments include an increased management focus via a newly implemented security 

program scorecard, improved information systems and information technology inventories, 

improved plan of action and milestone processes, automated information systems risk 

categorization, system and program reviews, and other actions. 

ACTIONS NEEDED TO ADDRESS THE CHALLENGE: Agency-level managers should 

continue to consider IT security a top priority and display greater commitment and attention to 

assuring compliance with federally mandated IT security requirements to reduce the level of 

vulnerability. Specifically, agencies need to ensure that the requirements of OMB 

Circular No. A-130, Management of Federal Information Resources, are fully met. 

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CHALLENGE: IMPLEMENTATION OF IMPROPER PAYMENTS 

INFORMATION ACT REQUIREMENTS NEEDS 

IMPROVEMENT 

SUMMARY: USDA still faces many challenges in implementing the Improper Payments 

Information Act (IPIA) of 2002. The Act requires agency heads to annually review all 

programs and activities that they administer and identify those that may be susceptible to 

significant improper payments. If the estimate exceeds $10 million, agencies are to report the 

causes of the improper payments and corrective actions taken. In FY 2005, eliminating 

improper payments became a President’s Management Agenda initiative. On August 10, 2006, 

Governmentwide guidance was consolidated into OMB Circular No. A-123, Management’s 

Responsibility for Internal Control, Appendix C, Requirements for Effective Measurement and 

Remediation of Improper Payments. Within USDA, OCFO is designated as the lead agency for 

coordinating and reporting the Department’s efforts to implement IPIA. For FY 2007, OCFO 

has designated compliance with IPIA as a top priority. OIG considers this to be a major 

challenge for USDA because of the number and complexity of USDA programs and activities 

that meet the Act’s criteria. 

OIG AUDIT/INVESTIGATION ACTIONS: During FY 2006, OIG initiated audits of FSA, 

FS, RHS, and NRCS efforts to quantify improper payment error rates for high-risk programs 

and establishment of related corrective actions. The audits revealed significant findings relating 

to compliance with IPIA. For example, OIG determined that valid statistical samples had not 

been performed and that improper payments reported in FY 2005 were not properly calculated. 

Similarly, OIG found that estimated improper payments reported in FY 2005 did not always 

include payments made to ineligible recipients. Furthermore, OIG felt that the corrective 

actions were too narrow in scope and ineffective in addressing previously reported findings. 

Lastly, OIG identified one audited agency that did not have a process in place for recovering 

improper payments. In response to these findings, OIG recommended that agency officials need 

to develop and implement controls to ensure statistical sampling processes comply with all 

OMB and OCFO requirements. This includes using the entire universe, reviewing all payments 

selected, accounting for payment variables, and maintaining documentation to support results 

reported in the Performance and Accountability Report (PAR). In addition, agencies should 

include a quality assurance review of its sampling design, second-party reviews of data 

accumulated for the sampling process, and sampling guidance. 

OIG investigations have identified millions of dollars of benefits obtained fraudulently in some 

of the Department’s largest programs. Such programs include the food stamp, FSA loan, crop 

insurance, and rural development programs. Over the past 5 fiscal years, our investigations led 

to total monetary results of $635 million, of which $443 million was restitution ordered by 

courts to repay the amount of losses directly due to criminal activity. The focus of our 

investigations is on specific subjects and specific allegations of criminal violations. Thus, the 

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results achieved in individual investigations pertain directly to individuals, rather than 

identifying broad agencywide problems in benefit delivery. However, our investigative findings 

assist in identifying problem areas, such as common schemes used to obtain undeserved 

payments. 

For FY 2007, OIG is conducting an audit of FSA with the objective of evaluating the criteria 

used to identify improper payments and the statistical process used to select and estimate the 

extent of improper payments. Additionally, OIG plans to assess FSA’s corrective actions for its 

improper payments. 

DEPARTMENTAL/AGENCY ACCOMPLISHMENTS/PLANS: In FY 2006, USDA 

consolidated small and similar programs for improved focus in the risk assessment process. 

This consolidation caused USDA to move from 286 programs in FY 2005 to 146 programs in 

FY 2006. USDA’s FY 2006 sampling identified that the Department had an estimated 

$7.05 billion of improper payments. USDA has identified 15 programs susceptible to improper 

payments, which is an increase from 13 programs identified in FY 2005. 

During FY 2006, USDA completed risk assessments for all programs. Also, USDA is in the 

process of developing plans to measure improper payments for all high risk programs and 

receiving OMB approval. Corrective action plans are being developed to reduce improper 

payments and establish both reduction and recovery targets for all high-risk programs. The 

Department is working towards fully complying with reporting standards, including reporting 

component error rates for the first time for three Food and Nutrition Service programs (National 

School Lunch and School Breakfast Programs and the Special Supplemental Nutrition Program 

for Woman, Infants, and Children) and reporting statistical error rates for four newly declared 

high-risk programs administered under FSA’s Commodity Credit Corporation. These four 

programs are the Direct and Counter Cyclical Payments Program, Conservation Reserve 

Program, Disaster Assistance Programs, and Noninsured Crop Disaster Assistance Programs. 

ACTIONS NEEDED TO ADDRESS THE CHALLENGE: Major challenges remain for 

USDA in meeting the goals of the IPIA and ultimately improving the integrity of payments. 

USDA agencies need to continue to implement and fully follow the requirements of OMB and 

OCFO’s revised direction. Analyses of the internal control structure of all major programs must 

be performed, and weaknesses that could create vulnerabilities for improper payments need to 

be identified and remedied. Due to the breadth and complexity of the undertaking, successful 

implementation of the IPIA poses a significant management challenge to the Department. 

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CHALLENGE: DEPARTMENTAL EFFORTS AND INITIATIVES IN 

HOMELAND SECURITY NEED TO BE MAINTAINED 

SUMMARY: Continuing concern about potential terrorist threats have added a new dimension 

to USDA’s missions and priorities—in particular, its missions to ensure the safety and 

abundance of the Nation’s food supply from the farm to the table and to protect the health of 

American agriculture from the introduction of foreign animal and plant pests and diseases. The 

National Strategy for Homeland Security provides a framework for prioritizing the use of 

Federal resources based on the highest threats and risks. Critical mission areas are defined as 

intelligence and warning, border and transportation security, domestic counterterrorism, 

protecting critical infrastructure and key assets, defending against catastrophic threats, and 

emergency preparedness and response. 

For FY 2007 the USDA homeland security missions were funded at over $536 million. The 

USDA Homeland Security Office (HSO) and agencies concentrate on selected areas called the 

Food and Agriculture Defense Initiative. For FY 2007, the initiative was funded at 

$28.9 million for food defense and $156.6 million for agriculture defense. Many of these 

initiatives were mandated under the Public Health and Bioterrrorism Preparedness and Response 

Act of 2002; for example, enhancing the capability to respond in a timely manner to bioterrorist 

threats to the food and agricultural system and developing an agricultural bioterrorism early 

warning surveillance system. 

USDA agencies must continue to work together to develop a better understanding of changing 

risks and threats. USDA must continue to foster effective coordination and communication 

across agency and other Department lines to ensure effective implementation of ongoing and 

future homeland security initiatives. For example, the Department is coordinating and 

monitoring efforts to implement the animal and plant disease diagnostic and reporting networks 

required by Homeland Security Presidential Directive-9. 

OIG AUDIT/INVESTIGATION ACTIONS: Building on its earlier progress, USDA must 

continue its efforts to identify its assets, conduct thorough security risk assessments, and 

establish appropriate safeguards to prevent or detect deliberate acts to contaminate the food 

supply, disrupt or destroy American agriculture, or harm U.S. citizens. At the same time, USDA 

and the Department of Homeland Security (DHS) must continue to address weaknesses in their 

border inspection activities to guard against the unintentional introduction of pests, diseases, and 

contaminants on imported products. 

Commodity Inventories. In our February 2004 audit of homeland security issues regarding 

USDA commodity inventories, OIG reported that FSA needs to conduct vulnerability and risk 

assessments to determine the appropriate levels of protection for these agricultural commodities. 

We also reported that FSA needs to formulate clear directions on food safety and security for the 

commodities that it manages, handles, transports, stores, and distributes. Although FSA agreed 

with our recommendations, preliminary resource and budgetary constraints delayed actions to 

address this concern. 

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Select Agents and Toxins. In January 2006, OIG issued an audit of the Animal and Plant 

Health Inspection Service’s (APHIS) implementation of the Agricultural Bioterrorism Protection 

Act of 2002, which provides for the regulation of agents and toxins that could pose a severe 

threat to animal and plant health or to animal and plant products. We reported that APHIS had 

not ensured that entities were fully complying with regulations regarding security plans; 

restricting access to select agents or toxins; training individuals authorized to possess, use, or 

transfer select agents or toxins; and maintaining current and accurate inventories. 

Agriculture Quarantine Inspection Activities. OIG audits conducted prior to the transfer of 

APHIS inspection duties to DHS disclosed serious control weaknesses at American borders or 

ports of entry for agriculture and other food products. Although the inspection function at 

borders and ports of entry was transferred to DHS, APHIS retains functions such as quarantine, 

risk analysis, destruction and re-exportation, user fees, and adjudication of violations. USDAOIG and DHS-OIG issued a report in February 2007, which assessed how well U.S. Customs 

and Border Protection (CBP) communicated and cooperated with USDA on issues relating to 

agricultural inspection policies and procedures, complied with established procedures for 

agricultural inspections of passengers and cargo, and accurately tracked agricultural inspection 

activities. The audit also reviewed whether CBP had taken corrective action on USDA-OIG 

issues reported on prior to the transition of the responsibilities to CBP. We were able to resolve 

many of the prior issues/recommendations; however, we found other issues had not been fully 

addressed. 

In May 2006, GAO reported that CBP and APHIS continue to experience difficulty sharing 

information such as key policy changes and urgent inspection alerts. GAO recommended that 

DHS and USDA work together to establish processes and procedures for sharing urgent 

information, assessing inspection effectiveness, and identifying major risks posed by foreign 

pests and diseases at ports of entry. GAO also recommended developing and implementing a 

national staffing model to ensure that agriculture staffing levels at each port are sufficient to 

meet those risks. 

Avian Influenza. In our June 2006 review of APHIS’ oversight of avian influenza (AI), we 

concluded that APHIS has made commendable progress in developing plans and establishing the 

networks necessary to prepare for, and respond to, outbreaks of AI. 

With regard to its National AI Preparedness and Response Plan (Response Plan), we reported 

that APHIS needed to provide additional guidance on preparing and responding to highly 

pathogenic AI (HPAI) or notifiable AI outbreaks in live bird markets or other “off farm” 

environments. Also, APHIS needed to finalize interagency coordination on the process and 

procedures for notifying owners of susceptible animals of the current infectivity risks, and the 

necessary protective actions they should take when an outbreak of AI occurs. In its response, 

APHIS described a number of initiatives planned and in-process to address our concerns. 

 

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DEPARTMENTAL/AGENCY ACCOMPLISHMENTS/PLANS: Currently, as stated in the 

FY 2006 PAR, the Departmental efforts and initiatives in Homeland Security include: 

• hosting bi-weekly homeland security discussions with mission area representatives; 

• requiring bi-weekly updates on homeland security projects from component agencies and 

quarterly status reports on Homeland Security Presidential Directive-9 tasks from mission areas; 

• conducting risk assessments to determine appropriate levels of security needed for USDA-owned 

agricultural commodities; and 

• analyzing risk assessment findings and identifying changes needed to existing policies and 

procedures. 

In response to our select agent audit, APHIS coordinated with the Department of Health and 

Human Service’s (HHS) Centers for Disease Control and Prevention to develop and implement 

procedures to share responsibilities for inspecting registered entities handling agents. APHIS 

established formal procedures for performing security inspections at the registered entities to 

ensure that the inspections are consistent and thorough. APHIS is requiring that its inspections 

of registered entities in possession of select agents verify that these entities base their security 

plans on a site-specific risk analysis and address all critical areas identified in the regulations. 

In response to the President’s National Strategy for Pandemic Influenza, APHIS developed its 

Response Plan to address the threat of AI. APHIS has characterized it as a “living document,” 

subject to revision, that establishes a comprehensive approach to the management of an outbreak 

of HPAI on a large commercial poultry operation. APHIS is also coordinating and establishing 

AI surveillance networks with other Federal, State, and private entities. APHIS is working with 

Federal and State cooperators in developing strategies for monitoring migratory birds, as well as 

working internationally to provide outreach, education, and technical assistance. APHIS 

clarified actions that employees should take in obtaining and administering necessary vaccines 

and anti-virals in the event that a culling operation for HPAI occurs. APHIS has performed and 

documented an analysis that identifies gaps in sampling surveillance. APHIS issued the 

National Avian Influenza Surveillance Plan, dated June 29, 2007, which included goals, 

objectives, case definitions, data collection and analysis methodologies, reporting of 

surveillance results, and assessment of surveillance programs. 

In response to our review of homeland security issues pertaining to USDA commodity 

inventories, FSA generally agreed with our recommendations and agreed to work with HSO to 

complete risk and vulnerability assessments and to develop appropriate guidelines and 

procedures. However, actions were delayed as FSA initially sought to hire a contractor to guide 

FSA through the risk assessment process, but was unable to obtain funding. To assist in 

protecting the Nation’s food supply, the Federal Bureau of Investigation (FBI), DHS, USDA, 

and Food and Drug Administration (FDA) have since developed a joint assessment program, the 

Strategic Partnership Protection Agroterrorism (SPPA) Initiative. The purpose of this initiative 

is to conduct a series of assessments of the food and agricultural sector in collaboration with 

private industry and State volunteers. 

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Together with the FBI, DHS, FDA, and other USDA agencies, FSA will participate in a 

summer 2007, SPPA grain facility risk assessment. The assessment will identify vulnerabilities 

and develop corrective measures for the handling and storage of agricultural commodities. FSA 

has also tentatively scheduled for the fall of 2007, a second SPPA facility risk assessment that 

would address certain processed commodities that FSA and the Commodity Credit Corporation 

purchase and store for the Food and Nutrition Service and the Agricultural Marketing Service. 

According to FSA, for both SPPA risk assessments, HSO has requested FSA to facilitate and 

lead the group discussions. Where applicable, FSA plans to use the results of the risk 

assessments in responding to the audit recommendations. 

ACTIONS NEEDED TO ADDRESS THE CHALLENGE: 

Commodity Inventories. FSA needs to complete its planned risk and vulnerability assessments 

of grain and commodity storage facilities and use the results of such assessments to develop 

guidelines and procedures to protect commodity inventories. 

Select Agents and Toxins. APHIS needs to implement its new procedures for inspecting 

registered entities in possession of select agents and verify that these entities conduct and 

document annual performance tests of their security plans; and update those plans based on the 

results of performance tests, drills, or exercises. APHIS also needs to verify that adequate 

security is maintained over select agent inventories. Registered entities need to be re-inspected 

to ensure compliance with regulations, using formal written procedures to ensure that the 

inspections are consistent and thorough. 

Agriculture Quarantine and Inspection Activities. USDA and DHS need to work together to 

strengthen controls and communication, develop the necessary processes and procedures to 

assess inspection effectiveness, and identify major risks posed by foreign pests and diseases at 

ports of entry. Also, staffing models need to be developed to address those risks. 

AI Surveillance Activities. APHIS needs to revise its Response Plan to include detailed 

instructions for handling HPAI occurrences in live bird market systems and other “off-farm” 

environments. In addition, APHIS needs to coordinate with other USDA agencies and States to 

develop and formalize producer notification and action procedures when an outbreak of AI 

occurs, to include identification of the roles and responsibilities of personnel involved, specific 

timeframes for action, and linkage to the Standard Operating Procedures set forth in the 

Response Plan. 

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CHALLENGE: MATERIAL WEAKNESSES CONTINUE TO PERSIST IN CIVIL 

RIGHTS CONTROL STRUCTURE AND ENVIRONMENT 

(Reinstated Challenge)

SUMMARY: In 2005, OIG removed the challenge for Civil Rights (CR) from the list of 

management challenges facing the Department. The premise behind the challenge was that 

complaints were not timely addressed and there was a backlog of old complaints. Two reports 

issued in 2005 documented that the Assistant Secretary for Civil Rights (ASCR) had developed 

13 initiatives to address these long-standing problems, including the backlog. In a report issued 

in May 2007, however, we found that although CR’s processing time to complete a case has 

fallen from 3 years in 1997 to slightly under 1.5 years in 2006, its efforts have not been 

sufficient to ensure that employee civil rights complaints are effectively tracked and timely 

processed. The risk to employees’ rights could reduce the public’s confidence in USDA’s 

ability to administer and address civil rights activities. 

OIG AUDIT/INVESTIGATION ACTIONS: We found that material weaknesses continued 

to persist in CR’s control structure and environment. Specifically, CR had not (1) established 

the necessary framework to monitor the processing of complaints and to intervene when 

established timeframes were not met, (2) sufficiently strengthened its controls over the entry and 

validation of data in its information system, and (3) established adequate controls to ensure case 

files could be timely located and the files contained the required documentation. As a result, CR 

cannot effectively track and timely process employee civil rights complaints. 

DEPARTMENTAL/AGENCY ACCOMPLISHMENTS/PLANS: We found that in 2006, 

CR’s processing time to complete a case averaged 504 days or just under 1.5 years, a significant 

improvement over the processing time of 3 years reported in 1997. In February 2005, CR began 

implementation of the Civil Rights Enterprise System (CRES), a Web-based application that 

allows USDA agencies and CR to use one automated system for processing and tracking equal 

employment opportunity (EEO) complaints at both the informal and formal stages. In a report 

issued in 2000, we had reported that CR had its tracking system and the agencies had their own 

systems, with CR tracking EEO complaints that were not in the agencies’ systems and the 

agencies having complaints that were not in CR’s system. Prior to the implementation of CRES, 

agencies did not have an enterprise system to track informal EEO complaints. 

ACTIONS NEEDED TO ADDRESS THE CHALLENGE: CR should develop a detailed 

formal plan to process employment complaints timely and effectively. CR should also 

implement a monitoring framework to track the processing of complaints and intervene when 

timeframes are not being met. To strengthen controls over the entry and validation of data in 

CRES, CR needs to identify the business rules and implement a plan for testing and applying 

these rules. In addition, CR needs to implement a process for validating the accuracy of 

information entered in CRES. CR needs to develop procedures to control and monitor case file 

documentation and organization, including procedures to document which CR divisions or units 

are responsible for receiving, transferring, filing, and safeguarding documents in the file folder. 

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CHALLENGE: USDA NEEDS TO DEVELOP A PROACTIVE, INTEGRATED 

STRATEGY TO ASSIST AMERICAN PRODUCERS TO MEET 

THE GLOBAL TRADE CHALLENGE (NEW CHALLENGE) 

SUMMARY: The agricultural sector plays a major role in the overall U.S. economy, and the 

availability of global markets for agricultural products is critical to the long-term economic health 

and prosperity of the food and agricultural sector. Expanding global markets should increase 

demand for agricultural products and, therefore, lead to greater economic stability and prosperity 

for America’s producers. In the Department’s strategic plan for FY 2002-2007 and for FY 2007-

2010, increasing export opportunities for U.S. agriculture was listed at the top of the 

Department’s strategic goals. Between 1990 and 2005, the dollar value of U.S. agricultural 

exports rose by 39 percent (from $59.4 billion to $82.7 billion), but due to larger export gains by 

foreign competitors, the U.S.’ market share of global exports declined by 32 percent over the 

same period. In 1990, the U.S. market share was 14.3 percent; by 2005, it had declined to 

9.7 percent. In a review conducted by the Department, U.S. market share was described at the 

lowest level in 30 years, due to “over-reliance on slow growth commodities, mature markets, and 

rising competition.” 

Concurrently, the share of American crop land devoted to cultivating biotechnology derived or 

genetically engineered (GE) crops has grown significantly. In 2006, American producers had 

planted around 135 million acres with GE crops; this amounted to 53 percent of the total global 

biotechnology derived acreage. For agricultural commodities such as soybeans and corn, 

U.S. production has largely become GE-based: the percentage of GE soybeans planted in the 

United States increased from 54 percent in 2001 to 89 percent in 2006; during the same period, 

the percentage of GE corn planted in the United States increased from 25 percent to 61 percent. 

Recognizing the importance of American agriculture in trade to foreign markets and the 

increasing importance of GE crops to the American agricultural sector, the 2002 Farm Bill 

mandated a number of general and specific trade initiatives in these areas. The 2002 legislation 

required a long-range agricultural global market strategy building on the policies of the 1996 

Farm Bill, which established an “agricultural export promotion strategy” to take into account new 

market opportunities for agricultural products. Furthermore, under the general trade provisions, 

the 2002 Farm Bill extended the Export Credit Guarantee Program, encouraged multi-year and 

multi-country agreements, and extended funding for the Export Enhancement Program. The 

2002 Farm Bill also included specific provisions on biotechnology—developing a biotechnology 

and agricultural trade program, funding biotechnology use in developing countries, and educating 

consumers about the benefits and safety of these products. 

Other countries—especially countries that have long been traditional markets for American 

agricultural commodities—have not always been eager to import GE crops. Even though the 

Food and Agriculture Organization of the United Nations has acknowledged the benefits and 

wholesomeness of GE crops, the European Union has instituted labeling and traceability 

requirements for biotechnology derived imports, requirements that negatively affect 

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Because of the sensitivity and concern that GE traits, particularly regulated or non-approved 

traits, inadvertently appear in agricultural commodities sold to these foreign markets, the need 

for strengthened monitoring and oversight over field trials is critical. Recently, the Department 

faced a number of legal challenges to its issuance of these field-testing permits; for example, on 

March 12, 2007, the Federal district court for the Northern District of California ruled that 

GE alfalfa seed had been approved for commercial release illegally, because there had been no 

Environmental Impact Statement. Earlier, in August 2006, the Federal district court for Hawaii 

ruled that the Department had violated the Endangered Species Act as well as the National 

Environmental Policy Act in allowing drug-producing GE crops to be cultivated without 

conducting preliminary investigations on the environmental impact prior to approval for 

planting. 

The threat of inadvertent release and incorporation of GE crop traits that are regulated or not 

approved for human consumption into agricultural commodities can have a potentially 

devastating impact on American agricultural exports. For example, last summer the discovery 

of unapproved GE traits in certain rice varieties destabilized U.S. rice exports and resulted in the 

closing of markets in the European Union and other destinations to U.S. rice. Just this winter, 

Government tests confirmed the presence of unapproved GE traits in planting seeds for rice 

production, again resulting in temporary disruptions in the foreign markets for the U.S. rice 

industry. According to the U.S. Rice Federation, the $1.2 billion foreign market for U.S. rice 

exports could be significantly impacted or entirely closed off by such inadvertent releases of 

GE traits to crop production. 

Given the new importance of GE crops to American agriculture, USDA faces significant 

challenges not only in monitoring and providing oversight to field trials of such crops (to 

preclude inadvertent release to other crop production), but also in promoting trade of all 

American agricultural commodities, overcoming trade barriers in well-established markets, 

educating the public as to the safety concerns and benefits of agricultural biotechnology, and 

cultivating new markets more receptive to importing biotech crops. 

To meet these challenges, USDA must balance several goals, including (1) developing, 

expanding, and implementing business processes to formulate marketing strategies at a 

worldwide level, including those of its program participants; (2) maintaining adequate 

accountability for GE seeds and crops; (3) preserving the integrity of non-GE seeds and crops; 

and (4) educating the public as to the health and safety of the American food supply, particularly 

agricultural biotechnology. 

OIG AUDIT/INVESTIGATION ACTIONS: 

Strengthening Controls Over Field Trials. During our review of USDA’s monitoring of 

GE crops, we evaluated how USDA issues genetically engineered organism (GEO) release 

notifications and permits, which are required to ship or field test regulated GEOs. We found 

that the Department needs to strengthen its controls over the entire process, from how it handles 

permit and notification applications to how it oversees the devitalization of GE crops under 

approved notifications and permits. Based on the latest response from the Department, we were 

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still unable to reach management decision on 5 of the 28 recommendations reported. These 

unresolved recommendations include requiring written protocols for notifications as well as 

permits prior to approval of the field testing, providing such written protocols to inspectors into 

link the priorities of all stakeholders to USDA goals and objectives, and from there to produce a 

truly global strategy. The Department has proposed that the 35 percent threshold involving 

high-value and processed commodities be eliminated with the new farm bill. 

In its response to our trade promotion report, the Department stated that it has begun to 

catalogue the existing information and reporting systems that support the mission to expand 

U.S. agricultural exports. The Department also stated that it will be reviewing the mechanisms 

needed to support existing Government Performance and Results Act reporting related to market 

access issues. The Department hopes to complete its review of other data and reporting 

mechanisms by the end of calendar year 2007. 

ACTIONS NEEDED TO ADDRESS THE CHALLENGE: In its response to our Farm Bill 

Trade Title report, FAS expressed general disagreement with the conclusions reached citing the 

use of questionable data and “misunderstandings or misrepresentations” of the export strategies 

used to make funding decisions for market access programs. Regardless of the data used, there 

is a trend of steadily declining U.S. market share. USDA should—in consultation with 

Congress—analyze and reassess its strategic goals and marketing strategies as a whole in order 

to regain, to the extent possible, U.S. competitiveness in global agricultural exports. To better 

promote the export of agricultural crops, USDA needs to develop a coordinated and 

consolidated global market strategy, including guidelines and strategies to deal with countries 

reluctant to import GE crops and to open new markets willing to import American agricultural 

products, particularly high-value and processed products. 

To improve USDA’s oversight of regulated GE crops, the Department needs to provide the 

specific corrective action plans to address the outstanding audit recommendations, such as 

clarifying the number of field site inspections for permits and notifications and defining the term 

“termination of the field test.” 

CHALLENGE: BETTER FOREST SERVICE MANAGEMENT AND 

COMMUNITY ACTION NEEDED TO IMPROVE THE HEALTH 

OF THE NATIONAL FORESTS AND REDUCE THE COST OF 

FIGHTING FIRES (NEW CHALLENGE) 

SUMMARY: In recent years, the average costs to fight wildfires have exceeded more than 

$1 billion per year. In 2006, more than 9.87 million acres of public and private land were 

burned by wildland fire (15,427 square miles). In 2006, FS spent more than $1.5 billion for 

wildland fire 

 

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suppression. FS efforts to contain firefighting costs are impacted by several issues: climate 

change, the increase in hazardous fuels occurring on Federal lands, and the population growth in 

rural communities in the wildland urban interface (WUI). Addressing these key issues is critical 

if FS is going to be successful in reducing both the severity of wildland fires and the cost of 

fighting these fires. An additional challenge facing FS is fire safety; as the intensity of fires 

increases and the agency is called upon to suppress fires in urban areas, the dangers to 

firefighters has increased.

OIG AUDIT/INVESTIGATION ACTIONS: We completed our audit of large fire 

suppression costs in November 2006. Our review identified that the major cost driver of 

suppression costs has been unregulated development in the WUI. Improperly planned and 

unregulated growth in the WUI significantly increases the risks these communities face from 

wildfires. Because of the increased risk, FS must spend more money to prevent wildfires from 

reaching these areas and more money protecting the communities when wildfires do reach them. 

If not for the threat to the WUI, FS could use less expensive fire suppression tactics or even let 

the fires burn naturally. It is critical that FS work with local communities to ensure that private 

landowners take steps to reduce the risk of fire on private property adjacent to Federal land. In 

addition, we found FS needs to modify its policies that unduly restrict use of fire to reduce 

hazardous fuels on FS land. We also found that the agency lacked effective cost containment 

controls: managers’ and incident commanders’ decisions and oversight were neither tracked nor 

evaluated, agency performance measures and reporting mechanisms did not allow FS 

management to assess the effectiveness of its wildfire suppression cost containment efforts, and 

cost containment reviews had limited effectiveness. 

Our audit of FS’ implementation of the Healthy Forest Initiative evaluated the agency’s efforts 

in reducing hazardous fuels on Federal land. Deteriorating forest health has resulted in the 

unnaturally heavy accumulation of hazardous fuels. While FS’ 2005 budget for hazardous fuels 

reduction was $276 million, it has been estimated that hazardous fuels are accumulating at three 

times the rate that they can currently be treated. FS has allocated hazardous fuel reduction funds 

based, in part, on historical funding allocations and accomplishing the most acres of treatment. 

These factors do not necessarily address areas that may have the most risk of major wildfires. 

Treatment of high risk areas may cost more for fewer acres, but it may do more to reduce the 

potential for catastrophic fires than treatment of a large number of acres. FS needs to change its 

funding approach for fuel reduction projects to recognize the potential risk to forest resources 

and private property. This will help ensure that the limited funds are better targeted to reduce 

the potential for catastrophic fires. 

Other audits that we have recently completed related to fire suppression activities concluded that 

FS needed to improve its controls over the use of firefighting contract crews and the use of 

Emergency Equipment Rental Agreements (EERA). The audit related to contract crews 

concluded that significant improvements were needed in safety training for these crews. Our 

review of EERA found that by using a combination of best practices, FS can lower costs for 

equipment and supplies it obtains through the EERA process. 

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DEPARTMENTAL/AGENCY ACCOMPLISHMENTS/PLANS: In response to audit 

recommendations, FS has implemented policies and procedures designed to contain wildfire 

suppression expenditures and to increase accountability for suppression operations. FS has 

developed new strategic performance measures and increased the emphasis on cost 

accountability. Also, FS has increased the level of management oversight on large fires and 

initiated significant changes in its wildfire cost containment reviews. The agency has 

implemented a formal training program for personnel who conduct cost containment reviews 

with the emphasis focusing on cost drivers and the impact of fire suppression strategies. 

Incident commanders will have performance standards that include whether the tactics 

employed represented cost effective use of resources. FS is also placing more emphasis on 

wildland fire use (WFU). Also, FS practices will allow managers to switch between 

suppression tactics and WFU as each situation evolves. In the past, once a strategy of 

suppression was chosen the manager was not allowed to change even if the situation warranted. 

FS is developing a fire program system to economically allocate resources and a LANDFIRE2

system to provide data to use in order to target fire and resource projects more effectively. 

ACTIONS NEEDED TO ADDRESS THE CHALLENGE: Top Department and FS 

management needs to work with Congress and other land management agencies to find ways to 

convince State and local governments to enact and vigorously enforce building and zoning 

codes in areas threatened by wildland fire. FS also needs to 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. FS also needs to 

continue to improve its internal controls over wildland fire expenditures and the delivery of 

systems to help managers improve cost containment decisions. FS needs to ensure that it 

structures its human and physical resources in a manner to meet the changing environment of 

forest health and the expanding of WUI. 

2

 LANDFIRE, also known as the Landscape Fire and Resource Management Planning Tools Project, is a 5-year, 

multi-partner project producing consistent and comprehensive maps and data describing vegetation, wildland fuel, 

and fire regimes across the United States. It is a shared project between the wildland fire management programs of 

the Department of Agriculture’s Forest Service and the U.S. Department of the Interior. 

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CHALLENGE: IMPROVED CONTROLS NEEDED FOR FOOD SAFETY 

INSPECTION SYSTEMS (New Challenge) 

SUMMARY: The safety of the Nation’s food supply and the adequacy of its Federal inspection 

systems is a major concern of consumers, Congress, and other stakeholders due to recent foodborne illnesses and food contamination events. FSIS must demonstrate that its information and 

data systems, management controls, and inspection processes are adequate to support its 

assessments of the adequacy of slaughter and processing hazard controls and production 

processes. 

The Federal meat and poultry inspection program is operated under the Hazard Analysis and 

Critical Control Point (HACCP) system (HACCP was implemented in 1998). Under HACCP, 

each slaughter and processing establishment is responsible for designing a food safety system 

that complies with sanitation standards and procedures, HACCP requirements, and pathogen 

reduction requirements. FSIS is responsible for verifying that each establishment’s food safety 

system is operating in compliance with the regulations and in a way that will result in safe and 

wholesome products. FSIS is moving towards a risk-based inspection system as its next step to 

modernize the inspection process and has stated that HACCP is the foundation of this risk-based 

initiative. 

Since 2000, OIG has reported that FSIS had not analyzed and/or verified the adequacy of 

establishment HACCP plans. Also, we reported that FSIS did not have an effective 

management control structure that would ensure that adequate systems and processes were in 

place to accumulate, review, and analyze available data to monitor and assess compliance with 

HACCP and inspection requirements. We recommended that FSIS develop a written timephased plan for completing its reviews of HACCP plans, to include periodic reassessments, and 

to establish a strategy for hiring and training staff. We also made numerous recommendations 

to improve FSIS information technology systems, inspection oversight, and data quality. 

OIG AUDIT/INVESTIGATION ACTIONS: OIG issued a series of food safety audits in 

2000 that assessed the effectiveness of FSIS’ meat and poultry inspection program under 

HACCP. We concluded that while FSIS had taken positive steps in its implementation of the 

science-based HACCP program, FSIS needed to have a more aggressive presence in the 

inspection and verification process. FSIS had, in our assessment, reduced its oversight short of 

what was prudent and necessary for the protection of the consumer. The conditions noted in our 

2003 review of the ConAgra recall (18 million pounds of ground beef and beef products 

suspected of being contaminated with E. coli O157:H7) again led us to question the adequacy of 

establishment HACCP plans and FSIS’ oversight and verification programs that identify and 

control hazards in the production process. 

In our 2004 audit of application controls for the Performance Based Inspection System (PBIS), 

we evaluated the adequacy and effectiveness of FSIS’ controls over the input, processing, and 

output of PBIS data. PBIS is a software application designed by FSIS to manage its HACCP 

inspection assignments, specific inspection procedures, and data reporting. We found that FSIS 

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had not implemented adequate controls to ensure the integrity of PBIS data and concluded that 

this ultimately could affect FSIS’ ability to adequately manage its inspection activities. 

In response to both GAO and OIG audits and recommendations, FSIS developed a management 

control system to provide assurance that the agency is accomplishing its mission of protecting 

consumers from unsafe and unwholesome food products. A key component of FSIS’ 

management control system is the In-Plant Performance System (IPPS), which was established to 

strengthen supervision and improve inspector accountability. Our 2006 audit of IPPS found that 

FSIS’ policies and procedures were generally adequate and that the system improved supervision 

and inspector accountability. However, we did find that the review process could be strengthened 

in the areas of written guidance and management oversight; not all inspection activities identified 

as critical had been assessed. 

In 2007, GAO designated three new high-risk areas in its annual high risk report. One of the 

high-risk areas is Federal oversight of food safety because of its importance to the economy and 

public health and safety. Any food contamination could undermine consumer confidence in the 

Government’s ability to ensure the safety of the U.S. food supply, as well as cause severe 

economic consequences. GAO believed the current fragmented Federal system (15 agencies 

collectively administering at least 30 laws related to food safety) has caused inconsistent 

oversight, ineffective coordination, and inefficient use of resources. 

DEPARTMENTAL/AGENCY ACCOMPLISHMENTS/PLANS: FSIS developed and 

recently implemented a management control system that is to provide multi-layered management 

oversight of its inspection activities. FSIS has focused on strengthening supervisory oversight of 

its in-plant inspection personnel through the use of IPPS. FSIS has also recently implemented 

AssuranceNet, a Web-based system, which will pull inspection data from five databases to 

facilitate analysis. The goal of AssuranceNet is to allow FSIS to monitor the agency’s inspection 

activities. 

ACTION NEEDED TO ADDRESS THE CHALLENGE: Although FSIS agreed to 

implement corrective actions to address prior audit concerns, some actions are not complete. 

FSIS needs to fully address prior weaknesses before it can ensure risks to public health from 

adulterated meat and poultry products processed under the proposed risk-based inspection 

process are minimized. FSIS must demonstrate that it has adequate information and data 

systems, controls, and processes in place and operational to support its ongoing assessments of 

the adequacy of establishment HACCP plans and production processes, and its inspection 

activities. Most critical, FSIS needs to develop a written, time-phased plan for completing 

reviews of HACCP plans. The time-phased plan should include a strategy for hiring and training 

staff. FSIS also needs to develop a review program that includes periodic (1 to 2-year) 

reassessment of HACCP plans. 

29
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ACRONYMS USED IN THIS DOCUMENT 

AI avian influenza 

AIP approved insurance companies 

APHIS Animal and Plant Health Inspection Service 

ARPA Agricultural Risk Protection Act of 2000 

ASCR Assistant Secretary for Civil Rights 

CBP Customs and Border Protection 

CDP crop disaster programs 

CIMS comprehensive information management system 

CR Civil Rights 

CRES Civil Rights Enterprise System 

DCP Direct and Counter-Cyclical Payment Program 

DHS Department of Homeland Security 

EEO equal employment opportunity 

EERA Emergency Equipment Rental Agreements 

FAS Foreign Agricultural Service 

FBI Federal Bureau of Investigations 

FDA Food and Drug Administration 

FS Forest Service 

FSA Farm Service Agency 

FSIS Food Safety and Inspection Service 

FY fiscal year 

GAO Government Accountability Office 

GE genetically engineered 

GEO genetically engineered organisms 

HACCP Hazard Analysis and Critical Control Point 

HHS Health and Human Services 

HIP Hurricane Indemnity Program 

HPAI highly pathogenic avian influenza 

HSO [USDA] Homeland Security Office 

IPIA Improper Payments Information Act of 2002 

IPPS In-Plant Performance System 

IT information technology 

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 

PAR Performance and Accountability Report 

PBIS Performance-Based Inspection System 

QC quality control 

RD Rural Development 

Response Plan National Avian Influenza Preparedness and Response Plan 

RHS Rural Housing Service 

RMA Risk Management Agency 

SPPA Strategic Partnership Protection Agroterrorism Initiative 

SRM Specified Risk Materials 

USDA U.S. Department of Agriculture 

WFU wildland fire use 

WRP Wetland Reserve Program

30
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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. 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. Section 831 of the Defense Authorization Act for 

FY 2002 requires recovery auditing. In this process, agencies entering into contracts worth more than $500 

million in a fiscal year must execute a cost effective program for identifying errors made in paying contractors and 

for recovering amounts erroneously paid to the contractors. In FY 2005, Eliminating Improper Payments became 

a President’s Management Agenda (PMA) initiative. On August 10, 2006, government-wide guidance was 

consolidated into OMB Circular A-123, Management's Responsibility for Internal Control, Appendix C. Under 

this guidance, USDA has 5 programs required to report under Section 57 of A-11 and has identified an 

additional 11 at risk of significant improper payments through the risk assessment process. 

USDA is taking steps to implement IPIA fully and achieve a “green” rating for the Eliminating Improper 

Payments PMA initiative. During FY 2007, USDA maintained “yellow” status. Accomplishments this year 

include: 

 Completing risk assessments for all programs; 

 Developing plans to measure improper payments for all high risk programs and receiving OMB approval; 

 Developing corrective action plans to reduce improper payments and establishing both reduction and recovery 

targets for all high risk programs; 

 Fully complying with reporting standards; and 

 Reporting error rates for National School Lunch and School Breakfast programs for the first time. 

USDA’s improper payment rate of 6.11% for FY 2007 is a reduction from the 6.97% rate reported for FY 2006. 

The estimated improper payments amount of $4.4 billion for FY 2007 is a reduction from the $4.6 billion for FY 

2006. The Farm Service Agency (FSA), with seven high risk programs, showed significant improvement in the 

reduction of improper payments. FSA reduced their overall estimated improper payments from $2.9 billion 

(11.18%) in FY 2006 to $563 million (2.49%) in FY 2007. Since many of FSA’s corrective actions were 

implemented late in FY 2007, improvements may not be shown until the FY 2008 review results are reported. 

FSA’s improvements were related to: 

 direct senior management involvement and support to reduce improper payments; 

 agency-wide training on improper payments awareness and responsibilities; 

 inclusion of improper payment payments reduction in FSA strategic planning documents; 

 implementation of program checklists; 

 integrating reducing improper payments into employee’s performance plans; and 

 publication of notices providing new instructions. 

USDA will be able to move to “green” status when error rates are available for all programs and it demonstrates 

that reduction and recovery goals are being met. Due to budget and program constraints, this process can be 

complicated. For the programs without an estimated error rate, USDA worked with OMB to develop interim 

methods to establish and track erroneous payment percentages. 
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Additionally, USDA is taking steps to implement recovery auditing fully. Using an independent recovery audit 

contractor working on contingency, USDA identified $206,000 of potentially recoverable improper payments. Of 

this amount, USDA recovered $146,000 in FY 2007. 

OMB provided a reporting template for IPIA in OMB Circular A-136. The template requires responses to 

specific issues. USDA’s response to these issues follows. 

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. 

OCFO issued detailed guidance for the risk assessment process including templates and extensive reviews of 

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: 

 The amount of improper payments needed to meet the reporting standards; 

 A 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; 

 Listing of significant reviews and audits; 

 Final determination of risk level; 

 Planned future enhancements (optional); and 

 Description of how improper payments are recovered (optional). 
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USDA has identified the following 16 programs as susceptible to improper payments. 

Selection Methodology Agency Program 

Farm Service Agency (FSA), 

Commodity Credit Corporation (CCC) 

Marketing Assistance Loan Program (MAL)

Food Stamp Program

National School Lunch Program (NSLP) 

School Breakfast Programs (SBP) 

Section 57 of OMB Circular A11 

Food Nutrition Service (FNS)

Special Supplemental Nutrition Program for Woman, Infants 

and Children

Milk Income Loss Contract Program 

Loan Deficiency Payments 

Direct and Counter-Cyclical Payments 

Conservation Reserve Program 

Miscellaneous Disaster Programs 

Farm Service Agency (FSA), 

Commodity Credit Corporation (CCC)

Noninsured Assistance Program 

Food Nutrition Service (FNS) Child and Adult Care Food Program

Forest Service (FS) Wildland Fire Suppression Management

Rural Development (RD) Rental Assistance Program

Risk Management Agency (RMA) Federal Crop Insurance Corporation Program Fund

USDA Identified as Susceptible 

to Significant Improper 

Payments 

Natural Resources Conservation 

Service (NRCS)

Conservation Security Program

II. Describe the statistical sampling process conducted to estimate the improper payment rate for 

each program identified. 

Agency Program Sampling Process 

FSA/CCC Marketing Assistance 

Loan Program (MAL)

A statistical sample of high risk programs is conducted by the Farm Service Agency’s (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 being tested. 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 95 percent confidence level. 

Once the universe of the program is determined for the target fiscal year, a stratified two-stage 

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 is drawn from legal and 

program administrative guidance. Findings of non-adherence 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
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FNS Food Stamp Program 

(FSP)

Statistical sampling 

Each month, States select a statistically random sample of cases from a universe of all households 

receiving FSP benefits for that given month. Most States draw the samples using a constant sampling 

interval. There are some which employ simple random and/or stratified sampling techniques. Required 

annual sample sizes range from 300 for State agencies with small FSP 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 FSP universe. Federal subsamples 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 FSP 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.

FNS National School Lunch 

Program (NSLP)

USDA makes use of periodic studies to assess the level of error in program payments because 

detailed information on the circumstances of the National School Lunch Program (NSLP) and School 

Breakfast Program (SBP) participating households are not collected administratively. The current 

study – 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 School Breakfast 

Program 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 the studying the second stage of 

sampling. Schools were stratified into two groups: (1) elementary schools and (2) middle- and highschools. The school sample included both public and private schools. A total of 264 schools 

participated in the study (216 non-Provision 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 reduced-price meals and over 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 the NSLP as well as 50 breakfast transactions at each of the 218 

schools participating in the School Breakfast Program. 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. 

FNS School Breakfast 

Program (SBP) 

The statistical sampling process for this program is similar to the FNS National School Lunch Program 

(NSLP). See the NSLP description. 
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FY 2007 Performance and Accountability Report 

FNS Special Supplemental 

Nutrition Program for 

Women, Infants and 

Children (WIC) 

FNS plans to continue periodic examinations of WIC certification and vendor error. 

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 WIC during spring 1998. The sample was based on a multi-stage sample 

design, with 50 geographic primary sampling units (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 that was 

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’ intent is that the 2008 decennial income verification study will use a similar sampling strategy 

that provides a nationally representative estimate of erroneous payments within the IPIA-specified 

precision parameters. The certification error rate will be reported in FY 2009. 

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 WIConly 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. These lists were sued to establish the national 

sample frame of vendors active during the study period. Geographic Information System software 

was used to form 365 PSUs 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 in order to yield estimates of overcharge and undercharge. 

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 3,150 Family Daycare Homes (FDCHs) in 95 

distinct sponsors in 14 States. Data collectors went to each sampled sponsor with randomly drawn 

lists of 30 to 90 FDCHs and extracted documents necessary to establish eligibility for 

reimbursements from the sponsors’ files.

FSA Milk Income Loss 

Contract Program (MILC) 

See the process described in the Marketing Assistance Loan Program (MAL) discussion shown 

above. The same process was used for this program. 

FSA Direct and CounterCyclical Payments (DCP) See the process described in the Marketing Assistance Loan Program (MAL) discussion shown 

above. The same process was used for this program. 

FSA Conservation Reserve 

Program (CRP) 

See the process described in the Marketing Assistance Loan Program (MAL) discussion shown 

above. The same process was used for this program. 

FSA Miscellaneous Disaster 

Programs (CDP) 

See the process described in the Marketing Assistance Loan Program (MAL) discussion shown 

above. The same process was used for this program. 

FSA Noninsured Assistance 

Program (NAP) 

See the process described in the Marketing Assistance Loan Program (MAL) discussion shown 

above. The same process was used for this program. 

FS Wildland Fire 

Suppression 

Management

Wildland Fire Suppression Fund (WFSU) transactions were analyzed and a stratified sampling 

method was employed to select transactions. FS used a package of statistical software tools 

designed to assist the user in selecting random samples and evaluating the audit results. The goal 

behind the software package was to develop valuable analytical tools that could be easily used by 

auditors. The statistical audit tool has been used by the Office of Inspector General since the 

1970’s. 

The sample size was determined using a 90% confidence level, anticipated rate of occurrence of 

2.9% and a desired precision range of +/-2.5%. The transactions were selected using a random 

number generator, selecting the corresponding record number in the universe of payments. 

The population was broken down into four categories: Travel, Payroll, Purchase Card Management 

System (PCMS), and Contracts. Separate statistical samples were selected using the criteria 

required by OMB. An exception occurred when a transaction met the criteria for an improper 

payment as defined by the Improper Payment Improvement Act (IPIA). We categorized errors that 

were improper as errors that were either insufficiently documented or were improperly paid. 
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FY 2007 Performance and Accountability Report 

RD Rental Assistance 

Program

The agency reviewed the sampling plan developed by the U.S. Department of Housing and Urban 

Development for its studies. It engaged Rural Development (RD) statisticians to prepare a similar 

plan for this report. This report is based on a review of tenants receiving rental assistance (RA) 

during FY 2006. The sampling plan consisted of 666 RA payments from a universe of 3,333,206 or 

.019 percent. The methodology produced a sample with a 99-percent confidence level. The study 

required field staff to evaluate tenant files and income calculations. The agency did not test if RD’s 

deputy chief finance office paid appropriately on the borrower’s request for subsidy due to the 

minuscule error rate from the FY 2004 report and the implementation of an automation enhancement 

to improve data entry. 

The universe of rental assistance payments FY 2006, was 3,333,206. 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 (MFIS). The extract contained a list of all tenants receiving RA during FY 2006. 

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, an unnumbered letter dated March 

20, 2007, was issued to RD field staff that explained the process (including detailed instructions), 

provided the list of tenant payments to be reviewed and provided the data currently maintained in 

MFIS. These data were used as the baseline review of the tenant data comparison between the 

Agency records and the management agent’s tenant files. The study asked State office staff 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

RMA drew 600 random 2004 and 2005 crop year indemnities to review during 2005 and 2006. It will 

repeat this process for three years to compile 900 random indemnity reviews that will be used to 

identify the RMA program-error rate. Samples are drawn by the compliance staff which oversees the 

compliance review data base and is responsible for 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 Conservation Security 

Program 

A risk assessment was developed with the Financial Management Division and the National 

Program Manager. Using last year’s risk assessments and corrective action plans, NRCS identified 

any new risks and internal controls to test. It reviewed internal and external reviews and audits to 

eliminate duplication of effort and incorporated testing of any new internal controls implemented as a 

result of the reviews and audits. Statutory and program changes as they related to IPIA were 

considered. 

Samples were drawn by a contractor statistician from the universe of payments made to participants 

during fiscal year 2006. The anticipated error rate was based on the actual target rate of .50%. 

NRCS used a rigorous confidence level of 95% and precision range of +/-2.5% to select the number 

of samples. A total of 95 samples were selected. 

A questionnaire was developed with the program manager. Sample payment data were merged into 

the questionnaire. The questionnaire was sent to State and field offices to complete and return with 

supporting documentation. The questionnaire is a tool for re-enforcing program rules and a means to 

obtain verification of items which would not be readily available in a contract file. 

NRCS implemented individual program review checklists. These were created by the Financial 

Management Division based on the risk assessments and internal controls selected for testing. As 

samples were returned, the agency used the review checklist to test the effectiveness of the 

selected internal controls. This ensured testing consistency by the review team. NRCS also tested 

payment calculations, contracting policy adherence, and issues from last year’s sampling. Person 

and land eligibility was verified as described in the Farm Bill statutory language. 
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FY 2007 Performance and Accountability Report 

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. 

Agency Program Corrective Actions Planned 

FSA/CCC Marketing Assistance Loan 

program (MAL) 

The three most significant causes for payments being identified as improper were as 

follows: 

• A lien search for Federal or State Tax liens was not conducted. 

• The Financing Statement was not filed. 

• The loan quantity is not supported by a producer certification, measurement 

service, or warehouse receipt. 

Actions taken or that will be taken to reduce the weaknesses identified are as follows: 

a. Broad Scope Actions Taken: 

• FSA is making every effort to lower the improper payment rate and to reduce 

program weaknesses contributing to improper payments. Regardless of the 

reasons improper payments are made, FSA is taking the issue of improper 

payments very seriously. 

• The Agency has taken actions to correct its deficiencies in many areas and has 

incorporated the priority of reducing improper payments into its strategic planning 

documents. 

• The Administrator has personally participated in an online training module on 

performance and accountability. This presentation explains the importance of 

managing payments, the impact of the improper payment results from FY 2006, 

and how every employee within FSA is accountable for doing their share in 

reducing improper payments. FSA issued a program Notice making it mandatory 

for all FSA employees working with or making policy decisions to view the training 

module and require the State Executive Directors (SEDs) to certify that those 

employees viewed the training module before August 27, 2007. 

b. Actions Already Taken that Impact All Causes of Improper Payments Identified: 

The actions taken were completed late in FY 2006 or early FY 2007 so the impact would 

not be realized until review of the FY 2007 payment activity. The FY 2007 payment 

activity will be sampled as part of the FY 2008 review cycle. 

 • Issued various National Notices to State and COFs providing them with instructions 

related to training, proper processing of payments, and the new checklist for 

processing loans. 

• Provide training on improper payments to field personnel and educate 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 Ag 

Learn, a Department of Agriculture enterprise-wide learning management system, 

and is being followed up with communications and job aid to help facilitate 

compliance controls. 

• Integrate the employee’s individual performance results related to reducing 

improper payments into his/her annual performance rating. 

• Developed a new checklist, the CCC-770 MAL, MAL Checklist, for COF employees 

to use. By completing the CCC-770 MAL, the COF employee is certifying that the 

applicable program provisions have, or have not been met. Handbook 8-LP was 

amended on December 13, 2006, to include policy that a CCC-770 MAL or CCC770 eLDP/LDP must be completed before a loan or LDP is issued. 

 
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FY 2007 Performance and Accountability Report 

Agency Program Corrective Actions Planned 

 c. Actions That Will be Taken that Impact All Causes of Improper Payments Identified 

• FSA is implementing a new compliance review process for the 2007 crop year. 

The new compliance spot check review process will allow FSA to (1) conduct a 

more meaningful and comprehensive spot check/compliance review and; (2) utilize 

a better mechanism for reporting spot check results. The new reporting 

mechanism will allow the National Office to monitor improper payments discovered 

as result of a spot check. 

• Provide a Notice to State and COFs providing the detail findings discovered during 

the FY 2007 MAL Statistical Sample including established policy and procedure 

references for each finding. 

• Based on sample results, amend the CCC-770 MAL checklist, as appropriate, to 

ensure that COFs are reminded of the necessary policies and procedures for 

program compliance. 

• Contact State Office managers where the majority of improper payments were 

identified, according to the statistical sample, to determine possible training and/or 

job aids the State and county staff may need to assist in facilitating compliance to 

controls. 

• Re-enforce current program policies regarding program compliance through the 

issuance of National notices to State and COF personnel. 

• Review existing policy and procedures to determine program compliance 

inefficiencies and eliminate inadequate program compliance controls. 

d. Actions That Will be Taken that Impact Lien Searches for Federal or State Tax Liens 

Not Conducted: 

FSA will clarify current policies associated with conducting Federal and State Tax liens, 

conducting lien searches and perfecting security interest in program notices, handbook 

procedures and regulations, if necessary. These notices, in addition to conference calls 

to the specific State and COFs that were identified in the statistical sample, should help 

to reduce the number of improper payments. 

FNS Food Stamp Program Causes of improper payments 

An improper payment occurs 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 2005 completed statistical sample revealed that approximately 

74.5 percent of all variances occurred before or at the most recent 

certification/recertification. Additionally, 68.5 percent of the errors were State agency 

caused. About half of the errors (50.8 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 28.0 percent. 

The analysis of the FY 2006 data is scheduled for release in early 2008. 

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 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. 
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FY 2007 Performance and Accountability Report 

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) 

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 to 

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. The act strengthened the certification process by: 

• Requiring food stamp 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 (TANF) and the Food Distribution Program on 

Indian Reservations (FDPIR); 

• 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; 

• Expanding authority for the use of public records for verification of applications; and 

 • Requiring increased efforts to obtain household response to application verification 

requests; requiring districts with high rates of non-response to verification to target 

subsequent year verification activity toward error-prone applications. 

FNS is engaged in continuing efforts to fully implement all the provisions of the CNR 

designed to improve program accountability. 

Improved State and Federal Oversight and Technical Assistance 

FNS conducted the following to improve oversight and technical assistance: 

Since 2004, 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 

monitoring of schools; and 

• Since 1995, provided ongoing guidance and training materials to States on the 

School Meals Initiative (SMI), to help schools improve compliance with program 

nutrition and menu planning standards in order to increase the accuracy of mealcounting. 

Expanded National Data Collection and Analysis to Inform Policy 

• FNS conducted the following to collect and disseminate program data: 
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FY 2007 Performance and Accountability Report 

 • Initiated an annual measure of administrative errors in the certification process in 

school year 2004-2005; 

• As early as the 1990s, tested alternative approaches to the existing school meals 

certification and verification processes to assess their impact on accuracy and 

program access; 

• Highlighted the results of the data collections at numerous briefings with State and 

Federal partners and Congressional staff; and 

• Developed the Access, Participation, Eligibility and Certification (APEC) study, 

which provides the first comprehensive national estimate of erroneous school meal 

payments for the PAR, as required by the IPIA. 

Additional Action Planned 

FNS proposes to expand training, technical assistance, and other efforts to reduce 

payment errors that result from operational problems. Planned efforts include: 

• Working with the National Food Service Management Institute to provide webbased training to States and schools on certification and other accountability 

issues; 

• Delivering training to States on improving their oversight of local schools (fiscal 

year 2008), which will lead to States’ conduct of more rigorous and robust locallevel oversight; 

• Emphasizing to State agencies that annual verification data must be used to 

ensure that corrective action is taken by school districts to address error rates; 

• Partnering with the School Nutrition Association to coordinate efforts on training 

and technical assistance to its membership on accountability issues; and 

• Working on strategies to continue the APEC study, which would enable FNS to 

estimate and measure changes in erroneous payments over time, and would help 

inform FNS, Congress, the States, and advocacy partners on the development of 

additional guidance, training, and policy options. 

FNS School Breakfast Program (SBP) • The corrective actions planned for this program are similar to the FNS National 

School Lunch Program (NSLP). See the NSLP description. 

FNS Special Supplemental Nutrition 

Program for Women, Infants and 

Children (WIC) 

• 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, February 24, 1999, the WIC 

Certification Integrity Interim Rule (65 FR 3375, January 21, 2000) and the WIC 

Certification Integrity Final Rule (65 FR 77245, December 11, 2000) implemented this 

requirement. The WIC Food Delivery Final Rule (65 FR 83248, December 29, 2000) 

mandated one-year disqualifications for the most serious participant violations, including 

dual participation and misrepresentation of income. The WIC Miscellaneous Final Rule 

(71 FR 56708, September 27, 2006) required State agencies to prevent conflicts of 

interest such 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 will measure the level of improper payments due to certification error in Fiscal 

Years 2008-09. 

• Vendor Error: 

Overall rates for vendor error are very low in relation to the volume and value of 

transactions. Nevertheless, 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. The Child Nutrition Act was amended in 1996 to 

require the disqualification of WIC vendors who had been disqualified by the Food 

Stamp Program (FSP), and 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 (64 FR 13311, March 18, 1999) implemented these 

requirements and also mandated three-year disqualifications for overcharging and 

charging for food not received. The WIC Food Delivery final Rule (65 FR 83248, 

December 29, 2000) mandated nationwide standards for vendor authorization, training, 

and monitoring. 
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FY 2007 Performance and Accountability Report 

FNS Child and Adult Care Food 

Program (CACFP) 

CACFP has three distinct parts: Child Care Centers, Adult Daycare facilities and Family 

Daycare Homes (FDCHs). 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. 

• CCAP — In the Spring of 2004, FNS began the Child Care Assessment Project 

(CCAP). This project was designed to measure the effectiveness of efforts to 

improve the integrity of CACFP family daycare homes and provide information from 

a broadly representative national sample of sponsors and providers. Over a four -

year period, FNS is conducting comprehensive on-site assessments of a sample of 

participating family daycare home sponsors. These assessments are designed to 

analyze the effectiveness of FNS regulatory and policy initiatives on program 

performance. They will also offer insights on the control points in the claiming and 

reimbursement process that most frequently cause or contribute to improper 

payments. This information will also help to support the effort to develop 

measurement strategies to estimate CACFP erroneous payments pursuant to IPIA. 

Data collection for this activity will conclude at the end of FY 2007 and the final 

results will be presented in the USDA PAR for FY 2008. 

• Sponsor error — FNS has developed an annual sponsor tiering error measure and 

tested it. CACFP sponsors are responsible for determining whether family daycare 

homes receive meal reimbursement at the higher rate (Tier 1) or lower rate (Tier 2). 

In FY 2007, the second annual data collection was conducted to determine a 

nationally representative sponsor tiering determination error rate. The findings are 

reported above. 

• Claiming error — FNS has identified two potential methods of estimating the risk of 

claiming error: 

1. State data approach: Use data from State monitoring visits of FDCHs. 

2. 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 in FY 2007. The pilot sample size included approximately 220 FDCHs. 

Data collection has been completed and results will be reported in the FY 2008 PAR. 

FNS has contracted with Mathematica Policy Research, Inc. (MPR) to evaluate the 

feasibility of four different data collection methods for validating family daycare homes 

(FDCHs) meal reimbursement claims. FNS is currently reviewing the results of MPR's 

pretest of the four possible data collection methods. The next step is for MPR to conduct 

a pilot test of the data collection method(s) which are perceived to have the greatest 

likelihood of producing valid comparison between the true number of reimbursable 

meals and the number claimed by FDCHs for reimbursement. Results of MPR's 

evaluation will be available in FY 2008. 
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FY 2007 Performance and Accountability Report 

FSA Milk Income Loss Contract 

Program (MILC) 

The three most significant causes for payments being identified as improper were as 

follows: 

• Information on the contract does not support payment eligibility. 

• Payment is based on incorrect production. 

• Payee’s share is incorrect. 

Actions taken or that will be taken to reduce the weaknesses identified are as follows: 

a. Broad Scope Actions Taken: 

• FSA is making every effort to lower the improper payment rate and to reduce 

program weaknesses contributing to improper payments. Regardless of the 

reasons improper payments are made, FSA is taking the issue of improper 

payments very seriously. 

• The Agency has taken actions to correct its deficiencies in many areas and has 

incorporated the priority of reducing improper payments into its strategic planning 

document. 

• The FSA Administrator has personally participated in an online training module on 

performance and accountability. The presentation explains the importance of 

managing payments, the impact of the improper payment results from FY 2006, 

and how every employee within FSA is accountable for doing their share in 

reducing improper payment. 

b. Actions Already Taken that Impact All Causes of Improper Payments Identified: 

• Provide training on improper payments to field personnel and educate them on the 

importance of control procedures as well as the potential risks of noncompliance. 

Training will be delivered through various means including in person and via Ag 

Learn, a Department of Agriculture enterprise-side learning management system, 

and is being followed up with communications and job aid to help facilitate 

compliance controls. 

• Integrate the employee’s individual performance results related to reducing 

improper payments into his/her annual performance rating. 

• Beginning in December 2006, FSA required COF employees to re-check eligibility 

for every MILC applicant to verify and ensure that all MILC applicants met all 

eligibility requirements before the application is approved. After eligibility is verified 

for a MILC applicant, COF employees are required to complete a processing 

checklist before disbursing payment to the eligible applicant. The payment 

processing checklist requires the COF employee to certify that they reviewed 

production evidence against the data entered in the eMILCX automated software 

application and that a second party review was completed before each monthly 

payment is issued to the producers in a dairy operation. Both the eligibility 

checklist and the MILCX checklist address the primary reasons for improper 

payments for the MILC program; payment based on incorrect production and 

information on contract does not support payment eligibility. County Executive 

Directors and a State Committee Designee are required to randomly spot check 

checklists to ensure they are completed. 

c. Actions that Will be Taken that Impact All Causes of Improper Payments Identified: 

• Provide a Notice to State and COFs providing the detail findings discovered during 

the FY 2007 MILC Review including established policy and procedure references 

for each finding. 

• Based on sample results, amend the CCC-770 MILCX checklist, as appropriate, to 

ensure that COFs are reminded of the necessary policies and steps for program 

compliance. 

• Re-enforce current MILC policies regarding program policy and compliance 

through issuance of National notices to State and COF personnel. Contact State 

Office managers where the majority of improper payments were identified, 

according to the statistical sample, to determine possible training and/or job aids 

the State and county staff may need to assist in facilitating compliance controls. 

• FSA implemented a new compliance review process for Fiscal Year 2007. The 

new compliance review spot check process will allow FSA to conduct a more 

meaningful and comprehensive sport check/compliance review and utilize a better 

mechanism for reporting spot check results. The new reporting mechanism will 

allow the National Office to monitor improper payments discovered as a result of a 

spot check. 
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FY 2007 Performance and Accountability Report 

 • Clarification amendments have been made to 11-D, in addition to answering 

questions received from COF employees pertaining to completing spot checks and 

implementing new corrections functionality in the eMILCX automated software 

released May 16, 2007. 

COC Dairy Operation Reconstitution Reviews – A dairy operation that reorganizes or 

restructures the constitution or makeup of their operations into another organization 

framework is subject to a review by FSA to determine legitimacy. This ensures that 

dairy operations reorganize according to State requirements for a single dairy operation 

so that payments are not issued to multiple dairy operations erroneously. 

FSA Loan Deficiency Payments (LDP) The three most significant causes for payments being identified as improper were as 

follows: 

• The LDP quantity is not supported by a producer certification, measurement 

service, warehouse receipt, or other acceptable production evidence. 

Late payment interest was not paid. 

• The LDP application was not on file. 

Actions taken or that will be taken to reduce the weaknesses identified are as 

follows:

a. Broad Scope Actions Taken:

See the actions described in the Marketing Assistance Loan Program (MAL) shown 

above. The same actions apply to this program. 

b. Actions Already Taken that Impact All Causes of Improper Payments Identified:

The actions taken were completed late in FY 2006 or early FY 2007 so would have 

their impact on the FY 2007 payment activity. The FY 2007 payment activity will be 

sampled as part of the FY 2008 review cycle. 

• Issued various National Notices to State and COFs providing them with 

instructions related to training, proper processing of payments, and the new 

checklist for processing loans. 

• Provide training on improper payments to field personnel and educate 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 Ag Learn, a Department of Agriculture enterprise-wide learning 

management system, and is being followed up with communications and job 

aid to help facilitate compliance controls. 

• Integrate the employee’s individual performance results related to reducing 

improper payments into his/her annual performance rating. 

• Developed a new checklist, the CCC-770 LDP/eLDP, LDP/eLDP Checklist, for 

COF employees to use. By completing the CCC-770 LDP/eLDP, the COF 

employee is certifying that the applicable program provisions have, or have not 

been met. Handbook 8-LP was amended on December 13, 2006, to include 

policy that a CCC-770 MAL or CCC-770 LDP/eLDP must be completed before 

a loan or LDP is issued. 

c. Actions That Will be Taken that Impact All Causes of Improper Payments 

Identified:

• FSA is implementing a new compliance review process for the 2007 crop year. 

The new compliance spot check review process will allow FSA to (1) conduct a 

more meaningful and comprehensive spot check/compliance review and; (2) 

utilize a better mechanism for reporting spot check results. The new reporting 

mechanism will allow the National Office to monitor improper payments 

discovered as result of a spot check. 

• Provide a Notice to State and COFs providing the detail findings discovered 

during the FY 2007 LDP Statistical Sample including established policy and 

procedure references for each finding. 

• Based on sample results, amend the CCC-770 LDP/eLDP checklist, as 

appropriate, to ensure that COFs are reminded of the necessary policies and 

procedures for program compliance. 
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FY 2007 Performance and Accountability Report 

• Contact State Office managers where the majority of improper payments were 

identified, according to the statistical sample, to determine possible training 

and/or job aids the State and county staff may need to assist in facilitating 

compliance to controls. 

• Re-enforce current program policies regarding program compliance through the 

issuance of National notices to State and COF personnel. 

• Review existing policy and procedures to determine program compliance 

inefficiencies and eliminate inadequate program compliance controls. 

• Enhance current financial systems and security issues in order to use Treasury 

Offset Program System to verify Debt Collection Improvement Act compliance. 

FSA Direct and Counter-Cyclical 

Payments (DCP) 

The results of DCP’s FY 2007 statistical sample of improper payments were based 

on FY 2006 DCP payment data. DCP’s FY 2007 sample results indicate that the 

most significant error for FY 2006 DCP payments was that the payee’s interest in 

base acres on the farm did not support the claimed payment share. 

Actions taken or that will be taken to reduce the weakness identified are as follows: 

a. Broad Scope Actions Taken:

See the actions described in the Marketing Assistance Loan Program (MAL) 

shown above. The same actions apply to this program. 

b. Actions Already Taken that Impact Situations where the Payee’s Interest in Base 

Acres on the Farm Did Not Support the Claimed Payment Share:

The actions taken were completed late in FY 2006 or early FY 2007 so the impact 

would not be realized until review of the FY 2007 payment activity. The FY 2007 

payment activity will be sampled as part of the FY 2008 review cycle. 

• Integrate the employee’s individual performance results related to reducing 

improper payments into his/her annual performance rating. 

• Provide training on improper payments to field personnel and educate 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 Ag Learn, a Department of Agriculture enterprise-wide learning 

management system, and is being followed up with communications and job aid 

to help facilitate compliance controls. 

Developed a new checklist, the CCC-770 DCP, DCP Contract Checklist, for COF 

employees to use. By completing the CCC-770 DCP, the COF employee is certifying 

that the applicable program provisions have, or have not, been met. Handbook 1-DCP 

was amended on December 11, 2006, to include policy that a CCC-770 DCP must be 

completed before DCP payment is issued. 

c. Actions That Will be Taken that Impact Situations where the Payee’s Interest in 

Base Acres on the Farm Did Not Support the Claimed Payment Share:

• Provide a Notice to State and COFs providing the detail findings discovered 

during the FY 2007 DCP Statistical Sample including established policy and 

procedure references for each finding. 

• Based on sample results, amend the CCC-770 DCP checklist, as appropriate, to 

ensure that COFs are reminded of the necessary policies and procedures for 

program compliance. 

• Re-enforce current program policies regarding program compliance through the 

issuance of National notices to State and COF personnel. 

• Review existing policy and procedures to determine program compliance 

inefficiencies and eliminate inadequate program compliance controls. 

• If possible, develop automated tools to assist COF staff with the identification of 

problematic situation. 
OTHER ACCOMPANYING INFORMATION

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FY 2007 Performance and Accountability Report 

FSA Conservation Reserve Program 

(CRP) 

The three most significant causes for payments being identified as improper ere as 

follows: 

• Incorrect payment rates. 

• Performance not certified on an AD-862 (Practice Certification) 

• Compliance not certified on a FSA-578 (Report of Acreage) or CRP-817U 

(Certification of Compliance for CRP) 

Actions taken or that will be taken to reduce the weaknesses identified are as follows: 

a. Broad Scope Actions Taken:

See the actions described in the Marketing Assistance Loan Program (MAL) 

shown above. The same actions apply to this program. 

b. Actions Already Taken that Impact All Causes of Improper Payments Identified:

The actions taken were completed late in FY 2006 or early FY 2007 so the impact 

would not be realized until review of the FY 2007 payment activity. The FY 2007 

payment activity will be sampled as part of the FY 2008 review cycle. 

• Issued various National Notices to State and County Offices providing them with 

instructions related to training, proper processing of payments, and the new 

checklist for processing loans. 

• Provide training on improper payments to field personnel and educate 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 Ag Learn, a Department of Agriculture enterprise-wide learning 

management system, and is being followed up with communications and job aid 

to help facilitate compliance controls. 

• Integrate the employee’s individual performance results related to reducing 

improper payments into his/her annual performance rating. 

• Developed a new checklist, the CCC-770-CRP, which is the CRP Contract 

Approval and Payment Checklist, for COF employees to use. By completing the 

CCC-770-CRP, the COF employee is certifying that the applicable program 

provisions have, or have not been met. Handbook Agricultural Resource 

Conservation Program, 2-CRP (Revision 4), Amendment 10, paragraph 7 was 

revised on December 13, 2006, to include provisions for CCC-770 CRP. 

Additionally, subparagraphs 253, A-B, 372 B-E and 496 A have been amended to 

update provisions for CCC-770 CRP. Exhibit 26 has been amended to include a 

revised copy of CCC-770 CRP. The CCC-770-CRP is a tool for employees to use 

to confirm that all necessary requirements for payment readiness have been 

completed before payment is issued. The CCC-770 form was developed to 

reduce COR findings and improper payments. 

c. Actions That Will be Taken that Impact All Causes of Improper Payments 

Identified:

• FSA is implementing a new compliance review process for the 2007 crop year. 

The new compliance spot check review process will allow FSA to (1) conduct a 

more meaningful and comprehensive spot check/compliance review and; (2) 

utilize a better mechanism for reporting spot check results. The new reporting 

mechanism will allow the National Office to monitor improper payments 

discovered as result of a spot check. 

• Provide a Notice to State and COFs providing the detail findings discovered 

during the FY 2007 CRP Statistical Sample including established policy and 

procedure references for each finding. 
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FY 2007 Performance and Accountability Report 

• Based on sample results, amend the CCC-770-CRP checklist, as appropriate, to 

ensure that COFs are reminded of the necessary policies and procedures for 

program compliance. 

• Contact State Office managers where the majority of improper payments were 

identified, according to the statistical sample, to determine possible training and/or 

job aids the State and COF staff may need to assist in facilitating compliance to 

controls. 

• Re-enforce current program policies regarding program compliance through the 

issuance of National notices to State and COF personnel. 

• Review existing policy and procedures to determine program compliance 

inefficiencies and eliminate inadequate program compliance controls. 

• Continuation of training efforts related to improper payments for field personnel to 

educate them on the importance of control procedures as well as the potential 

risks of noncompliance. The conservation training will consist of two levels and 

will be conducted through out FY 2008; and beyond if needed. The following 

criteria is being used by CEPD to identify the level of training needed: 

Basic Course: This course is strongly recommended for State Office personnel with 

less than 5 years of State Office Conservation Reserve Program (CRP) experience 

who possess the basic knowledge, skills, and abilities to administer CRP. The 

participant will elevate their basic level of understanding of CRP policy and procedures, 

raising their performance level through practical exercises, case studies, and 

examples. 

In order to provide some very efficient CRP training, the Conservation and 

Environmental Programs Division will survey State Office program knowledge of CRP 

policies and provisions. 

Advanced Course: This course is designed for State Office personnel with 5 years or 

more of State Office CRP experience that wish to elevate their level of quality for 

managing and understanding of the CRP within their state. 

This course will provide advanced CRP policy and procedure training in addition to indepth area specific training for experienced State Office Conservation personnel. 

d. Actions That Will be Taken that Impact the Incorrect Payment Rates:

• Enhancing existing web-based software and retiring legacy systems in order to 

more closely tie all program payments to a single contract file. This migration will 

reduce the potential that contract payment documents and records will contain 

inconsistent or out-of-date information. (See Section 7 for delivery schedule). 

• Requiring COF with potential improper payments identified to review the payment 

and determine if the payment was proper had the procedures been followed. If 

not, the COF will be required to establish a receivable, and take action to recover 

the overpayment, and afford appropriate appeal rights. 

FSA Miscellaneous Disaster Programs 

(CDP) 

The results of Miscellaneous Disaster Programs FY 2007 Statistical Sample for 

improper payments were based on FY 2006 payment data for the following programs: 

• Crop Disaster Program 

• Livestock Assistance Program 

• Crop Disaster Program – VA 

• Tree Assistance Program – Orchard 

• Hurricane Indemnity Program 

• Florida Nursery 

• Feed Indemnity Program 

• Feed Program – American Indian 

• Florida Citrus 

• TAP – Timber 

• Florida FAV Disaster 
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FY 2007 Performance and Accountability Report 

 • TAP – Pecan Producers 

• Tree Indemnity Program. 

It is important to note that none of these are permanent programs. Therefore, each 

fiscal year’s payment data represents different disaster response programs based on 

authorities provided by legislation passed by the Congress. 

For Miscellaneous Disaster Program, the four most significant causes for payments 

being identified as improper in the statistical sample were as follows: 

• Payment amount is incorrect. 

• Information on disaster application does not support payment. 

• Required acreage report is not on file. 

• Late payment interest is not paid or the amount paid was incorrect. 

 Actions taken or that will be taken to reduce the weaknesses identified are as follows: 

a. Broad Scope Actions Taken: 

• FSA is making every effort to lower the improper payment rate and to reduce 

program weaknesses contributing to improper payments. Regardless of the 

reasons improper payments are made, FSA is taking the issue of improper 

payments very seriously. 

• The Agency has taken actions to correct its deficiencies in many areas and has 

incorporated the priority of reducing improper payments into its strategic planning 

documents. 

• The FSA Administrator has personally participated in an online training module on 

performance and accountability. The presentation explains the importance of 

managing payments, the impact of the improper payment results from FY 2006, 

and how every employee within FSA is accountable for doing their share in 

reducing improper payments. 

b. Actions Already Taken that Impact All Causes of Improper Payments Identified: 

The actions taken were completed late in FY 2006 or early FY 2007 so the impact would 

not be realized until review of the FY 2007 payment activity. The FY 2007 payment 

activity will be sampled as part of the FY 2008 review cycle. 

• Provide training on improper payments to field personnel and educate 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 Ag 

Learn, a Department of Agriculture enterprise-wide learning management system, 

and is being followed up with communications and job aid to help facilitate 

compliance controls. 

• Integrate the employee’s individual performance results related to reducing 

improper payments into his/her annual performance rating. 

c. Actions That Will be Taken that Impact All Causes of Improper Payments Identified:

• Provide a Notice to State and COFs providing the detail findings discovered during 

the FY 2007 Miscellaneous Disaster Programs Statistical Sample including 

established policy and procedure references for each finding. 

• Contact State Office managers where the majority of improper payments were 

identified, according to the statistical sample, to determine possible training and/or 

job aids the State and COF staff may need to assist in facilitating compliance to 

controls. 

• Re-enforce current disaster programs’ policies regarding program compliance 

through the issuances of National notices to State and COF personnel. 

• In September 2007, the National Office will hold the 2005-2007 Crop Disaster 

Program National Training for State and COF employees. Training will provide 

State and COF personnel with program policy and procedure, impacts of improper 

payments, and include software training. 
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FY 2007 Performance and Accountability Report 

 • Based on the FY 2007 Miscellaneous Disaster Programs Statistical Sample results, 

the National Office will develop a Checklist for the 2005-2007 Crop Disaster 

Program or any other new disaster program being implemented, if determined 

necessary. 

• FSA implemented a new compliance review process for the 2007 crop year. The 

new compliance spot check review process will allow FSA to (1) conduct a more 

meaningful and comprehensive spot check/compliance review and; (2) utilize a 

better mechanism for reporting spot check results. The new reporting mechanism 

will allow the National Office to monitor improper payments discovered as a result 

of a spot check. 

FSA Noninsured Assistance Program 

(NAP) 

The six most significant causes for payments being identified as improper were as 

follows: 

• Incorrect total production used to calculate payment 

• Unit’s yield is not properly calculated 

• Acceptable production evidence is not filed when required 

• Notice of loss not timely filed 

• Information on the payment application does not support the payment 

• Notice of loss does not support the payment. 

Actions taken or that will be taken to reduce the weaknesses identified are as 

follows: 

a. Broad Scope Actions Taken:

See the actions described in the Marketing Assistance Loan Program (MAL) 

shown above. The same actions apply to this program. 

b. Actions Already Taken that Impact All Causes of Improper Payments Identified:

The actions taken were completed late in FY 2006 or early FY 2007 so the impact 

would not be realized until review of the FY 2007 payment activity. The FY 2007 

payment activity will be sampled as part of the FY 2008 review cycle. 

• Provide training on improper payments to field personnel and educate 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 Ag Learn, a Department of Agriculture enterprise-wide learning 

management system, and is being followed up with communications and job 

aid to help facilitate compliance controls. 

• Integrate the employee’s individual performance results related to reducing 

improper payments into his/her annual performance rating. 

• Issued various National Notices to State and County Offices providing them 

with instructions related to training, proper processing of payments, and the 

new checklist for processing loans. 

• Developed a new checklist, the CCC-770-NAP, Noninsured Crop Disaster 

Assistance Program Payment Checklist, for County Office employees to use. 

By completing the CCC-770-NAP, the County Office employee is certifying that 

the applicable program provisions have, or have not been met. Handbook 1-

NAP was amended on December 11, 2006, to include policy that a CCC-770-

NAP Checklist must be completed before a payment is issued. 

c. Actions That Will be Taken that Impact All Causes of Improper Payments 

Identified:

• FSA is implementing a new compliance review process for the 2007 crop year. 

The new compliance spot check review process will allow FSA to (1) conduct a 

more meaningful and comprehensive spot check/compliance review and; (2) utilize 

a better mechanism for reporting spot check results. The new reporting 

mechanism will allow the National Office to monitor improper payments discovered 

as result of a spot check. 

• Provide a Notice to State and County Offices providing the detail findings 

discovered during the FY 2007 NAP Statistical Sample including established policy 

and procedure references for each finding. 
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FY 2007 Performance and Accountability Report 

• Based on sample results, amend the CCC-770-NAP checklist, as appropriate, 

to ensure that County Offices are reminded of the necessary policies and 

procedures for program compliance. 

• Contact State Office managers where the majority of improper payments were 

identified, according to the statistical sample, to determine possible training 

and/or job aids the State and county staff may need to assist in facilitating 

compliance to controls. 

• Re-enforce current program policies regarding program compliance through the 

issuance of National notices to State and county office personnel. 

• Review existing policy and procedures to determine program compliance 

inefficiencies and eliminate inadequate program compliance controls. 

 Wildland Fire Suppression 

Management 

Insufficient documentation was detected in the travel and purchase card management 

processes and not in the payroll or contractual payment processes. Insufficient 

documentation included: lost travel vouchers, or just incomplete documentation (for 

example, some receipts missing for Purchase Card Management System (PCMS) 

cards). Insufficient documentation did not result in an improper payment. The cause and 

subsequent correction action plan for insufficient and or improper documentation will be 

addressed during the OMB A-123 testing Corrective action plans. Several payment 

processes are used in the Wildland Fire Suppression Fund so control systems vary by 

process consequently corrective action will vary by process. For PCMS, FS has 

implemented stricter monitoring over purchase card transactions with monthly audits 

which should improve documentation problems. 

In some cases prompt payment interest was not computed correctly because the 

incorrect log dates were input thereby causing the Foundation Financial Information 

System to underpay interest to vendors. The Lean Sigma Transaction Processing 

Initiative should implement new control systems to ensure correct log dates which will 

improve timely payment and ensure proper computation of prompt payment interest.

RD Rental Assistance Program The overall number of errors is less than the prior report, although the combined dollar 

amount is higher. This year, 19% of the overpayments were attributed to tenant 

certifications that were either not signed by the tenant or not in the file. This caused the 

total amount of rental assistance paid to be considered as improper. This accounts for 

78% of the overpayments identified. In FY 2006, the overpayments attributed to tenant 

certifications not signed by the tenant or not in the file was 7%. 

Corrective actions include: 

• Errors found in this report must be followed up by Loan Servicers for corrective 

actions; 

• State offices, with an error rate of 2% or higher of the total errors, must develop a 

corrective action plan. The plan will include procedures to train field staff, 

borrowers and property managers in appropriate required documentation and 

follow-up with tenants and income-verifiers; 

• Issue an unnumbered letter to the State Offices regarding the findings from this 

report. 

• Management companies, with an error rate of 5% or higher of the total errors, must 

provide a corrective action plan indicating actions they will undertake to improve 

internal controls for reviewing tenant file documentation. 

• The national office will continue to pursue access to the U.S. Department of Health 

and Human Services new hires data to be shared with State offices. 

• Add to HB-2-3560, Multi-Family Housing (MFH) Asset Management Handbook, 

Chapter 6 – Project Occupancy, a check sheet for property management agents to 

review when verifying assets, income and adjustments to income; 

• Add to HB-2-3560, MFH Asset Management Handbook, Chapter 6 – Project 

Occupancy, a check list of required tenant file documentation; and 

• Develop a “Fact Sheet” for MFH tenants explaining their responsibilities and rights 

regarding income disclosure and verification. 
OTHER ACCOMPANYING INFORMATION

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FY 2007 Performance and Accountability Report 

RMA Federal Crop Insurance 

Corporation Program Fund 

RMA is in the third year of the three-year review cycle established to determine the 

improper payment rate for the Federal Crop Insurance Program. The agency identified a 

lower-than-expected rate in the first round of random sampling, 1.92 % absolute error, 

and a slightly higher aggregate 2.68% absolute error rate for the 2007 PAR report. 

 Despite these findings, the agency will not have a completed benchmark established 

until the review of 2006 crop year indemnities has been completed and reported in 2008. 

The strategy for bringing the error rate down includes identifying error trends and policy 

concerns, then correcting them. However, in the first 600 policies reviewed no definitive 

trends, or underlying policy or underwriting issues have become apparent. This is due 

in part to the diversity of crops being reviewed. This suggests it will be several years 

before RMA would amass sufficient numbers of samples on any particular crop to draw 

meaningful comparisons in the error identified. 

RMA negotiated and executed a new Standard Reinsurance Agreement starting in 

2005. That agreement emphasizes improved quality controls and enhanced penalties 

that together should encourage participating companies who sell and service Federal 

crop insurance policies to improve the improper payments rate. 

NRCS Conservation Security Program Causes of improper payments identified in NRCS’ risk assessments for Farm Bill 

programs can be categorized into four areas; statutory compliance, program 

compliance, eligibility and payment calculation. Findings from prior year audits as they 

applied to IPIA were incorporated into the review. Specific internal controls resulting 

from these audits would not have been in effect for its sample period but will be tested 

once implemented. 

Participant eligibility was a target area for this year’s testing. Specifically, Highly Erodible 

Land/Wetland Compliance (HEL/WC) and Adjusted Gross Income determinations. 

ProTracts has automated eligibility determinations for contracts and payments made 

through that tool by using the Farm Service Agency eligibility data base. NRCS used tax 

returns and certified accountant statements to verify Adjusted Gross Income. Field 

personnel perform HEL/WC compliance checks. 

After reviewing the samples we found a total of 10 improper payments. Documentation 

issues for program compliance continue to be a source of improper payments. Four of 

the ten improper payments were related to the inability to produce supporting 

documentation. Three were due to a lack of documentation to demonstrate control of the 

land and the fourth was a lack of receipts to support a payment for use of Biofuels. 

Starting with FY 2005, Conservation Security Program (CSP) payments were initiated 

through our contracting tool called ProTracts. Business rules and internal controls built 

into Protracts helped eliminate many of the types of improper payments we found in 

prior years. This year we tested the internal controls that relate to program 

documentation, eligibility and payment calculation. We found no instances of errors 

made by the software for program documentation and eligibility. We did find one 

payment calculation error due to the rounding routine under certain conditions. The 

software has been modified to prevent this error in the future. 

One of the samples was identified by the field as a cross over duplicate payment. The 

Farm Bill prohibits payments for the same practice from different programs on the same 

tract of land in the same fiscal year. An external audit issued by the General Accounting 

Office on CSP dated April 28, 2006 highlighted this issue. Program Management 

developed a plan to identify possible cross over payments and guidance to collect these 

duplicate payments. The payment in this sample we selected was made prior to the 

GAO audit and collection activity had been started. ProTracts now has a business rule 

edit in place which should prevent this error from happening in the future. 

The remaining four improper payments were the result of human errors in entering 

incorrect information into Protracts. These errors were unique and highlight the need for 

stronger quality assurance testing, training and/or internal controls. We are addressing 

with Program Leadership adding additional internal control edits in Protracts to prevent 

them where practical.s 

The results of this years sampling will be reported to leadership. Action items will be 

developed including a timeline of milestones and individual responsible for its 

completion. This information will be passed down to all State offices so that all may 

benefit from weaknesses found or where improvements can be made. Where specific 

action is needed to correct an error or where recovery is warranted, the State 

conservationist will be contacted. 
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FY 2007 Performance and Accountability Report 

IV. Based on the Rate(s) Obtained in Step III, Set Annual Improvement Targets through FY 2010. 

Improper Payment Reduction Outlook FY 2006 – FY 2010 

Below is a summary level table 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. 

Amounts represent when the sampling results are reported. USDA programs report results the year following 

sampling activity. For example, results reported during FY 2007 represent measures of FY 2006 outlays and 

program activity. 

Improper Payment Sampling Results ($ in millions) 

Results 

Reported in FY 2006 

Results 

Reported in FY 2007 

Program Outlays IP% IP$ Outlays IP% IP$ 

Marketing Assistance Loan Program, FSA/CCC [Note #12] 7,950 20.26% 1,611 6,306 7.52% 458 

Food Stamp Program, FNS 28,160 5.84% 1,645 29,942 5.99% 1,794 

National School Lunch Program, FNS [Note #1] 

Total Program N/A N/A N/A 8,602 16.30% 1,402 

Certification Error 8,602 9.42% 810 

Counting/Claiming Error 8,602 6.88% 592 

School Breakfast Program, FNS [Note #1] 

Total Program N/A N/A N/A 2,086 24.94% 520 

Certification Error 2,086 9.15% 191 

Counting/Claiming Error 2,086 15.79% 329 

Women, Infants and Children, FNS [Note #2] 

Total Program 3,525 N/A N/A 3,598 N/A N/A 

Certification Error Component 3,525 N/A N/A 3,598 N/A N/A 

Vendor Error Component 3,525 0.60% 21 3,598 0.69% 25 

Child and Adult Care Food Program, FNS [Note #2] 

Total Program 2,065 N/A N/A 2,187 N/A N/A 

FDC Homes – Tiering Decisions 864 1.80% 16 738 1.69% 12 

FDC Homes – Meal Claims 864 N/A N/A 738 N/A N/A 

Milk Income Loss Contract Program, FSA [Note #3] 9 N/A N/A 351 2.17% 8 

Loan Deficiency Payments, FSA 4,790 9.25% 443 4,071 0.45% 18 

Direct and Counter-Cyclical Payments, FSA [Note #12] 8,546 4.96% 424 9,550 0.37% 37 

Conservation Reserve Program, FSA [Note #12] 1,815 3.53% 64 1,851 0.45% 9 

Miscellaneous Disaster Programs, FSA 2,365 12.30% 291 368 6.76% 25 

Noninsured Assistance Program, FSA 109 22.94% 25 64 13.14% 8 

Wildland Fire Suppression Management, FS [Note #4] 

Total Program 725 N/A N/A 1,412 0.95% 13 

Component Sampled 285 2.49% 7 N/A N/A N/A 

Rental Assistance Program, RD [Note #5] 569 3.49% 22 855 3.07% 26 

Federal Crop Insurance Corporation Program Fund, RMA 3,206 1.92% 62 2,364 2.68% 63 

Conservation Security Program, NRCS [Note #9] 1,375 0.22% 3 227 0.47% 1 
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FY 2007 Performance and Accountability Report 

Detailed Breakout of Improper Payment Reported in FY 2007 

Total 

Payments 

$ in 

millions IP % 

OverPayments 

% 

UnderPayments 

% 

Other 

% 

Incorrect 

Disbursement 

% 

Incomplete 

Paperwork 

% 

Marketing Assistance Loan 

Program, FSA/CCC 6,306 7.52% 7.52% N/A N/A 0.39% 7.13% 

Food Stamp Program, FNS 

[Note #6] 29,942 5.99% 4.82% 1.17% N/A 5.99% N/A 

National School Lunch Program, 

FNS [Note #1and #6] 8,602 16.30% 12.36% 3.93% N/A 16.30% N/A 

School Breakfast Program, FNS 

[Note #1and #6] 2,086 24.94% 21.52% 3.42% N/A 24.94% N/A 

Women, Infants and Children, FNS 

[Note #6] 3,598 0.69% 0.24% 0.45% N/A 0.69% N/A 

Child and Adult Care Food 

Program, FNS [Note #6] 738 1.69% 1.67% 0.02% N/A 1.69% N/A 

Milk Income Loss Contract 

Program, FSA [Note #7] 351 2.17% 1.73% 0.44% N/A 2.13% 0.04% 

Loan Deficiency Payments, FSA 4,071 .45% .43% .02% N/A 0.45% N/A 

Direct and Counter-Cyclical 

Payments, FSA 9,550 0.37% 0.37% N/A N/A 0.37% N/A 

Conservation Reserve Program, 

FSA 1,851 0.45% 0.23% 0.22% N/A 0.23% 0.22% 

Miscellaneous Disaster Programs, 

FSA [Note #7] 368 6.76% 5.07% 1.69% N/A 6.02% 0.74% 

Noninsured Assistance Program, 

FSA 64 13.14% 10.97% 2. 17% N/A 12.41% 0.74% 

Wildland Fire Suppression 

Management, FS 1,412 0.95% 0.29% 0.09% 0.57% 0.38% 0.57% 

Rental Assistance Program, RD 855 3.07% 2.42% 0.65% N/A 1.92% 1.16% 

Federal Crop Insurance 

Corporation Program Fund, RMA 2,364 2.68% 2.64% 0.04% N/A 2.68% N/A 

Conservation Security Program, 

NRCS 

227 0.47% 0.47% 0.00% N/A 0.23% 0.24% 

Total 72,385 6.11% 4.99% 5.47% 0.64% 
OTHER ACCOMPANYING INFORMATION

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FY 2007 Performance and Accountability Report 

Improper Payment Reduction Outlook ($ in millions) 

FY 2008 Reporting FY 2009 Reporting FY 2010 Reporting 

Program Outlays IP% IP$ Outlays IP% IP$ Outlays IP% IP$ 

Marketing Assistance Loan 

Program, FSA/CCC 10,660 7.00% 746 8,749 5.00% 438 9,119 2.50% 228 

Food Stamp Program, FNS [Note 

#6] 30,376 5.80% 1,762 31,351 5.70% 1,787 31,961 5.60% 1,790 

National School Lunch Program, 

FNS [Note #1and #6] 8,761 TBD TBD 9,115 TBD TBD TBD TBD TBD 

School Breakfast Program, FNS 

[Note #1and #6] 2,226 TBD TBD 2,371 TBD TBD TBD TBD TBD 

Women, Infants and Children, FNS 

[Note #6] 4,158 0.64% 27 4,093 0.59% 24 TBD TBD TBD 

Child and Adult Care Food 

Program, FNS [Note #6] 702 1.64% 12 725 1.59% 12 TBD TBD TBD 

Milk Income Loss Contract 

Program, FSA [Note #7] 200 2.00% 4 N/A N/A N/A N/A N/A N/A 

Loan Deficiency Payments, FSA 189 0.50% 1 149 0.50% 1 33 0.50% 1 

Direct and Counter-Cyclical 

Payments, FSA [Note #10] 6,899 0.41% 28 6,293 0.41% 26 6592 0.41% 27 

Conservation Reserve Program, 

FSA [Note #11] 1,890 0.50% 10 1,926 0.50% 10 1,879 0.50% 9 

Miscellaneous Disaster Programs, 

FSA [Note #7] 1,496 5.00% 75 1,403 3.50% 49 N/A N/A N/A 

Noninsured Assistance Program, 

FSA 154 

10.00

% 15 325 5.00% 16 325 2.50% 8 

Wildland Fire Suppression 

Management, FS 1,410 .90% 13 1,406 0.85% 11 1,500 0.80% 9 

Rental Assistance Program, RD 888 3.00% 27 924 2.90% 27 961 2.80% 27 

Federal Crop Insurance Corporation 

Program Fund, RMA [Note #8] 3,421 3.80% 130 3,500 3.70% 130 3,500 3.60% 126 

Conservation Security Program, 

NRCS [Note #9] 272 0.40% 1 388 0.30% 1 496 0.20% 1 

Note #1: The NSLP and SBP are reporting error rates for the first time in the FY 2007 report based on the 2005-

2006 school year. The study methodology derived separate estimates of erroneous payments from each source of 

error for the NSLP and SBP. Interaction between sources of error can affect the actual erroneous payment that 

results from any single transaction in the two programs. The estimate of erroneous payments for each source is 

the error that would result if the other sources were free of error. Adding the certification error and noncertification error erroneous payments estimates together tends to inflate the overall estimate; therefore, this 

combined estimate should be considered an upper bound of an overall estimate of payment error for the NSLP 

and SBP. 

Note #2: WIC and CACFP tested components of their total program. WIC tested a component of the payment 

process on a sample of all outlays. CACFP tested a component of the payment process of a component of the 

total outlays. FNS intends to report a WIC certification error in FY 2009. 
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FY 2007 Performance and Accountability Report 

Note #3: MILC was not tested in FY 2006 due to very low outlays during FY 2005. Testing resumed in FY 2007 

reviewing outlays during FY 2006. MILC expires, September 30, 2007. Thus, no outlays are expected beyond FY 

2007. 

Note #4: The entire Wildland Fire Suppression Management program was sampled for the FY 2007 report, 

including payroll, travel and purchase card transactions. For FY 2005 and FY 2006, only the portion of the 

program related contract payments were sampled.

Note #5: For FY 2007 reporting, the Rental Assistance statistical sample is based on the entire FY 2006. The FY 

2006 results were based on a partial sample period September 1, 2005 to May 31, 2006. The results reported in 

both FY 2006 and FY 2007 contain eight months of overlapping FY 2006 outlays. 

Note #6: The NSLP and SBP are reporting error rates for the first time in FY 2007. Since the study results were 

recently announced, FNS is just beginning to address NSLP and SBP reduction targets for FY 2008 and FY 

2009. FNS will provide OMB the NSLP and SBP reduction targets with the next few months. The only FNS 

program with a reduction target available for FY 2010 is the Food Stamp program. Other FNS programs will 

develop FY 2010 estimated outlay projections and reduction targets as part of the FY 2010 budget process. 

Corrective action plans were developed for these programs addressing the causes and identifying initiatives to 

reduce improper payments. 

Note #7: The program currently is not authorized in FY 2009 and does not have any estimated outlays. 

Note #8: RMA has completed the second year of a three year testing cycle. In FY 2008, RMA will report the 

third year of a thee year cycle and provide more informed out-year projections for FY 2009, FY 2010 and FY 

2011. 

Note #9: The Conservation Security program is one of six Farm Security and Rural Investment (Farm Bill) 

programs. For FY 2006, all Farm Bill programs were reviewed. For FY 2007, only the Conservation Security 

program was sampled. For the FY 2008 review, USDA added all Farm Bill programs due to concerns over 

eligibility data. Those programs will remain as part of the review process until the concerns are mitigated or the 

improper payments statistical results are proven to be below the high risk standards. 

Note #10: Current program authority for the Direct & Counter-Cyclical program ends September 30, 2007. 

Future reduction target rates assume current program policies and procedures will continue in effect. It is 

anticipated that program policies and procedures will change due to new Farm Bill proposals under consideration. 

The impact of those changes is unknown and affect on improper payment rates cannot be estimated a this time. 

Until all proposals are finalized and the Farm Bill is signed into law, future performance targets are being based 

on assumption that current program polices and procedures are continuing. 

Note #11: Current program authority for the Conservation Reserve program ends December 31, 2007. Future 

reduction target rates assume current program policies and procedures will continue in effect. It is anticipated 

that program policies and procedures will change due to new Farm Bill proposals under consideration. The 

impact of those changes is unknown and affect on improper payment rates cannot be estimated at this time. Until 

all proposals are finalized and the Farm Bill is signed into law, future performance targets are being based on the 

assumption that current program polices and procedures are continuing. 

Note #12: The FY 2007 estimated improper payment dollar amounts for the Marketing Assistance Loan 

program, Direct & Counter-Cyclical Payments and the Conservation Reserve program reflect a slight variance 

from the relationship between the improper payment percentage and the outlays amount. These variances result 
OTHER ACCOMPANYING INFORMATION

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FY 2007 Performance and Accountability Report 

from the complex, multi-stage statistical sampling methodology used to calculate the independent projections of 

the dollars/percentages in error. The variances are not an attribute measurement, but rather a complex ratio 

estimate weighted with respect to the payments within their applicable county stratification. 

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. 

USDA continued its recovery audit program with seven agencies in FY 2007. All agencies used independent 

recovery audit firms working on contingency. 

Steps taken to reduce future errors include strengthening internal controls by providing information related to all 

recovered monies and the underlying transactions to management. The most successful method of identifying 

funds to be recovered has been the review of vendor statements. Most amounts identified during FY 2007 were 

due to the vendor statements reviews started in FY 2006. 

FY 2007 Recovery Auditing Results ($ in Million) 

Agency 

Component 

Amount 

Subject to 

Review for 

FY 2007 

Reporting 

Actual 

Amount 

Reviewed 

and 

Reported 

FY 2007 

Amounts 

Identified 

for 

Recovery 

FY 2007 

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 1,207.115 1,207.115 0.131 0.071 .338 0.353 .469 0.424 

Natural 

Resources 

Conservation 

Service 830.732 830.732 0.026 0.026 0.000 0.000 0.026 0.026 

Agricultural 

Research 

Service 457.351 457.351 0.000 0.000 0.000 0.000 0.000 0.000 

Animal Plant 

Health 

Inspection 

Service 439.600 439.600 0.000 0.000 0.374 0.374 0.374 0.374 

Farm Service 

Agency 114.087 114.087 0.047 0.047 0.000 0.000 0.047 0.047 

Food Safety 

and Inspection 

Service 34.985 34.985 0.000 0.000 0.000 0.000 0.000 0.000 

Rural 

Development 66.899 66.899 0.000 0.000 0.000 0.000 0.000 0.000 

Agricultural 

Marketing 

Service 32.176 32.176 0.002 0.002 0.000 0.000 0.002 0.002 

All Others 2,083.754 0.000 0.000 0.000 N/A N/A N/A N/A 

USDA Total 5,266.699 3,182.945 0.206 0.146 .712 0.727 .918 0.873 
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FY 2007 Performance and Accountability Report 

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. 

FSA

The following are steps that have or will continue to be taken to ensure agency managers are held accountable for 

reducing and recovering improper payments: 

The National Office will continue supporting the use of the program checklists for eligibility and program policy 

by local offices processing program applications. By completing the program Checklists, the County Office 

(COF) employee is certifying that the applicable program provisions have, or have not been met. The County 

Executive Director (CED) and State Committee (STC), or their designated representative, are required to spot 

check a certain number of program checklists. The CED, or their designated representative, must report to 

County Office Committee (COC) and the STC representative any checklists in which CED does not concur 

with the preparer’s determination. The STC, or their designee, shall submit the results of the spot checks to the 

(State Executive Director (SED). SEDs are required to provide the National Office with a report of FSA 

programs spot checked. 

 FSA has a performance management program in place to improve individual and organizational effectiveness 

in accomplishing the Agency’s mission and goals. This program provides for improper payments to be 

included in the SED Performance Plan, element 5 titled “Program Management.” 

 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 CED, are responsible for making payments to producers and following all 

administrative steps in doing so. Employees will be evaluated on program delivery and their compliance with 

regulations, policies, and procedures through their performance plans. 

 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. 

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 the Food Stamp Program, Special Supplemental 

Nutrition Program for Women Infants and Children, and Child and Adult Care Food Program is to reduce the 

error rates. The agency goals and priorities are incorporated into each manager’s performance plan. 
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FY 2007 Performance and Accountability Report 

FS 

The entire Albuquerque Service Center management team is held accountable by performance metrics that 

include compliance with the Improper Payments Information Act. 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 an error rate of two percent or higher must develop a corrective action plan. The plan will 

include 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 contained a position-corresponding strategic objective element since FY 

2005. 

NRCS 

NRCS has incorporated all of PMA’s goals and objectives, including IPIA, in the performance standards for all 

senior executive service positions. These also are planned to be included in the regional assistant chiefs and state 

conservationist performance plans. 

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 

agency requested in its FY 2007 budget submission to Congress to obtain the necessary information 

systems and infrastructure. 

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. USDA 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. 

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. 

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 statue commonly is referred to the “Finality Rule.” 
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FY 2007 Performance and Accountability Report 

FNS 

The 2002 Farm Bill restricts the liability levels States can be sanctioned due to high error rates. It also restricts the 

amount of bonus funding available to States that do a good job reducing and maintaining a low error rate. In 

many instances the goal of providing easy access to benefits must be balanced with the goal of reducing improper 

and erroneous payments. While the risks involved vary by program, some general characterizations can be made: 

 Program administration is decentralized and can involve a myriad of governmental and non-governmental 

organizations; 

 States and localities tend to focus on managing local funds, rather than Federal funds; and 

 Proper implementation of nutrition assistance programs requires a high degree of accuracy. 

RD 

The RD program does not have the statutory requirements similar to the Department of Housing and Urban 

Development to gain access to data from the Department of Health and Human Service’s New Hire Database, 

Internal Revenue Service, Social Security Administration, and the Department of Labor to be shared with field 

offices and management agents. 

IX Additional comments, if any, on overall agency efforts, specific programs, best practices, or 

common challenges as a result of IPIA implementation. 

Under the Recovery Auditing Act (P.L. 107-107), USDA agencies listed in Section V. of this report engaged 

recovery auditing firms to perform recovery auditing reviews of contracts to identify improper payments. One 

recovery auditing firm, as part of its 2006 review process, sent a form letter to vendors requesting information in 

an effort to help identify and recover improper payments. Without a prior Federal Register notice, solicitation of 

comments and assessment of the information collection burden, such a letter to vendors raised concerns whether 

or not the process is subject to the provisions of the Paperwork Reduction Act. For future years, USDA will 

request recovery auditing firms to not sent form letters to vendors but solely rely on the review of documentation 

provided by USDA to perform the improper payments reviews. 

USDA has no additional comments. 
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FY 2007 Performance and Accountability Report 

Appendix C—Table of Exhibits 

Exhibit 1: Headquarters Organization ............................................................................................................ 3

Exhibit 2: FY 2006 and 2005 USDA Program Obligations Dedicated to Strategic Goals ............................ 5

Exhibit 3: FY 2006 and 2005 USDA Staff Years Dedicated to Strategic Goals ............................................ 6

Exhibit 4: USDA Scorecard for FY 2007........................................................................................................ 7

Exhibit 5: Summary of Material Weaknesses ............................................................................................... 37

Exhibit 6: Summary of Management Assurances ......................................................................................... 37

Exhibit 7: Initiatives To Be Completed ........................................................................................................ 41

Exhibit 8: Decrease in Total Open Audit Inventory..................................................................................... 42

Exhibit 9: Audit Follow-Up Definitions....................................................................................................... 43

Exhibit 10: Inventory of Audits with Disallowed Costs ................................................................................. 44

Exhibit 11: Distribution of Adjustments to Disallowed Costs ....................................................................... 44

Exhibit 12: Inventory of Audits with Funds To Be Put to Better Use ........................................................... 44

Exhibit 13: Decrease in Audits Open One or More Years Past Management Decision Date ....................... 45

Exhibit 14: Distribution of Audits Open One or More Years Past the Management Decision Date, 

Disallowed Costs and FTBU ....................................................................................................... 45

Exhibit 15: Audits Open One Year or More Past the Management Decision Date and Behind 

Schedule........................................................................................................................................ 45

Exhibit 16: Key Performance Measures .......................................................................................................... 49

Exhibit 17: Increase U.S. Export Opportunities ............................................................................................. 54

Exhibit 18: Trends in Expanding and Retaining Market Access.................................................................... 54

Exhibit 19: Support Foreign Food Assistance................................................................................................. 59

Exhibit 20: Support Foreign Food Assistance................................................................................................. 59

Exhibit 21: Increase U.S. Export Opportunities ............................................................................................. 62

Exhibit 22: Trends in Expanding and Retaining Market Access.................................................................... 62

Exhibit 23: Increase the Use of Biobased Products......................................................................................... 65

Exhibit 24: Agricultural Statistics Reports Released On-Time ...................................................................... 67

Exhibit 25: Trends in Agricultural Statistics Reports Released On-Time...................................................... 67

Exhibit 26: Percent of Market-Identified Quality Attributes for which USDA Has Provided 

Standardization............................................................................................................................. 67

Exhibit 27: Trends in Market-Identified Quality Attributes for which AMS/GIPSA Has Provided 

Standardization............................................................................................................................. 68

Exhibit 28: Providing Tools to Help Farmers and Ranchers Stay Economically Viable................................ 73

Exhibit 29: Trends in Providing Tools To Keep Farmers and Ranchers Economically Viable...................... 73

Exhibit 30: Strengthen Rural Businesses......................................................................................................... 77

Exhibit 31: Trends in Creating or Saving Jobs................................................................................................ 77

Exhibit 32: Improving Rural Quality of Life Through Homeownership Opportunities................................ 81

Exhibit 33: Trends in Rural Home Ownership .............................................................................................. 82

Exhibit 34: Improving Rural Quality of Life Through Water and Waste Disposal Facilities........................ 82

Exhibit 35: Trends in Water and Waste Disposal Service.............................................................................. 82

Exhibit 36: Improving Rural Quality of Life Through Community Facilities ............................................... 82

Exhibit 37: Trends in Community Facilities................................................................................................... 82
OTHER ACCOMPANYING INFORMATION

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FY 2007 Performance and Accountability Report 

Exhibit 38: Improving Rural Quality of Life Through Electric Facilities....................................................... 83

Exhibit 39: Trends in Electric Facilities.......................................................................................................... 83

Exhibit 40: Improving Rural Quality of Life Through Telecommunications Facilities.................................. 83

Exhibit 41: Trends in Telecommunications Facilities..................................................................................... 83

Exhibit 42: Pathogen Reduction (Food Inspection)........................................................................................ 87

Exhibit 43: Trends in Pathogen Reduction (Food Inspection)....................................................................... 87

Exhibit 44: Ensure the Capabilities of Plant and Diagnostic Laboratories are Improved............................... 89

Exhibit 45: Trends Improving the Capabilities of Diagnostic Laboratories ................................................... 89

Exhibit 46: Strengthen the Effectiveness of Pest and Disease Surveillance and Detection Systems............... 92

Exhibit 47: Trends in Strengthening the Effectiveness of Pest and Disease Surveillance and Detection 

Systems ......................................................................................................................................... 92

Exhibit 48: Improve Access to Nutritious Food.............................................................................................. 98

Exhibit 49: Trends in Improving Access to Nutritious Food........................................................................... 99

Exhibit 50: Promoting Healthier Eating Habits and Lifestyles.................................................................... 101

Exhibit 51: Trends to Promote Healthier Eating Habits and Lifestyles....................................................... 101

Exhibit 52: Increase Efficiency in Food Management .................................................................................. 103

Exhibit 53: Trends in Increased Efficiency in Food Management................................................................ 103

Exhibit 54: Healthy Watersheds, High Quality Soils and Sustainable Ecosystems...................................... 108

Exhibit 55: Trends in Application of Comprehensive Nutrient Management Plans and CRP Riparian 

and Grass Buffers........................................................................................................................ 108

Exhibit 56: Enhanced Soil Quality................................................................................................................ 111

Exhibit 57: Trends in Soil Quality Protection............................................................................................... 111

Exhibit 58: Hazardous Fuel Reduction ......................................................................................................... 117

Exhibit 59: Trends in Treatment of Hazardous Fuel.................................................................................... 117

Exhibit 60: Sustainable Forests and Grasslands ............................................................................................ 118

Exhibit 61: Trends in Protection of Non-federal Forests and Grasslands .................................................... 118

Exhibit 62: Improved Wildlife Habitat ......................................................................................................... 121

Exhibit 63: Trends in Wildlife Habitat Enhancement.................................................................................. 121
OTHER ACCOMPANYING INFORMATION

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FY 2007 Performance and Accountability Report 

Appendix D—Acronyms 

ACSI – American Customer Satisfaction Index 

AETI – Agribusiness Education, Training and Incubator Project 

AFB – American Foul Brood 

AGOA – African Growth and Opportunity Act 

AHMS – Animal Health Monitoring and Surveillance 

AI – Avian Influenza 

AKI – Agricultural Knowledge Initiative 

ALB – Asian Longhorned Bettle 

AMP – Asset Management Plan 

ANNH – Alaska Native-Serving and Native Hawaiian-Serving 

Institutions Education Grants Program 

ART – Account Relationship Tool 

ARS – Agricultural Research Service 

ASB – Agricultural Statistics Board 

ATS – Automated Targeting System 

B&I – Business and Industry 

BBP – Building Block Plans 

BSE – Bovine Spongiform Encephalopathy 

CCD – Collapsing Colony Disorder 

CDC – U.S. Centers for Disease Control and Prevention 

CDL – Cropland Data Layers 

CEM – Contagious Equine Metritis 

CHRP – Citrus Health Response Plan 

CIA – Conjugated Inoleic Acid 

CIMS – Comprehensive Information Management System 

CNMP – Comprehensive Nutrient Management Plans 

CPI – Consumer Price Index 

CRP – Conservation Reserve Program 

CSFP – Commodity Supplemental Food Program 

CSREES – Cooperative State Research, Education and Extension 

Service 

CTA – Conservation Technical Assistance Program 

CWPP – Community Wildlife Protection Plans 

CYFAR – Children, Youth, and Families at Risk Program 

ERS – Economic Research Service 

ERS – Enterprise Reporting System 

EU – European Union 

FACTS – Forest Service Activity Tracking System 

FAD – Foreign Animal Disease 

FB4P – Federal Biobased Products Preferred Procurement 

Program 

FDPIR – Food Distribution Program on Indian Reservation 

FFIS – Foundation Financial Information System 

FFMIA – Federal Financial Management Improvement Act 

FISMA – Federal Information Security Management Act 

FLP – Farm Loan Programs 

FMMI – Financial Management Modernization Initiative 

FRPC – Federal Real Property Council 

FS – Forest Service 

FS R&D – Forest Service Research and Development 

FSA – Farm Service Agency 

FSA – Food Safety Assessment 

FSP – Food Stamp Program 

FSRE – Food Safety Regulatory Essentials 

FSRIA – Farm Security and Rural Investment Act of 2002 

FTA – Free Trade Agreement 

FTE – Full-Time Employee 

FY – Fiscal Year 

GAO – Government Accountability Office 

GE – Genetically Engineered 

GIS – Geographic Information System 

GPS – Global Positioning System 

GWSS – Glassy-winged Sharpshooter 

HACCP – Hazard Analysis and Critical Control Point 

HFI – Healthy Forest Initiative 

HFRA – Healthy Forest Restoration Act 
OTHER ACCOMPANYING INFORMATION

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FY 2007 Performance and Accountability Report 

DA – The Department of Agriculture of the Philippines 

DDG – Distiller Grain 

DHS – The United States Department of Homeland Security 

DOI – United States Department of the Interior 

DR – Dominican Republic/* 

DR-CAFTA – Dominican Republic-Central American Free Trade 

Agreement 

EA – Enterprise Architecture 

EAB – Emerald Ash Borer 

ECMM – Enterprise Correspondence Management Module 

EDI – Electronic Data Interchange 

EFCRP – Emergency Forestry Conservation Reserve Program 

EFNEP – Expanded Food and Nutrition Education Program 

EFT – Electronic Funds Transfer 

END – Exotic Newcastle Disease 

EPP – Emerging Plant Pest 

EPPO – European & Mediterranean Plant Protection Organization 

EQIP – Environmental Quality Incentives Program 

HSDP-9 – Homeland Security Presidential Directive 9 

IAER – Iraq Agricultural Extension Revitalization Project 

IGP – IT Governance Process 

IPIA – Improper Payments Information Act 

IPPC – International Plant Protection Center 

IS – Information System 

IT – Information Technology 

Lm – Listeria Monocytogenes 

LSTP – Lean Six Sigma Transaction Process 

MID-SIPP – Monthly Income Dynamics, Survey of Income and 

Program Participation 

MIDAS – Modernize and Innovate the Delivery of Agricultural 

Systems 

MITS – Management Initiatives Tracking System 

MOA – Memorandum of Agreement 

NAFTA – North American Free Trade Agreement 

NAHSS – National Animal Health Surveillance System 

NAIS – National Animal Identification System 

NAP – Noninsured Crop Disaster Assistance Program 

NCP – National Conservation Planning Database 

NDB – National Data Bank 

NITC – National Information Technology Center 

NPP – National Posted Price 

NRI – National Research Institute 

NSLP – National School Lunch Program 

NVAP – National Veterinary Accreditation Program 

NVSL – National Veterinary Services Laboratories 

OCFO – Office of the Chief Financial Officer 

OEPNU – Office of Energy Policy and New Uses 

OIE – World Organization of Animal Health 

OIG – Office of the Inspector General 

OMB – United States Office of Management and Budget 

OPM – Office of Personnel Management 

PART – Program Assessment Rating Tool 

PBIS – Performance-Based Inspection System 

PC – Plum Curculio 

PEIS – Program Evaluation and Improvement Staff 

PHDCIS – Public Health Data Communication Infrastructure 

Systems 

PHICP – Public Health Information Consolidation Projects 

PMA – President’s Management Agenda 

PRA – Pest Risk Assessment 

ProTacts – Program Contracts System 

PRS – Performance Results System 

PRT – Provincial Reconstruction Team 

QC – Quality Control 

R&D – Research and Development 

RND – Results Not Demonstrated 

RTE – Ready to Eat 

SAM – State Agency Model 

SBP – School Breakfast Program 
OTHER ACCOMPANYING INFORMATION

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FY 2007 Performance and Accountability Report 

SCN – Soybean Cyst Nematode 

SEBAS – Socio-Economic Benefit Assessment System 

SOD – Sudden Oak Death 

SPOTS – Strategic Placement of Treatments 

SPS – Sanitary and Phytosanitary 

SSA – Sub-Saharan African 

TANF – Temporary Assistance to Needy Families 

TFP – Thrifty Food Plan 

TPA – Trade Policy Authority 

TRQ – Tariff Rate Quota 

TSC – Technical Service Center 

USDA – United States Department of Agriculture 

USTR – United States Trade Representative 

VENA – Value-Enhanced Nutrition Assessment 

WFP – World Food Program 

WIC – Special Supplemental Nutrition Program for Women, 

Infants and Children 

WRP – Wetland Reserve Program 

WTO – World Trade Organization 
OTHER ACCOMPANYING INFORMATION

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FY 2007 Performance and Accountability Report