Additional copies of this Performance and Accountability Report (PAR) 

 may be downloaded at http://www.usda.gov/ocfo/usdarpt/usdarpt.htm. 

To request paper copies of this report or other reports 

referenced herein, e-mail your specific request to 

pm@usda.gov. 

If you have comments or questions, email them to pm@usda.gov 

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

its programs and activities on the basis of race, color, national origin, gender, 

religion, age, disability, political beliefs, sexual orientation and marital or 

family status. (Not all prohibited bases apply to all programs.) Persons with 

disabilities who require alternative means for communication of program 

information (Braille, large print, audiotape, etc.) should contact USDA’s 

TARGET Center at (202) 720-2600 (voice and TDD). USDA is an equal 

employment opportunity employer. 
USDA

F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT i 

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 ............................................................................................................................................... 6

Performance Goals and Results.............................................................................................................. 7

Management Challenges ...................................................................................................................... 10

Future Demands, Risks, Uncertainties, Events, Conditions and Trends .............................................. 14

USDA’s Results Agenda—Implementing Federal Management Initiatives ........................................ 15

Financial Statement Highlights ............................................................................................................ 25

Management Accountability and Control ............................................................................................ 29

II. Annual Performance Report................................................................................... 33

Strategic Goal 1: Enhance Economic Opportunities for Agricultural Producers ................................. 34

Strategic Goal 2: Support Increased Economic Opportunities and Improved Quality of Life 

In Rural America.................................................................................................................................. 59

Strategic Goal 3: Enhance Protection and Safety of the Nation’s Agriculture and Food Supply......... 75

Strategic Goal 4: Improve the Nation’s Nutrition and Health.............................................................. 95

Strategic Goal 5: Protect and Enhance the Nation’s Natural Resource Base and Environment......... 110

Fiscal Year 2005 Program Obligations Incurred................................................................................ 123

Fiscal Year 2005 Staff Years ............................................................................................................. 131

Data Assessment of Performance Measures....................................................................................... 133

Program Assessment Rating Tool (PART) Evaluations..................................................................... 159

Program Evaluations .......................................................................................................................... 173

III. Systems, Controls and Legal Compliance ........................................................... 185

Inspector General Act Amendments of 1988 Management’s Report on Audit Follow-Up ............... 185

Federal Managers’ Financial Integrity Act Report on Management Controls .................................. 192

Federal Financial Management Improvement Act Report on Financial Management Systems......... 200

IV. Financial Statements, Notes, Supplemental and Other Accompanying 

Information............................................................................................................. 209

Message From The Chief Financial Officer....................................................................................... 209

Consolidated Financial Statements .................................................................................................... 211 

Required Supplementary Stewardship Information ........................................................................... 282 

Required Supplementary Information................................................................................................ 297

V. Report of the Office of Inspector General ........................................................... 311

VI. Appendices.............................................................................................................. 337

Appendix A—Management Challenges............................................................................................. 337

Appendix B—Improper Payment and Recovery Auditing Details .................................................... 356

Appendix C—Table of Exhibits......................................................................................................... 374

Appendix D—Acronyms.................................................................................................................... 377 
USDA

ii F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

MESSAGE FROM THE SECRETARY

The United States Department of Agriculture (USDA) appreciates this 

opportunity to share with Congress, the Executive Branch, and all Americans 

information on the important efforts undertaken and progress made on your 

behalf during the past year. From expanding the economic security and 

opportunities available to farmers and ranchers, to safeguarding the Nation’s 

food supply, to enhancing the quality of life in rural America, to promoting 

nutrition and health, to protecting our natural resources, USDA has a proud 

record of accomplishment in 2005 advancing timeless objectives for our 

Nation. We are pleased to share the highlights of our efforts in this FY 2005 

Performance and Accountability Report. 

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

virtually every American every day. Evolving over 140 years, USDA is one 

of the most complex departments in the Federal Government, with more than 300 programs advancing 

progress in a diverse array of significant public responsibilities. Annually, we spend more than $75 billion of 

our fellow Americans’ money. In 2005, these resources helped: 

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; 

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

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 wildland fire season in the West; 

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 to 

increase our efforts to 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. 
USDA

F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT iii 

The dedicated public servants of USDA have good reason to be proud of the work they did in 2005. Their 

efforts have made a tangible, positive difference in the lives of all Americans—from the safety of the food on 

your plate, to the abundance and affordability of the food in your grocery store, to the economic viability of 

America’s farms and ranches, to the prosperity and opportunity available in rural communities, to the 

wholesome meals provided to citizens in need, and to agriculture’s contributions to global food security and 

international commerce. To ensure we have a strong foundation for the performance and accountability 

process, USDA managers have reviewed the data used in this report. Except where we point out and discuss 

specific limitations, I hereby provide reasonable assurance that the data we provide are valid, reliable, and an 

accurate measure of where we have made real progress and where we still have room for improvement. This 

effort complies with the Federal Managers’ Financial Integrity Act (FMFIA), both in terms of the strength of 

our financial management systems and of the overall efficient, effective operations of our programs. 

This report also satisfies FMFIA reporting requirements. FMFIA ensures that Federal programs are operated 

efficiently, effectively, and in compliance with relevant laws. Therefore, except for those areas in need of 

improvement identified in this document, USDA is providing qualified assurance that our systems of internal 

control comply with FMFIA’s objectives. FMFIA also requires financial systems to conform to certain 

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

The Department’s financial management systems comply substantially with the objectives of FMFIA, with the 

exception of the material deficiencies identified in this report. 

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

that title today. I am proud of our employees and the positive impact their diverse efforts have had on 

American life over the course of 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. 

Mike Johanns 

Secretary of Agriculture 

November 15, 2005
USDA

iv F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

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 2005 Performance and Accountability Report is the year-end progress report of the U.S. 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. 

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 who have an interest in the workings of 

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


USDA

F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 1 

I. Management’s Discussion and Analysis 

AN OVERVIEW OF THE UNITED STATES DEPARTMENT OF 

AGRICULTURE

Exhibit 1: Headquarters Organization 

• Forest Service

• Natural 

Resources 

Conservation 

Service

Under Secretary 

for Natural 

Resources and 

Environment

SECRETARY

Deputy Secretary

SECRETARY

Deputy Secretary

Chief Information 

Officer

Chief Information 

Officer Chief Financial 

Officer

Chief Financial 

Officer Inspector General Inspector General Executive 

Operations

Executive 

Operations Director of 

Communications

Director of 

Communications General Counsel General Counsel

• Agricultural 

Research Service

• Cooperative State 

Research, 

Education, and 

Extension Service

• Economic 

Research Service

• National 

Agricultural 

Statistics Service

Under Secretary 

for Research, 

Education and 

Economics

• Food and 

Nutrition Service

• Center for 

Nutrition Policy 

and Promotion

Under Secretary 

for Food, 

Nutrition, and 

Consumer 

Services

• Agricultural 

Marketing 

Service

• Animal and Plant 

Health Inspection 

Service

• Grain Inspection, 

Packers and 

Stockyards 

Administration

Under Secretary 

for Marketing and 

Regulatory 

Programs

• Farm Service 

Agency

• Foreign 

Agricultural 

Service

• Risk 

Management 

Agency

Under Secretary 

for Farm and 

Foreign 

Agricultural 

Services

• Rural Utilities 

Service

• Rural Housing 

Service

• Rural BusinessCooperative 

Service

Under Secretary 

for Rural 

Development

• Food Safety and 

Inspection 

Service

Under Secretary 

for Food Safety

Assistant Secretary 

for Congressional 

Relations

Assistant Secretary 

for Congressional 

Relations

Assistant Secretary 

for Administration

Assistant Secretary 

for Administration Assistant Secretary 

for Civil Rights

Assistant Secretary 

for Civil Rights

Mission Statement: 

The United States Department of Agriculture provides leadership on food, 

agriculture, natural resources, quality of life in rural America and related issues 

based on sound public policy, the best-available science and efficient 

management. 

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. Today, USDA improves the Nation’s economy and quality of life 

by: 

Enhancing economic opportunities for U.S. farmers and ranchers; 
MANAGEMENT’S DISCUSSION AND ANALYSIS

USDA

2 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

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 nutrition. 

Addressing these concerns presents its share of challenges. America’s food and fiber producers operate in a 

global, technologically advanced, rapidly diversifying and highly competitive business environment driven by 

sophisticated consumers. 

This report provides information on USDA’s core performance measures as described in its revised FY 2005

Annual Performance Plan/Performance Budget. There are five strategic goals that guide the Department. 

They are: 

To enhance economic opportunities for agricultural producers; 

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. 

The primary legislative authority guiding USDA’s efforts is the Farm Security and Rural Investment Act of 

2002 (FSRIA). This law aims to advance: a reliable, safe and affordable food and fiber supply; sound 

stewardship of agricultural land and water resources; the economic opportunities available for American farm 

products at home and abroad; continued economic and infrastructure development in rural America; and 

leading-edge research to maintain an efficient and innovative agricultural and food sector. 

Some of the more substantial reforms called for by this legislation include: 

Introducing counter-cyclical farm income support to assist farmers during hard times; 

Expanding conservation programs and adding emphasis on farm environmental practices; 

Making more borrowers eligible for Federal farm credit assistance; 

Restoring food stamp eligibility for legal immigrants; 

Adding several commodities to those requiring country-of-origin labeling; 

Introducing animal welfare provisions; and 

Enhancing the Nation’s biobased product and bioenergy programs. 

As USDA moved into the fourth year of implementing this legislation, FY 2005 key milestones included: 

Announcing $1.7 billion in funding for conservation programs on working lands; 

Allocating funds to States for financial and technical assistance for FSRIA programs and other 

activities. USDA will use at least $30 million for technical service providers and nearly $41 million 

to implement the new Conservation Security Program (CSP) under a final rule that will be published 
MANAGEMENT’S DISCUSSION AND ANALYSIS

USDA

F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 3 

shortly. CSP is a voluntary program that provides financial and technical assistance to promote the 

conservation and improvement of soil, water, air, energy, plant and animal life, and other 

conservation purposes on Tribal and private working lands. The allocation also includes $54 million 

in financial assistance for the Grasslands Reserve Program (GRP), which the Department hopes to 

operate this year under an interim final rule that will be published shortly. GRP is a voluntary 

program that helps landowners and operators restore and protect grassland, including rangeland and 

pastureland, and certain other lands, while maintaining the areas as grazing lands; 

Publishing a Departmental final rule for Conservation Innovation Grants and announcing the 

availability of more than $19 million to fund selected grant proposals in 2005; 

Publishing a Departmental regulation to establish the USDA policy to increase the purchase and use 

of biobased products to the extent practicable; 

Implementing the Beginning Farmer and Rancher Contract Land Sales Program. This pilot program 

guarantees up to five loans each in at least five geographically diverse States. A private seller will 

make these loans to a beginning farmer on a contract land sale basis provided that underwriting 

criteria are met and a commercial bank agrees to serve as escrow agent; 

Providing funds to help rural businesses create or save more than 15,000 jobs; 

Approving $331 million of funding for broadband loans and reviewing additional applications; 

Awarding $21 million in grants under the Renewable Energy and Energy Efficiency Program for FY 

2005. The program is designed to help rural small businesses, farmers and ranchers develop 

renewable energy systems and promote energy efficiency improvements; 

Awarding with the U.S. Department of Energy (DOE) $12.6 million in grants under the USDA and 

DOE’s joint Biomass Research and Development Program to 11 projects in FY 2005. The program 

makes grants available to eligible entities to research, develop and show the benefits of biobased 

products, bioenergy, biofuels, biopower, and related processes; 

Making almost $67 million in Bioenergy Program producer payments for FY 2005. The Bioenergy 

Program seeks to expand industrial consumption of agricultural commodities by promoting their use 

in bioenergy production (ethanol and biodiesel); 

Improving surveillance programs for animal diseases, contributing to the eventual control or 

eradication of such diseases and assisting in certifying the status of the U.S. or its regions with regard 

to freedom from specific animal diseases; and 

Utilizing approximately $370 million to purchase fruits, vegetables and other specialty crops for 

distribution through USDA nutrition assistance programs. USDA made $24 million available to the 

U.S. Department of Defense for the procurement of fresh fruits and vegetables. 
MANAGEMENT’S DISCUSSION AND ANALYSIS

USDA

4 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

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. USDA’s seven mission areas follow. 

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 sustainable management of 

both public and private lands. FS manages 192 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 aimed at helping farmers and ranchers weather the unavoidable challenges inherent in agriculture, 

such as natural disasters. 

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

(CCC) exists to stabilize farm income and prices in order 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. From rural infrastructure projects that finance the delivery of everything from 

safe, running water to high-speed Internet access to housing programs and economic development initiatives, 

this mission area unites a variety of valuable programs that together comprise the backbone of Federal efforts 

to ensure rural communities are full participants in economic and other community opportunities. 

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 Federal nutrition 

assistance programs include the Food Stamp Program, Child Nutrition Programs, such as school lunches, 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 
MANAGEMENT’S DISCUSSION AND ANALYSIS

USDA

F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 5 

research and promotion efforts aid all Americans by linking cutting-edge scientific research to the nutritional 

needs of consumers. 

Food Safety 

The Food Safety Mission Area is comprised of the Food Safety and Inspection Service (FSIS), which ensures 

the safety, wholesomeness and correct labeling and packaging of meat, poultry and egg products. FSIS sets 

public health performance standards for food safety, and inspects and regulates these products in interstate and 

international commerce, including imported products. This mission area has significant responsibilities 

coordinating efforts among various Federal agencies, including the Department of Health and Human Services 

and the Environmental Protection Agency. 

Research, Education and Economics 

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) and the 

National Agricultural Statistics Service (NASS). 

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 national and international agricultural trade standards via Federal, 

State and international 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 support agencies which then maximize the time, energy and resources 

they devote to the delivery of services to USDA customers and stakeholders. 
MANAGEMENT’S DISCUSSION AND ANALYSIS

USDA

6 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

RESOURCES

Congressional appropriations are the primary funding source for USDA operations. FY 2005 program 

obligations totaled $134.4 billion, an increase of $20.1 billion compared to FY 2004. These are current year 

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

adjustments. Staff year resources totaled 109,558, decreasing 1,943 compared to FY 2004. 

Exhibit 2: FY 2005 and 2004 USDA Program Obligations Dedicated to Strategic Goals* 

USDA Program Obligations Dedicated to Strategic Goals 

FY 2005 Actual FY 2004 Actual 

Strategic Goal 1:

Enhance Economic

Opportunities for 

Agricultural Producers 

— 41%

Strategic Goal 5:

Protect and Enhance 

the Nation’s Natural 

Resource Base and 

Environment — 7%

Strategic Goal 4:

Improve the Nation’s 

Nutrition and Health 

— 37%

Strategic Goal 3:

Enhance Protection 

and Safety of the 

Nation’s Agriculture 

and Food Supply — 3%

Strategic Goal 2:

Support Increased 

Economic 

Opportunities and 

Improved Quality of 

Life in Rural America

— 12%

Strategic Goal 1:

Enhance Economic

Opportunities for 

Agricultural Producers 

— 41%

Strategic Goal 5:

Protect and Enhance 

the Nation’s Natural 

Resource Base and 

Environment — 7%

Strategic Goal 4:

Improve the Nation’s 

Nutrition and Health 

— 37%

Strategic Goal 3:

Enhance Protection 

and Safety of the 

Nation’s Agriculture 

and Food Supply — 3%

Strategic Goal 2:

Support Increased 

Economic 

Opportunities and 

Improved Quality of 

Life in Rural America

— 12%

2005 PROGRAM OBLIGATIONS

Strategic Goal 1:

Enhance Economic

Opportunities for 

Agricultural Producers 

— 34%

Strategic Goal 5:

Protect and Enhance 

the Nation’s Natural 

Resource Base and 

Environment — 8%

Strategic Goal 4:

Improve the Nation’s 

Nutrition and Health 

— 40%

Strategic Goal 3:

Enhance Protection 

and Safety of the 

Nation’s Agriculture 

and Food Supply

— 3%

Strategic Goal 2:

Support Increased 

Economic 

Opportunities and 

Improved Quality of 

Life in Rural America

— 15%

Strategic Goal 1:

Enhance Economic

Opportunities for 

Agricultural Producers 

— 34%

Strategic Goal 5:

Protect and Enhance 

the Nation’s Natural 

Resource Base and 

Environment — 8%

Strategic Goal 4:

Improve the Nation’s 

Nutrition and Health 

— 40%

Strategic Goal 3:

Enhance Protection 

and Safety of the 

Nation’s Agriculture 

and Food Supply

— 3%

Strategic Goal 2:

Support Increased 

Economic 

Opportunities and 

Improved Quality of 

Life in Rural America

— 15%

2004 PROGRAM OBLIGATIONS BLIGATIONS

*The sum of the pie chart percentages may be greater than 100 percent because of rounding. 

Exhibit 3: FY 2005 and 2004 USDA Staff Years Dedicated to Strategic Goals* 

USDA Staff Dedicated to Strategic Goals 

FY 2005 Actual FY 2004 Actual 

Strategic Goal 2:

Support Increased 

Economic Opportunities 

and Improved Quality of 

Life in Rural America 

— 7%

Strategic Goal 1:

Enhance Economic 

Opportunities for 

Agricultural Producers 

Strategic Goal 5: — 23%

Protect and Enhance 

the Nation’s Natural 

Resource Base and 

Environment — 49%

Strategic Goal 4:

Improve the Nation’s 

Nutrition and Health

— 3%

Strategic Goal 3:

Enhance Protection 

and Safety of the 

Nation’s Agriculture 

and Food Supply

— 18%

Strategic Goal 2:

Support Increased 

Economic Opportunities 

and Improved Quality of 

Life in Rural America 

— 7%

Strategic Goal 1:

Enhance Economic 

Opportunities for 

Agricultural Producers 

Strategic Goal 5: — 23%

Protect and Enhance 

the Nation’s Natural 

Resource Base and 

Environment — 49%

Strategic Goal 4:

Improve the Nation’s 

Nutrition and Health

— 3%

Strategic Goal 3:

Enhance Protection 

and Safety of the 

Nation’s Agriculture 

and Food Supply

— 18%

2005 Staff Years 2005 Staff Years

Strategic Goal 2:

Support Increased 

Economic Opportunities 

and Improved Quality of 

Life in Rural America —

8%

Strategic Goal 1:

Enhance Economic 

Opportunities for 

Agricultural Producers 

— 23%

Strategic Goal 5:

Protect and Enhance 

the Nation’s Natural 

Resource Base and 

Environment — 49%

Strategic Goal 4:

Improve the Nation’s 

Nutrition and Health

— 3%

Strategic Goal 3:

Enhance Protection 

and Safety of the 

Nation’s Agriculture 

and Food Supply

— 18%

Strategic Goal 2:

Support Increased 

Economic Opportunities 

and Improved Quality of 

Life in Rural America —

8%

Strategic Goal 1:

Enhance Economic 

Opportunities for 

Agricultural Producers 

— 23%

Strategic Goal 5:

Protect and Enhance 

the Nation’s Natural 

Resource Base and 

Environment — 49%

Strategic Goal 4:

Improve the Nation’s 

Nutrition and Health

— 3%

Strategic Goal 3:

Enhance Protection 

and Safety of the 

Nation’s Agriculture 

and Food Supply

— 18%

2004 Staff Years 2004 Staff Years

*The sum of the pie chart percentages may be greater than 100 percent because of rounding. 
MANAGEMENT’S DISCUSSION AND ANALYSIS

USDA

F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 7 

PERFORMANCE GOALS AND RESULTS

Of the performance goals contained in USDA’s FY 2005 Revised Annual Performance Plan/Performance 

Budget, 29 were met or exceeded, 6 were reported as deferred [unable to report the necessary data until a 

specified date] and 4 were unmet. The following Performance Scorecard, 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. Information on data quality is contained 

in the Data Assessment of Performance Measures section. 

Exhibit 4: USDA Scorecard for FY 2005 

Performance Scorecard for FY 2005 

Objectives Annual Performance Goals Result 

Strategic Goal 1: Enhance Economic Opportunities for Agricultural Producers 

1.1 Expand International 

Market Opportunities 

1.1.1 Dollar value of trade preserved through USDA staff 

interventions and trade agreement monitoring 

Exceeded 

1.2 Support International 

Economic 

Development and 

Trade Capacity 

Building 

1.2.1 Number of mothers, infants and schoolchildren receiving daily 

meals and take-home rations through McGovern-Dole 

International Food for Education and Child Nutrition Program 

Exceeded 

1.3 Expand Alternative 

Markets for 

Agricultural Products 

1.3.1 Number of groups of biobased products designated for 

procurement 

Deferred

1.4.1 Increase the percentage of beginning farmers, racial and ethnic 

minority farmers, and women farmers financed by USDA 

Exceeded 

1.4.2 Reduce average processing time for direct loans Exceeded 

1.4.3 Reduce average processing time for guaranteed loans Met 

1.4 Provide Risk 

Management and 

Financial Tools to 

Farmers and 

Ranchers 

1.4.4 Increase the value of risk protection provided to agricultural 

producers through FCIC-sponsored insurance 

Exceeded 

Strategic Goal 2: Support Increased Economic Opportunities and Improved Quality of Life in Rural America 

2.1 Expand Economic 

Opportunities through 

USDA Financing of 

Businesses 

2.1.1 Create or save additional jobs through USDA financing of 

businesses 

Exceeded 

2.2.1 Homeownership opportunities provided Exceeded 

2.2.2 Customers served by new or improved telecommunications 

facilities 

Unmet 

2.2.3 Customers served by new or improved water and waste 

disposal facilities 

Exceeded 

2.2.4 Customers served by new or improved electric facilities Exceeded 

2.2 Improve the Quality of 

Life in Rural America 

through USDA 

Financing of Quality 

Housing, Modern 

Utilities and Needed 

Community Facilities 

2.2.5 Customers served by new or improved community facilities Met 

Strategic Goal 3: Enhance Protection and Safety of the Nation’s Agriculture and Food Supply 

3.1 3.1.1 Prevalence of Salmonella on broiler chickens Unmet 

3.1.2 Prevalence of Listeria monocytogenes in ready-to-eat meat and 

poultry products 

Met 

3.1.3 Prevalence of E. coli O157:H7 on ground beef Met 

Reduce the Incidence 

of Foodborne 

Illnesses Related to 

Meat, Poultry and Egg 

Products 

3.1.4 Millions of viewings of food safety messages (mixed media — 

e.g., USDA Food Safety Mobile, USDA Meat and Poultry 

Hotline, etc.). 

Exceeded 
MANAGEMENT’S DISCUSSION AND ANALYSIS

USDA

8 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Performance Scorecard for FY 2005 

Objectives Annual Performance Goals Result 

3.2 Reduce the Number 

and Severity of 

Agricultural Pest and 

Disease Outbreaks 

3.2.1 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 or humans 

Met 

3.2.2 Percentage of facilities in complete compliance at the most 

recent inspection 

Unmet 

3.2.3 Number of animals affected by noncompliances documented on 

inspection reports 

Unmet 

3.2.4 Expand the ability to detect plant diseases to protect the Nation 

from disease outbreaks 

Exceeded 

3.2.5 Expand the ability to detect animal diseases to protect the 

Nation from disease outbreaks 

Exceeded 

3.2.6 Provide scientific information to protect animals from pests, 

infectious diseases, and other disease-causing entities that 

impact animal and human health 

Met 

Strategic Goal 4: Improve the Nation’s Nutrition and Health 

4.1 Improve Access to 

Nutritious Food 

4.1.1 Rates of eligible populations participating in the Food Stamp 

Program 

Deferred 

 4.1.2 Rates of eligible populations participating in the School 

Breakfast Program 

Deferred 

 4.1.3 Rates of eligible populations participating in the Special 

Supplemental Nutrition Program for Women, Infants and 

Children 

Deferred 

4.2.1 Improve the Healthy Eating Index (HEI) scores for the U.S. 

population 

4.2 Promote Healthier Deferred 

Eating Habits and 

Lifestyles 4.2.2 Determine food consumption patterns of Americans, including 

those of different ages, ethnicity, regions, and income levels. 

Provide sound scientific analyses of U.S. food consumption 

information to enhance the effectiveness and management of 

the Nation's domestic food and nutrition assistance programs. 

Met 

4.3 Improve Food 

Program Management and 

Customer Service 

4.3.1 Increase Food Stamp payment accuracy Deferred 

Strategic Goal 5: Protect and Enhance the Nation’s Natural Resource Base and Environment 

5.1.1 Number of acres of hazardous fuel treated that are in the 

wildland-urban interface and the percentage identified as high 

priority through collaboration consistent with the 10-year 

Comprehensive Strategy Implementation Plan 

Met 

5.1.2 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 and the percentage identified as high priority 

through collaboration consistent with the 10-year 

Comprehensive Strategy Implementation Plan 

Exceeded 

5.1 Implement the 

President’s Healthy 

Forests Initiative and 

Other Actions to 

Improve Management 

of Public Lands 

5.1.3 Number of acres treated outside the wildland-urban interface as 

a secondary benefit of other vegetation management that 

contribute to an improvement in Condition Class 

Exceeded 

5.2 5.2.1 Conservation plans written for cropland and grazing lands Met 

5.2.2 Cropland and grazing lands with conservation applied to protect 

the resource base and environment 

Met 

Improve Management 

of Private Lands 

5.2.3 Reduction in the acreage of cropland soils damaged by erosion Met 

 5.2.4 Number of comprehensive nutrient management plans applied Met 

 5.2.5 Increase Conservation Reserve Program (CRP acres of riparian 

and grass buffers) 

Met 
MANAGEMENT’S DISCUSSION AND ANALYSIS

USDA

F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 9 

Performance Scorecard for FY 2005 

Objectives Annual Performance Goals Result 

 5.2.6 Agricultural wetlands created, restored, or enhanced Met 

 5.2.7 Increase CRP restored wetland acres Met 

ACTIONS ON UNMET AND DEFERRED GOALS

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

substantial anecdotal information exists that USDA has pursued its strategic objective to improve the Nation’s 

nutrition and health successfully, with the exception of research goals, the Department has deferred reporting 

on these goals until accurate and complete data are available to document the progress of these efforts in FY 

2005. Sometimes circumstances arise that result in the Department falling short of its goals. At other times, 

while USDA consciously alters its approach to enhance its service to the public, the Department makes 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. 

Performance Goal 1.3.1—Deferred. Number of groupings of biobased products designated for 

procurement. Regulations advancing this performance goal have been delayed. It is expected that the 

first designation will be published as a final rule during the second quarter of FY 2006. 

Performance Goal 2.2.2—Unmet. Increase the number of subscribers receiving new and/or 

improved telecommunication services (broadband). The primary reason for this performance goal 

being unmet is that the budget authority was not fully utilized. USDA is increasing outreach efforts 

to assist prospective loan applicants and to increase awareness of the Broadband program. However, 

USDA will monitor this and reevaluate the target if any trends indicated the need to reevaluate how 

many loan dollars are needed per subscriber receiving new or improved service. 

Performance Goal 3.1.1—Unmet. Prevalence of Salmonella on broiler chickens. FSIS did not have 

a risk-based, public policy in place in FY2005 to specifically target upward trends in this 

performance measure. Beginning in FY 2006, FSIS has identified specific actions that will be 

published in the Federal Register that are expected to be implemented and will target poultry 

operations that exceed an action level that is set below the current regulatory limit. The FSIS actions 

will focus on ensuring that poultry operations are fully addressed factors that contribute to increased 

likelihood of Salmonella presence on broilers. 

Performance Goal 3.2.2—Unmet. Percentage of facilities in complete compliance at the most recent 

inspection. Data for the number of animals affected by compliances documented on inspection 

reports in 2005 were inaccurate. Thus, there is no means to compare program performance in FY 

2005 with previous years. The Licensing and Registration Information System database, which 

provides these data, is obsolete and will be replaced during the coming year. 

Performance Goal 3.2.3—Unmet. Number of animals affected by noncompliances documented on 

inspection reports. Data for the number of animals affected by compliances documented on 

inspection reports in 2005 were inaccurate. Thus, there is no means to compare program performance 

in FY 2005 with previous years. The Licensing and Registration Information System database, which 

provides these data, is obsolete and will be replaced during the coming year. 
MANAGEMENT’S DISCUSSION AND ANALYSIS

USDA

10 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Performance Goal 4.1.1—Deferred. Rates of eligible populations participating in the Food Stamp 

Program. The measure has been deferred due to unavailable data. 

Performance Goal 4.1.2—Deferred. Rates of eligible populations participating in the School 

Breakfast Program. The measure has been deferred due to unavailable data. 

Performance Goal 4.1.3—Deferred. Rates of eligible populations participating in the Special 

Supplemental Nutrition Program for Women, Infants and Children. The measure has been deferred 

due to unavailable data. 

Performance Goal 4.2.1—Deferred. Promote the Healthy Eating Index. The measure has been 

deferred due to unavailable data. 

Performance Goal 4.3.1—Deferred. Improve Food Program Management and Customer Service. 

The measure has been deferred due to unavailable data. 

MANAGEMENT CHALLENGES

The Office of Inspector General (OIG) prepares an annual report to the Secretary on the most serious 

management challenges faced by the Department (Appendix A). USDA management addresses these 

challenges and responds by providing accomplishments for the current fiscal year and planned actions for the 

upcoming fiscal year, if required. The chart below compares the challenges reported by OIG in the FY 2004 

report with those that remain in the FY 2005 Management Challenges Report. 

FY 2004 Management Challenges FY 2005 Management Challenges 

Increased Oversight and Monitoring of Food Safety 

Inspection Systems are Needed 

Research Misconduct Policy Not Consistently Implemented 

Agencies Need to Better Coordinate Program Delivery and 

Control 

Interagency Communication, Coordination and Program 

Integration Need Improvement 

Financial Management – Improvements Made but 

Additional Actions Still Needed 

Integrity of the Federal Crop Insurance Programs Must be 

Strengthened Through Improved Quality Control Systems 

and IT Processing 

A Strong Internal Control Structure is Paramount to the 

Delivery if Forest Service Programs 

Implementation of Strong, Integrated Management Control 

(Internal Control) Systems Still Needed 

Information Technology Security – Much Accomplished, 

More Needed 

Continuing Improvements Needed in Information 

Technology (IT) Security 

Risk Must be Examined and Improper Payments Minimized 

Within USDA 

Reducing Improper Payments Continues to be a Priority of 

Congress and the Administration 

Homeland Security Considerations Should be Incorporated 

Into Program Design and Implementation 

Departmental Efforts and Initiatives in Homeland Security 

Need to be Maintained 

Controls over Germplasm Storage Material and Genetically 

Engineered Organism Field Testing are Critical to U.S. 

Markets 

Department-wide Efforts and Initiatives on Genetically 

Engineered Organisms Need to be Strengthened 

Civil Rights Complaints Processing Still a Concern at 

USDA 

This challenge has been removed from the list. 

Improvements and Safeguards Needed for the Rural MultiFamily Housing Program 

This challenge has been removed from the list. 
MANAGEMENT’S DISCUSSION AND ANALYSIS

USDA

F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 11 

The table that follows includes FY 2005 accomplishments and/or FY 2006 planned actions. 

USDA’s Management Challenges 

2005 Major Management Challenges 

Fiscal Year 2005 Accomplishments and/or Planned 

Actions for Fiscal Year 2006 

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

• Establish comprehensive information management 

systems, data reconciliation processes, and effective 

data mining for farm programs

USDA has implemented electronic verification of 

participant eligibility through the Program Contracting 

System. This system uses a web link to USDA records for: 

• Obtaining current and prior-year eligibility information; 

• Internal controls to enforce business rules and screen 

eligibility; and 

• Controls to block unauthorized obligations and 

payments for applicants. 

Policy guidance was issued in August 2005. 

The Risk Management Agency, Farm Service Agency and 

the Natural Resources Conservation Service have joined 

efforts to develop a web-based: 

• County office application; 

• Management reporting application; and 

• Notification system that will allow county offices and 

approved insurance providers the ability to 

communicate on reported discrepancies and track 

progress. 

• Implement a Department-wide Research Misconduct 

Policy 

The REE mission area will: 

• Coordinate and implement a Department wide research 

misconduct policy that is compliant with the Office of 

Science and Technology requirements; and 

• Develop Memoranda of Understanding with the 

Department’s research agencies for the referral of 

research misconduct allegations. 

• Ensure that animal disease surveillance program 

policies and procedures are well-defined and 

supportable and terminology and practices are 

consistent with public announcements 

On July 6, 2005, APHIS and FSIS entered into a 

Memorandum of Understanding documenting shared 

responsibilities to ensure the safety of the food supply. 

USDA’s Veterinary Services’ National Center for Import 

and Export (NCIE) established an intranet site to allow 

staff to communicate on policy changes. For more 

information, visit www.aphis.usda.gov/vs/ncie/. NCIE has 

also developed a tracking system that will serve as a 

central point of access for: 

• Current policy changes; 

• Product certifications; and 

• Permit guidelines. 

To further strengthen controls, FSIS and APHIS will: 

• Evaluate the FSIS ante-mortem/alternative collection 

site procedures to ensure that no condemned animals 

enter the food supply; 

• Evaluate the Bovine Spongiform Encephalopathy 

Surveillance Program for application to other animal 

disease surveillance programs; and 

• Continue efforts to enhance communications between 

APHIS and FSIS on border related investigations. 
MANAGEMENT’S DISCUSSION AND ANALYSIS

USDA

12 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

2005 Major Management Challenges 

Fiscal Year 2005 Accomplishments and/or Planned 

Actions for Fiscal Year 2006 

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

Strengthen the quality control in the Federal Crop 

Insurance Programs. 

RMA will conduct a review of selected insurance provider 

operations to evaluate compliance with quality control 

guidelines as outlined in the Standard Reinsurance 

Agreement. 

Prepare complete, accurate financial statements without 

extensive manual procedures and adjustments. 

OCFO in conjunction with component agencies will 

continue to improve financial systems and support 

financial reports by automating manual processes. 

Improve Forest Service (FS) internal controls and 

management accountability in order to effectively manage 

its resources, measure its progress towards goals and 

objectives, and accurately report its accomplishments. 

FS planned actions include: 

• Establishing accountability for performance measure 

reporting accuracy; 

• Establishing management controls to ensure adequate, 

reliable, and verifiable information; 

• Holding managers accountable; and 

• Ensuring that targets and goals not met are identified. 

To further ensure accountability, FS will: 

• Conduct comprehensive risk assessments of its 

programs and develop plans to address identified risks; 

• Obtain closure on 50% of audits less than 1 year old; 

and 

• Obtain official closure on 70% of outstanding audits 

more than 1 year old. 

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

Agencies need to: 

• Emphasize security program planning and 

management; 

• Establish an internal control program throughout the 

systems’ lifecycle; 

• Identify, test, and mitigate IT security vulnerabilities (risk 

assessments); 

• Improve access controls; 

• Implement appropriate application and system software 

change control; and 

• Develop disaster contingency (service continuity) plans. 

To compliment agency-specific initiatives to address these 

challenges, OCIO will: 

• Amend existing certification and accreditation policy to 

add the Associate Chief Information Officer for Cyber 

Security as a mandatory concurrence signatory to all 

accreditations; 

• Engage multiple contractors to perform a wide variety of 

security activities including Federal Information Security 

Management Act tracking and reporting, security 

strategic planning, and independent verification and 

validation of accreditations; 

• Develop an information technology security scorecard 

to rate agencies/systems owners on security posture; 

and 

• Develop and implement a sustainable process to 

perform periodic on-site compliance reviews.

4) Reducing Improper Payments Continues to be a Priority of Congress and the Administration

Assign sufficient resources and provide management 

oversight. 

Strengthen program risk assessment methodology to 

identify and test the critical internal controls over program 

payments totaling over $100 billion.

Develop a supportable methodology/process to detect and 

estimate the extent of improper payments.

Develop and implement a corrective action plan to address 

the weaknesses that allowed the improper payments to 

occur. 

Agencies that have identified programs that are susceptible 

to improve payments need to develop and implement 

action plans to reduce the amount of these payments.

In addition to agency-specific plans outlined in Appendix B, 

OCFO will: 

• Develop a list of all programs and a plan to conduct risk 

assessments by the end of the second quarter of fiscal 

year 2006;

• Ensure that agencies complete sampling results and 

corrective action plans for all high-risk programs; and

• Ensure that agencies develop plans to measure 

improper payments for all high risk programs in 

FY 2007.
MANAGEMENT’S DISCUSSION AND ANALYSIS

USDA

F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 13 

2005 Major Management Challenges 

Fiscal Year 2005 Accomplishments and/or Planned 

Actions for Fiscal Year 2006 

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

Continue efforts to coordinate with DHS in implementing 

effective control systems to ensure the safety and security 

of agricultural products entering the country. 

APHIS will: 

• Finalize a Memorandum of Understanding with the 

Department of Homeland Security (DHS) to perform 

joint port reviews; and 

• Schedule regular meetings with DHS to ensure 

effective coordination and communication. 

FSIS will: 

• Secure an agreement with the Bureau of Customs and 

Border Protection (CBP) to share information between 

agencies to improve cooperation between CBP and 

FSIS and ensure regulatory compliance and food 

defense; and 

• Obtain interim access to CBP data available via the 

Internet as part of the eCustoms Partnership team. 

Conduct vulnerability and risk assessments to determine 

adequate food safety and security over agricultural 

commodities that the Department manages, handles, 

transports, stores and distributes. 

FSA/CCC will: 

• Conduct on-site risk assessments of warehouse 

operations in collaboration with USDA’s Homeland 

Security Office and the U.S. Food and Drug 

Administration; 

• Participate in Carver Plus Shock training for future risk 

assessments. Carver Plus Shock is a risk tool designed 

to identify vulnerabilities and rate the risk associated 

with those vulnerabilities. The Department of Homeland 

Security and the Department of Defense require this 

tool; and 

• Evaluate results of risk assessments to identify 

vulnerabilities and develop corrective measures. 

Continue to work with OIG and other USDA agencies to 

ensure effective coordination and implementation of 

Homeland Security Presidential Directive 9 (HSPD-9); i.e., 

develop a coordinated agriculture and food-specific 

standardized response plan for integration into the National 

Response Plan and a National Veterinary Stockpile. 

The Office of Homeland Security will: 

• Host bi-weekly discussions with mission area 

representatives; and 

• Require quarterly status reports on HSPD-9 tasks. 

Strengthen controls over select agents and toxins. FSIS will: 

• Utilize data from CBP on the status of imports arriving 

at U.S. ports of entry; 

• Participate in the Federal Health Architecture (FHA) 

food safety work group; and 

• Participate in the development of the International 

Trade Data Systems (ITDS). ITDS is a Federal 

Technology initiative sponsored by the CBP to 

coordinate, standardize, and simplify federal border 

clearance and other international trade and 

transportation processes. 

Establish Department-wide policies and procedures for 

defining sensitive and dual use information and 

implementing adequate controls to protect such 

information. 

FSIS will: 

• Participate in the Federal Health Architecture (FHA) 

food safety group. FHA is an OMB Presidential 

Initiative, led by the Department of Health and Human 

Services to link local, State and Federal health 

information systems into an integrated, national health 

system; and 

• Participate with 15 other agencies to develop model 

architecture for linking food-related public health 

surveillance systems. 
MANAGEMENT’S DISCUSSION AND ANALYSIS

USDA

14 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

2005 Major Management Challenges 

Fiscal Year 2005 Accomplishments and/or Planned 

Actions for Fiscal Year 2006 

6) Department-wide Efforts and Initiatives on Genetically Engineered Organisms (GEO) Need to be Strengthened

Strengthen germplasm policies and procedures. 

Strengthen GEO field testing process. 

The Biotechnology Regulatory Service (BRS) was 

established under APHIS to oversee work done with 

genetically engineered organisms (GEOs). APHIS 

published a Federal Register notice on the scoping of a 

programmatic Environmental Impact Statement (EIS) to 

address regulatory revisions. The notice covered issues 

such as criteria and standards for field-testing and 

information requirements. 

BRS will prepare the programmatic EIS that will provide 

the analysis and public input needed for the major 

revisions being considered. A draft will be completed in 

2006. 

BRS and Plant Protection and Quarantine (PPQ): 

• Have signed a Memorandum of Understanding that 

clarifies roles and responsibilities for field inspections, 

and outlines a formal work flow for inspections and 

provides guidance on cross-unit coordination; 

• Have defined their responsibilities in an inspection 

manual released in 2005. The manual includes: 

− New inspection checklists; 

− Questions directly related to regulations; 

− Inspection procedures; 

− Requirements for written inspection reports; and 

− Guidance for inspectors to improve the consistency 

and quality of BRS inspections. 

• BRS and PPQ will conduct monthly conference calls to 

discuss inspections and other relevant issues. 

Establish improved methods to detect GEO products in 

trade exports. 

BRS will develop a comprehensive, integrated 

management system to track all information on permits 

and notifications. 

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. 

In addition to these enduring factors, homeland security has emerged as 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 will challenge USDA’s ability to achieve its desired outcomes include: 

Weather-related hardships and other uncontrollable events at home and abroad; 

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

strength of the U.S. dollar and political changes in other countries that can impact domestic and 

global markets greatly in any year; 
MANAGEMENT’S DISCUSSION AND ANALYSIS

USDA

F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 15 

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; 

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 to move quickly across national and international boundaries; and 

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. 

USDA’S RESULTS AGENDA—IMPLEMENTING FEDERAL 

MANAGEMENT INITIATIVES

USDA is working 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 FY2002-2007, 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; 

Implement business processes and information technology needed to make its services available 

electronically; 

Link budget decisions and program priorities more closely with program performance and recognize 

the full cost of programs; 

Reduce improper payments by developing targets and corrective action plans, and tracking the results 

annually to ensure that the corrective actions are effective; 

Efficiently and effectively manage its real property; 

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 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 a department is progressing adequately in meeting established 
MANAGEMENT’S DISCUSSION AND ANALYSIS

USDA

16 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

deliverables and timelines. As of September 30, 2005, USDA had earned a “green” progress score for all of its 

initiatives. The following is a summary of major USDA management initiatives and FY 2005 highlights. 

HUMAN CAPITAL

The President wants Executive agencies to be responsive to citizens and dedicated to obtaining results. 

USDA’s Strategic Human Capital Plan addresses this by identifying human capital challenges and developing 

an accountability system. Targeted challenges include meeting the demand for cutting-edge research talent, 

creating a workforce with a combination of skills not previously required, and fully supporting the 

Department’s mission with the same or fewer staff. 

In managing its human capital and delivering its services to customers, USDA will continue to focus on 

ensuring civil rights and equal employment opportunity for everyone, regardless of race, color, national 

origin, gender, religion, age, sexual orientation, disability, or marital or familial status. The Department is 

committed to continuous civil rights progress in the workplace, program delivery and processing complaints 

timely and efficiently. 

USDA’s plans include: 

Maintaining the links among Departmental and agency human capital and annual performance plans; 

Integrating the human capital impact of such Presidential initiatives as competitive sourcing and 

eGovernment; 

Using workforce planning and hiring flexibility to recruit, retain and reward employees while 

developing a high-performing and accountable workforce; and 

Ensuring employment opportunities for all, while implementing programs targeting critical 

occupations with projected skill gaps and underrepresented groups; and 

Actions taken by USDA in FY 2005 to achieve this result include: 

Aligned performance plans in mission critical occupations with the strategic goals of the 

organization. The Office of Management and Budget and the Office of Personnel Management 

(OPM) documented that at least 60 percent of all performance plans were aligned with the strategic 

goals of the organization; 

Completed a comprehensive review of the Department's human capital plan, analyzed the results and 

documented how they were used in improving human capital. This involved a review of more than 

100 human capital action strategies. It demonstrated the integration of competitive sourcing and 

eGovernment PMA initiatives with human capital; 

Achieved a hiring timeline of 28 days against the OPM standard of 45 days for general schedule 

employees and significantly reducing the hiring timeline for senior executive service employees; 

Demonstrated the use of hiring flexibilities to recruit and retain a high performing workforce 

Reduced under-representation and established process to sustain diversity; and 
MANAGEMENT’S DISCUSSION AND ANALYSIS

USDA

F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 17 

Reduced skill gaps to less than 3 percent in 18 of the Department's 19 mission critical occupations. 

Reduced the number of mission critical occupations with skill gaps exceeding 3 percent from 

4 to 1. 

COMPETITIVE SOURCING

USDA 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 

sources. The Department will continue to simplify and improve the procedures for evaluating sources. 

The Department improved its use of competitive sourcing process by ensuring that the studies it conducts 

reflect more strategically grouped and related functions to maximize the impact of this initiative. The 

Department required that a feasibility study, including cost-benefit analysis, be completed prior to conducting 

a competitive sourcing study. This ensures that functions selected for public-private sector competitions will 

result in an organization implemented with lower costs and increased management efficiencies. Studies are 

now being linked to agency human capital plans to ensure work force planning and restructuring, and 

retention goals are met while achieving cost savings. 

USDA plans to continue to evaluate its jobs to identify those that can be studied to achieve efficiency and/or 

quality improvement. 

Actions taken by USDA in FY 2005 to achieve this result include: 

Completed competitions to improve productivity and produce annual savings; 

 Estimated gross savings is $179.2 million over a five-year period for competitive sourcing 

studies completed in FY 2004. 

Completed feasibility studies as follows: 

 APHIS—Protection & Quarantine—272 FTEs – December 2004; 

• Results of the feasibility study did not indicate a favorable return on investment. 

 Completed RMA—Program Support – 66 FTEs – December 2004; 

• Results of the feasibility study did not indicate a favorable return on investment. 

 Completed FSIS—Financial Systems Support—44 FTEs; 

• Determined it is not feasible to study. Automation of the function was scheduled for 

implementation beginning in September 2005. The modernization will eliminate the FTEs, 

which will save $1,000,000 by July 2007. 

 Completed GIPSA—Rice Inspection—45 FTEs – March 2005; 

• Completed GIPSA feasibility study for rice inspection indicates a positive return on 

investment. Due to actions by Anheuser Busch to eliminate mandatory rice inspections, 

GIPSA lost about 25 percent of its rice inspection business. As a result, GIPSA will 

restructure its program and associated personnel. OMB has agreed to delay the start of the 

GIPSA competitive sourcing study until GIPSA’s personnel restructuring actions have been 

resolved—approximately in one year. GIPSA will then reevaluate the feasibility of 

conducting the study on its rice inspection services. 
MANAGEMENT’S DISCUSSION AND ANALYSIS

USDA

18 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

 Completed FAS—Administrative Support—73 FTEs—March 2005; 

• Results of the feasibility study did not indicate a favorable return on investment. 

 Completed NRCS—Soil Conservation Technicians—280 FTEs – January 2005; 

• Results of the feasibility study did not indicate a favorable return on investment. 

 Completed NRCS—Civil Engineering Technicians—127 FTES – January 2005; 

• Results of the feasibility study did not indicate a favorable return on investment. 

 Completed NRCS—Geological Analysis—36 FTEs – January 2005; 

• Results of the feasibility study did not indicate a favorable return on investment. 

Conducted training on feasibility studies, most efficient organization and FAIR Act inventory; and 

Reviewed the FAIR Act inventory justification for similar positions among different agencies 

Department-wide and addressed inconsistencies in the classification of like functions. 

Challenges 

FS Legislative Restrictions—FY 2005 $2 million cap on competitive sourcing spending; 

 House Appropriations Committee’s Interior, Environment and Related Agencies Subcommittee 

voted to continue cost limits on competitive sourcing—FY 2006 $2.5 million cap. 

 FS will complete and implement the recommendations of the agency’s business process 

reengineering initiatives for Human Resources and the Budget and Finance functions. 

Additionally, FS is implementing the IT competitive sourcing study during FY 2005 and FY 

2006. Completion of these major organizational and cultural changes will enable FS to begin 

additional competitive sourcing studies in late FY 2006 and/or early FY 2007. 

Farm Service Agency (FSA) and Rural Development (RD) Legislative Restriction—FY 2005 

Appropriations Act prohibits funds to be used to study, complete a study of, or enter into a contract 

with a private party to carry out, without specific authorization in a subsequent Act of Congress, a 

competitive sourcing activity of the Secretary of Agriculture, including support personnel of the 

Department of Agriculture, relating to rural development or farm loan programs. 

FINANCIAL PERFORMANCE

USDA’s Financial Performance is overseen by the Office of the Chief Financial Officer (OCFO), which 

works in partnership with all USDA agencies to ensure the Department’s financial management reflects sound 

business practices. The PMA requires all Federal agencies to maintain an unqualified financial statement audit 

opinion, which indicates a department’s financial statements are free of significant errors or misstatements. 

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 across the Department. USDA’s clean audit opinion was sustained in FY 2005. 

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 (GAO). The Office of the Chief Financial Officer (OCFO) works to improve financial 

management, in partnership with the Chief Financial Officers of USDA agencies, as a core attribute of the 
MANAGEMENT’S DISCUSSION AND ANALYSIS

USDA

F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 19 

Department’s operating culture. OCFO is working closely with USDA agencies to eliminate all material 

weaknesses. 

OCFO will lead efforts to improve management information by helping USDA’s agencies craft and access 

useful, 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. 

USDA has issued a Request for Information (RFI) for the Financial Management Modernization Initiative 

(FMMI) for the replacement of USDA’s legacy corporate financial management system. The purpose of the 

RFI is to solicit vendor comments and suggestions on our financial management concept and USDA’s 

functional requirements for future systems modernization. Implementing the FMMI solution will provide 

USDA agencies with a modern, efficient core financial management system. FMMI will provide high quality 

information to our managers who need it, when they need it and will enable them to use the information to 

manage their business areas more effectively, consistent with the OMB’s Financial Management Line of 

Business initiative. USDA uses the Financial Data Warehouse to integrate program and financial information 

that complies with system architecture standards in OMB Circular A-127. 

USDA’s plans include: 

Maintaining an unqualified audit opinion on its financial statements; 

Eliminating all material weaknesses; 

Improving financial-reporting procedures and systems; and 

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

Actions taken by USDA in FY 2005 to achieve this result include: 

USDA sustained an unqualified audit opinion on its FY 2005 consolidated financial statements, 

making this the fourth consecutive year for receiving a clean opinion; 

The Financial Data Warehouse (FDW) modernization, used for agency ad-hoc reporting, was 

completed, migrating platforms to a mid-range environment for faster queries with enhanced query 

capabilities; 

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; 

USDA began web enablement of USDA Corporate Financial and Performance Reporting, a quarterly 

performance system that the Secretary of Agriculture and his senior executives will use to drive 

program results; 

USDA awarded a contract to build web-enabled Financial Management Dashboards. The 

dashboards, when implemented, will provide agencies with more timely access to the results of their 

account relationship tests—a series of 28 tests that measure standard general ledger budgetary and 

proprietary account relationships. The dashboards will provide the capability to identify specifically 

where relationship failures occur so that appropriate action can be taken; 
MANAGEMENT’S DISCUSSION AND ANALYSIS

USDA

20 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

USDA agencies improved their financial performance measures, targets and milestones in their 

efforts to expand the use of financial information for decision-making; 

USDA continued reviews of year-end adjusting entries; standard general ledger abnormal balances; 

financial statement line-item variance analysis; and other aspects of financial statement preparation 

in order to assure quality of financial statement data throughout the fiscal year; and 

USDA developed a new methodology for automating the Statement of Financing and produced an 

automated prototype using the financial data warehouse information. This methodology was shared 

with other Departments of the Federal Government and the Federal Accounting Standards Advisory 

Board as a methodology to improve the timeliness and quality of financial data. 

ENHANCING EGOVERNMENT

USDA launched a Department-wide effort in 2001 to improve the methods through which its agencies 

collectively executed its broad mission objectives. The Department’s strategies, published in USDA’s 

eGovernment Strategic Plan in 2002, focus on improving the delivery of its information and services and 

reducing costs. 

USDA is using an Enterprise Architecture to inform and guide its decision-making. Enterprise Architecture 

refers to a strategic information asset base, which defines a Department’s mission, the information and 

technologies necessary to perform that mission, and the transitional processes executed in response to any 

changing mission needs. 

USDA plans to: 

Provide customers with single points of access to information and services; 

Simplify and unify business processes spanning multiple agencies; 

Establish information and service-delivery standards; and 

Consolidate redundant information technology services and systems through use of shared USDA or 

Government solutions. 

Actions taken by USDA in FY 2005 to achieve this result include: 

Provided an OMB-approved eGovernment Implementation Plan; 

Submitted completed Enterprise Architecture (EA); 

Fully executed all memoranda of understanding with managing partners; 

Remediated 36 of 43 business cases on the management watch list; 

Coordinated final earned-value management regulation; 

Published draft earned-value implementation guide; and 

Passed the security assertion markup language testing by the General Services Administration (GSA) 

and receive GSA certification for eAuthentication service. The service now becomes a Security 

Assertion Markup Language (SAML)-compliant service provider. SAML allows users with approved 

credentials to gain access to applications across the Federal Government. 
MANAGEMENT’S DISCUSSION AND ANALYSIS

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F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 21 

BUDGET AND PERFORMANCE INTEGRATION

USDA continues to improve how it integrates performance information into its budget decisions. Beginning 

with the FY 2005 President’s Budget, the Department integrated budget and performance throughout the 

budget-formulation process. This integration includes the use of OMB’s Program Assessment Rating Tools 

(PART) assessments. PART is used to assess and improve program performance and efficiency within the 

Federal Government in order to achieve better results. USDA program analysts and budget staff are working 

closely with mission area and agency representatives to establish budget priorities based on USDA’s strategic 

goals and desired outcomes. The Department continues to improve its performance information annually. 

USDA plans to: 

Continue using performance information during all stages of the budget formulation 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; and 

Align the budget with the Department’s strategic plan to keep the focus on results and continue to 

encourage effective management. 

Actions taken by USDA in FY 2005 to achieve this result include: 

USDA issued guidance and continued working with agencies to integrate PART recommendations 

into the formulation and presentation of agency budget proposals as well as discussing those findings 

in budget justifications; 

The Deputy Secretary held in-depth meetings with subcabinet officials to discuss the specific plans 

and milestones to address recommendations in PARTs with a “Results Not Demonstrated” rating in 

order to complete reassessments by the second quarter of FY 2006; 

The Department continues working with agencies to ensure that their milestones are reasonable and 

detailed enough to fully address OMB PART recommendations and lead to improved program 

performance. The Department’s budget office uses the Internal Scorecard process to track agency 

progress toward meeting these recommendations; and 

The Department’s budget office enhanced the quarterly financial and performance report in order to 

enable more active and efficient participation by senior Department officials during the integration of 

budget and performance. 

REAL PROPERTY

Executive Order (E.O.) 13327, Federal Real Property Asset Management, establishes the framework for 

improved 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, USDA 

agencies shall 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 action. As the foundation of the Department’s real property asset management program, the 

following strategic objectives will be used for real property management improvement: 
MANAGEMENT’S DISCUSSION AND ANALYSIS

USDA

22 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

USDA Real Property Asset Management Strategic Objectives 

1. Department’s holdings support agency missions and 

strategic goals and objectives

6. Provide appropriate levels of investment 

2. Maximize facility utilization by co-locating agency 

operations when possible 

7. Eliminate unneeded assets 

3. Accurately inventory and describe real property assets 

using the Corporate Property Automated Information 

System 

8. Use appropriate public and commercial benchmarks 

and best practices to improve asset management 

4. Use performance measures as part of the asset 

management decision process 

9. Advance customer satisfaction 

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

property decision-making process 

10. Provide for safe, secure and healthy workplaces 

USDA’s plans include: 

Establishing the Real Property Council (RPC) to advise the Assistant Secretary for Administration 

and Senior Real Property Officer (SRPO). RPC also will provide internal agency coordination and 

guidance, and disseminate information for implementing E.O. 13327 and the President’s 

Management Agenda within USDA; 

Establishing an asset management planning process for agencies (asset management plan) and 

agencies’ building block plans and monitoring and reporting its performance in implementing this 

process. This work includes policies and methodologies for maintaining property holdings in an 

amount and type according to agency budget and mission. It is designed to optimize the level of real 

property operating, maintenance and security costs; 

Establishing asset management performance measures; 

Maintaining 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; 

Establishing a three-year rolling timeline that addresses opportunities and determines priorities as 

identified in agency building block plans, and demonstrates implementation through compliance with 

the established timeline; 

Institutionalizing the management of the Department’s real property assets consistent with its 

strategic plan, the AMP and performance measures. The Department then would use these 

documents and indicators as the foundation to assist leadership in formulating and making real 

property management decisions; and 

Actively participating 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.

Actions taken by USDA in FY 2005 to achieve this result include: 

Developed a comprehensive asset management plan, including agency-specific building block plans, 

and submitted to OMB for review and approval; 

Finalized an OMB-approved methodology for implementing FRPC performance measures at the 

constructed-asset level; 
MANAGEMENT’S DISCUSSION AND ANALYSIS

USDA

F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 23 

Submitted and received OMB approval of a strategy and timeline for making necessary system 

enhancements and capturing constructed asset level FRPC data across USDA agencies; and 

Issued Secretary’s Memorandum 5100-002, Implementing Executive Order 13327-Federal Real 

Property Asset Management. 

RESEARCH AND DEVELOPMENT INVESTMENT CRITERIA

This program initiative calls on Federal Government agencies to apply a framework to research using three 

criteria—relevance, quality and performance. USDA’s 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—have aggressively moved forward 

to integrate this framework. The use of the criteria is an effective means to ensure that programs are 

addressing the right issues, meeting high-quality standards and accomplishing what they set out to do. 

USDA’s plans include: 

Continuing to apply objective criteria as projects are evaluated for funding; 

Closely coordinating among research agencies to ensure that common criteria and performance 

measures are used where possible; and 

Incorporating results into decision making. 

Actions taken by USDA in FY 2005 to achieve this result include: 

USDA research agencies continued to conduct independent external program reviews and committed 

to implementing such reviews in FY 2006. The reviews were structured by the three investment 

criteria; 

Program reviews became an integral component of program planning, management and assessment 

in ARS, CSREES and ERS; and 

ARS and CSREES used the results and recommendations from program reviews in program planning 

and management. 

ELIMINATING IMPROPER PAYMENTS 

USDA has developed comprehensive internal control and quality-assurance processes and systems to ensure 

accurate and complete program payments. In FY 2005, Eliminating Improper Payments became a President’s 

Management Agency (PMA) initiative. The Office of the Chief Financial Officer (OCFO) issued specific 

policy guidance including templates and timelines for implementing the Improper Payments Information Act 

(IPIA) and meeting the goals of the PMA initiative. 

Based on recent audit estimates, Federal agencies make more than $45.1 billion in improper payments 

annually. The initiative 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. USDA has identified 11 programs that are risk susceptible. The Department has prepared 

corrective-action plans for these programs to reduce and recover improper payments. The plans will reduce 

improper payments by approximately $49 million while recovering approximately $43 million in improperly 
MANAGEMENT’S DISCUSSION AND ANALYSIS

USDA

24 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

made payments. Reductions in improper payments will include reducing errors in direct benefit programs and 

contracting/administrative payments. 

USDA plans include: 

Assessing the risk of improper payments in all its programs annually; 

Working at the Department and agency levels to reduce the number of improper payments made; and 

Recovering, where possible, overpayments made to individuals and organizations. 

Actions taken by USDA in FY 2005 to achieve this result include: 

Completed risk assessments for all USDA programs and activities (286 risk assessments completed, 

11 identified as high risk); 

Developed plans to measure improper payments for all programs determined to be high risk and 

received OMB approval; 

Completed testing to determine the amount of improper payments for programs determined to be 

high risk. The results of these tests are shown in Appendix B of this report; 

Planned corrective actions and set targets to both reduce and recover improper payments. These plans 

were submitted to OMB for approval; and 

Completed a pilot recovery-auditing project at the Forest Service. Using an independent recovery 

audit contractor working on contingency, USDA was able to identify $333,000 in improper payments 

and has recovered $189,000 to date. 

For a detailed report on FY 2005 management actions, plans to address erroneous payments in progress and 

results of recovery auditing programs, see Appendix B. 

FAITH-BASED AND COMMUNITY INITIATIVE

This initiative strives to support the essential work of faith-based and community organizations. The initiative 

accomplishes this goal by ensuring that these organizations are allowed to compete on equal footing for 

Federal dollars, and educating them on grant opportunities. Agencies have already identified several barriers 

to participation in Federal programs and are working to eliminate them. They are increasing outreach and 

technical assistance to faith-based and community organizations. The agencies are also testing innovative 

ways to improve program services by engaging faith-based and community organizations in pilot projects. 

USDA has a long history of working with faith-based and community organizations to help those in need. The 

Department is strengthening these partnerships and creating new ones to alleviate hunger and build strong 

communities. 

USDA plans include: 

Ensuring that faith-based and community organizations have equal access to USDA programs; 

Educating these organizations about any programs designed to enhance their capacity to serve their 

communities; 
MANAGEMENT’S DISCUSSION AND ANALYSIS

USDA

F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 25 

Continuing to reduce barriers and encourage participation through improved coordination with State 

and local organizations; 

Seeking opportunities to meet the needs of communities through USDA programs; and 

Reporting on progress to ensure that USDA is producing real results for Americans in need. 

Actions taken by USDA in FY 2005 to achieve this result include: 

Coordinated outreach and technical assistance by developing comprehensive strategy using 12 best 

practices; 

Worked to ensure barrier-free access, including 7 of 14 best practices; 

Established procedures to collect data on participation by faith-based organizations and communitybased organizations in select programs available to the public; and 

Continued to manage 4 pilot programs to test new ways for faith-based organizations and 

community-based organizations to assist it meeting its program goals. The Department also reported 

outcome-based evaluations of these projects. 

FINANCIAL STATEMENT HIGHLIGHTS 

BUDGETARY RESOURCES AND OUTLAYS

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

Treasury Department. 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. 

Appropriations Received as reported in the Statement of Budgetary Resources differ from Appropriations 

Received as reported in the Statement of Changes in Net Position due to Special and Trust funds appropriated 

receipts. These are shown as Appropriations Received in the budgetary statement but are reported based on 

their nature, either as exchange revenue in the Statement of Net Cost, or non-exchange revenue or transfers in 

the Statement of Changes in Net Position. 

2005 2004 % Change 

Appropriations Received 88,940 94,316 (6)% 

Total Budgetary Resources 166,833 142,890 17% 

Obligations Incurred 140,835 117,809 20% 

Outlays 91,966 78,446 17% 

Data in millions 

Analysis of Resources 

Appropriations Received decreased by $5.4 billion during FY 2005. This decrease is due in part to the 

Commodity Credit Corporation (CCC) reduced appropriation in the current year of $9.5 billion for its prior 

year realized losses. 

The Food and Nutrition Service (FNS) reflected an increase in appropriations of $4.8 billion, 84% of the 

increase is attributable to growth in the Food Stamp Program, with 16% attributable to the Child Nutrition 

Programs for meal services and for higher food costs. 
MANAGEMENT’S DISCUSSION AND ANALYSIS

USDA

26 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Total Budgetary Resources increased during FY 2005 by $23.9 billion. $15 billion is attributable to the CCC 

established borrowing authority on its revolving fund. The fund is indefinite in nature and CCC estimates the 

authority that is needed to cover current fiscal year obligations. FNS contributed with $4.8 billion of increased 

resources with most of the remaining resources attributable to National Resources and Conservation Services 

(NRCS) Programs. 

Obligations and Outlays 

Obligations Incurred increased in FY 2005 by $23 billion. CCC and FNS Programs contributed 95% of the 

total increase. For CCC, Direct and Counter Cyclical, Crop Disaster and Loan Deficiency Program payment 

accounted for $16.5 billion of increased obligations. FNS’s obligations for the Food Stamp and Child 

Nutrition Programs accounted for $5.4 billion obligation increases. 

Outlay increases in FY 2005 amounted to $13.5 billion. These directly relate to the Program Obligations as 

described above. 

BALANCE SHEET AND NET COST OF OPERATIONS

Presented below are some key components of the USDA Balance Sheet for comparison and analysis. 

FY 2005 FY 2004

Fund Balance with Treasury 42,327 $ 39,488 $ 7 %

Loans Receivable & Related Foreclosed Property 75,176 73,841 2 %

General Property, Plant, and Equipment, Net 4,885 4,914 (1) %

Other 10,596 3,571 197 %

Total Assets 132,984 121,814 9 %

Debt 83,515 69,053 21 %

Loan Guarantee Liability 1,214 1,188 2 %

Other 46,277 36,589 26 %

Total Liabilities 131,006 106,830 23 %

Unexpended Appropriations 21,490 22,158 (3) %

Cumulative Results of Operations (19,512) (7,174) 172 %

Total Net Position 1,978 14,984 (87) %

Total Liabilities and Net Position $ 121,814 132,984 $ 9 %

% CHANGE

CONDENSED BALANCE SHEET DATA

As of September 30, 2005 and September 30, 2004

(in millions)

Assets 

Fund Balance with Treasury 

Congressional appropriations are the primary funding source for USDA operations. 

Appropriations are used to fund programs and are available to pay current liabilities and finance authorized 

purchase commitments. Funds received and disbursed are generally processed by the U.S. Treasury. 
MANAGEMENT’S DISCUSSION AND ANALYSIS

USDA

F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 27 

Loans Receivable and Related Foreclosed Property 

Loans Receivable and Related Foreclosed Property is the single largest asset on the USDA Balance Sheet. 

Rural Development offers both direct and guaranteed loan products for rural housing and rural business 

infrastructure. These represent 81% of the total USDA loan programs. Commodity Loans and Credit 

Programs administered by Commodity Credit Corporation (CCC) represent 11% of the total. 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 remaining 8% of loans receivable are the direct and guaranteed loan 

programs administered by the Farm Service Agency, providing support to farmers who are temporarily unable 

to obtain private, commercial credit. 

General Property, Plant and Equipment, Net (PP&E) 

Improvements to Land, which represent 48% of the net PP&E, consist primarily of forest road surface 

improvements. Building improvements and Other Structures represent an additional 25%. Other primary 

categories of PP&E include equipment and software. 

Other 

Accounts Receivable, Net represent 96% of total Other Assets and 7% are Intragovernmental Receivables. In 

fiscal year 2005, CCC recognized a public receivable in the amount of $7.1 billion under the Tobacco 

Transition Payment Program (TTPP). The receivable is recorded at the present value of the remaining 

expected receipts in the Tobacco Trust Fund over a ten-year period beginning in 2005 and ending in 2014. 

Liabilities 

Liabilities represent the amount of monies or other resources that are likely to be paid as a result of a 

transaction or event that has already occurred. However, no liability can be paid absent an appropriation. 

Where an appropriation has not been enacted, liabilities are considered not covered by budgetary resources. 

Debt-Intragovernmental 

CCC’s debt to Treasury increased by $11 billion over the prior fiscal year. Funds were used to repay prior 

year debt and cover current year obligations for the Direct and Counter Cyclical programs, Crop Disaster and 

Loan Deficiency programs. RD increased its debt to Treasury by $3.2 billion to fund Housing Loan activity. 

Loan Guarantee Liability 

USDA’s loan guarantee liability is affected by guaranteeing new loans, adjustments from loan activity (i.e. 

collecting fees, interest subsidies, claim payments), and the annual reestimate of loan costs. In fiscal 2005, the 

increased loan guarantee liability is primarily due to disbursing $3.9 billion in new loans, resulting in 

increased guarantee liability. 

Other 

Of the $46,276 and $36,588 million in other liabilities in Fiscal 2005 and 2004, respectively, $16,819 and 

$17,469 million, respectively, is payable to Treasury. The amount payable to Treasury represents the net 

resources of pre-Credit Reform programs that will be returned to Treasury after the collections of these loans. 

In addition, CCC recorded a long-term liability in the amount of $7.1 billion under the TTPP that provides for 
MANAGEMENT’S DISCUSSION AND ANALYSIS

USDA

28 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

ten installment payments at the present value of the remaining payout amount to holders and tobacco 

producers beginning in 2005 and ending in 2014. $2.7 billion were recorded for income support programs. 

Net Position 

The Net Position on the Balance Sheet represents on an accrual basis, the changes of the assets and liabilities 

during the year and the current year Net Cost of Operations. The decrease in Net Position by approximately 

$13 billion can be attributed primarily to the $17 billion of increased costs of operations and a net of $4 billion 

utilized from prior years results to cover current year operations. 

NET COST OF OPERATIONS

FY 2005 FY 2004 % Change

Enhance Economic Opportunities for Agricultural

Producers:

Net Cost of Goal 1 28,878 $ 16,604 $ 74 %

Support Increased Economic Opportunities and

Improved Quality of Life in Rural America:

Net Cost of Goal 2 1,014 2,113 (52) %

Enhance Protection and Safety of the Nation's

Agriculture and Food Supply:

Net Cost of Goal 3 2,441 2,415 1 %

Improve the Nation's Nutrition and Health:

Net Cost of Goal 4 50,987 45,411 12 %

Protect and Enhance the Nation's

Natural Resource Base and Environment:

Net Cost of Goal 5 7,693 7,479 3 %

Net Cost of Operations $ 74,022 91,013 $ 23 %

CONDENSED STATEMENT OF NET COST

USDA Net Cost of Operations totaled $91,013 million and $74,022 million for fiscal years 2005 and 2004, 

respectively. Grants and Direct Payments for CCC and Grant and Program Benefits for FNS represent the 

largest portion of USDA cost, with $78,731 million and $56,082 million in cost for 2005 and 2004, 

respectively. Grants and Direct Payments increased in fiscal 2005 primarily due to changes in CCC activity 

related to increases in payments for peanut quota buyouts, milk income loss contracts, direct and countercyclical programs, crop disaster assistance programs and the Food Stamps and Child and Nutrition Programs. 

The cost of Grants and Direct Payments for CCC directly correlates with the USDA goal to enhance economic 

opportunity for agricultural producers. For FNS, Grants and Program Benefit costs are associated with the 

goal to improve the Nation’s nutrition and health. 

Impact of Hurricane Katrina 

The devastation of Hurricane Katrina affected several states in the Gulf coast region. USDA agencies 

provided significant efforts to assist in this national disaster. 
MANAGEMENT’S DISCUSSION AND ANALYSIS

USDA

F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 29 

The FS committed approximately 7,000 employees to the Federal Emergency Management Agency (FEMA) 

hurricane effort, including 105 Incident Management Teams (IMT) and 345 crews. Crucial support was 

provided at the New Orleans International Airport—trained helicopter personnel off-loaded more than 500 

evacuees per hour and provided food to more than 600,000 people. An IMT opened 15 distribution points and 

served more than 10,000 people per day, providing nearly 3 million meals, 4 million gallons of water, and 40 

million pounds of ice. Many warehouses included around-the-clock distribution and processing of hundreds of 

truckloads per day, totaling nearly 7,500 semi-truckloads, using 500,000 gallons of fuel. 

RD placed almost 8,000 evacuees in homes and provided more than 18,000 families with temporary relief 

from their mortgage payments. RD also cooperated with private partners to restore utilities throughout the 

affected areas. 

APHIS was instrumental in rescuing 300 people and 40,000 animals. Many of the animals were treated by 

veterinarians, most were returned to their owners, and those remaining were placed in shelters operated by 

animal care organizations. 

NRCS used its National Cartography and Geospatial Center to help identify the best areas for animal debris 

disposal and burial that will not endanger water sources. FEMA provided authority and $10 million to NRCS 

for the disposal of hundreds of animal carcasses, including more than 6 million birds. 

The National Finance Center (NFC) in New Orleans was able to continue sending out paychecks to more than 

500,000 federal employees and continued to provide full accounting services to its numerous federal agency 

customers. Its operations were able to continue almost uninterrupted in spite of the fact that its 1,623 federal 

and contract employees were scattered across 41 states. Preliminary efforts are underway to bring employees 

home to the NFC. 

Evaluations of losses of USDA real properties have been completed and have revealed that losses were not 

significant enough to have a material impact on the USDA Consolidated Financial Statements. Assessments 

of the cost of the hurricane to USDA are continuing but also do not appear to affect the Consolidated 

Financial Statements. 

MANAGEMENT ACCOUNTABILITY AND CONTROL

USDA is providing qualified assurance of compliance with the objectives of the Federal Managers’ Financial 

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

Management Systems.” Not included in that assurance are the material deficiencies described in this report. 

Within USDA, subcabinet officials, agency administrators and staff office directors are responsible for the 

efficient operation of their programs and compliance with relevant laws. These executives also ensure that 

their financial management systems conform to applicable laws, standards, principles and related 

requirements. USDA’s goal was to eliminate the remaining material deficiencies by the end of FY 2006, and 

correct any new material deficiencies within one year. 
MANAGEMENT’S DISCUSSION AND ANALYSIS

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30 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

SUMMARY OF MATERIAL DEFICIENCIES

USDA completed corrective action on one of the three existing material deficiencies. Additionally, it is 

reporting one new material deficiency for FY 2005. USDA has reduced the number of existing material 

deficiencies from a high of 19 in FY 2002 to 3 in FY 2005. This is an 84 percent decrease in the number of 

outstanding material deficiencies reported 3 years ago. Additional information is found in the Systems, 

Controls, and Legal Compliance section. 

Exhibit 5: Summary of Outstanding Material Deficiencies and Estimated Completion Dates 

Responsible 

Agency(ies) 

Material 

Deficiency 

Description 

Corrective Actions 

Remaining To Be Taken 

Reason for 

Change in 

Estimated 

Completion Date 

Year 

Identified 

Current 

Estimated 

Completion

Date 

Section 2 Material Weakness 

Multiple Multi 00-01: USDA 

Information 

Security Weakness: 

Weaknesses have 

been identified in 

the Department’s 

ability to protect its 

assets from fraud, 

misuse and 

disruption. 

• OCIO will: Improve the 

quality and process for 

managing USDA 

information security 

vulnerabilities and actions; 

• Complete vulnerability 

assessments of all mission 

critical systems; 

• Continue to manage the 

USDA information 

survivability program to 

Extensive and 

wide-ranging 

weaknesses 

within USDA’s 

information 

security program 

have delayed 

completion. 

FY 2000 FY 2006 

 guide agencies in the 

development and testing of 

disaster recovery and 

business resumption plans 

for USDA’s highest priority 

mission critical systems; 

• Implement and maintain a 

robust Internet Protocol (IP) 

database that includes 

accurate, up-to-date 

contacts for each IP 

address; 

• Refine policy and issue new 

policy; and 

• Ensure that security 

management positions 

have the authority and 

cooperation of agency 

management to implement 

and manage security 

programs effectively. 

 

 • FS will: Improve controls 

over the PRCH system data 

access, input, and integrity 

and segregation of duties. 

 FY 2005 FY 2006 
MANAGEMENT’S DISCUSSION AND ANALYSIS

USDA

F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 31 

Responsible 

Agency(ies) 

Material 

Deficiency 

Description 

Corrective Actions 

Remaining To Be Taken 

Reason for 

Change in 

Estimated 

Completion Date 

Year 

Identified 

Current 

Estimated 

Completion

Date 

 • NRCS will: Document 

change control processes, 

software changes, and 

testing processes for the 

ProTracts System. Improve 

controls and documentation 

of change control for 

payment specifications. 

Reconcile Protracts 

appropriations, obligations 

and payments to FFIS. 

 FY 2005 FY 2006 

 • FSA/CCC will: Collaborate 

with OCIO to identify and 

implement additional 

improvements needed to 

improve the agency’s 

general control 

environment. 

 FY 2004 FY 2006 

Multiple Multiple 05-01: 

Improvement 

needed in financial 

accounting and 

reporting policies, 

practices and 

procedures* 

• FS will determine specific 

actions to be taken. 

N/A FY 2004 FY 2006 

• FSA/CCC will: Re-examine 

existing accrual policies 

and analytical procedures 

with regard to Federal 

accounting standards and 

CCC business practices, 

determine where 

improvements need to be 

made, and implement 

improvements. 

In light of their 

recent audit, FSA 

is planning 

comprehensive 

reengineering of 

business 

processes and 

systems to 

completely 

resolve the 

material nonconformance. 

Early in FY 2006, 

FSA will develop 

a detailed 

corrective action 

plan including 

compensating 

controls. 

FY 2004 FY 2006 

Section 4 Financial Management System Nonconformance 

FSA/CCC MW 04-01: 

Improvement 

Needed in Funds 

Control 

Mechanisms 

FSA/CCC will: 

• Document and evaluate 

current system of 

budgetary accounting 

controls, identify 

deficiencies and develop 

improved control 

processes; 

• Obtain training for staff, 

and implement 

organizational changes; 

In light of their 

recent audit, FSA 

is planning 

comprehensive 

reengineering of 

business 

processes and 

systems to 

completely 

resolve the 

material nonconformance. 

FY 2004 FY 2009 
MANAGEMENT’S DISCUSSION AND ANALYSIS

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32 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Responsible 

Agency(ies) 

Material 

Deficiency 

Description 

Corrective Actions 

Remaining To Be Taken 

Reason for 

Change in 

Estimated 

Completion Date 

Year 

Identified 

Current 

Estimated 

Completion

Date 

FSA/CCC 

(cont’d) 

• Identify compensating 

controls to address material 

weakness and ensure 

requirements are 

incorporated into the next 

generation of program 

feeder systems; and 

• Enhance usage of existing 

web services for funds 

control. 

Early in FY 2006, 

FSA will develop 

a detailed 

corrective action 

plan including 

compensating 

controls. 

 

* While deficiencies in this area were reported in FY 2004 financial statement audits, they did not give rise to a Departmental material 

weakness. 

CONCLUSION

We hope this overview of the Department helps inform all stakeholders of the significant efforts underway to 

enhance, through sound management practices, the performance of all USDA programs and the Department’s 

stewardship of the significant taxpayer dollars entrusted to it. Through the performance and accountability 

process, USDA has undertaken an intensive effort to link Departmental and program management to the only 

result that matters: the provision of valuable programs and services delivered in a high-quality, cost-effective 

way to the American people. While this section has focused on overall management efforts that encompass 

the Department as a whole, additional information on how these initiatives impact specific programs, agencies 

and USDA efforts can be found in the next section, the Annual Performance Report, which offers a detailed, 

objective-by-objective discussion of the progress USDA made in reaching its FY 2005 goals. 


USDA

F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 33 

II. Annual Performance Report 

The 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 2005 through such activities as: 

Providing farmers and ranchers with risk management and financial tools; 

Meeting with experts from around the globe to discuss current and new economic opportunities; 

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 Departmental implementation of nutrition assistance programs; 

Delivering targeted nutrition assistance to children and low-income people; 

Fostering better nutrition and health with dietary guidance and promotion; 

Completing new free trade agreements, opening new international markets and maintaining existing 

markets; 

Fighting potential pests 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. 

USDA’s public performance management reporting process includes: 

A strategic plan that contains the Department’s long-term goals and strategies (www.usda.gov); 

An annual performance budget that outlines year-to-year strategies and targets for achieving USDA’s 

long-term goals; and 

A performance and accountability report that illustrates to Congress and the American people how 

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

Most of USDA’s programs and activities are represented in specific performance goals and targets. The 

Department also conducts and supports a broad range of research, educational and statistical activities that 

contribute to the achievement of each of its overall goals. The creation of knowledge at the frontiers of 

biological, physical and social sciences, and the provision of that knowledge to agriculture, forestry, 

consumers and rural America are core processes for USDA. Accordingly, selected accomplishments in 

research are presented throughout this report. Additionally, the report describes the data used to measure 

performance. These descriptions cover any material inadequacies in the completeness, reliability and quality 

of the performance data. Also included is a brief reason for why the data are inadequate and the actions USDA 

is taking to remedy such inadequacies. The thresholds, or ranges, for determining year-end performance 

results are also identified in the report. These thresholds are identified by program managers and document 

the process for determining if a performance goal was exceeded, met or unmet. The program managers also 

provided the rationale used to establish the met range. 
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34 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

The report includes a list of programs that have undergone the Office of Management and Budget Program 

Assessment Rating Tool (PART). The PART identifies how well and efficiently a program is working and 

what specific actions can be taken to improve its performance. Other program evaluations, which discuss the 

achievements or conclusions from the completion of internal and other external assessments conducted during 

Fiscal Year (FY) 2005 related to the measures, are also included. Only Federal employees participated in the 

preparation of the performance information contained in the Annual Performance Report section. 

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 2005. 

STRATEGIC GOAL 1: ENHANCE ECONOMIC OPPORTUNITIES FOR 

AGRICULTURAL PRODUCERS

Expanding and maintaining global markets for agricultural products is critical for the long-term economic 

health and prosperity of our food and agricultural sector. U.S. farmers have a wealth of natural resources, 

cutting-edge technologies and a supporting infrastructure that result in a production capacity beyond domestic 

needs. Expanding and maintaining global markets will increase demand for agricultural products and 

contribute directly to economic stability and prosperity for America’s farmers. 

To expand overseas markets and facilitate trade, USDA assists in the negotiation of new U.S. trade 

agreements and the monitoring and enforcement of existing trade agreements. In cooperation with private 

sector producer and commodity trade associations, USDA conducts an array of market development and 

export promotion programs designed to build long-term markets overseas. The Department helps to expand 

market opportunities through programs of technical assistance and training that support economic 

development and growth in developing countries and assist them to participate and benefit from international 

trade. USDA works to facilitate trade through the adoption of science-based regulatory systems and standards. 

An economically 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, gain adequate 

capital, protect itself adequately against financial risk and adjust to changing market needs. Increasing the 

efficiency of the agricultural sector and developing new uses for agricultural products is critical to the 

economic health of the Nation; USDA supports farms and farmers in many ways. When natural disasters 

strike, USDA reacts quickly to help affected producers recover from their losses and restore their lands to 

prior productivity levels. The Department partners with commercial lenders to guarantee ownership and 

operating loans. It also makes direct loans to producers to finance operating expenses and farm ownership 

loans, and provides needed capital in times of emergency. USDA also provides for income stability to keep 

producers economically viable through economic safety net programs in the form of direct payments, 

marketing assistance loans and commodity support programs. USDA supports much-needed basic research to 

identify new uses and more efficient technology for producing and marketing agricultural products. 
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F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 35 

OBJECTIVE 1.1: EXPAND INTERNATIONAL MARKET OPPORTUNITIES

Exhibit 6: Resources Dedicated to Expand Alternative Markets for Agricultural Products and Activities 

FY 2005 

USDA Resources Dedicated to Objective 1.1 Actual Percent of Goal 1 

Program Obligations ($ Mil) 1,830.0 11.19% 

Staff Years 6,655 26.52% 

Introduction 

Expanding market opportunities through trade negotiations and maintaining market access by enforcing 

existing agreements to maintain market access are extremely beneficial to the U.S. economy. They create jobs 

for Americans throughout the agricultural production, processing and marketing process. USDA continues to 

make this a pillar of its economic enhancement plan. 

U.S. agricultural exports were forecast at $62 billion in FY 2005, only slightly lower than the record 

$62.4 billion set in FY 2004. This year, exports of horticultural products, pork and dairy products reached new 

records, supported in part by the lower value of the dollar and strong demand. With an export value of 

$14.5 billion, horticultural products consist of many kinds of fresh and processed fruits, vegetables and tree 

nuts. This year, almond exports account for nearly half the increase as prices rise in response to strong 

demand and limited supply. Offsetting gains in high-value products, the value of U.S. bulk commodity 

exports is lower due to record global supplies. These extra supplies reduced grain, oilseed and cotton prices, 

and lowered wheat export volume due to increased competition. U.S grain and feed exports are forecast at 

$15.8 billion in FY 2005, oilseeds and products are set at $11.1 billion, and cotton at $3.9 billion. 

FY 2006 U.S. agricultural exports are forecast at a record $63.5 billion. Exports of horticultural products are 

projected to rise $1.4 billion to a record $15.9 billion on higher unit values and volumes for many products. 

Predicted to rise $600 million exports of tree nuts (mostly almonds) again will account for nearly half the 

increase. Gains also are expected for exports of wine, essential oils, and highly processed fruit and vegetable 

products. Additionally, cotton exports are forecast to rise $600 million on higher unit values. While some 

increase in grain volumes exported is expected due to reduced competition, lower wheat prices limit any 

overall value increase for grains. The oilseeds outlook calls for little change in volume of soybean exports due 

to record demand from China. It also calls for weaker unit values with the expected rebound in Brazil’s crop. 

A competitive dollar and moderate global economic growth support export expansion. 

Overview 

The Department’s work with the World Trade Organization (WTO) is key in establishing international market 

opportunities for U.S. agricultural producers. WTO is a multilateral institution charged with administering 

rules for trade among its 145 member countries. While WTO did not meet its goal of achieving a “first 

approximation” of an agricultural text by the end of July 2005, trade ministers will meet again in Hong Kong 

this December. Work will continue through the fall in preparation for that meeting. The basic goals for which 

all participating countries will continue to work remain. These goals include eliminating export subsidies, 

reducing trade distortion and domestic support, and increasing market-access opportunities. A big step 
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36 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

toward increasing international marketing opportunities for U.S. agricultural producers took place 

August 2, 2005, with the passage of the Central American Free Trade Agreement (CAFTA-DR), a 

comprehensive trade agreement between the U.S., Costa Rica, the Dominican Republic, El Salvador, 

Guatemala, Honduras and Nicaragua. It is designed to give U.S. agricultural exporters the same or better 

access to CAFTA-DR consumers as their competitors, providing promising new opportunities in a regional 

market where domestic exports currently total nearly $1 billion. 

USDA also continues to work to create new export opportunities through other free trade agreements. In 

particular, the Department is focused on the forthcoming expiration of Trade Promotion Authority (TPA) in 

2007. The TPA is designed to put the U.S. in a strong position to lead the way in completing major new trade 

agreements that advance the global interests of domestic agriculture. 

Negotiating reductions in trade barriers to create opportunities is just the beginning for U.S. exporters. To help 

U.S. exporters capitalize on trade agreements, USDA actively works to ensure that market opportunities are 

maintained. This increases U.S. exporter confidence enabling them to take the risks associated with export 

sales. These sales depend on consistent and reliable market access. As more international trade agreements are 

concluded, additional Department resources for monitoring and compliance efforts are necessary. For 

example, WTO members submit more than 800 notifications of intent annually to alter or create new import 

requirements related to food safety or plant and animal health. USDA has worked aggressively to increase the 

notification rate for such new or revised standards so that it can halt or change restrictive measures before they 

take effect. Each notification must be evaluated for U.S. impacts and immediately addressed if domestic 

exports or export opportunities are affected negatively. The Department continues to work toward long-term 

solutions. Challenges include trade restrictions related to Bovine Spongiform Encephalopathy (BSE) and bioengineered crops. (BSE is a chronic degenerative disease affecting the central nervous system of cattle.) 

USDA also continues to monitor the impact of the North American Free Trade Agreement (NAFTA). NAFTA 

is a comprehensive trade-liberalization agreement among the U.S., Canada and Mexico. U.S. agricultural 

exports to its NAFTA partners continue to set new records. Canada remains the largest market with annual 

U.S. sales forecast at $10.5 billion in FY 2005. Free trade agreements (FTAs), which removed trade barriers 

and promoted a strong economy, propelled Canada past the European Union (EU-25) and Japan to become the 

U.S.’ top overseas market by the mid-1990s. Canada is a major market for U.S. fresh and processed fruits and 

vegetables, snack foods, juices, wine, and many other consumer-ready products. Forecast at $9 billion in FY 

2005, Mexico overtook Japan as the second-largest market. Trade with Mexico, like Canada, benefited from 

NAFTA because of the removal of trade barriers. Closely tied to the U.S. economy, Mexico has enjoyed 

strong economic growth, which strengthened domestic demand for international goods. While Mexico 

continues to be a good customer of coarse grains, cotton and wheat, higher-value consumer foods are 

increasingly important. Strong Mexican demand supports rising sales of U.S. pork, beef, poultry, fresh and 

processed fruits, and snack foods. 

U.S. agricultural exports to Japan are forecast at $7.6 billion, making it the third-largest market. An absence of 

new trade agreements to reduce Japan’s high tariffs and the country’s economic collapse in the 1990s, largely 

have halted U.S. export expansion to this country. About half of U.S. sales to Japan consist of bulk 

commodities, mainly coarse grains and soybeans. While most of the remaining sales are consumer-ready 
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F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 37 

foods, much of that is limited to beef and pork, although fruit and tree nut sales are noteworthy. Beef trade has 

recently been halted since the country imposed its BSE ban. 

EU-25 is now the fourth-largest market for U.S. agricultural products, with little change in total sales and 

estimated at $7 billion. EU-25 is a major market for soybeans and tobacco as well as tree nuts, especially 

almonds. Wine sales are also noteworthy because wine is among the top five U.S. agricultural exports to the 

EU-25. Opportunities remain limited in most other categories. Production subsidies keep domestic supplies 

high, and trade barriers limit market access. Expansion opportunities for U.S. agricultural exports to Europe 

have remained limited for many years. 

China has risen in recent years, now representing the fifth-largest market for agricultural products. After 

posting a record $6.1 billion in 2004, FY 2005 saw a drop to $5.4 billion. The decrease was attributed to lower 

soybean and cotton prices, as shipping volumes are expected to continue at higher levels. These numbers 

compare to $1.8 billion in FY 2002. China’s domestic supply-demand situation creates new opportunities to 

ship greater volumes of cotton, soybeans and wheat. Considerable progress has recently been made to reduce 

China’s trade barriers through its WTO membership. Those dividends will continue during the next several 

years. 

In terms of agricultural trade, China's first year of WTO membership in 2002 involved implementing 

regulations relating to biotechnology safety, testing and labeling. These rules, issued by China's Ministry of 

Agriculture shortly before the country's WTO accession, did not provide adequate time for scientific 

assessment and the issuance of final safety certificates for U.S. biotechnology products. Following concerted 

high-level pressure from USDA and other U.S. agencies, China agreed to issue temporary safety certificates. 

Additionally, in July 2005, China issued a final safety certificate for NK603 – the last biotech corn variety 

needing approval. 

Selected Results in Research, Extension and Statistics 

Enhanced Statistics to Understand the Impact of Hurricanes on Citrus—Officials added Florida citrus 

forecasts to the November Crop Production Report because of several hurricanes moving through the State 

during August and September 2005. Citrus forecasts typically are excluded from the November Crop 

Production Report. 

Enhanced Understanding of Producer Response to Soybean Rust—Due to the discovery of Asian 

soybean rust in the U.S., speculation rose on how growers would react to the fast-spreading, yield-reducing 

disease. Thus, USDA included related questions in its March Agricultural Survey for the 31 soybeanproducing States. The survey provided information on farmers’ awareness of Asian soybean rust and how its 

discovery has affected their planting decisions for the 2005 crop. Prospective Plantings published the results 

of the survey. 

Global Markets for High Value Foods—Understanding the myriad factors that affect the choice of 

locations to produce and sell food products shows the competitiveness of U.S. agriculture in global markets. 

Two new reports—New Directions in Global Food Markets and Market Access for High-Value Foods—show 

how food trade patterns are influenced by the changing nature of competition in the global food industry. Key 

factors include shifting consumer preferences, the growth in multinational food retailers and changes in global 

supply chains. Consumer-driven changes increasingly are pushing food suppliers to meet consumer demand 
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38 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

and preferences locally. These moves occur even as the food industry becomes more global. For more 

information on high-value food markets, including data on trade and international investment, visit 

www.ers.usda.gov. 

Market Analysis and Outlook—USDA continues to work closely with the World Agricultural Outlook 

Board (WAOB) to provide short- and long-term projections of U.S. and world agricultural production, 

consumption and trade. WAOB reviews and approves USDA's commodity and farm-sector forecasts. Several 

initiatives have increased the exposure and accessibility of the data and analysis. This exposure occurred 

through the documentation of business rules and models used in the forecasting process. The report 

Forecasting the Counter-Cyclical Payment Rate for U.S. Corn: An Application of the Futures Price 

Forecasting Model offered details on this process and an associated data product that covers the three major 

field crops of corn, soybeans and wheat. Another initiative documented key aspects of wheat market analysis. 

Fruit Fly Control Techniques Show Promise—A USDA program called the Hawaii Area-Wide Fruit 

Fly Integrated Pest Management Program could open export markets for the State’s diverse array of tropical 

fruits. Under the program, USDA teamed up with the Hawaii Department of Agriculture and the University of 

Hawaii to create techniques to control medfly, melon fly, Malaysian fruit fly and oriental fruit fly, and help 

Hawaiian farmers implement them. Hawaiian farmers who have adopted the integrated pest management plan 

have cut chemical pesticide use by 75 to 95 percent and are growing crops they had once given up on because 

of fruit fly damage. California, Florida and Texas are monitoring the program's ability to control fruit flies. 

While keeping medfly out of California has cost the State nearly $500 million during the past 25 years, it 

could lose more than $1.4 billion annually if the pests established themselves there. California would suffer 

losses from lost markets, export sanctions, treatment costs and reduced crop yields. 

Enhanced Statistics on Non-Ambulatory Cattle—USDA, in cooperation with the National Animal 

Health Monitoring System (NAHMS), conducted the second phase of a two-year survey effort to study nonambulatory cattle on U.S. farms. NAHMS collects, analyzes and disseminates data on animal health, 

management and productivity across the U.S. This survey, coordinated with USDA’s January 2005 Cattle 

Inventory Survey, provided statistical services such as questionnaire development, data collection, keying and 

editing, and summarization. In May 2005, USDA published figures on non-ambulatory cattle and calves in the 

U.S. by region, based on data collected in January 2004 and 2005. 

Strengthening Access to Agricultural Resource Management Survey—The Agricultural Resource 

Management Survey (ARMS), USDA’s annual, national survey of farms, is the primary source of information 

about the financial condition, production practices, use of resources and economic well-being of America’s 

farmers and farm households. ARMS provides a powerful data source to provide direct answers to key 

questions from USDA policy officials, Congress and other decision-makers within and outside the Federal 

Government. The Department continued expanding access through outreach activities to researchers at U.S. 

universities and agency staff. An increased sample starting in 2004 allows ARMS survey information about 

farm production, business and households to include detailed data for 15 top farming States. In FY 2005, 

public access to summarized ARMS data improved greatly. USDA presented ARMS data in a dynamic, 

technologically advanced and easy-to-use web-based delivery tool. Users can select among survey data sets to 

build custom reports, refine queries with specific samples/populations, and group summary statistics for 
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F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 39 

comparisons. Advanced statistical analysis is available to registered users for additional statistical analysis and 

economic modeling. 

Challenges for the Future 

The next few years present exciting challenges for the Department. USDA can increase export opportunities 

for the U.S. by reaching agreement in the WTO on new rules for agricultural trade while working toward 

additional FTAs. New WTO trade rules will 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 counties. In these countries, the food and 

agriculture sector is the dominant economic driver. They are also the singular focus in establishing a stable 

social environment and a sustainable market infrastructure. Additional FTAs will address country- or regionspecific market-access issues, immediately enhancing trade. USDA will continue to monitor implementation 

of agreements. 

U.S. export opportunities will increase in large and important export markets and emerging markets. This 

increase could push total U.S. agricultural exports to record levels in the next few years. U.S. meat, grains, 

soybeans, cotton and especially value-added, consumer-ready products will benefit from expanding export 

sales. On the U.S. import side, consumers are expected to continue their interest in high-value, internationally 

produced agricultural products. Additionally, developing countries will want more access to U.S. markets. 

This new access will allow them to improve their own food standards as they learn to compete in the 

international marketplace. USDA also recognizes that its international trading partners have concerns about 

how the Department addresses their market-access goals. Among those concerns is the lengthy rulemaking 

process—from risk assessment to final rule—that opens the domestic market to international commodities. 

USDA is looking to improve its processes to ensure it can continue to meet its international obligations as 

more and more countries seek to enter the global agricultural trading system. 

Key Outcome: Improved International Market Opportunities 

USDA works closely with the Office of the U.S. Trade Representative (USTR) and other Government 

agencies to pursue new trade agreements and enforce the provisions of existing agreements. These agreements 

include technical regulations and measures designed to enhance food safety and protect plant and animal 

health. 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. 

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 and individuals with high-level training and education 

in economics, marketing and technical fields such as plant pathology and veterinary science. 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 

international decision makers. They also help support U.S.-based technical experts who develop science-based 

protocols and health certification procedures for exporting all U.S. food and agricultural products. 
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40 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Exhibit 7: Increase U.S. Market Opportunities 

Fiscal Year 2005 

Annual Performance Goals and Indicators Target Actual Result 

1.1.1 Dollar value of trade preserved through USDA staff 

interventions and trade agreement monitoring ($ Mil) 

$2,500 $2,800 Exceeded 

Analysis of Results 

USDA exceeded its performance goal by $300 million. This was accomplished by trade opportunities 

preserved through monitoring and compliance enforcement, overseas advocacy services, negotiations of 

technical protocols, and trade negotiations. Contributing to the performance was a delay in implementation of 

certain aspects of EU-25’s new regulations on wood-packaging material. The regulations would have 

impacted tens of billions of dollars in U.S. commercial trade and caused an estimated $1 billion in short-term 

damage to U.S. food and agricultural trade. USDA estimates that roughly half, or $80 billion, of commercial 

goods annually are shipped on wood pallets or another wood-packaging material. None of this material meets 

the proposed EU-25 standards because we have no certification process in place to ensure that the pallets are 

made from wood that was debarked. Also contributing to the performance was the reopening of many markets 

that had been closed following the discovery of BSE in Washington State in December 2003. USDA projected 

a target of $2.5 billion in trade access and opportunities preserved in FY 2005. 

The number of trade maintenance issues and their potential impact on U.S. exports depends primarily on 

foreign governmental action, sometimes in response to such events in the U.S. as a livestock disease outbreak. 

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 in the country in question. The impact of any given action can range from a few thousand dollars to 

billions of dollars. While USDA can use the list of outstanding concerns to help guide work priorities and set 

annual goals, a portion of the goal recognizes that additional events likely will occur that require immediate 

regrouping and realigning of staff and work priorities. 

USDA’s selection of this performance measure demonstrates the critical role that trade monitoring and 

compliance enforcement play in protecting U.S. exporter opportunities to capture sales as an outcome of 

successful negotiations. As the U.S. Government continues to negotiate new bilateral, regional and 

multilateral trade agreements, the challenge will be to monitor and enforce compliance effectively. This 

monitoring will ensure that U.S. agriculture receives full benefits from negotiated reductions in tariff and nontariff barriers. 

The exact value of new markets opened through trade agreements is difficult to determine using traditional 

economic models. In a new market, there is little quantifiable data to estimate how consumer demand will 

react to import opportunities. 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. An estimate of export 

opportunities can only be made after a few years of observing international demand and growth rates. 

Assuring market access is critical to stable free trade. From year to year, the number of trade issues and their 

potential impact on U.S. exports depends on international reaction to such issues as biotechnology, plant and 

livestock diseases, pests, pesticides and sanitation. 
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F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 41 

Exhibit 8: Expand and Retain Market Access 

Fiscal Year 2005 

Trends 2001 2002 2003 2004 2005 

Dollar value of trade preserved through USDA 

staff interventions and trade agreement monitoring 

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

$1,329 $1.327 $2,713 $3,950 $2,8001

1

Result based on projected estimate. See the Data Assessment of Performance Measures section for more information. 

The figures themselves reflect the uncertainty of trade disruptions. In FY 2005, the bans on U.S. beef and 

bovine products due to the potential threat of BSE have proven to be challenging barriers. Through diligent 

monitoring and resolution of trade disputes, USDA has made remarkable and consistent progress in expanding 

and retaining sales of U.S. agricultural products that likely would have been lost. The hard work of USDA’s 

domestic and overseas field offices is a critical part of this process. The Department’s work with other Federal 

and State agencies, and its private-sector partners made this achievement possible. Next steps include 

completion of the Doha Round agriculture negotiations, various bilateral and regional FTAs, reopening 

markets closed due to BSE and continuing to monitor and enforce compliance on many trade disruptions 

affecting U.S. agriculture. (The Doha Round refers to negotiations designed to improve market access for 

agricultural products.) 

OBJECTIVE 1.2: SUPPORT INTERNATIONAL ECONOMIC DEVELOPMENT AND TRADE 

CAPACITY BUILDING

Exhibit 9: Resources Dedicated to Support International Economic Development and Trade Capacity 

Building 

FY 2005 

USDA Resources Dedicated to Objective 1.2 Actual Percent of Goal 1 

Program Obligations ($ Mil) 3,140.0 5.73% 

Staff Years 1,364 5.44% 

Introduction 

The ultimate goal for supporting developing countries is to help them become economically stable and 

capable of supporting their populations with jobs, affordable food and other basic necessities. USDA 

participates in this effort with food aid and trade and development programs. USDA helps provide these 

services along with other Federal agencies, such as the U.S. Agency for International Development (USAID). 

USAID is an independent agency that provides economic, development and humanitarian assistance around 

the world in support of U.S. international policy goals. USDA technical assistance and training play a vital 

role in helping these 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 includes market information, agricultural grades and standards, 

and the refrigeration methods used in transporting perishable agricultural items. The assistance also helps 

increase capacity to purchase U.S. exports. In combination with food aid that covers gaps in supplies and 

keeps the population healthy, USDA deploys its unique resources and expertise in agricultural- 
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42 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

development activities. This process helps advance market-based policies and institutions, sustainable 

agricultural systems, and 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 

harmonization of regulatory frameworks. Other priorities include reducing hunger and malnutrition with 

sustainable, productivity-enhancing technologies and supporting agricultural reconstruction in post-conflict or 

post-disaster areas. 

A primary focus for USDA food aid in developing countries is school children and their mothers. The 

McGovern-Dole International Food for Education and Child Nutrition Program (FFE) provides for the 

donation of U.S. agricultural commodities and associated financial and technical assistance for pre-school and 

school-feeding programs in developing countries. The program also authorizes maternal, infant and childnutrition programs. Its purpose is to support a healthy future 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. 

Overview 

Like their international counterparts, Americans want a world where all countries are stabilized through 

economic development and trade capacity building. The 2002 National Security Strategy of the United States 

recognizes that the root of any threat to the U.S. is the lack of economic development. This deficiency often 

results in economic and political instability. For most developing countries, a productive and sustainable 

agricultural sector bolsters economic well-being. Thus, agricultural development is crucial to U.S. national 

security strategy. In developing and transitioning economies, USDA focuses on: 

Trade and investment liberalization to stimulate job and income growth; 

Research and education to raise agricultural productivity, with applications of science and 

technology, including biotechnology, to boost food availability; 

Institution building to support sustainable agriculture, market infrastructure, and the development of 

market-information systems to support production and marketing decisions; and 

Food assistance to support social stability and enhance the health of current and future workers. 

A recent example of this is USDA technical assistance to U.S. Central American Free Trade Agreement 

(CAFTA-DR) partners in trade capacity building. In 2005, the six countries – Costa Rica, El Salvador, 

Guatemala, Honduras, Nicaragua and the Dominican Republic – agreed to accept exports of U.S. meat and 

poultry products by using science-based information to make decisions. Costa Rica and Nicaragua received 

training in U.S. food safety and meat inspection requirements and passed USDA audits for exporting meat to 

the U.S. As a condition of market access, the Department audits the meat inspection programs of U.S. trading 

partners annually. These audits are designed to verify that these countries maintain food safety standards and 

inspection programs equivalent to those of the U.S. The audit’s passage allows each country to export meat 

products to the U.S. The Department also engaged CAFTA-DR countries to improve their regional 

institutional capacity for data collection and statistical surveys related to agricultural and production 

information, agricultural prices and rural incomes. Access to timely and accurate agricultural statistics will 
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help producers, exporters and importers better identify opportunities to expand trade in international markets 

opened by CAFTA-DR. 

Selected Results in Research, Extension and Statistics 

Marketing Plan to Export, Plant, Monitor and Evaluate Seed Potatoes in China—China 

is the largest producer and user of potatoes in the world, growing approximately 50 million tons 

annually. While almost 3 million tons of seed potatoes are needed per year to achieve this level of 

production, the Chinese have banned the importation of new seed potatoes for more than 17 years. 

Recently, China has had a significant potato disease problem. In 2003, it authorized the importation 

of “certified” seed potato from the U.S. Alaska and Washington are two of the few States that meet 

the strict new phytosanitary conditions required for Chinese approval of seed potato importation 

from the U.S. Approval will require developing a marketing plan for introducing and evaluating new 

“certified” disease-free seed potatoes, or minitubers, in China. Following a preliminary evaluation of 

U.S. seed potatoes planted in northeast China in 2004 and 2005, several potatoes will be submitted 

for a "Provincial Variety Evaluation Program" in those provinces where the U.S. could be 

competitive. The sale of U.S. seed potatoes could occur in 2008 if officials approve the formal 

Provincial Variety Evaluations. 

China in 21st Century Agricultural Markets—China is one of the top 10 markets for U.S. 

agricultural exports and is the world’s largest producer and consumer of a range of commodities. 

USDA continues to investigate how policy and economic developments in China affect global 

agricultural markets. The report, China’s New Farm Subsidies, considers the implications of a shift 

in China's policy in 2004. At that time, China had begun to assist, instead of tax, agriculture. This 

move reflected a new view of agriculture as a sector needing assistance. China introduced direct 

subsidies to farmers, repealed its centuries-old agricultural tax, helped producers with seed and 

machinery purchases, and increased spending on rural infrastructure. While the subsidies are targeted 

at grain producers, they do not provide strong incentives to increase such production. 

Challenges for the Future 

Unfortunately, significant food needs continue to limit food security and economic development in many 

countries. USDA works closely with the World Food Program (WFP) and private voluntary relief 

organizations to ensure that the U.S. commitment to alleviating global hunger and malnutrition remains 

strong. WFP offers food aid to natural disaster victims, displaced victims and the world’s hungry and poor. 

USDA’s trade-capacity building efforts are aimed at helping developing countries participate in negotiations, 

implement agreements and connect trade liberalization to a program for reform and growth. Helping these 

countries achieve sustainable economic development and capacity to trade helps build future growth markets 

for the U.S. 

Key Outcome: Economic Development Enhanced through the Provisions of Foreign Food 

Assistance 

More than 800 million people worldwide suffer from hunger and malnutrition—most of them children. These 

children are the basis for a sustainable economic future. In many countries, children represent most of the 

population. A healthy and educated young population is necessary to advance economic development, food 
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44 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

security and a stable social structure. Activities aimed at market-capacity building for both domestic and 

international trade are enhanced by, and in turn support, these basic requirements for a sustainable economic 

infrastructure. 

The U.S. is the world’s leader in international food aid, providing more than 50 percent of total worldwide 

food assistance to combat this challenge. U.S. food-aid programs are a joint effort across several Federal 

Departments. USDA works with USAID, non-profit organizations and American universities to provide 

targeted food-aid support and related assistance where it is needed the most. 

These activities, combined with USDA technical assistance and training, foster a stable society, economic 

growth, and market infrastructure development. These potential gains augment recipient countries’ ability to 

boost domestic production. In turn, their dependence on food aid is reduced. The activities also allow recipient 

countries to build sound economic policies that support sustainable development and participation in global 

agricultural trade. 

Exhibit 10: Support Foreign Food Assistance 

Fiscal Year 2005 

Annual Performance Goals and Indicators Target Actual Result 

1.2.1 Number of mothers, infants and schoolchildren receiving daily meals 

and take-home rations through McGovern-Dole International Food 

for Education and Child Nutrition Program (Mil) 

2.2 2.98 Exceeded 

Analysis of Results 

The performance goal was exceeded. FFE promotes school enrollment and attendance, contributing to an 

educated workforce and economic growth and development. FFE is unique in that its primary goal of 

increasing school attendance can be measured with confidence. In FY 2004, 2 million meals were distributed 

to school children and mothers daily on a $50 million budget. In FY 2005, the funding level increased to 

$86.8 million. The increased funding, lower commodity prices and greater emphasis on the direct feeding of 

children allowed USDA and its partners to increase the meals-per-day distribution.

Exhibit 11: McGovern-Dole International Food for Education and Child Nutrition Program 

Fiscal Year Actual 

Trends 2001 2002 2003 2004 2005 

Improve food security and nutrition through McGovernDole International Food for Education and Child Nutrition 

Program by providing daily meals and take-home rations 

for mothers, infants and school children (Mil) 

N/A N/A 2.5 2.0 2.98

An extensive operational and results survey is conducted by every private voluntary organization participating 

in the delivery of food aid through FFE. A thorough review and evaluation of the survey by USDA will cover 

the progress, results and challenges faced by the participating food distributors. The survey will be used to 

develop a strategy to address challenges to effective food distribution and barriers to better results. 
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OBJECTIVE 1.3: EXPAND ALTERNATIVE MARKETS FOR AGRICULTURAL PRODUCTS

Exhibit 12: Resources Dedicated to Expand Alternative Markets for Agriculture Products and Activities 

FY 2005 

USDA Resources Dedicated to Objective 1.3 Actual 

Percent of 

Goal 1 

Program Obligations ($ Mil) 5075.1 9.26% 

Staff Years 3,589 14.30% 

Introduction 

The Farm Security and Rural Investment Act of 2002 (FSRIA) provided new opportunities for USDA to 

foster the development and production of bioenergy (commercial fuel grade ethanol and biodiesel) through the 

Bioenergy Program. This program encourages the production of renewable energy and lessens U.S. 

dependence on foreign oil. At the same time, it supports market prices for commodities used in bioenergy 

production, which assists farmers, ranchers and rural communities. Commodity Credit Corporation (CCC) 

Charter Act authority is also used by the Bioenergy Program to make payments for biodiesel production. This 

support has been critical in sustaining the developing biodiesel industry. CCC is a Government-owned and 

operated entity created to stabilize, support, and protect farm income and prices. 

FSRIA authorized the Federal Biobased Products Preferred Procurement Program (FB4P) program for the 

preferred procurement of biobased products by Federal agencies. A final rule establishing the operational 

guidelines for FB4P was published in the Federal Register in mid-FY 2005. The first of a continuing series of 

rules to designate generic groupings of biobased products for preferred procurement became available as a 

proposed rule for public comment in late FY 2005. Rulemaking to designate generic groupings of biobased 

products for preferred procurement will continue for a number of years as rapidly as the statutory data 

requirements to support designation can be developed. A proposed rule to establish a voluntary labeling 

program for biobased products is expected to be available for public comment in early FY 2006 with a final 

rule in place by late FY 2006. 

FB4P is expected to significantly increase the use of biobased products within the Federal Government. This 

increased usage, in turn, will encourage production of biobased products for that market. 

FSRIA is also designed to increase public awareness about the benefits of using biobased products. FSRIA 

authorizes loans, loan guarantees and grants to farmers, ranchers and rural small businesses to purchase 

renewable energy systems and make energy efficiency improvements. Farmers across the country are being 

introduced to a new energy source and given the opportunity to join this new venture. 

Overview 

The Bioenergy Program stimulates industrial consumption of agricultural commodities by promoting their use 

in bioenergy production. The increased use of these commodities supports demand and prices in the areas 

around the facilities. The bioenergy plants can also have a significant financial impact in the communities 

where they are located, including creating new, and supporting existing, jobs. 
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USDA’s programs are designed to: 

Develop alternative markets for agricultural products; 

Stimulate new sources of demand that will benefit farmers by increasing economic activity and job 

opportunities in rural America; 

Create a portfolio of more environmentally friendly products; and 

Enhance the energy security of the U.S. by reducing dependence on imported energy. 

FB4P increases the demand for processing facilities in rural areas. It also boosts the demand for biomass 

material from agricultural, marine and forest sources. Currently, USDA is working to fully implement the 

program. Once implemented, the aforementioned benefits will be realized. 

Selected Results in Research, Extension and Statistics 

Organic Produce Development—With partial funding from USDA, Cornell University developed a 

network of plant trial and breeding sites throughout the country. The move was designed to foster organic 

product development with public sector, individual and company cooperators. The exchange of genetic 

materials has been intensified. Thus, more diverse material is being assessed more widely for superior 

performance in organic systems. 

Pork Quality and the Role of Market Organization—A number of developments have captured the 

attention of the pork industry. One issue centers on health concerns and the corresponding preferences for lean 

pork. Another is the growing incidence of undesirable quality attributes, such as pale and soft meat, resulting 

from breeding for leanness. A USDA study found that organizational arrangements that influenced pork 

quality negatively, such as contracts between packers and producers, can also facilitate industry efforts to 

address quality and other concerns. These arrangements include reducing measuring costs, controlling 

difficult-to-measure quality attributes, facilitating adaptations to changing quality standards and reducing 

transaction costs associated with relationship-specific investments in branding programs. 

New Commercial Uses for Poultry Feathers—A patent application for a process to convert cleaned and 

chopped feather material into plastic products—on a laboratory scale—has been filed. This process would 

make possible new uses for some of the nearly 4 billion pounds of poultry feathers generated annually in the 

U.S. The feather-based plastic can be made on traditional processing equipment and molded just like any 

other plastic. Feather-derived plastic would be a unique material for packaging or any other application where 

high strength and biodegradability are desired. Feather-based plastics would help solve an environmental 

problem and increase the commercial and economic value of a natural renewable polymer resource—feathers. 

Improved Understanding of Glucosinolates Potentially Benefiting Plants and People—The 

July 2005 edition of The Plant Journal featured a cover story on USDA-supported research funded through 

the National Research Initiative (NRI). NRI funds research on key problems of national and regional 

importance in biological, environmental, physical and social sciences relevant to agriculture, food and the 

environment on a peer-reviewed, competitive basis. The aforementioned University of California-Davis 

research related to the production of glucosinolates by such crops as broccoli, cauliflower, cabbage and 

Brussels sprouts. For humans, the glucosinolates in these crops appear to help prevent cancer. In plants, the 

glucosinolates help protect them from pathogen attack. The research showed that plants with larger amounts 
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of glucosinolates were more resistant to insect damage. This research may lead to a better understanding of 

how plants defend themselves against insects and other pathogens. It may also lead to the development of new 

crop varieties with increased glucosinolate content. The content could improve plant resistance to pathogens 

and provide better nutritional value for human diets. 

Serving the Public 

Through the Bioenergy Program, producers receive payments to offset part of their cost of buying 

commodities used to expand eligible bioenergy (commercial fuel grade ethanol and biodiesel) production. 

Increased bioenergy production helps strengthen the income of soybean, corn and other producers. It also 

lessens U.S. dependence on traditional energy sources. Additionally, bioenergy products support rural 

communities through the jobs created and maintained by the production facilities. 

FB4P serves the agricultural sector, rural communities and their residents, and the broader U.S. economy. 

Farmers and ranchers benefit from increased demand for their products and new crops used as feedstocks in 

biobased-product production. Rural communities and their residents benefit from the new investment in 

handling and processing facilities used in the production of these commodities. New jobs in rural communities 

related to biobased handling and processing create new economic vigor and bring opportunities to the families 

living there. 

Challenges for the Future 

The challenges to future success are: 

The development of an infrastructure to support the efficient and economically viable development 

of biobased products; 

Informing rural America about the benefits of biodiesel fuel use and helping farmers transition to a 

new style of operating; 

The continued need for public policies supporting the development and use of biobased products; 

The need for public education about the environmental, performance and energy-security benefits of 

using biobased products, and more effectively managing the carbon cycle; 

The development and valuation of measures that identify and assess the benefits that come from 

increased use 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 for testing and evaluation of biobased content, environmental 

attributes and life-cycle costs that will be 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 their voluntarily posting their 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. Without that cooperation, it will be difficult for the agencies to learn of the 

availability of biobased products. 
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In response to these challenges, USDA is creating regulations and operating procedures for the Bioenergy 

Program and the FB4P. The Department is also developing 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. The USDA’s Office of Procurement and Property Management will announce the model 

procurement program once USDA agencies have implemented the model. If successful, this model 

procurement program will make an important contribution toward creating market-based opportunities to 

produce and consume increased amounts of biobased products. 

Exhibit 13: Increase the Use of Biobased Products

Fiscal Year 2005 

Annual Performance Goals and Indicators Target Actual Result 

1.3.1 Number of groups of biobased products designated for 

procurement 

4 Deferred Deferred 

Analysis of Results 

The performance goal was partially met. USDA published the final rule implementing the FB4P guidelines 

January 11, 2005. 

The statute creating this preferred procurement program specifies that “items” will be designated for preferred 

procurement for this program through a process of regulatory rulemaking. “Items” are generic groupings of 

biobased products. For example, such a generic grouping could be “biobased hydraulic fluids for mobile use.” 

This grouping would include all biobased products in the market intended for that use. Another example could 

be “janitorial cleaners,” which would include all biobased products used in janitorial cleaning applications. 

“Items” can include several dozens of individual branded products. 

USDA has identified more than 100 generic groupings of biobased products for potential designation. The 

items in the FY 2005 target that the Department designated for rulemaking were selected based on the 

availability of test data and other information. That availability was based upon the level of cooperation from 

manufacturers and vendors of products that fell within these items. The manufacturers and vendors provided 

test material and other product information to USDA to support its designation rulemaking. 

Manufacturer and vendor cooperation is crucial in developing the information required to support designation. 

Once items are designated and Federal agencies begin to purchase biobased products that fall within the 

designated generic groupings, USDA anticipates that manufacturers and vendors will become increasingly 

interested in cooperating with the Department to develop the information necessary for designation of 

additional groupings. As more groupings are designated and the benefits of preferred procurement 

demonstrated, USDA expects Federal agencies to increase their purchases of biobased products substantially. 

The Department also anticipates even stronger cooperation from manufacturers and vendors as they see this 

program’s value. 

Since FY 2004 was the first year of the program’s implementation, USDA will use performance information 

from both that year and FY 2005 in determining a baseline. 
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Exhibit 14: Biobased Products Performance 

Fiscal Year Actual 

Trends 2001 2002 2003 2004 2005 

Number of groups of biobased products 

designated for procurement 

N/A Authorized 

in FSRIA 

Developmental 

stage 

Developmental 

stage 

0 

USDA has made substantial progress in establishing the regulatory framework necessary for operating the 

preferred procurement program. It has also created the necessary electronic information system to provide a 

timely and efficient communication mechanism. Federal agencies can use the system to learn which biobased 

products are available. It will also provide them with information on qualifying for preferred procurement and 

contacting the manufacturers and vendors of those products. Manufacturers and vendors whose products are 

classified as “items” designated for preferred procurement by regulatory rulemaking will be invited to post 

product and contact information on the web-based information system, which will be the primary source of 

information on the identity and availability of biobased products for Federal agencies required to purchase 

such products. This system is also expected to be used by the general public to gather information on the 

availability and identity of biobased products. This will facilitate broader use of such products. 

In FY 2006, manufacturers and vendors will begin to reap the benefits of the program as measured in 

increased sales of biobased products to Federal agencies. Voluntary cooperation by manufacturers and 

vendors with the Office of Energy Policy and New Uses (OEPNU) in gathering the information needed to 

designate generic groupings of biobased products by rulemaking remains a challenge. Another challenge is 

providing information on those products to USDA’s electronic information system to determine how quickly 

the program grows. (OEPNU assists the Secretary of Agriculture in developing USDA’s energy policy and 

coordinating its energy programs and strategies.) 

USDA is undertaking a substantial outreach effort to manufacturers and vendors of biobased products to help 

them assess the benefits of the program and develop the needed cooperation. The Department has entered into 

a cooperative agreement with Iowa State University to identify biobased products, manufacturers and vendors. 

The agreement also seeks their cooperation in developing data and other product information needed for the 

designation of groupings by rulemaking. In turn, Iowa State University has developed cooperative 

relationships with the Biobased Manufacturers Association, the United Soybean Board, the National Corn 

Growers Association, the National Biodiesel Board, the Renewable Fuels Association and USDA’s Forest 

Products Laboratory. These relationships are designed to identify biobased products and manufacturers and 

vendors of those products. USDA is increasing its efforts to test selected biobased products to support 

designation by rulemaking of these products. 
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Description of Actions and Schedules 

USDA published Guidelines for Designating Biobased Products for Federal Procurement on January 11, 

2005. The first regulation to designate items was published in the Federal Register as a proposed rule for 

public comment on July 5, 2005. It is expected that the first designation rule will be published as a final rule 

by the end of calendar 2006. 

OBJECTIVE 1.4: PROVIDE RISK MANAGEMENT AND FINANCIAL TOOLS TO FARMERS AND 

RANCHERS

Exhibit 15: Resources Dedicated to Providing Risk Management and Financial Tools to Farmers and 

Ranchers 

FY 2005 

USDA Resources Dedicated to Objective 1.4 Actual Percent of Goal 1 

Program Obligations ($ Mil) 44,714.5 81.60% 

Staff Years 13,487 53.74% 

Introduction 

Agricultural producers face severe economic losses annually due to such unavoidable causes as low prices 

and/or reduced yield due to drought, excessive moisture, natural disasters and insects. The agricultural 

production sector is characterized by small profit margins and ever-changing cycles of good and bad 

production years. USDA provides and supports cost-effective means of managing risk for agricultural 

producers. This assistance is designed to improve the economic stability of agriculture by developing a variety 

of risk management tools and continuing to assess producers’ needs. These tools range from yield-based 

insurance products that protect individual crops against loss of yield and/or price reduction to whole farm 

products that protect the producer’s entire farming operation against loss. Providing risk management tools to 

farmers and ranchers helps them protect their livelihood in times of disasters or other uncontrollable 

conditions. 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. 

Preserving the economic stability of farms and ranches is critical for protecting the Nation’s agricultural 

industry. USDA programs support the financial viability of the Nation’s farmers and ranchers. They provide a 

financial “safety net” that helps ensure productive and viable farms and ranches. USDA’s loan assistance and 

income support and disaster assistance programs work to ensure that food and fiber producers receive the 

financial assistance and support necessary to maintain and grow their businesses. 

USDA strives to improve its program delivery structure by ensuring fair and equitable services to all of its 

customers. This includes all beginning, socially disadvantaged and limited-resource farmers. Departmental 

activities aimed at preventing civil rights program complaints will minimize associated risk, ensure equal 

access to financial tools and enhance economic opportunities. 
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Overview 

The USDA Federal Crop Insurance Program provides an actuarially sound risk management program to 

reduce agricultural producers’ economic losses due to unavoidable causes. Recently, USDA has seen dramatic 

growth in this program. In FY 2005, the Department insured 48.7 million acres more than it did in 1999, and 

approximately 16 percent or 39.2 million acres more than it did 5 years ago. 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. 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 administrative and operating expenses associated with the companies delivering the insurance products. 

FCIC is a wholly-owned Government corporation created in 1936 to provide for the Nationwide expansion of 

a comprehensive crop insurance program. 

In 2005, USDA renegotiated SRA. These changes are estimated to generate average annual Government 

savings of $37 million. They also promote policy sales in less profitable areas and reduce program fraud, 

waste and abuse. During 2005, the number of participating companies increased, bringing the total to 16. 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 $44.2 billion in FY 2005. 

Producers also have access to a number of USDA farm income support programs that bring much needed 

economic stability to the agricultural sector. Assistance is provided through direct payments, which are based 

on historical planting and yields. These payments are not tied to the production of specific crops and countercyclical income support payments based on market prices in relation to target prices. Marketing assistance 

loans provide producers interim financing at harvest time. These loans help producers meet their cash flow 

needs without having to sell their commodities at harvest time when prices are low. With adequate financing, 

producers store their production at harvest. These loans facilitate orderly marketing of commodities 

throughout the year. In FY 2004, USDA issued approximately 430,000 marketing assistance loans valued at 

more than $9 billion. 

Additionally, to ensure the effectiveness of its credit programs, it is important for USDA to provide timely 

financial resources and other assistance to borrowers when a need arises. Therefore, USDA plans to continue 

to reduce processing times for loan requests each year. The Department will also continue to closely monitor 

the delinquency and loss rates of the direct loan portfolio. Borrower ability to pay installment debt on time is a 

strong indicator of financial strength and viability. Reduced losses in the program indicate that borrowers are 

experiencing greater success in meeting their financial obligations. 

Selected Results in Research, Extension and Statistics 

The Message is Being Heard—A priority for USDA is providing science-based information, knowledge 

and education to farmers to help facilitate their risk management. A recent evaluation study shows that the 
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farmers are using this information regularly. Results of the study Evaluating an Integrated Educational 

Program for Producers in Wyoming, South Dakota, North Dakota and Montana indicate that producers who 

participated in the workshops evaluated their actual operational risk and risk management and operational 

plans after attending a USDA-supported workshop. Producers further indicated that reducing costs, adopting 

new technology and crop insurance are their top priorities. 

Agricultural Contracting and the Scale of Production—Agricultural contracting occurs when farmers 

receive income from contracts. Changes in U.S. farm structure can have potentially wide-ranging impacts on 

the distribution of Government benefits and the sector’s responses to supply and demand shocks and policy 

initiatives. While several major, long-term and familiar trends have characterized structural change in farming 

since the 1930s, the last two decades have witnessed an important evolution in the nature of such change. 

Recent changes in farm structure are detailed in the USDA paper, Agricultural Contracting and the Scale of 

Productions. The growth of contracting has had important implications for the structure of the farm sector. 

The paper presents evidence that contracting is associated positively with the scale of production. In other 

words, contract production tends to be at a larger scale than its independent counterpart and that larger-scale 

producers are more likely to contract than smaller-scale ones. 

Serving the Public 

Agricultural producers are exposed to both production and price risks daily. They can benefit from crop 

insurance to protect themselves against these economic risks. USDA is a leader in helping producers ease the 

effects of these risks on farm income. The Department promotes the use of crop insurance and other risk 

management tools. Federal crop insurance offers producers various types of insurance coverage and other 

tools to protect against crop and revenue loss. 

USDA also offers direct and guaranteed farm ownership and operating loans to family-sized farmers and 

ranchers who cannot obtain commercial credit from a bank, farm credit system institution or other lender. 

Department loans can be used to purchase land, livestock, equipment, feed, seed and supplies. The loans also 

can be used to construct buildings or make farm improvements. These loans particularly are important to 

beginning, minority and women farmers whose limited cash flow may preclude them from qualifying for a 

commercial loan. 

USDA’s commodity programs continue to be a testament to the country’s commitment to maintaining a 

balanced food and fiber industry for its consumers. The assistance made available under these programs helps 

stabilize American farming and ranching operations. This assistance enables farmers and ranchers to reduce 

their risk of financial loss due to inclement weather or unfavorable global market conditions. 

Direct and counter cyclical payments reduce financial risks and help producers meet their cash flow needs. 

Marketing-assistance loans provide producers interim financing at harvest time to meet cash flow needs 

without having to sell their commodities when market prices are at harvest time lows. Enabling producers to 

store production at harvest facilitates more effective commodity marketing throughout the year. 

USDA is working continuously to ensure the public knows about all of its programs and services. The 

efficient processing of civil rights program complaints will decrease lawsuits, reduce civil rights complaints, 

decrease delays and lower costs to the Department. These reductions will assist in achieving the goal of 

ensuring that USDA provides fair and equitable services and benefits to all of its customers. 
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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 existing product data needs. This technology also 

services new or revised products. USDA is researching how to deliver more products suited for a diverse 

agriculture and cover specialty crops with unique agronomic and economic characteristics. This research 

includes 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 

risk-management delivery of products to ensure their effective delivery to agricultural producers. To further 

contribute to the producers’ ability to protect their financial stability, USDA will continue to provide 

education, outreach and 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 as 

crop production reaches these areas. It also occurs by developing new types of coverage, such as for livestock, 

pasture, forage, rangeland, 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 can help producers protect themselves from yield and/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, USDA is currently evaluating contracts for 

the development of new and very innovative risk management solutions for insuring pasture, rangeland, 

forage and hay. They include developing a new plan for pasture, rangeland and dryland hay using a dual index 

consisting of such tools as a satellite-based vegetative index and a proxy crop, and a Temperature Constrained 

Normalized Difference Vegetation Index. This index uses data derived from satellite-based remote sensing 

imagery that will describe the seasonal growth dynamics of vegetation for target areas. One such toll is a 

Seasonal Growth Constrained Rainfall Index, which uses a weighted warm season/cool season indexing 

period and the National Oceanic and Atmospheric Administration rainfall data system. Another one is the 

Precipitation Index, which bases itself on a weighted average amount of precipitation during a particular time 

period. The FCIC Board will determine which of these approaches meet the criteria for effective risk 

management coverage. Then the board will approve, modify or reject each approach for pilot testing in 

specific areas. 

USDA consistently reviews its farm loan program activities to assess the effectiveness and impact of its 

programs. The availability of funds for financial assistance and the local and national economies impacts the 

efficient delivery of services. Training, human-capital planning and organizational efficiencies are also 

contributing factors. Farm loan program challenges include ensuring a highly trained staff, assisting farmers 

during economic distress and natural disasters, and offering credit to eligible buyers unable to obtain it from 

other sources. 

One Farm Loan Program challenge is a lack of customer focus at the service-delivery point. USDA will 

improve technical assistance and education, and provide workshops for farmers, farming-related associations 

and civil rights organizations with an interest in farming and agriculture. These targeted, multi-agency efforts 
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will provide greater awareness of USDA program availability and inform its customers of participation 

requirements. 

Key Outcome: Improve Economic Viability of Beginning and Socially Disadvantaged Farmers 

and Ranchers 

While the future of farming in America depends on the continued entry by new operators and owners, the 

agricultural census reveals that there are fewer young farmers today than in the past. The census also shows 

that the number of new entrants into farming has fallen over time. To help offset this trend and encourage new 

entrants to farming, USDA targets a portion of its lending each year to beginning farmers. Beginning farmers 

are defined as those who have not operated a farm or ranch for more than 10 years, and who participate 

substantially in the operation of a farm or ranch. USDA credit assistance is particularly vital to beginning 

farmers as they tend to have smaller operations and lower equity levels. This limits their ability to obtain 

commercial credit. 

Similarly, USDA also targets its lending to socially disadvantaged farmers. Socially disadvantaged farmers 

are members of a group who have been subjected to racial, ethnic or gender prejudice. Socially disadvantaged 

farmers are more likely to have smaller farming operations, lower average incomes and a limited asset base. 

As a result, they are less likely than other farmers to qualify for credit from commercial sources. 

Farm loan programs provide support to family farmers and ranchers who otherwise would be unable to 

contribute to the agricultural sector. Assistance is offered through the Direct Loan and Guaranteed Loan 

Programs. Through the Direct Loan Program, USDA makes and services farm operating and ownership loans, 

and provides customers credit counseling and loan supervision to improve their chances in realizing 

successful farming operations. The Guaranteed Loan Program provides agricultural lenders with up to a 95-

percent guarantee of the principal loan amount for farm operating and ownership loans. The lender is 

responsible for servicing a borrower's account for the life of the loan. All loans must meet certain qualifying 

criteria to be eligible for guarantees. USDA has the right and responsibility to monitor the lender's servicing 

activities. 

Exhibit 16: Providing Credit Assistance 

Fiscal Year 2005 

Annual Performance Goals and Indicators Target Actual Result 

1.4.1 Increase the percentage of beginning farmers, racial and ethnic 

minority farmers, and women farmers financed by USDA.1

35.5% 46% Exceeded 

1.4.2 Reduce average processing time for direct loans (# of days) 40 35 Exceeded 

1.4.3 Reduce average processing time for guaranteed loans (# of days) 14 14.5 Met 

1 Data reported are proxy, which reflects the percentage of loans to beginning and socially disadvantaged farmers/ranchers. 

Analysis of Results 

USDA exceeded its performance targets for lending to beginning and socially disadvantaged farmers, and for 

loan-processing timeliness. In FY 2005, 46 percent of direct and guaranteed farm loans were provided to 

beginning and socially disadvantage farmers, a 6 percent increase from FY 2004. In all, 12,751 farm loans 

totaling $1.27 billion were issued to these groups. Loan proceeds are used to acquire, enlarge or improve a 
ANNUAL PERFORMANCE REPORT 

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F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 55 

farm (farm ownership loans) or provide short- to intermediate-term production or chattel financing (farm 

operating loans). As the preceding table indicates, USDA has dramatically increased the amount of credit 

assistance provided to beginning and socially disadvantaged farmers and ranchers since FY 2000. 

As indicated above, the data reported for lending to beginning and socially disadvantaged farmers is a proxy 

measure. Beginning in FY 2006, USDA will be measuring the “percentage of beginning farmers, racial and 

ethnic minority farmers, and women financed by USDA.” This measure, developed as part of the 

Department’s recent strategic planning initiative, is a better indicator of success in meeting the needs of these 

traditionally underserved groups. Currently, USDA is establishing the measurement parameters for this 

performance measure. Once that task is completed, baseline data and targets for future performance will be 

established. 

Improvements in loan-processing timeliness can be attributed to many factors. One is the comprehensive 

streamlining of the Guaranteed Loan Program, completed in 2001. This effort essentially reinvented the 

program. The work done now is less dependent upon USDA processes and more dependent on the normal 

business practices of lenders participating in the program. Additionally, USDA created a Preferred Lender 

Program that continues to yield positive results. The program was established to reward experienced 

agricultural lenders by streamlining and adding flexibility to loan-application and servicing requirements. It 

also expedites loan approval and other USDA decisions and allows lenders to originate and service guaranteed 

loans the way they do other loans in their portfolio. Thus, guaranteed loan processing times continued to drop 

in FY 2005, averaging 14.5 days, a 27.5 percent reduction from the FY 2000 baseline. 

The average time to process a direct loan also continued to decline, decreasing from 46 days in FY 2000 to 

35 days in FY 2005. During FY 2005, USDA continued its comprehensive streamlining initiative for Direct 

Loan Program regulations, handbooks and information collections. This ongoing streamlining effort will 

result in a significantly reduced burden for both applicants and USDA. It will also contribute to the continued 

improvement in loan-processing efficiencies. 

In FY 2005, USDA implemented Web Equity Manager, a commercially available financial analysis system 

widely used throughout the agricultural-lending sector. Known internally as the Farm Business Plan, the webbased farm planning software is used to develop business plans and manage loan portfolios. The Farm 

Business Plan changed the way USDA had operated for more than 50 years. The plan provides improved 

borrower information, allowing the Department to measure and monitor the financial status of borrowers, 

perform more in-depth portfolio analysis and focus resources on problem areas. Currently, the system is being 

used for the Direct Loan Program. Plans include making the system available to lenders participating in the 

Guaranteed Loan Program and eventually providing customers with direct system access. 
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56 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Exhibit 17: Performance Trends: Lending to beginning, racial and ethnic minorities, and women farmers and 

timeliness of loan processing 

Fiscal Year Actual 

Trends 2001 2002 2003 2004 2005 

Increase the percentage of beginning farmers, racial 

and ethnic minority farmers, and women farmers 

financed by USDA. Baseline: 2000 = 27% 

30% 33% 34% 40% 46% 

Reduce average processing time for direct loans 

(# of days) Baseline: 2000 = 46 

44 41 43 37 35 

Reduce average processing time for guaranteed 

loans (# of days) Baseline: 2000 = 20 

18 15 15 14 14.5 

Implementing these projects allows USDA to focus more resources on providing the technical assistance, 

services, monitoring and oversight essential to supporting high-risk beginning and socially disadvantaged 

farmers. USDA helps customers identify problems and develop solutions. This leads to lower loan 

delinquencies and reduced losses, and assists USDA in accomplishing its objective of improving the 

economic viability of farmers. 

Key Outcome: Increased Value of Risk Protection Provided to Agricultural Producers through 

FCIC-Sponsored Insurance 

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 FCIC-sponsored 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. 

FCIC consists of many public and private risk management alternatives designed to improve the economic 

stability of agriculture. The long-term agricultural producers’ ability to supply U.S. and global food-related 

markets depends on their ability to manage financial and natural risks associated with production. FCIC 

promotes the availability of a sound system of crop insurance for American agricultural producers. FCICsponsored insurance provides assistance in managing this risk. Private sector insurance companies sell and 

service these policies. FCIC develops and/or approves the premium rates, administers premium and expense 

subsidies, approves and supports products, and reinsures a portion of the companies’ risk. Contracts or 

partnerships are used for research and development of new and innovative insurance products. They also 

provide the means for the research and experience helpful in devising and establishing such a system. Private 

entities also may submit unsolicited proposals for insurance products to the FCIC for approval. During 2005: 

USDA completed its rulemaking process to allow approved insurance providers to offer premium 

discounts to farmers corresponding to demonstrated efficiencies in delivering crop insurance known 

as Premium Reduction Plans. In July, USDA issued an interim final rule based on comments 

received on the proposed rule issued earlier this year. Additionally, USDA issued a final rule 

establishing guidelines for submission of crop insurance policies, plans of insurance and premium 

rates to the FCIC Board under section 508(h) of the Act. The rule specifies procedures for submitting 

proposals and requesting reimbursement for research development and maintenance costs for 

products. It also outlines the approval process; 
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F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 57 

USDA finalized the Nursery Crop Insurance Provisions to provide coverage for plants in containers 

equal to or greater than one inch in diameter, provide separate basic units by share for all coverage 

levels and basic units by plant type when additional coverage is purchased, permit the insured to 

select one coverage level for each plant type basic unit when additional coverage is purchased, allow 

increases to the Plant Inventory Value Report up to 30 days before the end of the crop year, allow 

acceptance of an application for insurance for any current crop year up to 30 days before the end of 

the crop year, change the starting and ending dates for the crop year, and make other policy changes 

to improve coverage of nursery plants. The Department also finalized the Nursery Peak Inventory 

Endorsement to augment changes made in the Nursery Crop Provisions and allow growers of highpriced plants and species to be fully covered; 

USDA awarded two contracts for the development of new and innovative approaches to mitigate 

declines in yield guarantees following successive years of low yields. Multiple years of low yields in 

some drought-affected areas have an impact on producers’ actual production history (APH). The 

APH is often used to determine insurance coverage levels. New procedures developed under these 

contracts must mitigate this impact while maintaining the actuarial soundness and integrity of the 

crop insurance program; 

Asian soybean rust is a fungal disease that can defoliate plants quickly and reduce pod set, pod fill, 

seed quality and yield. To ensure that farmers know their rights and responsibilities, USDA 

augmented the information insurance providers are required to provide to farmers through their 

agents. The Department has met with commodity groups and crop insurance providers, their 

associations, and agent organizations to discuss the issue. These meetings allow USDA to clarify all 

necessary good farming practices; 

The FCIC Board of Directors voted to approve the conversion of the chile pepper dollar pilot 

program to a permanent APH regulatory program, discontinue processing cucumber and winter 

squash dollar pilot programs, and continue 12 other pilot programs. The board also approved 

expansion of the Group Risk Income Protection (GRIP) to cotton, wheat, and grain sorghum. GRIP is 

an area-based revenue insurance product that pays the insured in the event that the county pre-acre 

falls below the insured’s “trigger revenue.” (Trigger revenue is determined by multiplying the 

expected county yield by the greater of the expected price or the harvest price and by the coverage 

level percentage of the insured.) The board also expanded coverage to additional areas of corn and 

soybeans, incorporated the Harvest Revenue Option into current and future GRIP plans, extended the 

Adjusted Gross Revenue (AGR)-Lite to Virginia, and extended the Livestock Risk Protection Plan 

for cattle, swine, feeder and fed cattle to Montana; 

USDA updated its Written Agreement Handbook to strengthen underwriting requirements and meet 

legislative mandates. A written agreement is one between the insurance provider and the insured that 

allows coverage for areas where the program generally is not offered or alters designated terms of 

additional coverage authorized for the insured crop; 

USDA announced the awarding of $19.8 million in risk management partnership agreements. The 

Targeted States Program delivered crop insurance education to producers in 15 historically 

underserved States. Specialty crop, livestock, nursery, and horticulture producers benefited from the 

41 education partnership agreements for commodity partnership programs. Fifty-nine competitively 
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58 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

awarded partnerships with community-based, educational, and non-profit organizations assisted in 

providing risk management information to women, limited resource, and other traditionally 

underserved farmers and ranchers. USDA also awarded 12 research partnerships for the research and 

development of new non-insurance risk management tools; 

USDA has established procedures to participate in the review of loss determinations for claims that 

are likely to exceed $500,000. This authority, established in the 2005 SRA and 2005 Livestock Price 

Reinsurance Agreement, is a significant new function that promotes program integrity and prevents 

fraud, waste, and abuse; and 

The obligation of a product to follow “Good Farming Practices” has long been part of the Federal 

crop insurance policy. The Federal Crop Insurance Act (7U.S.C. 1501 et seq.) prohibits crop 

insurance from covering losses due to the failure to follow good farming practices. USDA 

established procedures for the insurance providers to make objective and scientifically sound good 

farming practice decisions and for the producer to seek reconsideration of those decisions from 

USDA. 

USDA continues to assess producers’ needs and private risk-management tools to ensure that new and 

innovative alternatives are available. 

Exhibit 18: Expand Use of Risk Management Tools 

Fiscal Year 2005 

Annual Performance Goals and Indicators Target Actual Result 

1.4.4 Increase the value of risk protection provided to agriculture 

producers through FCIC-sponsored insurance ($ Bil) 

$40.0 $44.2 Exceeded 

As of October 3, 2005 

Analysis of Results 

USDA exceeded its target by $4.2 billion. During FY 2005, the economic risk of American agricultural 

producers was reduced by approximately $44.2 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 FY 1999, the 

value has increased by approximately $13.3 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. 

Exhibit 19: Providing Risk Management and Financial Tools to Farmers and Ranchers 

Fiscal Year Actual 

Trends 2001 2002 2003 2004 2005 

Increase the value of risk protection provided to 

agriculture producers through FCIC-sponsored 

insurance. ($ Bil) Baseline: 1999 = $30.9 

$36.7 $37.3 $40.6 $46.7 $44.2 
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F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 59 

USDA has enhanced the value of risk protection significantly through FCIC-sponsored insurance since FY 

2000. The Department continues to work closely with insurance providers that market and provide full service 

on crop insurance policies. It 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. 

STRATEGIC GOAL 2: SUPPORT INCREASED ECONOMIC 

OPPORTUNITIES AND IMPROVED QUALITY OF LIFE IN RURAL 

AMERICA

Rural America, home to one-fifth of the Nation’s population, is a collage of people and economic activities. 

Today, seven out of eight rural counties are dominated by varying mixes of manufacturing, services and other 

non-farming activities. Of the 60 million people who live in rural America, only 2 million are engaged 

directly in production agriculture. While farm income is an important source of revenue for some rural 

families, most rural residents are not dependent on agriculture. Many family farmers rely on local, off-farm 

employment to supplement their farm income. 

A diversity of other enterprises, including renewable energy and “place”-based opportunities, such as support 

services for agriculture, forestry, mining, recreation, and manufacturing, provide many of the jobs and income 

in rural America. USDA enhances economic opportunities and quality of life for rural residents by helping to 

provide financial and technical assistance for business and industry, water and waste disposal, community 

facilities, advanced telecommunications and broadband infrastructure, electric utilities, and housing. The 

Department helps to ensure that rural residents have equal opportunity to share in the Nation’s prosperity and 

technological advancement. 

USDA facilitates the achievement of Presidential initiatives by encouraging, for example, minority 

homeownership and the production of renewable energy. The Department will continue to work with other 

Federal agencies, State and local governments, and private-sector interests to achieve a coordinated effort for 

the realization of Presidential initiatives as well as other activities important to rural America. 

OBJECTIVE 2.1: EXPAND ECONOMIC OPPORTUNITIES THROUGH USDA FINANCING OF 

BUSINESSES

Exhibit 20: Resources Dedicated to Support Expanding Economic Opportunities Through Financing of 

Businesses 

FY 2005 

USDA Resources Dedicated to Objective 2.1 Actual Percent of Goal 2 

Program Obligations ($ Mil) 7,186.6 44.21% 

Staff Years 2,836 35.32% 
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60 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Introduction 

Financing of businesses led to the creation or saving of 73,617 jobs in FY 2005. As a result, economic 

opportunities for rural communities have expanded. 

Overview 

USDA focuses on expanding economic opportunities in rural areas. With USDA assistance, traditional rural 

economies are transforming themselves and participating in new opportunities in mechanization, 

hybridization, biotechnology and world markets. Rural areas have an enormous competitive advantage in 

abundant land, clean environment and a highly motivated workforce. Thanks to modern technology and 

transportation systems, the traditional barriers of communication, time, distance and rural isolation are 

crumbling. The Department’s investments in rural communities are multi-faceted and include: 

Guarantees of bank loans to rural businesses; 

Loan guarantees and grants to develop energy savings and alternative energy sources;

Capitalizing revolving funds that assist rural businesses;

Grants to develop business infrastructure, such as industrial parks and incubators, and feasibility 

studies; 

Grants for business planning, public transportation and re-training;

Technical assistance to help communities develop their own strategies for economic development;

Economic research and technical assistance that enable agricultural cooperatives to enhance their 

management skills and business operations; 

Grants to create new enterprises based on value-added products; and

Grants to rural cooperative development centers to help rural residents explore new business 

opportunities.

USDA programs help create and save jobs in rural America. USDA administers several programs designed to 

support businesses in rural communities. The Business and Industry (B&I) Guaranteed Loan Program can 

help a rural business get needed credit by guaranteeing as much as 90 percent of a business loan made by a 

commercial lender. Loan proceeds may be used for working capital, machinery and equipment, buildings and 

real estate, and certain types of debt refinancing. B&I expands the lending capacity of private lenders in rural 

communities. Typically local lenders are small banks with limited lending authority under banking laws. The 

guarantee allows these lenders to make larger loans and avoid a “concentration of credit” problem. With the 

guarantee, lenders can make, sell and service quality loans that provide lasting community benefits. 

Businesses in rural communities tend to buy local goods and services and boost employment. This investment 

stimulates the economy. The B&I program represents a true private-public partnership in rural communities. 

The Farm Security and Rural Investment Act of 2002 (FSRIA) calls for USDA to make loan guarantees and 

grants to agricultural producers and rural small businesses. These guarantees and grants are used to purchase 

and install renewable energy systems and energy efficiency improvements in rural areas. FSRIA is designed 

to help rural small businesses reduce energy costs and consumption, and help meet the Nation’s critical 

energy needs. In Washington State, funds were used to install an Anaerobic Digester to convert manure from 
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F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 61 

1,500 cattle on 5 dairy farms into methane gas. The methane produced is used to fire a generator to provide 

electrical power for a portion of the dairy’s needs. The excess energy is sold to the local utility, providing 

additional income to the participating farmers. Additional benefits include a reduction in greenhouse gases, a 

reduction in surface and subsurface water contamination and odors, and the production of marketable byproducts including soil amendments and bedding materials. 

USDA also provides loans to establish revolving loan programs for public bodies, Indian tribes and not-forprofit organizations. These revolving loan programs are capitalized by 1 percent loans from USDA. Revolving 

loan funds provide financing to help develop small or emerging private business enterprises in rural areas for 

land acquisition, working capital, building renovation, new construction, new equipment and equipment 

upgrading. This program helps the beginning entrepreneur and the small business by providing low-cost loans, 

usually coupled with mentoring. As these loans are repaid, additional local businesses can borrow. Grants 

permit local fire departments to pay for improved equipment, communications and training. 

Through its value-added grant program, USDA assists agricultural commodity producers in adding value to 

their products by allowing them to capture a greater percentage of the consumer’s food dollar. A cooperative 

of dairy producers in Iowa and Minnesota did just that. They developed a variety of natural rind blue cheese 

that tied for first place in the American Cheese Society’s 2004 national contest. As a result of the quality of 

their products, the cooperative’s production plant now uses more than 5,000 pounds of milk that it purchases 

from cooperative members daily. Not only has the plant provided employment for 20 members of the 

community, it has enabled the cooperative families to preserve a way of life they enjoy. Value-added grants 

may be used for planning purposes, such as feasibility studies or business plans, or to establish working 

capital accounts to pay salaries and the other eligible expenses of starting a new business. 

USDA also invests in rural America’s most important resources – its people. USDA has a long-term strategy 

of providing technical advice and assistance, developing educational material, collecting statistics, and 

conducting applied economic research that enhances rural entrepreneurs’ abilities, strengthens economies and 

create job opportunities. By investing in America’s rural human capital, USDA is helping to develop 

community leaders that will make our rural towns economically robust in today’s global marketplace. 

Selected Results in Research, Extension and Statistics 

Linking Community Development and Sustainable Agriculture—With USDA seed money, the 

Southern Rural Development Center (SRDC) and the Southern-Region Sustainable Agriculture Research and 

Education Program (SARE) developed the Sustainable Communities Grants Competitive Program. SRDC 

seeks to support research activities at the Nation’s historically black colleges and universities. SARE provides 

grants and information to improve profitability, stewardship and quality of life. The program blends 

agriculture, community and economic development. Through their joint grants program, SRDC and SARE 

fund projects that link community development with sustainable agriculture in the South. The groups also 

work to improve the understanding of the benefits of such linkages. During the past year, this program has 

enabled Northern Louisiana farmers, community leaders and agriculture and community development 

technical assistance providers to develop local markets for produce. These groups have also been able to 

promote value-added activities to grow the local economy and have helped coastal Alabama communities to 

address farmland preservation issues. In Appalachia, a community college is teaching farmers what students 

and faculty have learned about raising trout, crawfish and tilapia by using water from abandoned coal mines. 
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62 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

In Kentucky, farm women are improving their policymaking skills so that they may participate more in local 

resource management. 

Improved Decision-making for Civic and Government Organizations—To help local, often 

volunteer, land-use decision makers with partial funding from USDA, Michigan State University developed 

the Citizen Planner Program. The seven-week, non-credit course leads to an optional certificate of 

competency. The curriculum was developed in partnership with the Michigan Society of Planning. Since 

2001, more than 2,000 citizens and elected officials representing 76 Michigan counties have learned about the 

tools available to conserve land while allowing community growth and development. Nearly two-thirds (64 

percent) of participants serve on local planning and zoning boards. They indicated that they paid closer 

attention to legal issues after attending the program. 

Rural Entrepreneurship Initiatives—With partial funding from USDA, Cornell University and the 

University of Vermont partnered to support start-up food companies. In its fifth year of operation, the 

Northeast Center for Food Entrepreneurship (NECFE) continues to provide comprehensive assistance to 

business owners in the Northeast. NECFE offers direct counseling and educational programs. To date, the 

center has helped entrepreneurs commercialize more than 2,200 food products. Based on a follow-up survey, 

the partners estimate that 806 full-time jobs were created by new businesses and 7,836 existing jobs continue 

to be supported by established businesses. Ninety-four percent of clients expressed satisfaction with the direct 

assistance received. Additionally, 65 percent reported that NECFE’s services contributed to the success of 

their businesses. 

Enhanced Statistics on Farming Demographics—In February, USDA issued the report Operators by 

Race. The publication combined the relevant 1997 and 2002 principal operator counts into one publication. 

Operators by Race marked the first documented information on operators who indicated that they were of 

more than one race in the agriculture census. USDA also released Women Principal Operators in March. 

The Agricultural Atlas, also released by USDA in March, provides graphic representation of data collected for 

the Census of Agriculture. A variety of maps illustrate agriculture trends and shifts across the U.S. down to 

the county level. The atlas is available at www.nass.usda.gov/research/atlas02. In June, a new interactive 

mapping tool became available. Data users now can customize maps using various data items from the 2002 

Census of Agriculture. For more information, visit www.nass.usda.gov/census. 

Trade and Rural Areas—American farmers produce raw farm products well in excess of domestic 

demand. Because processing these excess products could yield additional income and jobs, rural planners 

have viewed the food-export market as a potential base for rural development. Despite its logical appeal, it has 

been difficult to demonstrate the strength of this potential development effect for rural areas. A USDA study 

of the growth in U.S. meat exports in the last two decades suggested reasons for this difficulty. The 

researchers show that, while the U.S. has long had an apparent comparative advantage in meat production, the 

growth in meat exports resulted from changes that affected the cost of production and the demand for meat 

and the impact of new public policy. Most, if not all, of these changes were outside the control of rural 

development policymakers. 
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F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 63 

Challenges for the Future 

Rural economies face different challenges than urban and suburban areas. These challenges include: 

Historic dependence on natural resources, mostly commodities, which are subject to cyclical trends; 

Low profit margins on commodity sales; 

Large-scale changes in technology and the resulting efficiency gains in these industries; and 

Their inaccessibility and low-density populations. 

Additionally, rural areas typically are caught in a cycle of underdeveloped public services that make it 

difficult to attract or retain businesses. Education, health care and entertainment typically are only marginally 

acceptable. Every rural area has its unique concerns. 

Key Outcome: Enhance Capital Formation for Rural Communities 

Many rural communities are challenged by declining economies due to a combination of factors. These factors 

include transitioning away from traditional economic bases, efficient and competitive access to input or 

product markets, outmoded labor force skills, and rising international competition. USDA seeks to address 

these circumstances by expanding economic opportunities in rural areas through the stimulation of capital 

investment. The variety of investment strategies used includes guarantees of bank loans to rural businesses 

and capitalizing local revolving loan funds that assist these businesses. The Department also offers guarantees 

on bank loans, business planning grants and grants to foster energy savings, develop rural cooperative 

business ventures and add value to agriculturally produced commodities. The resulting enhanced capital 

formation is linked directly to the USDA goal of expanding economic opportunities. 

In many rural communities, farm families seek part-time and seasonal work to supplement on-farm income. 

USDA programs support skill development (marketing, finance) and small financial incentives to lenders who 

help broaden and stimulate local employment. Job growth and employment in rural communities lag behind 

that of urban areas. According to 2001 figures, while rural communities account for about 20 percent of the 

Nation’s population, they represent only 18 percent of all jobs in the U.S. 

Physical conditions and credit terms in rural areas are inferior to those in metropolitan and urban areas. For 

example, rural banks are smaller and bank regulations impose more restrictive lending limits (size of loans 

and concentration of industry) than larger urban institutions. The availability of the Internet and other web 

services is inconsistent in rural areas. Even telephone access is uneven in rural areas. Access to computer 

servers for business use may be unavailable or cost prohibitive. Phone lines often are too slow to 

accommodate high-speed data needs of businesses. This is a distinct disadvantage to rural business growth. 

The rare, publicly financed rural industrial park is smaller and has fewer amenities than its urban counterpart. 

While rural areas tend to grow during national economic expansion, sometimes at faster rates than metro 

areas, many have neither the size nor depth of tax bases to finance the direct amenities and conditions that 

businesses can demand from metropolitan governments. These amenities include transportation links, sewer 

and water, adequate fire protection, attractive downtowns, well-regarded school systems, reliable and 

accessible health care, and publicly financed training of workers. 

B&I can guarantee loans for satisfactory credit risks. This program allows lenders to offer competitive terms 

and loans up to $25 million in eligible areas. Up to $40 million may be guaranteed for certain value-added 
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64 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

cooperative enterprises. USDA also provides technical assistance and modest grants (frequently as a catalyst 

for attracting local private funds) for communities to launch the infrastructure necessary for businesses. 

Funding of small revolving loan funds encourages business growth. It helps new borrowers and emerging 

local entrepreneurs without a credit history or adequate collateral for a commercial lender. 

In rural Georgia, through B&I loans for business expansions, a home-based baking company grew into a 

77,000 square foot warehouse facility generating more than $18 million in annual sales and 350 employees. 

These business-expansion loans are not offered by traditional rural lenders. 

Exhibit 21: Strengthen Rural Businesses 

Fiscal Year 2005 

Annual Performance Goals and Indicators Target Actual Result 

2.1.1 Create or save additional jobs through USDA financing of 

businesses. 

63,856 73,617 Exceeded 

Analysis of Results 

The performance goal was exceeded for the number of jobs created or saved. The number of jobs created or 

saved is related directly to the funding levels for each program and business conditions in regional and 

national economies. There are six different programs, which count jobs created differently. B&I counts the 

jobs when the loan is closed. This is also true for some of the grant programs. The major revolving loan fund 

uses a formula based on a study that showed the cost of actually acquiring job information on each loan was 

determined not to be cost effective. These factors are beyond USDA’s control. Additionally, State offices 

substantially improved their ability to gather, record and report job information on all programs. 

The 73,617 jobs resulting from USDA’s programs for expanding economic opportunities in FY 2005 

exceeded the target level. While this number is less than the 2004 number, it is proportionate to lower FY 

2005 funding. 

In addition to direct jobs created or saved, the economic benefit to the rural community is estimated to be 

$2.50 for every dollar in guaranteed loans closed, according to U.S. Department of Labor statistics. These 

investments make a continuing difference in rural communities. 

USDA is developing a pilot information system, the Socio-Economic Benefit Assessment System (SEBAS), 

to enhance its ability to measure program–investment effectiveness. SEBAS, which uses detailed information 

about Department loan or grant investments, will enable USDA to measure the direct and indirect impact of 

program assistance on local and regional economic performance, and the quality of life in rural areas. 

Exhibit 22: Trends in Creating or Saving Jobs 

Fiscal Year Actual 

Trends 2001 2002 2003 2004 2005 

Create or save additional jobs through USDA 

financing of businesses 

105,222 

Baseline 

76,301 88,611 81,010 73,617 
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F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 65 

One challenge USDA faces is that general economic conditions strike harder and longer in rural areas. 

Poverty areas also require a greater scope and depth of technical support. 

The national delinquency rate for USDA business loans represents a myriad of conditions across the country 

in dispersed rural communities. National and regional economic trends are the primary influence, followed by 

the local business environment and finally the quality of the agency’s loan underwriting. While the 

Department cannot control macroeconomic factors or the conditions of each rural community, it has begun 

strengthening loan underwriting through continuous training, as well as implementing an accreditation 

program. The results have started to appear in the form of decreasing delinquency rates. 

OBJECTIVE 2.2: IMPROVE THE QUALITY OF LIFE IN RURAL AMERICA THROUGH USDA

FINANCING OF QUALITY HOUSING, MODERN UTILITIES AND NEEDED COMMUNITY FACILITIES

Exhibit 23: Resources Dedicated to Support Improving the Quality of Life in Rural America Through 

Financing Housing, Utilities and Community Facilities 

FY 2005 

USDA Resources Dedicated to Objective 2.2 Actual Percent of Goal 2 

Program Obligations ($ Mil) 9,069.6 55.79% 

Staff Years 5,194 64.68% 

Introduction 

USDA successfully improved the quality of life in rural America during FY 2005. The Department financed 

quality homes for 43,224 homebuyers, new/improved water and waste disposal facilities for 1,325,274 

subscribers, new/improved electric facilities for 2.4 million subscribers, broadband telecommunications in 80 

counties and improved community facilities for 12.9 million rural residents. 

Overview 

Many USDA programs make important contributions toward improving the quality of life in rural America. 

Of particular significance are programs increasing the quality and availability of housing, modern utilities and 

community facilities. USDA’s utilities programs also contribute to the creation of jobs and strengthening of 

the rural economy. For example, without adequate electric service, industries will not operate in rural 

America. Ensuring that rural America can participate fully in economic recovery requires safe, reliable and 

affordable infrastructure. 

The Department provides other grants and loans for use in developing a broad range of rural community 

facilities. These facilities include hospitals, fire, rescue and public safety equipment, schools, libraries and 

public buildings. These facilities enable communities to improve the quality and scope of community services. 

These services help rural residents achieve a quality of life more comparable to that found in urban and 

suburban areas. 

USDA’s rural water and waste programs provided new access to safe drinking water or sanitary wastewater 

disposal (or improved service) for 1,325,274 subscribers. 
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66 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

The Department’s Electric Program makes loans and loan guarantees to finance the construction of electric 

distribution, transmission and generation facilities. This process also funds system improvements and 

replacements required to furnish and improve electric service in rural areas, and demand-side management, 

energy conservation programs and on-grid and off-grid renewable energy systems. Demand-side management 

refers to understanding customers' needs and preferences, and their use of products. Since its beginning, the 

Electric Program has invested more than $74 billion in rural America’s infrastructure. 

USDA issues loans to corporations, States, territories and subdivisions and agencies. The Department also 

issues loans to municipalities, people’s utility districts and cooperative, not-for-profit, limited-dividend or 

mutual associations. These organizations provide retail electric-service needs to rural areas and supply the 

power needs of distribution borrowers. Additionally, USDA provides financial assistance to rural 

communities with extremely high energy costs. This assistance allows the communities to acquire, construct, 

extend, upgrade and otherwise improve energy generation, transmission or distribution facilities. Overall, the 

Department services nearly 700 cooperatives, utility districts and other institutions, which provide rural 

electricity in 46 States and 3 territories. 

USDA’s Broadband Telecommunications Program provides loans and loan guarantees for broadband services 

in rural communities. These loans facilitate the deployment of new and innovative technologies to make highspeed data transmission available in low-density, remote areas. Often, the private sector ignores these areas. 

Since its 2001 inception, the program has grown quickly. Financing has provided broadband access to more 

than 200 rural counties. These investments in critical telecommunications infrastructure are essential to 

enabling rural businesses and communities to keep pace with rapid developments in the rest of America and 

the world. 

USDA’s assistance reaches large numbers of rural Americans with services crucial to achieving a satisfactory 

quality of life. The Department provides direct and guaranteed loans to help rural citizens achieve 

homeownership. These loans served 43,224 households in 2005. Minority households accounted for more 

than 17.1 percent of all those purchasing homes with USDA loans and 18.1 percent of first-time buyers. 

USDA also provides programs to develop multi-family housing and offer assistance to make homes 

affordable. Special emphasis is placed on improving home affordability for minorities. 

USDA’s grants and loans to help rural communities obtain essential facilities reached 12.9 million residents in 

2005. Taken together, these investments bring important benefits to a large number of rural communities and 

citizens. They increase the availability of essential services and raise rural America’s quality of life. 

Selected Results in Research, Extension and Statistics 

Assisting Small Disadvantaged Farmers—The University of Arkansas, with partial funding from 

USDA, conducted an outreach program for Small Disadvantaged Farmers (SDF). As a result, approximately 

100 SDFs increased their incomes by an average of $5,000 during the year. 

The Impact of Recreation and Tourism on Rural Economies—Many rural communities use 

recreation and tourism to offset the decline in traditional employment opportunities and stimulate local 

development. While it is generally agreed that recreation and tourism contribute to population and 

employment growth, the low-skill and part-time jobs associated with the industry raise questions about 

contributions to local economic and community well-being. The USDA study Recreation, Tourism, and Rural 
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F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 67 

Well-Being estimated the local economic and community impacts of recreation and tourism development on 

rural America. Study findings are consistent with claims that tourism and recreational development contribute 

to rural well-being. This development increased local employment, income, and wage levels. It also decreased 

poverty, and improved education and health. Despite these gains, higher housing costs are a drawback of 

development. Local conditions also vary significantly, depending on the type of recreation area. 

Challenges for the Future 

Special challenges to this objective continue to be the increased cost of housing and other building costs, with 

program budgets that are not increasing. For example, as building costs continue to rise, fewer homes, 

community facilities and water and waste systems ultimately can be financed with available funding levels. 

In the water and wastewater area, a challenge USDA faces is assisting, with limited program resources, rural 

communities most in need of its financial and technical services. These communities usually have the least 

resources for such services. Droughts, limited water resources, extreme temperatures and other environmental 

factors present unique problems in developing utility systems, and worsen this condition. Since solutions to 

difficult conditions are expensive, additional grant funds must be used to develop feasible projects. 

USDA’s utilities programs also support creating jobs and strengthening the rural economy. Rural communities 

are unattractive to industry if they cannot provide adequate (and competitively priced) electric, telephone, 

water and waste services to these industries. A community’s ability to attract and keep these businesses and 

the jobs they provide are linked directly to these services. Ensuring that rural America can participate fully in 

economic recovery requires safe, reliable and affordable infrastructure. 

Key Outcome: Improve Rural Quality of Life through Homeownership Opportunities Provided 

There continues to be an unmet need for decent and affordable housing in rural America. USDA implements a 

wide variety of housing programs. Through its Single Family Housing Direct and Guaranteed Loan Programs, 

USDA helps rural families who would not be able to achieve the dream of homeownership without its 

assistance. In FY 2005, the Department invested $4.24 billion to assist 43,224 rural families obtain homes, 

and an additional $66 million to rehabilitate the homes of more than 11,700 very low-income families. The 

average income for families receiving direct loans is approximately $22,200 while the average for guaranteed 

loans is approximately $40,627. Families obtaining repair loans had an average income of $11,330, while 

elderly households receiving repair grants earned only $10,240. 

Other programs focus on assisting dwellers in rental housing, farm-worker housing, home rehabilitation and 

self-help, and new-home construction. 

Exhibit 24: Improving Rural Quality of Life Through Homeownership Opportunities 

Fiscal Year 2005 

Annual Performance Goals and Indicators Target Actual Result 

2.2.1 Homeownership Opportunities Provided Exceeded 

 Increase financial assistance to rural households to buy a home 38,300 43,224 

 Increase the number of minority homeowners 7,660 7,605 
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68 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Analysis of Results 

As housing prices have continued to soar, rising more than 10 percent Nationwide, demand for affordable 

housing has increased. This increase in demand took place at all income levels including low and very lowincome residents. These are typically families who cannot obtain credit from a conventional lender because of 

credit issues and lack of a down payment. 

USDA’s housing programs are critical for very low- to moderate-income families in attaining affordable 

homes and sharing in the Nation’s prosperity. In FY 2005, direct housing programs provided 9,200 low and 

very low-income rural Americans with new homes for the first time. A total of 27,600 families who could not 

obtain mortgages otherwise bought their first homes through USDA’s loan guarantee programs. 

The Department has responded aggressively to the President’s “Ownership Society” initiatives related to 

housing. His recent call for 7 million new affordable housing units in the next 10 years has been met with 

changes to USDA’s Guaranteed Loan Program to encourage more new construction. A pilot program 

providing construction financing in the guarantee program is to be expanded Nationwide. Changes to simplify 

regulations will lead to a higher portion of new home loans in the direct loan program through the self-help 

and construction contract methods. 

While the Nationwide homeownership rate is at a record level near 70 percent, the rate among minority 

households is less. In October 2002, the President set a goal of increasing minority homeownership by 5.5 

million families by the end of the decade. USDA responded by committing to increase minority 

homeownership, which includes: 

Doubling the number of self-help participants by 2010;

Increasing participation by minority lenders through outreach; 

Promoting credit counseling and homeownership education; and

Monitoring lending activities to ensure a 10 percent increase in minority homeownership.

Additionally, each State office was provided benchmarks and goals through 2010. The offices have also 

developed their own plans to meet the President’s goal. While minorities make up 13 percent of rural 

America, they obtained more than 17.1 percent of USDA loans in FY 2005. USDA helped more than 7,600 

minority households achieve their dreams of homeownership in 2005. 

One of the major contributors to this success is USDA’s Mutual Self-Help Housing Program. Through this 

program, groups of 6 to 12 families mutually build each other’s homes. This program has reduced 

significantly the barriers experienced by many minorities in achieving homeownership. It allows customers to 

use “sweat equity,” or their own labor, to reduce the overall cost of building the home. Minority families 

made up more than 50 percent of all program participants. The default rate on loans made through this 

program is 4 percent lower than other loans in the single-family housing portfolio. 

While the economy is stable and housing is booming in many parts of the country, these programs exist to 

ensure that the essentials—clean water, decent and affordable housing, and utilities—are available to those 

who have not experienced this upswing. 
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F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 69 

Exhibit 25: Trends in Rural Homeownership 

Fiscal Year Actual 

Trends 2001 2002 2003 2004 2005 

Increase financial assistance to rural households to 

buy a home (Baseline: 1999 = 55,941) 

44,701 43,036 44,130 48,894 44,224 

Increase the number of minority homeowners 8,402 

Baseline 

8,231 8,539 8,500 7,605 

Key Outcome: Improve Rural Quality of Life through New or Improved Telecommunications 

Facilities 

USDA finances the deployment of a Nationwide, rural broadband network. Since private capital for the 

deployment of broadband services in rural areas is insufficient, USDA incentives are that much more 

important. Providing rural residents and businesses with barrier-free access to today’s technological benefits 

will bolster the economy and improve the quality of life for rural residents. 

Building and delivering an advanced telecommunications network is affecting the Nation's economy, strength 

and growth significantly. Broadband networks in small, rural towns facilitate economic growth and support 

the delivery of increased educational opportunities through state-of-the-art telecommunications networks. 

While rural America can be defined by various statistics, the most important one is that 60 million people call 

it home. Just as the citizens in U.S. cities and suburbs benefit from access to broadband services, so should 

rural residents. In rural America, access to broadband plays a vital role in solving the problems created by 

time, distance, location and lack of resources. The promise of broadband is not just "faster access." It means: 

New educational opportunities through distance learning, enabling rural students to take virtual field 

trips around the world; 

Lifesaving medical treatment via telemedicine networks, allowing specialists to guide surgeries 

hundreds of miles away; and

Economic growth and new markets, where businesses prosper and grow locally, while competing 

nationally and globally via high-speed networks. 

The Farm Security and Rural Investment Act of 2002 (FSRIA) established the new loan and loan guarantee 

program “Access to Broadband Telecommunications Services in Rural Areas.” This program is designed to 

fund the cost of constructing, improving and acquiring facilities and equipment for broadband service in rural 

communities of 20,000 people or less. Direct loans are made for the life of the facilities financed. Loans may 

be made at 4 percent to rural communities, where broadband service currently does not exist. Loan guarantees 

bear an interest rate set by the private lender consistent with the current applicable market rate for a loan of 

comparable maturity. The guarantees are made for no more than 80 percent of the principal amount. The 

number of counties receiving new service will measure the extent to which the deployment of broadband 

service is achieved. 
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70 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Exhibit 26: Support High-Speed Telecommunications Service 

Fiscal Year 2005 

Annual Performance Goals and Indicators Target Actual Result 

2.2.2 Customers served by new or improved telecommunications 

facilities (Mil) 

.325 .232 Unmet 

Analysis of Results 

The performance goal was not met primarily because the entire lending authority was not utilized. Fewer than 

expected eligible and complete applications were received in the Broadband Loan Program. Program staff has 

revised procedures and worked with applicants to improve the efficiency of application review and loan 

processing, and facilitate participation by borrowers. 

The President has announced the goal for all Americans to have access to broadband service by 2007. As 

such, during the year, USDA has continued to market the broadband program aggressively by reaching out to 

the telecommunications industry and broadband providers. This move is designed to achieve the Department’s 

part of the goal of funding facilities that deliver broadband service to rural America. 

The broadband loan program is distinctively different from the traditional telecommunications program 

portfolio. First, even in today’s technology-driven marketplace, broadband service, while critically important, 

still is not deemed a “necessity-of-life” in the same manner as electricity, telephone service and water and 

waste disposal. It is a commodity that must be marketed properly so that potential customers are informed of 

the many benefits of broadband service. Only then are they likely to spend their hard-earned discretionary 

dollars on broadband access. Second, a majority of the applicants are “start-up” companies with little, if any, 

history of doing business in this industry. Third, today’s marketplace is a highly competitive one as opposed 

to the traditional monopolistic environment. Finally, many applications cover multi-State service territories, 

rather than a single cooperative serving a single rural community. Many are applications requesting to serve 

50, 75 or in excess of 100 rural communities in multiple States. 

These differences, while opening the door to a greater number of potential applicants, pose new challenges for 

a lending program. While financial feasibility remains as the key to making good loans, USDA looks to 

continue aggressively marketing and facilitating the deployment of broadband in rural America and supports 

the goal announced by the President. 

Increasing the number of counties with broadband service benefits rural communities. Broadband service 

allows for businesses to relocate, raises educational standards through distance learning projects and improves 

health care through the use of telemedicine. 

Exhibit 27: Trends in the Number of Subscribers Served by High-Speed Telecommunications Service

Fiscal Year Actual 

Trends 2001 2002 2003 2004 2005 

Customers served by new or improved 

telecommunications facilities (Mil) 

N/A N/A .382 

Baseline 

.374 .232 
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F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 71 

Description of Actions and Schedules 

USDA will monitor the telecommunications industry to detect any trends that indicate the need to re-evaluate 

how many loan dollars are needed per subscriber receiving new or improved service. The Department will 

review borrowers' performance reports which include subscriber growth compared to projections. The review 

will determine if the forecasted subscriber performance was achieved with the forecasted budget. USDA will 

also track trends in the cost and revenue data in loan applications compared to previous applications. This 

evaluation will determine if any changes in performance assumptions are required. Additionally, the 

Department will monitor industry events to analyze technology trends and other impacts on borrower 

performance. At least twice per year, USDA will review assumptions about the loan value/subscriber 

relationship to determine if modifications in assumptions are required. 

Potential challenges to this approach include obtaining accurate information from borrowers on a timely basis, 

and developing and maintaining staff knowledge of industry trends.

Key Outcome: Improve Rural Quality of Life through New or Improved Water and Waste 

Disposal Facilities 

Water and waste disposal loans and grants are provided to rural communities for the development, 

replacement or upgrading of such facilities. This effort includes poverty stricken rural communities and those 

facing distress because of outward migration, natural disasters or economic distress due to Federal actions. 

Direct loans are repayable over a maximum term of 40 years. Since the program’s inception in 1937, water 

and waste disposal borrowers have received $29 billion in direct loans, loan guarantees and grants. 

Failing water and waste disposal infrastructure is a common problem in cities and rural areas. Investments in 

repairs and replacements usually do not generate more revenue. Smaller systems with a smaller user base 

cannot absorb these added expenses without significant rate increases. 

Some of these issues can be mitigated through better asset management, full-cost pricing and technology 

advances. Proper care of assets can extend their useful life and improve their productivity. Keeping the public 

aware of the benefits of safe drinking water can improve its willingness to pay the cost of unsubsidized 

service. Additionally, technology advances can provide lower cost solutions. 

Exhibit 28: Improving Water and Waste Disposal 

Fiscal Year 2005 

Annual Performance Goals and Indicators Target Actual Result 

2.2.3 Customers served by new or improved water and waste disposal 

facilities (Mil) 

0.650 1.3 Exceeded 

Analysis of Results 

The performance goal was exceeded. Results from the FY 2003 Office of Management and Budget (OMB) 

Program Assessment Rating Tool (PART) assessment showed the program to be well-designed and managed. 

Additionally, it found: 

The program successfully targeted assistance for water and wastewater infrastructure to poor rural 

areas; and
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72 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

USDA effectively collects program data and uses that information to manage effectively. Over the 

life of the program, fewer people in rural areas are experiencing access problems relating to safe, 

affordable drinking water and wastewater disposal. 

In response to recommendations made in the 2003 PART, the program has been proactive in creating better 

output and outcome measurements. These changes are designed to quantify program success and identify 

solutions to serve rural residents better. In May 2005, the program revised its long-term measures to focus 

strategically on reducing rural peoples' exposure to water-related health and safety hazards by FY 2010. 

Another long-term goal will focus on maintaining sustainable water systems in rural communities. Annual 

analyses will track program data to improve funds leveraged for project development. The analyses will also 

improve the loan-to-grant mix so that more loan dollars are used by systems that can afford maximum debt 

capacity, and will limit grant funds to the neediest systems. 

Exhibit 29: Trends in Water and Waste Disposal Service 

Fiscal Year Actual 

Trends 2001 2002 2003 2004 2005 

Customers served by new or improved water and 

waste disposal facilities (Mil) 

1.01 

Baseline 

0.79 0.59 0.97* 1.3 

* Previously reported as 0.69 in the FY 2004 Performance and Accountability Report. 

Key Outcome: Improve Rural Quality of Life through New and/or Improved Electric Facilities 

In 1936, electricity was being taken for granted in American cities. Despite its availability, if one lived in a 

rural area at that time, chances are that person went without electricity or other necessities of modern life, and 

the high standard of living they make possible. With more than 70 years of experience, the electric programs 

have found that electric utility construction, operation and maintenance are best when high-quality, longlasting materials are used. 

Electricity came to rural America through some of the most successful Government initiatives in American 

history. This happened through USDA working with rural cooperatives, not-for-profit associations, public 

bodies and for-profit utilities. Today, the electric programs continue this tradition by helping rural utilities 

expand and keep their technology current. This program also helps USDA establish new and vital electrical 

services. 

The public-private partnership forged between USDA and the electric industry results in billions of dollars in 

rural infrastructure development. It also creates thousands of jobs for the American economy. Providing 

reliable, affordable electricity is essential to the economic well-being and quality of life for all of the Nation’s 

rural residents. The electric programs provide leadership and capital to upgrade, expand, maintain and replace 

America’s vast rural electric infrastructure. Under the authority of the Rural Electrification Act of 1936, 

USDA makes direct loans and loan guarantees to electric utilities to serve rural customers. This makes the 

Federal Government the majority note holder for more than 700 electric systems. 
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F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 73 

Exhibit 30: Connecting and Improving Electric Service 

Fiscal Year 2005 

Annual Performance Goals and Indicators Target Actual Result 

2.2.4 Customers served by new or improved electric facilities (Mil) 1.775 2.360 Exceeded 

Analysis of Results 

The performance goal exceeded its target by 585,000 subscribers. In FY 2005, USDA’s electric programs 

approved 111 loans to rural distribution, generation and transmission providers, worth more than $3.3 billion. 

These loans connected 194,181 new consumers and improved electric service to more than 2.36 million 

consumers. 

For every dollar that USDA invests, $2.70 is leveraged with private investment. This creates local jobs and 

higher local tax bases. It also develops a much stronger economy in rural communities. 

Exhibit 31: Trends in Connecting and Improving Electric Service 

Fiscal Year Actual 

Trends 2001 2002 2003 2004 2005 

Customers served by new or improved electric 

facilities (Mil) 

6.948 

Baseline 

11.525 3.746 4.195 2.360 

In addition to loan funds providing safe, reliable and affordable electric service, they also provide additional 

jobs in rural areas. While the cooperatives and corporations that obtain financing from the electric programs, 

like all businesses, impact the local economy through their employment and payroll, the total economic 

activity of these rural businesses stretches beyond these direct effects. Linkages exist between one firm or 

industry and the rest of the economy. An industry may buy a portion of its material inputs and business 

services from other loan businesses. Likewise, employees spend a portion of their earnings on goods and 

services within the local economy. These additional activities, or linkages, generate additional economic 

activity in the local area. 

Rural America is diverse and the challenges facing such communities are wide-ranging and varied. This 

diversity presents opportunities for the creative application of programs and policies, and calls for unique 

partnerships. The electric programs are focused on strengthening the partnership between USDA’s borrowers 

and grantees, and all rural America participating in and benefiting from Department programs. The electric 

programs continuously study the needs of rural communities, assess their lending practices and identify 

opportunities to better serve rural America. 

The electric programs are committed to improving efficiency and effectiveness by promoting progressive, 

entrepreneurial and innovative thinking. Electric programs employees are encouraged to develop and share 

new ideas to accomplish their mission in a customer-oriented manner. The programs work with local 

communities and borrowers to ensure that loan funds are spent for the purposes intended and in rural areas. 

These loan funds enable rural Americans to enjoy the same opportunities as their urban counterparts. 

Rural communities still in need of electric programs tend to be those with unique conditions not addressed 

easily or cheaply. Distance between customers, aging, substandard existing systems or unique environmental 
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74 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

conditions make those Americans most in need of USDA’s services increasingly expensive to support. At a 

minimum, these customers require more technical assistance provided through agency salaries and expenses. 

Likewise, reduction in the funding for salaries and expenses will limit the ability of the electric programs to 

provide the staff and other resources needed to deliver them and achieve the estimated level of performance. 

Key Outcome: Improve Rural Quality of Life through New or Improved Community Facilities 

USDA provides a series of grants and loans to finance the development of facilities essential to a modern 

standard of living in rural communities. A wide range of public facilities and equipment can be financed by 

these programs, including hospitals, fire trucks, police cars, child-care centers, food banks, schools, medical 

clinics, nursing homes, community centers, town halls, jails and street improvements. Financing these 

essential community facilities touched 12.9 million rural residents in 2005. Taken together, these investments 

benefit a large number of rural communities and citizens. They increase the availability of essential services 

and raise the quality of life in rural America. Moreover, USDA’s programs leverage Federal funds with 

private capital to invest in rural infrastructure, technology and human-resource development. A good example 

is the opening of a new child care/learning center in Ellsworth, Maine. “Let’s put the children first” was the 

mantra used during the design phase. This 12,000-square-foot facility boasts 6 classrooms, a meeting room, 

parent space, a commercial kitchen, offices, a library, a secure computer area, a parking area and an outdoor 

playground. Specific attention was taken to create rooms filled with natural light and promote a safe and 

creative environment for 60 preschoolers and 24 infants and toddlers. A $605,000 USDA Community 

Facilities Direct Loan, a $380,000 Department Community Facilities Guaranteed Loan with Union Trust 

Company, a Head Start grant and community-wide fundraising financed the project. 

USDA also began examining the capital-funding needs of critical access hospitals located in rural 

communities. A total of 28 hospitals and 13 outpatient facilities have been funded in the current fiscal year for 

a total investment of $135 million. Increased numbers of requests for financing of critical access hospitals are 

expected in the coming years. 

USDA provided funds to construct, renovate or improve 812 essential community facilities in FY 2005. Rural 

Americans will have improved services available from 112 health-care facilities, 312 public-safety facilities, 

92 educational facilities, 15 energy-related facilities, 157 public buildings and improvements, 7 recreation 

facilities and a number of other essential community facilities. 

Exhibit 32: Number of New and Improved Community Facilities 

Fiscal Year 2005 

Annual Performance Goals and Indicators Target Actual Result 

2.2.5 Customers served by new or improved community facilities (Mil) 12 12.9 Met 

Analysis of Results 

The performance goal was met. Despite favorable interest rates, many rural communities are facing increased 

financial stress due to agricultural conditions (including drought, flooding and forest fires), natural disasters, 

the slowed economy and other factors. Additionally, many sectors, such as health care, are experiencing 

increased financial pressures. Working with its partners, USDA has been able to help meet many of these vital 

needs. 
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F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 75 

Exhibit 33: Trends in New and Improved Essential Community Facilities

Fiscal Year Actual 

Trends 2001 2002 2003 2004 2005 

Provide access for residents to new improved 

community facilities (Mil) 

6.8 

Baseline 

7.2 7.2 12 12.9 

STRATEGIC GOAL 3: ENHANCE PROTECTION AND SAFETY OF THE 

NATION’S AGRICULTURE AND FOOD SUPPLY

USDA provides a secure agricultural production system and healthy food supply to consumers by protecting it 

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, labeled and packaged 

correctly. Additionally, the Department ensures that products imported from other countries are produced by a 

system equivalent to USDA’s. 

A key to enhancing public health is ensuring that employees executing USDA’s food safety responsibilities 

are scientifically and technically skilled. The Department is addressing the training and education of its 

workforce aggressively. To ensure consistent and accurate inspection, USDA has made a strong commitment 

to recruiting scientists and retooling its entire training and education program for all employees. These 

employees will be able to identify and focus on activities that enhance public health. USDA continues to 

implement five core initiatives to improve food safety for American families. The initiatives, established in 

2002, include: 

Improving the management and effectiveness of the Department’s regulatory programs; 

Ensuring that policy decisions are scientifically based; 

Improving the coordination of food safety activities with other public health agencies; 

Enhancing public education; and 

Protecting USDA-regulated products from intentional contamination. 

To reduce incidences of foodborne illness, USDA works to educate consumers on the importance of following 

food-safety guidelines. 

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 in the U.S. is diverse, extensive 

and easily accessible. This open system is vulnerable to introduction of pathogens and toxins through natural 

processes, global commerce and by intentional means. Crop and livestock production systems must be 

protected from the ravages of diseases whether domestic or foreign. The food supply must be protected during 

production, processing and preparation from contamination by pathogens and toxins that cause disease in 

humans. 
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76 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

OBJECTIVE 3.1: REDUCE THE INCIDENCE OF FOODBORNE ILLNESSES RELATED TO MEAT,

POULTRY AND EGG PRODUCTS

Exhibit 34: Resources Dedicated to Enhance Protection of Meat, Poultry, and Egg Products Inspection 

FY 2005 

USDA Resources Dedicated to Objective 3.1 Actual Percent of Goal 3 

Program Obligations ($ Mil) 1,230.9 35.83% 

Staff Years 11,406 56.89% 

Introduction 

Protecting the Nation’s food supply from potential hazards, whether chemical, microbial, or physical, is a 

formidable task. Accomplishing it will require sound science to make the appropriate decisions and policy. In 

light of the public’s heightened apprehension that terrorists could target the Nation’s food supply and with the 

potential for new and emerging microbial hazards, USDA’s food-safety systems must be assessed and updated 

continually. These regular inspections are especially true for meat, poultry and egg products. They will help 

maintain consumer confidence and protect the food supply from exposure to foodborne diseases. These 

systems include activities to track the incidence of pathogens in these products. They are also designed to 

raise public awareness about food safety and defense, and safe food handling. 

Overview 

Significant food safety advances have been made in the past year. How USDA is serving the public in this 

area can be seen in the selected results in research, extension services, and statistics. 

Selected Results in Research, Extension and Statistics 

Preventing Contamination by E. coli O157 and Salmonella—Preventing contamination of ground 

beef by E. coli depends partly on the ability to detect it on the farm. USDA funding support has enabled 

researchers at the University of Nebraska to develop a method of detecting E. coli and Salmonella in feedlot 

cattle with minimal handling of animals. The device, which is being patented, has revolutionized diseasecontrol research at the feedlot level. 

Societal Costs of Foodborne Illness—USDA has become well known for pioneering estimates of the 

social costs associated with foodborne illnesses caused by pathogens. In 2005, Department researchers 

updated the cost of foodborne illness E coli by using the U.S. Centers for Disease Control’s estimate of annual 

cases and newly available data. USDA estimated the annual cost of illness due to E. coli to be $406 million in 

2003, including $370 million for premature deaths, $31 million for medical care and $5 million in lost 

productivity. 

New Method to Detect Toxins in Food—A new technique to detect heat-resistant toxins in a single food 

sample should help researchers and inspectors detect those that cause gastroenteritis, an inflammation of the 

stomach and intestines. Generally, while conventional heating and processing kill foodborne bacteria, it does 

not destroy their toxins. USDA researchers developed a new biosensor test that uses surface plasmon 

resonance (SPR) to detect toxins. SPR is an optical method for measuring very thin layers of material 

adsorbed on a metal. 
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F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 77 

Online Database of Predictive Microbiology Information—USDA scientists in Pennsylvania have 

teamed up with the United Kingdom's Institute of Food Research to form the world's largest online database 

of predictive microbiology information. Predictive microbiology estimates the behavior of microorganisms in 

response to environmental conditions, including food production and processing operations from the farm to 

the table. The database, called ComBase, is designed to help make risk assessments and model development 

easier. The database can be found at wyndmoor.arserrc.gov/combase. The new database will allow producers 

to respond more quickly to potential food contamination problems caused by bacterial pathogens. 

New Technology to Ensure Safer Shellfish—USDA scientists in Delaware are working with university 

scientists to provide consumers with safer shellfish. Oysters, clams and mussels are considered aquaculture 

species because of the amount of management that goes into maintaining productive molluscan shellfish beds. 

These shellfish are a concern because bacterial and viral pathogens can become concentrated within edible 

shellfish tissues. Some shellfish consumers prefer to eat shellfish raw or only lightly cooked. Thus, the 

shellfish industry is interested in methods that can inactivate pathogens in their products without cooking. 

USDA scientists are studying a technique to sanitize raw shellfish and other virus-contaminated foods by 

using high-pressure processing (HPP). HPP subjects foods to extremely high pressure. The advantage of this 

technology is that neither heat nor chemicals are involved. Thus, shellfish and other foods can retain their raw, 

uncooked flavor and character. HPP is already being used commercially to pasteurize fruit juices in Japan and 

treat sliced deli meats in Spain. 

Key Outcome: Basing Policies on Science 

USDA’s accomplishments concerning food-safety initiatives, including basing policies on science, can be 

found in the U.S. Centers for Disease Control and Prevention’s (CDC) 2005 report on the incidence of 

infections from foodborne illness. The report noted significant declines from the 1996-1998 baseline in 

illnesses caused by the pathogens E. coli O157:H7 (42 percent), Listeria monocytogenes (40 percent), 

Campylobacter (31 percent) Yersinia (45 percent), and Salmonella (8 percent). These declines help bring the 

U.S. closer to achieving “Healthy People 2010” goals. “Healthy People 2010” is a long-range plan from the 

U.S. Department of Health and Human Services. It illustrates a wide range of public health opportunities that 

exist in the first decade of the 21st century. A broad coalition of experts from many sectors created the plan. 

The plan introduces a series of objectives designed to bring better health to all people in the U.S. “Healthy 

People 2010” features 467 objectives in 28 focus areas. It is designed to guide health planners, medical 

practitioners, educators, elected officials and all who work to improve health. Additionally, CDC attributes the 

decreases to control measures implemented by Government agencies and the food industry, and enhanced 

food safety education efforts. Specifically, CDC attributes the reduction in E. coli O157:H7-related illnesses 

to USDA policies implemented in 2002 and 2003. 

Listeria monocytogenes 

Data gathered during an outbreak of Listeria-related illnesses during the summer/fall of 2002, other food 

safety investigations and in-depth verification reviews led USDA to conclude that some establishments were 

not addressing the potential for bacterial contamination adequately in their HACCP plans, Sanitation Standard 

Operating Procedures (SSOP) or other control measures. SSOPs call for all Federally inspected meat and 

poultry plants to have written practices to demonstrate that they are meeting all basic sanitation requirements. 

In response, USDA implemented a directive that outlined steps Department inspectors must follow to ensure 
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that establishments producing ready-to-eat (RTE) meat and poultry products were preventing the Listeria 

contamination. The directive was designed to reduce the risk of listeriosis from consumption in high- and 

medium-risk RTE products. It provided for a new form of intensified verification testing. In this testing, 

inspection program personnel would swab environmental and product contact surfaces within inspected 

establishments. This new type of testing was used extensively to verify the effectiveness of preventive and 

corrective actions taken by establishments after Listeria contamination had been found. 

USDA also released a draft scientific risk assessment on Listeria in RTE meat and poultry products. A public 

meeting was held to discuss the risk assessment. The risk assessment was developed in conjunction with a 

previously released U.S. Food and Drug Administration/USDA risk ranking. The risk assessment incorporated 

both public comments and input from a peer review. It provided important data enabling USDA to design a 

final Listeria rule. 

Later, the Department issued an interim final rule requiring Federal establishments producing certain RTE 

meat and poultry products to take steps to reduce the incidence of Listeria monocytogenes. The rule required 

establishments to choose one of three approaches based on the stringency of the control program for Listeria 

that they implement. The approach taken is one factor in determining the frequency of USDA-conducted 

verification activities in each establishment. The highest frequency was concentrated in establishments that 

rely solely on sanitation practices compared with those that implement more aggressive and effective 

strategies. These include incorporating an inhibiting agent in product formulation or inserting an additional 

processing step to kill pathogens that may contaminate the product after cooling. 

After the rule took effect, the Listeria directive was updated to reflect its policies. USDA accepted comments 

about the rule for 18 months after publication. This time period allowed the Department to review and 

evaluate the effectiveness of these approaches. 

The Listeria rule was built on the results of the scientific risk assessment. The assessment provided guidance 

about the practices the industry should follow to protect RTE meat and poultry products from this pathogen 

most effectively. It showed that testing the processing environment was important in helping find the 

organism in the niches where it may reside. This testing allows processors to target and eliminate it from the 

plant environment before it could contaminate product. Most importantly, the risk assessment showed that an 

establishment could choose the most effective strategy to control Listeria depending on its product(s) and the 

environment in which it operates. 

The Listeria rule’s impact has already been significant. Establishments have made changes to prevent 

products from harboring this organism. USDA surveyed its inspection personnel in 1,400 establishments 

producing RTE meat and poultry products. It found that more than 87 percent had changed their operations in 

one way or another to control Listeria more effectively. More than 57 percent started testing for Listeria in the 

plant environment, more than 27 percent had begun using an antimicrobial agent to inhibit the growth of this 

organism and 17 percent are using post-lethality treatments. This rule challenged industry to do more to 

prevent contamination. 
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Escherichia coli O157:H7 

USDA measures to prevent ground beef contaminated with E. coli O157:H7 from entering commerce have 

also yielded significant decreases in this pathogen. In 1994, USDA declared E. coli O157:H7 an adulterant in 

raw ground beef. During the last decade, the Department has undertaken a number of initiatives to reduce the 

pathogen’s prevalence in raw ground beef. Beginning in October 2002, USDA required that each plant 

producing raw beef products reassess its HACCP plan to prevent adulterated products from entering 

commerce. Scientifically trained USDA personnel then audited beef establishments’ HACCP plans for the 

first time. 

Additionally, USDA has taken steps to begin a science-based baseline study for trimmings used to make raw 

ground beef. The study was reviewed by scientists serving on the National Advisory Committee on 

Microbiological Criteria for Foods (NACMCF). NACMCF provides impartial, scientific advice to Federal 

food-safety agencies in developing national food-safety systems, following products from the farm to final 

consumption. The committee issued its recommendations in a report titled “NACMCF Response to 

USDA/FSIS Request for Guidance on Baseline Study Design and Evaluations for Raw Ground Beef 

Components.” The initial phase of the beef trimming baseline study began August 2005. 

USDA issued a directive to provide new instructions to inspection-program personnel for collecting samples 

for E. coli O157:H7 testing. The directive describes follow-up actions USDA inspection program personnel 

will take after an initial Department sample of raw ground beef product or components, or raw beef patty 

components tests positive for E. coli O157:H7. It also provides new instructions for verifying the control of E. 

coli O157:H7 “positive” and “presumed positive” raw beef products, and moved to another official 

establishment, landfill operation or renderer for proper disposal. A renderer is an operator who may subject 

edible or inedible tissue to a process in which the resulting products are distinguished as edible-rendered (e.g., 

beef stock or flavoring) or inedible material. The resulting inedible products are used as protein sources for 

animal feed or other industrial purposes. 

Salmonella 

USDA issued new procedures for utilizing Salmonella performance standards as a verification tool for food 

safety. Now, instead of waiting for two consecutive failures of tests to trigger an in-depth review of plant 

SSOP and HACCP plans, reviews are initiated after any series is declared substandard. Improvements to the 

in-depth review process have also been implemented. These improvements include the addition of 

enforcement, investigations and analysis officers, and other HACCP-trained inspection program personnel. 

This process and other science-based initiatives have been vital in reducing Salmonella’s presence in raw 

meat and poultry regulatory samples since the 1996 – 1998 baseline. Out of the number of regulatory samples 

collected and analyzed by USDA in 2003, 3.78 percent of all products tested positive for Salmonella. That 

compares to 4.29 percent in 2002 and 10.65 percent in 1998. For more information, visit 

www.fsis.usda.gov/PDF/Salmonella_Progress_Report_1998-2003.pdf.

Although USDA’s rate of positive regulatory samples of all three pathogens discussed above may not 

represent the prevalence of these pathogens Nationwide, it does show a statistically significant downward 

trend for all foods. 
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Exhibit 35: Pathogen Reduction (Food Inspection) 

Fiscal Year 2005 

Annual Performance Goals and Indicators Target Actual Result 

3.1.1 Prevalence of Salmonella on broiler chickens 11.7% 17.0% Unmet 

3.1.2 Prevalence of Listeria monocytogenes on ready-to-eat meat and 

poultry products 

0.80% 0.690% Met 

3.1.3 Prevalence of E. coli O157:H7 on ground beef 0.37% 0.17% Met 

Analysis of Results 

With respect to the prevalence of Salmonella on broiler chickens, the percentage of positive samples increased 

in FY 2005. At the same time, most establishments continue to pass the performance standard established in 

1996. This standard provides for a maximum of 12 positives in a compliance set of 51 samples. The data, 

which can be found at http://www.fsis.usda.gov/Frame/FrameRedirect.asp?main=/OPHS/haccp/ 

salm6year.htm, show that 87 percent of 127 sets completed during 2005 passed the standard. This compliance 

rate is only slightly lower than the rates in the five previous years. The Department expressed its concern that 

the percentage of positive Salmonella tests (all sizes of establishments combined) increased slightly in all 

three poultry categories for 2005. USDA is examining Salmonella data from 1998 to the present to clearly 

identify those plants displaying negative performance trends. USDA is now conducting food-safety 

assessments in establishments having the most difficulty controlling Salmonella. 

With regard to Listeria, the Department had three different RTE sampling projects during FY 2005. Two of 

the projects targeted establishments or products where the risk of Listeria contamination is considered to be 

higher. The results here are from a project where samples are to be collected randomly from all RTE products. 

Results from 2004 and 2005 have shown substantial declines in the percentage of E. coli O157:H7-positive 

raw ground beef samples. In 2002, 0.77 percent of verification samples were positive. In 2003, the percentage 

dropped to 0.37 percent. For 2005, the level was 0.17 percent. A more detailed year-to-year comparison 

identified a 50 percent reduction in the rate of positive ground beef samples from FY 2002 to FY 2003 when 

controlling for seasonality. A detailed analysis showed that this decrease was statistically significant, that is, it 

is unlikely to have occurred by chance. That analysis was published in a peer-reviewed scientific journal. [See 

Journal of Food Protection. Naugle, A.L., Holt, K.G., Levine, P., and Eckel, R. 2005. Food Safety and 

Inspection Service Regulatory Testing Program for Escherichia coli O157:H7 in Raw Ground Beef. JFP 68(3) 

2005: 462-268]. USDA has significantly increased its testing for 2005. 

Exhibit 36: Trends in Pathogen Reduction (Food Inspection) 

Fiscal Year Actual 

Trends 2001 2002 2003 2004 2005 

Prevalence of Salmonella on broiler chickens 11.9% 11.5% 

Baseline 

11.7% 13.6% 17.0% 

Prevalence of Listeria monocytogenes in readyto-eat meat and poultry products 

1.26% 1.03% 

Baseline 

0.9% 0.89% 0.690% 

Prevalence of E. coli O157:H7 on ground beef 0.59% 0.77% 

Baseline 

0.37% 0.19% 0.17% 
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To illustrate the significance of these trends, the accomplishments of USDA’s food safety initiatives are 

presented in CDC’s annual 2005 report on the incidence of infections from foodborne illness. The report 

noted significant declines from a 1996-1998 baseline in E. coli O157:H7-related illnesses (42 percent). CDC 

attributes the decline to policies USDA implemented in 2002 and 2003. In late 2003, the Department released 

data that showed a 25 percent drop in the percentage of positive Listeria regulatory samples from the previous 

year, and a 70 percent decline compared with years prior to the implementation of HACCP. Additionally, for 

E. coli O157:H7, USDA has published a peer-reviewed analysis showing that the decrease in the percentage 

of positive regulatory samples from 2002 to 2003 was statistically significant. This finding is consistent with 

CDC reports of decreasing illness from E. coli O157:H7. 

USDA now collects industry data on RTE products as part of the October 2003 Listeria rulemaking. The 

Department used these data to revise its testing program for Listeria in RTE products. In January 2005, USDA 

implemented a new risk-based sampling program to verify control of Listeria in higher-risk establishments. 

This risk-based program uses production volume, control alternatives and previous testing results to generate 

schedules for verification testing. 

Description of Actions and Schedules 

While the percentage of establishments passing the performance standard has remained very high, USDA 

recognizes that the percentage of Salmonella-positive broiler samples has been increasing since 2000. 

A major challenge concerns how to reduce Salmonella in young chickens, given that most establishments are 

meeting the existing performance standard. 

The 2003 data posted on USDA’s web site shows that the percentage of positive Salmonella tests (all sizes of 

establishments combined) increased slightly in all three poultry categories. 

The Department continues to analyze Salmonella data from 1998 to the present to identify establishments 

displaying negative performance trends. In August 2005, the Department held a scientific meeting to address 

issues related to controlling the pathogen in the pre-harvest environment. A follow-up scientific meeting will 

address control measures for poultry processing establishments. 

USDA plans to adjust its Salmonella-testing program so that additional compliance sets are scheduled for 

establishments demonstrating the most control problems. This directive, which took effect May 21, 2003, 

grants inspection-program personnel access to a wide range of records concerning HAACP regulations. It also 

gives personnel the authority to review certain types of records regularly. Whenever an establishment fails an 

initial compliance set, Directive 5000 calls for the front-line supervisor and Senior Veterinary Medical 

Officer/Inspector-in-Charge (PHV/IIC) to conduct and assess the establishment’s HACCP and SSOP 

procedures and, where applicable, analyze data from the establishment’s generic E. coli testing. That testing 

will focus on the establishment’s corrective and further-planned actions. 

The front-line supervisor and PHV/IIC will also develop, document and implement a comprehensive plan to 

verify any corrective actions the establishment performs. 
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Key Outcome: Raising Public Health Awareness 

USDA consumer education programs are based on “integrated marketing.” This concept has three 

components: 

Mass media, or reaching out to the broad public; 

Cluster targeting, which uses demographic, geographic and socio-demographic information to tailor 

communications to segmented audiences; and 

One-on-one interactions, through the USDA’s Food Safety Mobile, the USDA Meat and Poultry 

Hotline and the Department’s virtual representative, "Ask Karen," a web-based automated-response 

system that answers food-safety questions 24 hours a day, 7 days a week. It complements the hotline 

and is another effective communication tool that allows USDA to expand its outreach programs, 

promote food safety and defense, and protect the public health. The Food Safety Mobile is a 35-foot, 

recreational-style vehicle covered with a bold, eye-catching design and prominent food-safety 

messages. It travels throughout the continental U.S., educating consumers about the risks associated 

with mishandling food and the steps they can take to reduce their risk of foodborne illness. 

Each component of the integrated marketing program is developed based on risk research. It is delivered using 

social-marketing concepts and is assessed through evaluative research. Ongoing Nationwide surveys and 

consumer focus-group studies are used to evaluate and ensure the initiative’s continuing effectiveness. 

Integrated marketing also tracks changes in consumer behavior. 

A 2004 pilot study of the thermometer-education campaign “Is It Done Yet?” demonstrated success in getting 

more consumers to use food thermometers. Based on feedback from focus groups and surveys, USDA revised 

the educational materials and launched “Is It Done Yet?” Nationwide in July 2005. 

USDA remains committed to communicating with all food handlers —consumers in the home, foodservice 

employees, the retail industry and those who work in processing plants. Food-safety publications for both 

industry and consumers have been translated into several languages including Spanish, Korean, Vietnamese, 

and Mandarin Chinese. USDA also uses national television, cable networks, educational television, radio, 

magazines, newspapers and web sites to enhance public education efforts. The aforementioned hotline has two 

Spanish-speaking food-safety specialists. This feature has enhanced outreach to the Spanish-speaking 

community. 

The Department continues to provide technical assistance and compliance guidance concerning major rules, 

policies and directives to small and very small establishments. It offered outreach and training in FY 2005 via 

webcasting to reach those unable to travel to one of the workshop locations. USDA held four workshops and 

four webcasts on food defense from May through July for owners and operators of meat, poultry and eggprocessing, import and slaughter establishments. Approximately 650 attendees participated in these 

workshops. The workshops provide Federal- and State-inspected plants with guidance and tools to use in 

strengthening the security of their operations and developing a food-defense plan. 

The Department has also expanded its distribution of materials aimed at assisting small establishments. Its 

HACCP documents and other food-safety materials, such as closed-captioned videos and computer disks, are 

offered to all at no charge. Most materials are offered in both English and Spanish. The program has filled 
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approximately 9,500 requests for resource materials. Additionally, USDA has mailed more than 50,000 foodsecurity guidance documents to meat, poultry and egg establishments, State-inspection programs and HACCP 

contacts and coordinators. 

Additionally, USDA continues to partner with universities to provide small and very small plants with a more 

in-depth understanding of HACCP systems and emerging food-safety concerns. Through the partnership, the 

universities develop new food-safety initiatives. They also offer low-cost training to small and very small 

plant owners/operators to help them improve their food-safety systems and produce safer products. In FY 

2005, USDA established cooperative agreements with 15 universities that have scheduled approximately 60 

classes. 

Exhibit 37: Public Health Outreach & Education 

Fiscal Year 2005 

Annual Performance Goals and Indicators Target Actual Result 

3.1.4 Viewings of food safety messages (Mil) 94 99.6 Exceeded 

Analysis of Results 

USDA defines “viewing” as its best estimate of the number of people receiving its food-safety messages. 

These messages are delivered via print, radio, television, conventions, presentations, newsletters, the Internet, 

USDA Meat and Poultry Hotline calls, Department publications, the USDA Food Safety Mobile, State 

partnerships, electronic mailboxes and “Ask Karen.” 

USDA reached more than 99.6 million consumers through such food-safety education campaigns as “Is It 

Done Yet?”, press releases, videos and newspaper and magazine articles. The Department has also printed 

food-safety message cards targeted to various underserved populations, including Native Americans, Asian 

and African Americans, and Hispanics. 

Additionally, USDA launched a newly designed web site that offers features and tools to help visitors easily 

find the food-safety information and services they need. The site, located at www.fsis.usda.gov/Food_Safety_ 

Education/Ask_Karen/index.asp#Question, is arranged by subject so users can navigate by topic rather than 

through USDA's organizational structure. 

This citizen-driven design helps all stakeholders quickly find the food safety information most relevant to 

them. The site now averages more than 13 million hits, almost 2 million page views and more than 510,000 

visitors monthly. 

Electronic outreach through “Ask Karen” answers questions about the safe storage, preparation and handling 

of meat, poultry and egg products. Though this is not a live chat, the 9,000-question database behind “Ask 

Karen” allows visitors to correspond naturally by typing in questions and receiving an immediate answer. 

“Ask Karen” can provide visitors with a list of related questions in their area of interest. Nearly 19,000 users 

have used “Ask Karen” since its April 2004 launch, receiving timely answers to almost 60,000 food-safety 

questions. 
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Exhibit 38: Number of Viewings for Food Safety Messages 

Fiscal Year Actual 

Trends 2001 2002 2003 2004 2005 

3.1.4 Viewings of food safety messages (Mil) N/A 90 

Baseline 

92 123 99.6 

OBJECTIVE 3.2: REDUCE THE NUMBER AND SEVERITY OF AGRICULTURAL PEST AND DISEASE 

OUTBREAKS

Exhibit 39: Resources Dedicated to Reducing Pest and Disease Outbreaks 

FY 2005 

USDA Resources Dedicated to Objective 3.2 Actual Percent of Goal 3 

Program Obligations ($ Mil) 2,204.2 64.17% 

Staff Years 8,643 43.11% 

Introduction 

To provide a secure agricultural production system and healthy food supply to consumers, USDA protects the 

country from pests and diseases, minimizes production losses, maintains market viability and contains 

environmental damage. This is done by: 

Conducting offshore threat assessment and risk reduction activities to identify and eliminate pests, 

diseases and weeds; 

Regulating and monitoring the importation of animals, plants and commodities to reduce the risk of 

introduction of invasive species. Other regulatory activities ensure safe research, release and 

movement of biotechnology and the development of effective veterinary biologics; 

Managing issues related to the health of U.S. animal and plant resources and conflicts with wildlife. 

It prevents the neglect and inhumane treatment of animals used in commerce, protects their health 

and reduces the chances of their contracting and spreading disease. Additionally, the Department’s 

work helps to control damage done to agricultural and natural resources by wildlife; 

Planning emergency response and conducting surveillance, detection, containment and eradication 

activities. By quick detection, scientists can fight pests and diseases while outbreaks remain localized 

and less costly to control. USDA educates and trains public and private sector organizations to report 

pests and diseases when they are first observed. It coordinates larger, complex eradication and 

control efforts. USDA stops movement of host materials by surveying infestation boundaries and 

establishing quarantines; and 

Developing and applying scientific methods for agricultural producers and consumers. USDA is 

working to increase the number of animal diseases for which a pure, safe, potent, and effective 

veterinary biologic is licensed and also to increase the number of states that can provide Federal 

veterinary diagnostic services. 

Taken together, these components comprise the Nation’s agricultural safeguarding system. 
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Overview 

Because of USDA’s effort, no foreign animal diseases introduced into the U.S. spread beyond their original 

area of introduction. This work prevented severe economic and environmental damage, as well as threats to 

animal health. This met the target established in the FY 2005 Annual Performance Plan/Performance Budget. 

No new plant pests or diseases spread beyond their original area of colonization to cause severe damage 

before they were detected. 

Diseases and pests have profound effects on the performance and well-being of plants and animals. They 

cause poor growth, decreased yield, higher production costs and unacceptable quality. Billions of dollars are 

lost through trade embargoes, quarantines, and the destruction of national livestock herds or vast crops when 

emerging or reemerging diseases or pests strike. A sound surveillance system is integral to preventing 

outbreaks of foreign animal diseases and controlling and eradicating domestic diseases of concern. Thus, 

USDA is continually exploring ways to enhance its comprehensive disease surveillance systems. These 

systems detect threats and manage them before they spread. During the past year, the Department has worked 

to enhance and strengthen its surveillance systems by, among other things, establishing the foundation of a 

national animal tracking system and expanding its low pathogenic avian influenza program. 

For emerging diseases to be detected and controlled, the make-up and environment of pathogens must be 

understood and their weaknesses exploited. Rapid diagnostic tests, novel genetic vaccines, immune 

modulatory strategies, disease resistance genes, and increased biosecurity measures will be needed to prevent 

or control outbreaks and the spread of plant and animal diseases in the future. 

Increased concern about the intentional introduction of disease agents and pests has resulted in the 

development of a network of diagnostic laboratories. These laboratories have enhanced the Nation’s collective 

capacity for surveillance and identification of specific pathogens greatly. The network uses standardized 

diagnostic tests and common software platforms to process diagnostic requests and share information among 

diagnostic laboratories. Through the network, producers gain an understanding of threats from diseases and 

pests, and learn effective and efficient ways to control economically significant pests, pathogens and diseases. 

Selected Results in Research, Extension and Statistics 

New Tests for Devastating Cattle Disease—With partial support from USDA, researchers at the 

University of Minnesota are working with Department scientists. The groups are using genetic information to 

develop a highly specific, sensitive and rapid test for detecting Johne's disease. This chronic wasting disease is 

found in cattle, sheep, goats and deer. These new tests, which enable detection of the bacterium in fecal matter 

or milk, can be completed in 72 hours or less. This research, published in the August 30, 2005 issue of the 

Proceedings of the National Academy of Sciences, gives scientists a better understanding of the disease, 

allowing them to create vaccines to prevent infection. Johne's disease costs the U.S. dairy industry millions of 

dollars each year due to reduced milk production. 

Bacteria Genome—Researchers at Oregon State University and The Institute for Genomic Research 

(TIGR) have determined the genetic make-up of a bacterium known to fight harmful plant pathogens. This 

information will help scientists determine how to fight plant diseases caused by other pathogens without using 

products that might harm the environment. The project to study Pseudomonas fluorescens Pf-5, a biological 
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control agent, was supported by competitive funding from USDA’s Microbial Genome Sequencing Program. 

This agent protects plants from pathogens and frost. TIGR and a USDA scientist led the team that altered Pf5. They found that it contained many genes for chemicals harmful to pathogens. About one-third of these 

chemicals were previously unknown.

Biosecurity—USDA is partnering with State agencies and universities to achieve a high level of agricultural 

biosecurity. The groups are focusing on the early detection, response and containment of outbreaks of 

invasive pests and pathogens. The establishment of this network of institutions provides the means necessary 

for ensuring that all participants are alerted of possible outbreaks and/or introductions, and technologically 

equipped to detect and identify pests and pathogens rapidly. 

Program of Research on the Economics of Invasive Species Management (PREISM)—

PREISM is designed to inform Federal and State decision makers regarding allocation of scarce resources to 

exclusion and control strategies for different types of pests. Recipients of PREISM FY 2003 and FY 2004 

funding participated in several workshops to share their research findings with USDA staff and other Federal 

agencies that manage invasive species. PREISM research resulted in the critical analysis of the economic and 

policy implications of soybean rust. The research also led to the almost immediate release of information 

about these matters soon after soybean rust detection in the United States.

New Test to Detect Sudden Oak Death—Sudden oak death, which has caused the death of tens of 

thousands of oak trees in this country, also afflicts many other trees, shrubs and plants. The pathogen 

Phytophthora ramorum (P. ramorum) causes sudden oak death. The discovery has forced officials to destroy 

at least 500,000 ready-to-sell plants in nurseries in 20 states. In response, USDA scientists in California and 

Maryland have developed a genetic test that relies on a sophisticated yet increasingly common technology 

known as polymerase chain reaction (PCR). PCR determines whether a piece of a leaf, for example, contains 

the genetic material from this pathogen. Importantly, many technicians in plant-health labs across the country 

already have the skills and equipment to run the test. The scientists have turned their test over to California 

agriculture officials and USDA for possible use with other molecular diagnostic methods. This fast, accurate 

test makes it possible to distinguish P. ramorum from other suspicious microbes. 

Sequencing the Genome of a Key Wheat Pathogen—USDA scientists and a cooperator from The 

Netherlands are leading a project to sequence the genome of a key wheat pathogen called Mycosphaerella 

graminicol (M. graminicola). The U.S. Department of Energy's Joint Genome Institute chose 

M. graminicola—one of the top five wheat disease pathogens—to alter its genetic make-up. M. graminicola 

causes major wheat damage worldwide, costing American wheat farmers $275 million annually in yield 

losses. It also costs European farmers more than $800 million a year in fungicide sprays. Determining the 

pathogen’s genetic make-up can help researchers understand how the fungus infects crops. This information 

should help control the fungus and related species. 

New Tools Being Developed to Defend Rice Plants against Pathogen—USDA scientists are 

providing rice plants with the genetic tools needed to recognize and identify incoming attacks from the 

damaging pathogen known as rice blast. The fungus Magnaporthe grisea (M. grisea) causes rice yield losses 

of up 30 percent annually worldwide. Two-thirds of the global population relies on rice. While many farmers 

around the world are growing record amounts of the staple grain, they cannot compete with the blast fungus' 
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adaptability to different situations. The blast pathogen is so adaptable that it can defeat a rice cultivar, 

specially bred to resist it, after just one growing season. The scientists are developing rice plants with the 

resistance gene and researching how to apply the M. grisea gene optimally to already-resistant rice plants to 

achieve even greater blast defenses. 

New Live Vaccines Developed for Farm-raised Catfish—USDA scientists in Alabama and Maryland 

have developed two new immersion-applied, modified live vaccines for farm-raised catfish and other species. 

While fish are susceptible to diseases and need vaccines, it is difficult to inject them. So, scientists try to 

develop vaccines that can be immersed in water. The two new vaccines provide protection against 

Flavobacterium columnare, the second-leading cause of catfish deaths and a hazard to many other fish 

species. While one field-tested vaccine cannot prevent disease, it can persist long enough to stimulate 

immunity in the fish. The other prevents a pathogen from colonizing while allowing it to persist for immunity 

to develop. These vaccines could save producers millions of dollars while lowering the cost of fish to 

consumers. 

Key Outcome: Provide a Secure Agricultural Production System and Healthy Food Supply 

Of the many threats to the security of our agricultural production system and food supply, pests and diseases 

are particularly dangerous because they are unexpected and can have quick, disastrous consequences. In the 

last few decades, increased travel and trade have contributed toward the spread of invasive species around the 

world. At the same time, the U.S. has come to rely heavily on agricultural export dollars, which depend on 

having an effective safeguard system. Congress has sought to protect the U.S. agriculture production system 

by appropriating funds for more than 30 programs to reduce the number and severity of agricultural pest and 

disease outbreaks. Two of the programs funded are Animal Health Monitoring and Surveillance (AHMS) and 

Animal Welfare. AHMS is designed to enhance the quality, safety, and competitiveness of U.S. food animal 

products. Animal Welfare is designed to ensure the humane care and treatment of all warm-blooded animals 

covered by AWA and used for research or exhibition, sold wholesale as pets, or transported for commerce. 

These two programs are highlighted in the FY 2005 Performance and Accountability Report. Next year, the 

Emerging Plant Pest (EPP) program will replace the Animal Welfare Program in this report. EPP refers to 

pathogens introduced in the U.S. after 1990, but not yet eradicated. 

Animal Pests and Diseases 

A key benefit of AHMS is rapidly detecting emerging foreign animal diseases. These may be introduced 

accidentally or intentionally. Information about the health status, productivity and health-related attributes of 

the U.S. animal population, products and biologics is critical to understanding the spread of animal pests and 

disease, establishing necessary quarantines, and planning effective eradication and control measures. Public 

concerns about diseases that affect both animals and people reinforce the need for accurate, timely and 

thorough information. 

The Department has enhanced the National Surveillance System that was previously directed at specific 

diseases and commodities. Under the new approach, USDA has broadened its network by developing 

partnerships with State Governments, Tribes, veterinary colleges, animal and livestock industries, public 

health agencies, and other governmental and private groups. As part of this effort, USDA established a 

National Surveillance Unit (NSU) to coordinate and integrate surveillance activities to maximize the 

efficiency of U.S. animal health surveillance programs. During FY 2005, NSU developed and implemented a 
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new surveillance plan in the National Animal Health Laboratory Network (NAHLN) for classical swine 

fever—an economically significant disease that could devastate the Nation’s swine herd if an outbreak 

occurred. NAHLN coordinates the veterinary diagnostic capacity of State animal health laboratories and their 

facilities, equipment and professional expertise. The Department also focused on strengthening its association 

with accredited veterinarians—important animal health surveillance partners—by developing an updated 

reference guide for them and streamlining its communications infrastructure to ensure they could be mobilized 

quickly in an emergency. USDA also collaborated with other Governmental agencies to address issues that 

involved linkages between farm-raised, wildlife, zoo and companion animals. This program is designed to 

quickly mitigate and manage the potentially devastating impacts animal diseases may have on the Nation’s 

food supply and economy. It also implements recommendations made by the National Association of State 

Departments of Agriculture in the Animal Health Safeguarding Review. 

Animal care in USDA adds a critical piece to the surveillance of diseases that can be spread from animals to 

humans. USDA inspectors in zoos, research facilities, and pet wholesale businesses have collaborated in 

surveillance efforts for LCVM in rodents, monkey pox and tuberculosis in elephants. These efforts will be 

vital in avian influenza surveillance because birds and big cats are susceptible to the disease and may play a 

role in transmission. This will be especially important in facilities where the public comes into contact with 

birds and exotic species exhibited at places such as zoos and sanctuaries. 

To protect both animal and human populations, USDA has several avian influenza programs in place. The 

USDA Animal and Plant Health Inspection Service (APHIS) works with states to monitor and respond to 

outbreaks of low pathogenicity (LPAI) and high pathogenicity (HPAI) avian influenza. APHIS also conducts 

outreach through “Biosecurity for the Birds,” which targets poultry producers and provides the latest 

information on avian influenza. In addition to these programs, APHIS maintains an avian influenza vaccine it 

uses to create a buffer around outbreak areas. 

USDA, with industry cooperation, randomly tests commercial flocks for avian influenza, and tests some wild 

migratory flocks, as well. The USDA Agricultural Research Service diagnostic test was used in the 

eradication of avian influenza in Texas in 2004. The test has now been distributed to the National Animal 

Health Laboratory Network, which includes university and state veterinary diagnostic labs throughout the 

United States, to better enable laboratories to monitor for and respond to avian influenza outbreaks. 

A USDA Food Safety and Inspection Service (FSIS) goal is to educate the public about food and avian 

influenza. For example, LPAI is not transmissible by eating poultry, and the chance of poultry infected with 

transmissible HPAI entering the food chain is very low. Proper handling and cooking protects against HPAI 

as well as other contaminants; food safety tips are disseminated in various venues by FSIS. 

Exhibit 40: Strengthen the Effectiveness of Pest and Disease Surveillance and Detection Systems 

Fiscal Year 2005 

Annual Performance Goals and Indicators Target Actual Result 

3.2.1 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 or humans. 

0 0 Met 
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Analysis of Results 

The target was met. USDA selected a target of zero because all program leaders, partners and cooperators, and 

Congress do not want a single instance of an animal disease to spread and cause severe damage. During FY 

2005, the U.S. had several introductions of foreign disease agents that were reported to the World 

Organization for Animal Health. 

Despite these introductions, there were no outbreaks of significant foreign animal diseases or pests that spread 

beyond the original area of introduction and caused severe economic or environmental damage or damage to 

the health of animals. 

Exhibit 41: Trends in Strengthening the Effectiveness of Pest and Disease Surveillance and Detection 

Systems 

Fiscal Year Actual 

Trends 2001 2002 2003 2004 2005 

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 or humans. 

0 0 0 

Baseline 

1 0 

Since the first U.S. case of BSE was announced in December 2003, only one other case has been confirmed in 

the country—in June 2005. In the 2003 case, an investigation revealed that the affected animal was of 

Canadian origin. The BSE exposure was assumed to have occurred in Canada. In the second case, while an 

investigation determined that the animal was of U.S. origin, it was born prior to a 1997 feed ban instituted by 

the U.S. Food and Drug Administration (FDA). FDA’s ban helps minimize the risk that a cow might consume 

feed contaminated with the agent thought to cause BSE. FDA has concluded that the animal in the second case 

was most likely infected prior to the 1997 BSE/ruminant feed rule. The animal did not enter the food supply. 

Throughout the past year, domestic demand for U.S. beef has remained strong due to the effective riskmitigation measures currently in place. USDA has a series of interlocking safeguards to protect U.S. 

consumers and animal health. These safeguards also prevent the introduction or dissemination of the BSE

agent. The system of human health protections includes the USDA ban on specified risk materials (SRMs) 

from the food supply. SRMs are most likely to contain the BSE agent if it is present in an animal. Additional 

measures include a longstanding ban on importing cattle and beef products from high-risk countries, a 

ruminant-to-ruminant feed ban, U.S. slaughter practices and aggressive surveillance. Data obtained from the 

enhanced BSE surveillance effort will help USDA determine whether any further changes to these risk 

management practices are necessary. 

USDA published a draft strategic plan and draft program standards for Natural Animal Identification System 

(NAIS) in FY 2005 that explain its phased-in approach and provide direction to stakeholders who wish to 

participate. Premises identification is the first key component of the system. During 2005, all States used a 

premises-registration system and more than 100,000 premises were registered. USDA is working with 

industry cooperators to implement the animal identification component of the system while the animal 

movement tracking database is being privatized. 
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Animal Welfare 

The Animal Welfare Program is designed to protect animals used for research in biomedical laboratories and 

those bred by the wholesale pet trade. The program also covers those used for education and entertainment in 

zoos, circuses and various exhibits, and those being transported in commerce. It protects them from disease 

outbreaks, neglect and inhumane treatment. USDA inspects facilities and records, investigates complaints and 

re-inspects facilities with documented problems. The program places primary emphasis on voluntary 

compliance. 

The Animal Welfare Program has conducted several canine-care workshops and big cat symposiums to 

educate the general public and licensees on issues dealing with the health and well-being of animals. USDA 

also hosted listening sessions for animal welfare organizations, industry, Federal and Congressional workers, 

and others. 

In 2005, USDA’s Animal Care Program conducted an “amnesty campaign” under which unlicensed dog 

breeders conducting sales covered by AWA could apply for a license without a penalty, unless they had been 

notified previously of the need for a license. 

The Animal Care Program also created a stakeholders’ letter. The letter, distributed periodically, keeps AWA 

licensees and others informed about AWA-related issues. In other outreach activities, USDA’s Animal Care 

Program sponsored a national State-Federal workshop to clarify lines of responsibility/jurisdiction and make 

partnerships better. This workshop was designed to ensure the welfare of wild/exotic (i.e., tigers, elephants, 

etc.) animals. A meeting planned for 2006 will address domestic animals. 

The Animal Welfare Program continued to focus on adapting new technology to improve the effectiveness 

and efficiency of its field inspectors, especially regarding enforcement of the Horse Protection Act (HPA). 

HPA prohibits horses subjected to a process called soring from participating in exhibitions, sales, shows or 

auctions. It also prohibits drivers from hauling sored horses across State lines to compete in shows. In soring, 

chemicals are applied to the legs of show horses to make them feel sore so that they lift them high during 

performances. The Animal Welfare Program involves the use of two different instruments. The first is a 

handheld gas chromatograph capable of identifying chemical vapors within 10 seconds. Applications for this 

technology include identifying illegal soring chemicals, bacteria from wounds or animal solid waste, and 

harmful chemical vapors in animal housing facilities. The other is a handheld infrared camera capable of 

detecting surface temperatures on living or inanimate objects. The device evaluates the adequacy of 

temperature, shade and ventilation management in zoos, kennels and research facilities. It can also determine 

the heat patterns in horse limbs that have been subjected to chemical and physical soring methods. 

Exhibit 42: Ensure the Humane Care and Handling of Animals Used in Commerce 

Fiscal Year 2005 

Annual Performance Goals and Indicators Target Actual Result 

3.2.2 Percentage of facilities in complete compliance at the most recent 

inspection 

70% 69% Unmet 

3.2.3 Number of animals affected by noncompliances documented on 

inspection reports 

360,000 Not 

Available 

Unmet 
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Analysis of Results 

Through regulatory inspections and educational efforts, the Animal Welfare Program raised the level of 

facility compliance from a baseline of 58 percent in 2001 to a level of 70 percent in 2004. The level dropped 

slightly from 70 percent in 2004 to 69 percent in 2005 due to approximately 1,000 additional dog dealers 

being licensed during the year. 

Data for the number of animals affected by noncompliances documented on inspection reports in 2005 were 

inaccurate. Thus, there is no means to compare program performance in FY 2005 with previous years. The 

Licensing and Registration Information System (LARIS) database provides these data. LARIS is obsolete and 

will be replaced during the coming year. 

Exhibit 43: Trends in Ensuring the Humane Care and Handling of Animals Used in Commerce 

Fiscal Year Actual 

Trends 2001 2002 2003 2004 2005 

Percentage of facilities in complete compliance at 

the most recent inspection 

58% 

Baseline 

68% 70% 70% 69% 

Number of animals affected by noncompliances 

documented on inspection reports 

588,961 

Baseline 

371,856 344,866 383,563 Not 

Available 

While the number of animals affected by noncompliances probably did not decrease during FY 2005, the 

Animal Welfare Program has reduced the total number of animals affected by noncompliances by more than 

200,000 since the baseline was established in FY 2001. The benefits of this achievement for the Nation are: 

Assurance that the animals are being treated properly; and 

Detection and treatment of diseases that might move from captive animals to wildlife and humans. 

Description of Actions and Schedules 

As mentioned above, USDA intends to replace LARIS during the next year. The new database will provide 

the program with more reliable performance measures and additional flexibility in the measures evaluated. 

The system will track the amount of animal suffering prevented due to Animal Care interventions for the three 

activities under AWA research, exhibition, and commerce. 

Key Outcome: Improve Animal and Plant Diagnostic Laboratory Capabilities 

The National Animal Diagnostic Network and Plant Diagnostic Network Centers ensure the performance of 

timely diagnostics. They also enhance the process of producing and maintaining a timely, comprehensive 

catalogue of pest and disease outbreak occurrences in a nationally accessible database. Identifying new or 

uncommon pests and diseases accurately 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 effectively from accidental or 

deliberate introduction of diseases. 
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Exhibit 44: Ensure the Capabilities of Plant and Diagnostic Laboratories are Improved 

Fiscal Year 2005 

Annual Performance Goals and Indicators Target Actual Result 

3.2.4 Expand the ability to detect plant diseases to protect the Nation 

from disease outbreaks (Number of plant diseases) 

3 5 Exceeded 

3.2.5 Expand the ability to detect animal diseases to protect the Nation 

from disease outbreaks (Number of animal diseases) 

6 7 Exceeded 

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). 

Plant disease detection criteria have been developed for soybean rust, sudden oak death (SOD), Ralstonia 

stem rot, plum pox virus and pink hibiscus mealy bug. Soybean rust is a fungal disease that attacks the foliage 

of a soybean plant, causing its leaves to drop prematurely. SOD 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 Hybiscus Mealybug is a serious insect threat to agricultural, ornamental and 

horticultural plants in tropical and sub-tropical areas. 

Animal disease-detection criteria have been developed for the following seven 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. High Pathogen Avian Influenza is a virus that can cause varying 

amounts of clinical illness in poultry. Bovine Spongiform Encephalopathy, or mad cow disease, 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 invasive pests and 

diseases. The diagnostic laboratories, adequately staffed and stocked with cutting-edge technology, are 

essential to accomplishing this mission. 

Exhibit 45: Trends Improving the Capabilities of Diagnostic Laboratories 

Fiscal Year Actual 

Trends 2001 2002 2003 2004 2005 

Specific Plant diseases labs are prepared to detect. N/A N/A 2 

Baseline 

3 5 

Specific animal diseases labs are prepared to 

detect. 

N/A N/A N/A 6 

Baseline 

7 

N/A = Not Available 

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 
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their detection criteria, and ensure that more strategically located laboratories are prepared to deal with 

geographically relevant disease threats. 

Key Outcome: Reduce the Number and Severity of Agricultural Pest and Disease Outbreaks 

Genome sequencing involves studying the genetic factors that allow a cell to exist. USDA has sequenced the 

genomes of a wide variety of pathogens to understand their diversity better. This sequencing allows scientists 

to recognize new cells. It also allows them to determine why a pathogen causes disease. Due to the everdecreasing cost of obtaining sequence data, the number of organisms or variants of the microorganisms has 

increased each year. 

To understand what genes allow an organism to resist infection, USDA has identified genetic combinations 

that would give economically important agriculture species a greater ability to survive infection. Sequencing 

of the complete genome of important agricultural species like chickens and cows is vital to this effort and 

facilitates the identification of diseases during the last several years. 

USDA has provided a number of diagnostic tests that help producers find and control diseases more rapidly. 

In some cases, these tests eventually are transferred to universities, State laboratories, private industry or other 

countries for use. 

USDA is at the very early stages of finding genomic markers linked to phenotypes of disease resistance. Much 

more needs to be done. Once more of these markers become available, companies will be able to breed 

animals without the danger of them contracting diseases. USDA is studying this process for the economically 

important livestock commodities. The future challenges are to continue and enhance this effort. To do this, the 

Department must support host genome sequencing and establish models of disease to validate the markers of 

resistance. 

Exhibit 46: Provide Scientific Information to Protect Animals from pests, Infectious Diseases, and Other 

Disease-Causing Entities that Impact Animal and Human Health 

Fiscal Year 2005 

Annual Performance Goals and Indicators Target Actual Result 

3.2.6 Provide scientific information to protect animals from pests, 

infectious diseases, and other disease-causing entities that impact 

animal and human health. 

Met 

 Number of organisms or variants of the microorganisms 

sequenced each year. 

70 70 

 Number of resistance markers for a variety of diseases 

identified. 

10 10 

 Number of tests that are transferred to universities, State 

laboratories, private industry, or other countries for use. 

3 3 

Analysis of Results 

USDA met the goal. While USDA has sequenced parts of many microorganisms and made new discoveries, 

many of these sequences only cover part of the genome. There are many more organisms and varieties to be 

studied. Despite this shortcoming, the sequence data are very useful. They have allowed scientists to discover 

the origin of microorganisms quickly and provided valuable insight into their diversity. Future challenges are 

to continue sequencing efforts and build relational databases so that the sequence data can be stored, mined 

and interpreted easily. 
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Exhibit 47: Trends in Providing Scientific Information to Protect Animals from Pests, Infectious Diseases, and 

Other Disease-Causing Entities that Impact Animal and Human Health 

Fiscal Year Actual 

Trends 2000 2001 2002 2003 2004 2005 

Number of organisms or variants of the 

microorganisms sequenced each year. 

20 

Baseline 

30 40 50 55 70 

Number of resistance markers for a variety of 

diseases identified. 

N/A N/A 3 

Baseline 

5 8 10 

Number of tests that are transferred to universities, 

State laboratories, private industry or other 

countries for use. 

N/A 1 

Baseline 

2 4 3 3 

N/A = Not Available 

While USDA has succeeded in transferring technologies, concepts and some fully viable tests to the end user 

during the past several years, many diagnostic innovations still are being lost before they are commercialized. 

Those tests that have been marketed immediately are used and have enhanced the capability of the producer, 

State Government and diagnostic labs in determining the cause and location of diseases. 

Challenges for the Future 

USDA faces many challenges in reducing the number and severity of pest and disease outbreaks. Some of 

these are external factors that, should they occur, could prevent program goal achievement. 

As in all farming, unexpected events in the natural environment can impact pest and disease programs. A pest 

may move from wild to domestic populations. Migratory birds may carry diseases across boundaries. Climatic 

factors may create unusually good conditions for the growth and spread of a pest or disease. Unusually wet 

weather can prevent program survey actions. If a pest or disease with unknown biological information or 

survey methodology enters the country, it might go undetected before spreading and causing significant 

damage. 

The outbreak and spread of a significant emerging, foreign animal or plant, pest or disease in the U.S. can 

drain available resources quickly. The occurrence of multiple instances of these problems or one instance in 

multiple locations would limit USDA’s prevention methods severely. When large or multiple outbreaks occur, 

personnel must be shifted temporarily from non-emergency programs. This could leave the donor program 

unable to achieve its outcomes if the emergency runs longer than expected. In the emergency programs, 

activities such as developing guidelines and training cooperators may suffer, thereby affecting the ability to 

shorten response times in the future. An outbreak of epidemic proportions can overwhelm the program’s 

ability to conduct timely testing. Personnel involved in support activities, such as regulatory enforcement, 

veterinary diagnostics and biologics, may find their workload outpacing their ability to provide effective 

services. When work priorities are reviewed, some of the burden may be shifted to cooperators. 

Animal cloning and genetic engineering activities are expected to pose a growing challenge. The development 

of transgenic animal species will present new problems in regulation, both in terms of maintaining the health 

and safety of agriculture and developing policy regarding their welfare. A transgenic animal refers to one 

whose genetic make-up has been altered with the genes of another species. In response to a petition, USDA’s 

program responsible for enforcing Animal Welfare Act (AWA) considered whether cloning and genetic 
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engineering of animals should be regulated under the act. The Department determined that AWA covers 

genetic engineering as a research activity in certain circumstances. Cloning activities will be evaluated on a 

case-by-case basis for coverage under the act. 

USDA must communicate and coordinate with its employees and partners so that they clearly understand their 

roles and responsibilities, and ensure they have the necessary resources to respond quickly and effectively. 

The Department relies on State and local Government agencies, professional societies and industries to 

implement, administer and pursue the program standards required to complete them successfully. The 

cooperation and participation of all these groups is essential to achieving goals. Nowhere was this more 

evident in 2005 than when USDA was called upon to work within a framework of many partnerships to assist 

with rescuing and caring for pets impacted by Hurricane Katrina. In the absence of clear authority of any 

Federal Government agency over private pets, such as dogs and cats, the USDA program that enforces AWA 

was asked to fill that role. The responsibilities of USDA’s Animal Care Program are expected to continue to 

grow in this area. The program provides leadership for determining standards for the humane care and 

treatment of animals. 

The Animal Care Program is experiencing an increase of about 100 AWA licensees per month. Almost all of 

these new licensees are commercial dog breeders. Providing services to this growing number of new licensees 

will continue to be a challenge for USDA. 

Planning responses to emergencies before they occur and developing the infrastructure to respond to them is 

an activity of growing importance in the post-9/11 and post-Katrina world. Preparing for a world pandemic 

requires coordinating large numbers of experts from widely diverse scientific disciplines and professional 

settings. Coordination increases the ability of USDA to respond as needed. Cooperative agreements with 

international organizations and countries allow information to be shared across wider boundaries. Mobilizing 

specialized personnel requires advance work establishing information on resource types and locations. 

STRATEGIC GOAL 4: 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. in 2005. Through its leadership of Federal nutrition-assistance programs, the Department made a 

healthier diet available for millions of children and low-income working families. Meanwhile, USDA’s 

Center for Nutrition Policy and Promotion used the latest science information to update Federal nutrition 

guidance and interactive tools. This information was designed to help consumers establish and maintain 

healthy diets and lifestyles that are consistent with the President’s HealthierUS Initiative. HealthierUS is a 

health and fitness initiative that promotes increased physical activity, the consumption of nutritious foods, 

regular preventive health screenings and the avoidance of risky behaviors, especially involving alcohol, 

tobacco and illegal drugs. Key accomplishments included: 

Promoting access to the Food Stamp Program (FSP). Food stamps help low-income 

families and individuals purchase nutritious low-cost meals. FSP is the Nation’s largest nutrition 

assistance program serving more than 25 million people monthly in FY 2005. The program enables 

participants to improve their diets by increasing their food-purchasing power via benefits redeemable 

at retail grocery stores across the U.S. USDA promoted FSP through a national media campaign 
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designed to reinforce the availability and importance of food stamps as nutrition assistance and work 

support. The campaign distributed radio spots in 35 media markets, 10 of which aired ads in both 

Spanish and English, and more than 2.2 million flyers and posters written in these languages across 

America; 

Continuing to ensure that Food Stamp benefits are accurately issued. The national 

payment error rate for FY 2004 is 5.88 percent, an all-time low error rate for FSP and a 34 percent 

improvement from just 5 years ago. This improvement is a result of strong partnerships with States 

administering the program and the implementation of program simplifications and policy options 

provided in the Farm Security Rural Investment Act of 2002 (FSRIA). The FY 2005 Food Stamp 

Payment Accuracy Rate will become available in June 2006 and will be reported in the FY 2006 

Performance and Accountability Report; 

Implementing new provisions in the Child Nutrition Programs. With the passage of the 

Child Nutrition Act of 2004, USDA began implementing new provisions of the law. Child Nutrition 

Programs are designed to provide nutritious meals to students at participating schools, with lowincome students receiving free or reduced-price meals. USDA took steps to ensure access to Federal 

nutrition-assistance programs for the children who need them, while maintaining and improving 

program integrity; and 

Launching MyPyramid so that consumers are motivated to make healthier food and physical 

activity choices consistent with the 2005 Dietary Guidelines for Americans and other standards, 

resulting in improved well-being and Healthy Eating Index scores. These guidelines give sciencebased advice on food and physical activity choices for health. MyPyramid, which can be accessed at 

www.mypyramid.gov, translates the guidelines’ principles. It features the concepts of 

personalization, variety, gradual improvement, physical activity, moderation and proportionality. By 

accessing MyPyramid, consumers can use several of its features to individualize their diet and 

physical activity patterns. 

In FY 2005, USDA made strides in improving the quality of Americans’ diet through a nutritionally enhanced 

food supply and 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 the quality of 

diets—diets 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 resulting from multifaceted causes 

including a “more is better” mindset for food consumption, a sedentary lifestyle and the easy availability and 

choices 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 consumers integrate these choices into a diet that promotes their long-term 

health. In FY 2005, USDA pursued national policies and programs to ensure that everyone has access to a 

healthy diet regardless of income, and that the information is available to support and encourage good 

nutrition choices. 

USDA’s success in promoting public health through good nutrition and effective nutrition-assistance 

education programs relies on research. The research provides critical knowledge of what one needs to eat for 

proper growth and development, continued health, and productivity. Research also shows how that knowledge 
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can be conveyed to the public in a manner that leads to true dietary changes. Further, USDA has research 

supporting the development of new healthy and tasty food products. This process provides another avenue for 

helping consumers eat well. In FY 2005, USDA conducted and supported research that resulted in a new 

understanding of how nutrients, such as isoflavins, promote health and influence what people eat. The 

Department also worked on developing healthy new products made from common commodities, such as rice 

and cheese by-products. 

OBJECTIVE 4.1: IMPROVE ACCESS TO NUTRITIOUS FOOD

Exhibit 48: Resources Dedicated to Improving Access to Nutritious Food

FY 2005 

USDA Resources Dedicated to Objective 4.1 Actual Percent of Goal 4 

Program Obligations ($ Mil) 49,396.9 98.31% 

Staff Years 845 28.39% 

Introduction 

The Federal Government is committed to ensuring that no child or family goes hungry. USDA’s nutritionassistance programs represent the Federal Government’s core effort to reduce hunger and improve nutrition. 

These programs aided one in five people nationally during FY 2005. They promote better health for all people 

in the U.S., support the transition to self-sufficiency for low-income working families and support children’s 

readiness to learn in school. A well-nourished population is healthier and more productive. 

Overview 

By working in partnership with States, USDA continues to implement effective nutrition-assistance programs 

and deliver program benefits to eligible participants. The programs promote access to a nutritious and 

adequate diet for those with little income and few resources. For a variety of reasons, many eligible 

individuals and families do not participate in these programs. In FY 2005, USDA focused on increasing the 

participation rate among people eligible for food stamps. The Department also focused on expanding access to 

the School Breakfast Program (SBP), which is not as widely available as the National School Lunch Program 

(NSLP). SBP provides cash assistance to States to operate breakfast programs in schools and residential childcare institutions. NSLP provides nutritionally balanced, low-cost or free lunches to children each school day. 

In 2005, USDA continued to work with States to implement FSRIA’s FSP provisions. These provide States 

with options to simplify the program’s administration. The Department also continued monitoring and 

tracking outreach efforts to targeted populations. USDA embarked on the second year of its media campaign 

to inform low-income people of their potential eligibility. The Department also provided technical assistance, 

outreach and participation grants and guidance to faith- and community-based organizations to encourage FSP 

participation. 

Despite SBP’s availability, many children that could benefit from breakfast at school currently do not use the 

program. On an average school day in FY 2005, more than 50 million children had access to school lunch and 

nearly 29 million children chose to eat a program lunch. Additionally, about 9.3 million children received a 
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school breakfast. USDA identified opportunities to promote SBP. The Department raised awareness of SBP’s 

availability with State and civic leaders, and supported and celebrated National School Breakfast Week. This 

program involves schools across America emphasizing the importance of a good breakfast through events, 

posters and student activities.

The Department also continued to serve those eligible for the Special Supplemental Nutrition Program for 

Women, Infants and Children (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. The program provides nutritious 

foods to supplement diets, information on healthy eating and health-care referrals. About 8 million pregnant 

women, new mothers and their young children benefited in an average month in FY 2005. The Department 

worked with the Office of Management and Budget, Congress and State partners to ensure that WIC funding 

levels were available and distributed effectively to serve all eligible persons who wished to participate. 

Finally, USDA reached out to a wide range of faith-based and community organizations to deliver program 

benefits and services, and encourage access to the programs. 

Selected Results in Research, Extension and Statistics 

Understanding Economic and Behavioral Influences on Fruit and Vegetable Choices—The 

newly released USDA MyPyramid and the 2005 Dietary Guidelines encourage Americans to increase their 

consumption of fruits and vegetables. USDA food supply data indicate that Americans consume 1.4 servings 

of fruit daily. This figure is less than half the 4 servings or 2 cups recommended in the 2005 Dietary 

Guidelines for Americans eating 2,000 calories per day. Marketers and nutritionists alike have pondered the 

reasons for Americans’ fruit and vegetable shortfalls. USDA examined how economic, social and behavioral 

factors influence consumers’ fruit and vegetable choices. Researchers found ways for consumers to meet the 

Food Guide Pyramid recommendations for fruit and vegetable consumption for less than $1 per day. Despite 

this finding, other research indicated that low-income consumers: 

Spent less on fruits and vegetables than others; and 

Were less likely to respond to a small change in income by purchasing more fruits and vegetables 

than their higher-income counterparts. 

New Super-Carb Product Created—A USDA scientist has created a new all-natural, super-carb product 

called Calorie-Trim. Derived from whole oats and barley, Calorie-Trim contains 20 to 50 percent beta-glucan, 

a soluble fiber found in these grains. When eaten, the biologically active fiber helps the body regulate blood 

glucose and lower bad cholesterol. This process helps lessen the risk of heart disease. Calorie-Trim can mimic 

some fat and carbohydrates' properties in food without overburdening the body with calories that contribute to 

diabetes and obesity. Additionally, Calorie-Trim, with less than 4 calories per gram, boasts 5 to 10 times more 

soluble fiber than regular milled oats, flour and oatmeal. 

New Alternative to Peanut Butter—USDA scientists have developed a tasty sunflower-seed butter that 

can be used for spreading on breads or crackers. Marketed as SunButter, the spread comes in an array of 

flavors and textures. Scientists have also created a low-carb version. Twelve States now include SunButter in 

their school lunch programs. Some airlines provide snacks made with SunButter as an alternative to peanuts. 

The product gives the roughly 3 million Americans who suffer from peanut allergies a satisfying option. 
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Potassium for Better Melons—USDA scientists studying ways to make melons more nutritious have 

found that spraying potassium on them as they grow boosts their beta carotene and vitamin C levels. Beta 

carotene is one of the most powerful dietary antioxidants. Vitamin C is a protein that gives structure to bones, 

cartilage, muscle, and blood vessels. The potassium application increased the fruits’ sugar content, which, in 

turn, raised levels of vitamin C and produced a better-tasting and sweeter melon. The potassium formulation is 

relatively simple, inexpensive, safe and readily available. It can also be combined with sprays for insects or 

disease. 

New Techniques for Pre-cut Fruit and Vegetables—USDA has developed three techniques for 

prolonging the shelf life of pre-cut fruits and vegetables. This process should help expand the fresh-cut 

produce supply—one of the fastest growing food categories in U.S. supermarkets. When plant cells detect a 

nearby injury, as occurs with slicing, they send electrical, chemical and hormonal signals to initiate defense 

responses to protect the plant. Such wound signaling changes plant tissue texture and chemical properties. 

One way to bypass the plant's alert system, scientists have found, is to slice the fruit while it is held under 

water. This method prevents plant tissues from detecting pressure changes that would accompany the slicing. 

The water forms a barrier that prevents fluids from escaping from the fruit or vegetable tissues being cut. Heat 

and ultraviolet light treatments also can be used to fool a plant's defense system and keep just-sliced fruit 

crisper and more flavorful longer. 

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 be unaware of the opportunity to receive these benefits. USDA looks to improve access to 

and promote awareness of these programs among those who may benefit from their services with continued 

outreach and information strategies. 

USDA’s ability to achieve this objective could be significantly enhanced if additional legislative authority for 

policies and program initiatives were enacted. This would enhance initiatives that 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 USDA’s 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 

As noted above, the resources and services USDA delivers through its nutrition-assistance programs represent 

the Federal component of efforts to improve the nutrition of children and low-income people. The Department 

is committed to providing access to nutritious food through the major nutrition assistance programs for 

eligibles who wish to participate. While data are not yet available to assess the success of these FY 2005 

efforts in increasing the rate of participation among eligible people, the period did see increased participation 

in all three targeted programs. 
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Exhibit 49: Improve Access to Nutritious Food 

Fiscal Year 2005 

Annual Performance Goals and Indicators Target Actual Result 

Improve Access to Nutritious Food (Mil): Deferred 

4.1.1 Rates of eligible populations participating in the Food Stamp 

Program 59.1% N/A 

4.1.2 Rates of eligible populations participating in the School Breakfast 

Program 18.0% N/A 

4.1.3 Rates of eligible populations participating in the Special 

Supplemental Nutrition Program for Women, Infants and Children N/A N/A 

Analysis of Results 

The measure has been deferred because data on the number of eligible persons are currently unavailable. Data 

for the SBP measure should be available for reporting in the FY 2006 Performance and Accountability Report 

(PAR). FY 2005 data for the FSP and WIC measures should be available for the FY 2007 PAR. An analysis of 

the most recent information available follows. 

Food Stamp Program—The most recent available information indicates that in FY 2003, Food Stamp 

Program participation increased for the second year in a row after a 7-year decline. The new data indicates 

that the Food Stamp Program served approximately 56 percent of all who were eligible to participate in FY 

2003, an increase from 54 percent in FY 2004. Ensuring that all who are eligible to participate is a top 

priority for USDA. The increase in participation is attributed, in part, to the use of State policy options that 

promote outreach and improve access to the program. Participation in the Food Stamp Program is also 

responsive to changes in unemployment; when the number of unemployed increase, program participation 

also rises. 

Additional waivers to increase FSP access to programs for elderly and other targeted groups. USDA 

works with a number of States on combined application (CAP) demonstration projects. CAPs allow 

elderly and disabled populations receiving Supplemental Security Income to apply for food stamps 

through a simplified process. Four additional States were approved to operate CAPs in FY 2005 for a 

total of 10 projects operating Nationwide; 

The awarding of 6 grants totaling $5 million to increase food-stamp awareness of low-income 

households and simplify the application process; 

The awarding, for the second year in a row, of $1 million in grants to faith- and community-based 

organizations and public agencies to educate people about the benefits of food stamps so that they 

can make informed decisions about applying and participating; 

Free outreach and educational materials, including posters, brochures and flyers in English and 

Spanish, a national media effort to raise awareness of FSP availability, an expanded web site with 

new outreach resources, and radio public service announcements. Materials in 35 languages are 

available for download. Additionally, USDA continued a toll-free information line—available in 

English and Spanish—to help the public learn more about the FSP such as how and where to apply; 
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Working with the U.S. Department of Justice to develop and distribute brochures in multiple 

languages to inform Federal program administrators of their obligations to accommodate people with 

limited English proficiency and other beneficiaries of their rights; 

Coordinating an FSP National Outreach Coalition to partner with and strengthen educational and 

outreach efforts nationally by sharing efforts and joining forces and resources; and 

Partnering with stores and retailer associations to promote food stamp outreach and nutrition 

education-related activities. This work included the use of an in-store FSP “pre-screening” tool to 

help people learn if they are eligible for the program, encouraging store use of FSP public service 

announcements and distributing outreach materials and MyPyramid nutrition information. 

SBP—FY 2005 SBP participation rate data will be available in December 2005, and will be reported in the 

FY 2006 USDA Performance and Accountability Report. SBP makes healthy, nutritious meals available to 

nearly 41 million students, however, an average of 9 million children actually eat a program breakfast. More than 

76,000 schools operated the program in FY 2005, which is an increase of approximately 1,000 schools from the 

previous year. USDA continued to support and encourage SBP participation in FY 2005 by: 

Continuing SBP promotion through such activities as School Breakfast Week, which involves schools 

across America in highlighting the program through events, posters and student activities that 

emphasize the importance of a good breakfast—either at home or served through the program—in 

being ready for school; and 

Implementing provisions in child nutrition reauthorization included in the Child Nutrition and WIC 

Reauthorization Act of 2004. The provisions expand program access by: 1) requiring States to enroll 

children who receive food stamps in the free school meals program without an additional application; 

2) combining applications for subsidized meals so that each household can submit just one for all its 

children; and 3) making each certification valid for the school year, eliminating the need to re-apply 

if circumstances change. 

WIC—FY 2005 WIC participation rate data will be reported in the FY 2007 PAR. In FY 2005, USDA 

continued efforts to ensure that funding was available to support participation for all those eligible who wish 

to participate. 

Exhibit 50: Trends in Improving Access to Nutritious Food 

Fiscal Year Actual 

Trends 2001 2002 2003 2004 2005 

Food Stamp Program % of eligible people participating 53.2% 53.8% 55.6% N/A N/A 

School Breakfast Program % of eligible school children 

participating 14.5% 15% 15.5% 16.3% N/A 

WIC Program % of eligible people participating (measure under 

development) N/A N/A N/A N/A N/A 

FSP—The most recent available information indicates that, in FY 2003, the FSP participation rate increased 

for the first time after a seven-year decline. The new data indicate that FSP served approximately 56 percent 

of all who were eligible to participate in FY 2003. Ensuring that all who are eligible participate is a top 

priority for USDA. One reason for the increase in participation since FY 2000 is changes in the law. Another 
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is that policy reforms in recent years have increased the number of eligible low-income individuals and 

families. Additionally, USDA has increased efforts to improve program access. 

SBP: Trend data indicate that the proportion of children enrolled in school who participate in SBP has risen 

slowly but steadily in recent years. This use reflects USDA’s continuing efforts to encourage schools to 

operate the program and children in those schools to participate. In FY 2005, approximately 9.3 million 

children received breakfast through the program each school day. 

WIC: A methodology to estimate the number of people eligible to participate in WIC is currently being 

developed. Data for FY 2005 are expected to be available in 2007 and will be reported in the FY 2007 PAR. 

OBJECTIVE 4.2: PROMOTE HEALTHIER EATING HABITS AND LIFESTYLES

Exhibit 51: Resources Dedicated to Promote Healthier Eating Habits and Lifestyles 

FY 2005 

USDA Resources Dedicated to Objective 4.2 Actual Percent of Goal 4 

Program Obligations ($ Mil) 561.1 1.12% 

Staff Years 919 30.86% 

Introduction 

Eating healthfully 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 known fact, a large gap remains 

between recommended dietary patterns and what people in the U.S. actually eat. USDA’s nutrition-assistance 

programs focus on improving eating behaviors through promotion and services. 

For the benefit of the total U.S. population, USDA uses Federal nutrition policy and nutrition education to 

provide scientifically-based information about healthful diets and lifestyles. For example, the Department 

promotes the aforementioned Dietary Guidelines for Americans and MyPyramid to help Americans make 

wise choices related to food and physical activity. 

Overview 

USDA used its nutrition-assistance programs and broader nutrition-education efforts to promote healthier 

eating and physical activity across the U.S. It worked to improve nutrition-education efforts within each of the 

major nutrition assistance programs. Highlights in FY 2005 included a series of projects to identify new 

strategies to address unhealthy weight gain through WIC, new Team Nutrition educational materials targeted 

to fruit and vegetable consumption and healthier school environments, and a major review and reengineering 

effort of food stamp nutrition education, still underway, to ensure that the Department focuses on changing 

behaviors using the best strategies available. 

USDA also released MyPyramid and the accompanying interactive tools that U.S. consumers can use to 

assess their diet and physical activity, which is located at www.MyPyramid.gov. USDA agencies promote 

healthy food choices, dietary habits, and eating behavior through research to improve understanding of 

optimal nutrient requirements at all stages of the life cycle, the relationship between diet, physical exercise 
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and health and the factors influencing individual food choices. The Department conducts and supports 

multidisciplinary nutrition research and education that considers interrelated factors affecting nutritional 

status, such as genetics, physiology, sociocultural factors, psychology, economics, agricultural and food 

systems, and public policy. 

Excessive weight gain and obesity will soon rival cigarette smoking as a leading cause of premature death and 

disability in the U.S. Improved diets can help with weight management and reduce the risk of certain types of 

cancers and type II diabetes—the disease’s most common form. Thus, USDA’s efforts focus on updating 

nutrition policy, providing information and promoting behavioral changes that can reduce excessive weight 

gain, obesity and other diet-related health conditions. These actions hold the potential to improve the lives of 

millions of Americans and reduce the health care and social costs of these conditions. These social costs 

include lost years of work productivity related to morbidity and mortality from diet-related health conditions. 

Researchers have identified poor diet and physical inactivity as the second-most common preventable cause of 

death in the U.S. The total cost attributed to excessive weight gain and obesity is estimated to be nearly $120 

billion annually. Even small improvements in the average diet could yield large health and economic benefits 

to individuals and society as a whole. 

To this end, USDA will continue promoting healthier eating and lifestyle behaviors as a vital public-health 

issue. The Dietary Guidelines for Americans is the cornerstone of Federal nutrition guidance. Using the 2005 

Guidelines and MyPyramid, the educational tool of the guidelines, USDA will continue its leadership role of 

providing advice on patterns people can follow to improve overall health through proper nutrition. 

In the same vein, according to Department and U.S. Census Bureau statistics, the nutrition assistance 

programs managed by USDA touch the lives of one in five Americans – an enormous opportunity to promote 

healthier behaviors. In 2005, the Department maintained its focus on getting benefits to children and lowincome people to encourage healthy eating and increased physical activity. 

Selected Results in Research, Extension and Statistics 

Selected Results in Research, Extension and Statistics Promoting Healthy Diets—The 

Expanded Food and Nutrition Education Program (EFNEP) is improving the diets of disadvantaged 

Americans. EFNEP is also helping prevent high blood pressure, heart disease, diabetes and obesity. This 

program is designed to assist limited-resource audiences acquire the knowledge, skills, attitudes and behavior 

modifications necessary for nutritionally sound diets. In FY 2004, EFNEP reached 378,206 youth and 157,809 

adults. An additional 578,366 family members were reached indirectly through adult participants. While lowincome people often do not consume enough key nutrients—including protein, iron, calcium and vitamins A, 

C and B6—data confirmed that, depending on the particular nutrients, EFNEP participants Nationwide 

increased their intake of these nutrients by 5 to 50 percent. Thus, participants improved their diets. Science 

and Education Impact Statements from October 2004 report that, of the nearly 74,000 surveyed, 87 percent of 

past EFNEP participants now make healthier food choices, prepare foods without added salt, read nutrition 

labels or ensure their children eat breakfast. 

Obesity Policy and the Law of Unintended Consequences—Effective action to combat obesity and 

excess weight could come in many forms since many variables influence diet and lifestyle choices. The wide 

range of factors contributing to food choices is compounded by the incredible variety of foods and 
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consumption opportunities available today—choices among thousands of food products, about whether to eat 

at home or in a variety of restaurants, and about lifestyles. Thus, public policy targeting specific foods or 

lifestyle choices could have surprising unintended consequences. USDA examined some of the potential 

intended and unintended consequences of three widely discussed obesity policies—nutrition labels in 

restaurants, taxes on snack foods, and restrictions on food advertising to children—focusing on the likely 

effect of each program on producer and consumer incentives and health outcomes. In every case, the 

unintended effects could dampen the policy’s success in reducing excess weight and obesity. 

Link between High-Carbohydrate Diet and Cataracts Studied—USDA-funded research has 

revealed new details about the association between a high-carbohydrate diet and cataract risk. Cataracts are a 

major cause of blindness worldwide and afflict an estimated 20 million Americans. Women who ate an 

average of 200 to 268 grams of carbohydrates daily were more than twice as likely to develop cortical 

cataracts as women who consumed between 101 and 185 grams per day. The recommended daily allowance 

of carbohydrates for adults and children is 130 grams. The connection between high-carb intake and increased 

cataract risk remains unknown; one possibility is that increased exposure to glucose, a breakdown product of 

carbs, might damage the eyes’ lenses. 

Zinc and Prostrate Cancer Links—USDA scientists in California have discovered new information 

about how zinc might help fight prostate cancer, the second-most common cause of cancer-related deaths 

among American men. Laboratory investigations using cancerous and cancer-free human prostate cells 

indicated that the afflicted cells accumulated less zinc than healthy ones. In a related finding, the cancerous 

cells had lower levels of ZIP1, a protein that moves zinc through the membrane that encloses a cell. Although 

another zinc-ferrying-protein, ZIP3, existed in the cancer cells, its location prevented it from being most 

effective. 

Cereal Fiber and Heart Disease—A USDA study found that women with a history of heart disease and 

who reported eating six or more servings of whole grains per week had slower progression of atherosclerosis. 

Atherosclerosis causes plaque to clog the passageways through which blood flows. Researchers found that 

stenosis—the narrowing of the diameter of arterial passageways—occurred less in women who ate more 

cereal fiber from whole-grain foods than those reporting lower intakes. The data suggest that following 

current dietary recommendations can slow the rate of heart disease progression. While the 2005 Dietary 

Guidelines for Americans urges people to consume at least three servings of whole-grain foods per day, 

experts say that most Americans consume less than a single serving daily. 

Challenges for the Future 

USDA’s effort to reduce excess weight gain and obesity and improve diet is expanding its reach. Immense 

resources are available in both the private and public sectors that can enhance the effects of the Department’s 

work on this issue. USDA works to create science-based resources that can be used within nutrition-assistance 

programs. These resources primarily target low-income persons and foster the much larger public and privatesector effort to achieve America’s ambitious nutrition goals. 

While USDA’s goal of reducing obesity levels begins with understanding what constitutes a healthy diet and 

the appropriate amount of exercise, ultimately success requires individuals to change their diets by modifying 

their eating behavior. Crafting more effective messages and nutrition education programs to help people make 
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better food choices requires understanding their current habits and the relationships between these decisions 

and their attitudes, knowledge and awareness of diet/health links. This requires data that link behavior and 

consumption decisions of individuals of various backgrounds, regions, ages and genders. While national data 

exist, 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 a major challenge 

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 to maximize the reach and impact of these materials. 

Promotional materials will be available within Federal nutrition-assistance programs, and to the general 

public. 

Attaining performance outcomes in this area depends partly on the emphasis that the U.S. places on healthier 

eating, including products and practices in the food marketplace. Additionally, physical activity and other 

lifestyle issues have a significant affect on body weight and health. 

Key Outcome: Promote More Healthful Eating and Physical Activity across the Nation 

USDA promotes healthy eating through its comprehensive nutrition research and education programs. Both of 

these programs 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 improve 

what people eat and find effective strategies to reach target populations with promotional information and 

messages. USDA assesses its performance in promoting healthful eating and physical activity among lowincome populations served by Federal nutrition-assistance programs. This is done by monitoring the Healthy 

Eating Index score (HEI). HEI is 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. 

Exhibit 52: Promoting Healthier Eating Habits and Lifestyles 

Fiscal Year 2005 

Annual Performance Goals and Indicators Target Actual Result 

4.2.1 Improve the Healthy Eating Index (HEI) scores for Deferred 

 People with incomes under 130% of Poverty 65 N/A 

 The U.S. Population 65.0 N/A 

Analysis of Results 

The measure has been deferred because data are not yet available. FY 2005 data will be available in 2006 and 

reported in the FY 2006 PAR. USDA continued its efforts to promote improvement in dietary practices for 

low-income people. To meet the needs of the general population, the Department also continued its leadership 

role in developing nutrition guidance and educational tools designed to motivate Americans to eat healthier. 

USDA also: 

Continued to provide technical assistance and training in support of State agencies or partners at 

conferences and meetings like the Head Start Conference and State Nutrition Action Plans; 
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Prepared to distribute the Food Stamp Nutrition Education (FSNE) Guiding Principles as approved 

by the Under Secretary (formerly the FSNE Framework). FNSE provides information on who 

provides the nutrition education, the strategies used in providing that education and how to contact 

local offices; 

Distributed more than 5.2 million Eat Smart, Play Hard nutrition education materials requested by 

program partners. This program offers practical suggestions designed to help motivate children and 

their caregivers to eat healthy and be active; 

Continued work on healthy school nutrition-environment activities, especially promoting the Healthy 

School Challenge at regional and State meetings. This program is designed to help encourage schools 

and parents to continue promoting healthy lifestyles for children; and 

In partnership with the U.S. Department of Health and Human Services, released the 2005 Dietary 

Guidelines for Americans and disseminated Finding Your Way to a Healthier You. The guidelines 

provided 41 key recommendations (23 for the overall population and 18 additional ones for specific 

population groups). This nutrition information is useful for the development of educational materials 

and tools and for the design and implementation of nutrition-related programs (including Federal 

food, nutrition education, and information programs). The Dietary Guidelines and the consumer 

brochure are available at www.healthierus.gov/dietaryguidelines/index.html. 

Exhibit 53: Trends to Promote Healthier Eating Habits and Lifestyles 

Fiscal Year Actual 

Trends 2001 2002 2003 2004 2005 

Healthy Eating Index (HEI) for People with Incomes under 

130% of Poverty 

N/A N/A N/A N/A N/A 

Healthy Eating Index for the U.S. Population N/A N/A N/A N/A N/A 

While data on trends in diet quality from 2001 to 2005 currently is unavailable, evidence from other sources 

indicates that problems related to diet quality persist, both among low-income people and the general 

population. USDA’s ongoing efforts during this period to promote behavior change, both through the nutrition 

assistance programs and its Nation-wide nutrition policy and promotional efforts have been focused on 

motivating changes to reduce and prevent excessive weight gain and obesity. 

Key Outcome: Increase Nutrition Information Available to the Public 

In 2005, USDA labs released four dietary databases and search tools to the public. Users can access the 

databases and tools at www.ars.usda.gov. One of the major releases was the National Nutrient Database for 

Standard Reference, Release 18. The release featured the most essential nutrients in foods commonly eaten in 

the U.S. As the American diet changes, updates to this database are essential to know if the public can get 

adequate amounts of essential nutrients. The database is available for use on personal digital assistants, 

personal computers and web-based applications. Availability in a variety of formats has increased access to 

and utilization of this valuable national resource by the scientific community, private industry and the general 

public. 
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USDA also released the latest “What We Eat in America” survey. This survey is the dietary component of the 

National Health and Nutrition Examination Survey conducted by the U.S. Department of Health and Human 

Services. The results are for the years 2001-2002 for 9,701 participants of the only nationally representative 

study of its kind. Additionally, the 13,000 foods covered by this survey can be accessed at 

www.ars.usda.gov/Services/docs.htm?docid=7783. The Department also released a set of products from the 

Community Nutrition Research Group. These products support the revised Food Guide Pyramid, including an 

updated pyramid servings database, search tool and intake tables. The USDA Center for Nutrition Policy and 

Promotion is using the tools in MyPyramidTracker.gov and for revising the Healthy Eating Index. 

Exhibit 54: Increasing Nutrition Information Available to the Public 

Fiscal Year 2005 

Annual Performance Goals and Indicators Target Actual Result 

4.2.2 Determine food consumption patterns of Americans, including 

those of different ages, ethnicity, regions, and income levels. 

Provide sound scientific analyses of U.S. food consumption 

information to enhance the effectiveness and management of the 

Nation's domestic food and nutrition assistance programs. 

Met 

 Number of reports from the USDA food and nutrient database. 4 4 

Analysis of Results 

In 2005, USDA scientists compared four popular diet plans in a controlled study for one year. It found that 

intake of protein, carbohydrate or fat was less important than total calories. Adherence to any diet was the best 

predictor of weight loss and adherence to the more restrictive diets was lower than to those that offered more 

balanced menu choices. Weight loss was correlated with improvements in such risk factors for heart disease 

as blood cholesterol. 

As part of long-term research on nutrient needs, USDA scientists determined that high protein intake did not 

have an adverse effect on calcium metabolism or bone health. Substituting some plant protein for animal 

protein in the diets of female volunteers had no impact on these health outcomes. This research definitively 

refutes the long-held belief that eating large portions of meat would lead to acidification in the body. This 

acidification, the process of conversion into an acid, would increase turnover of calcium from the skeleton. 

USDA scientists have increased public access to data and easy-to-use tools. Such information can help users 

apply state-of-the-art nutrition knowledge to dietary improvement. This assists consumers in improving their 

dietary choices to stem the increase in obesity and improve the health of people across the Nation. 

Exhibit 55: Trends in Determining Food Consumption Patterns 

Fiscal Year Actual 

Trends 2000 2001 2002 2003 2004 2005 

Number of reports from the USDA food and 

nutrient database. 

6 4 5 6 7 4 

N/A = Not Available 
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OBJECTIVE 4.3: IMPROVE FOOD PROGRAM MANAGEMENT AND CUSTOMER SERVICE

Exhibit 56: Resources Dedicated to Improve Food Program Management and Customer Service 

USDA Resources Dedicated to Objective 4.3 FY 2005 Actual Percent of Goal 1 

Program Obligations ($ Mil) 290.4 0.58% 

Staff Years 1,213 40.75% 

Introduction 

USDA is committed to ensuring that nutrition-assistance programs serve those in need at the lowest possible 

costs and with 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. 

USDA focused on maintaining strong performance in the food stamp payment-accuracy rate as its key 

performance goal in this area. 

Overview 

USDA continued to improve management by reducing program errors and continuing its use of electronic 

technology to enhance customer service. After achieving the critical goal in FY 2004 of completing the 

Nationwide implementation of electronic benefit transfer (EBT) for the delivery of food-stamp benefits, the 

Department continues to work with its State agency partners to ensure timely re-procurement of EBT systems 

awarded on the basis of free and open competition. EBT is an electronic system that allows a recipient to 

authorize transfer of his or her government benefits from a Federal account to a retailer account to pay for 

products received. The National Food Stamp payment error rate, which fell to a record low of 6.64 percent in 

FY 2003, improved further in FY 2004 to 5.88 percent. 

These efforts are part of USDA’s long-term core commitment to prevent waste, inefficiency and abuse that 

diverts taxpayer resources from the core purposes and goals of these programs. The sheer size of these 

programs demands that the utmost attention be given to applying efficient management practices and, to the 

extent possible, preventing errors in distributing benefits. Customer service deficiencies undermine the 

effectiveness of the programs in reaching clients with the benefits they need. Maintaining public trust in 

Federal nutrition-assistance programs is vital to their success and continued support. 

Challenges for the Future 

The nutrition-assistance structure is intended to serve people in special circumstances and settings. USDA 

must reshape its management approach because of the need to make services convenient and accessible to 

participants. Additionally, State and local Governments must deliver the programs. Thus, the Department 

must address erroneous and improper payment problems by providing monitoring and technical assistance. 

This approach requires adequate numbers of trained staff supported by a modernized information technology 

infrastructure to ensure full compliance with national program standards. The staff must also prevent or 

minimize error, waste and abuse. 

To meet the challenge of continued improvements in FSP payment accuracy, USDA continues to dedicate 

resources to this area. Despite these efforts, two significant challenges will impact future success. 
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Congressional action has changed the quality-control process, lowering the risk of penalties for poor State 

agency performance. It remains to be seen how States will react to these changes. Additionally, State budgets 

have been and will continue to be extremely tight. This factor could hurt State performance in the paymentaccuracy arena. USDA will continue to provide technical assistance and support to maintain payment 

accuracy in the context of this changing program environment. 

Key Outcome: Maintain a High Level of Integrity in the Nutrition Assistance Programs 

While 2005 data are unavailable, Food Stamp payment accuracy reached a record high in 2004. This record 

demonstrates strong efforts in this area, resulting in significant error reductions during the past several years. 

Even small changes in the food stamp error rate can save millions of dollars. 

Exhibit 57: Increase Efficiency in Food Management 

Fiscal Year 2005 

Annual Performance Goals and Indicators Target Actual Result 

4.3.1 Increase Food Stamp Payment Accuracy Rate 93.5% N/A Deferred 

Analysis of Results 

The FY 2005 food stamp payment accuracy rate will become available in June 2006 and will be reported in 

the FY 2006 PAR. 

The FY 2004 food stamp payment accuracy rate posted a record high of 94.12 percent. Of the total FY 2004 

payment error rate of 5.88 percent, 4.48 percentage points are attributed to the over-issuance of benefits. The 

other 1.4 percentage points are attributed to the under-issuance of benefits. Twenty-eight State agencies, 

including Illinois, New York, and Texas, achieved a payment error rate of less than 6 percent. California, with 

a payment error rate of 6.32 percent, continued to improve from its FY 2002 error rate of 14.84 percent. Eight 

State agencies experienced a high enough error rate to be subject to sanction if they do not improve in FY 

2005. 

USDA efforts such as the Partner Web (an intranet for State food stamp agencies) and the National Payment 

Accuracy Workgroup (consisting of representatives from USDA headquarters and regional offices) 

contributed significantly to this success. Members made timely and useful payment accuracy-related 

information and tools available across the U.S. 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 data. 

Exhibit 58: Trends in Increased Efficiency in Food Management 

Fiscal Year Actual 

Trends 2001 2002 2003 2004 2005 

Food Stamp Payment Accuracy Rate 91.3% 91.7% 93.4% 94.1% N/A 

USDA’s close working relationship with its State partners during the last several years and program changes 

to simplify rules and reduce the potential for error have caused consistent increases in the food stamp payment 

accuracy rate. The most important factor in maintaining improved performance in this area is the need for 
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State partners to continue and renew their commitment to utilize findings from the quality control system. To 

support State improvement, USDA will continue efforts with the National Payment Accuracy Workgroup to 

share best practice methods and strategies. USDA will also continue to resolve Quality Control liabilities 

through settlements. These settlements require States to invest in specific program improvements. 

STRATEGIC GOAL 5: PROTECT AND ENHANCE THE NATION’S 

NATURAL RESOURCE BASE AND ENVIRONMENT

High-quality soils and abundant supplies of clean water are the essential building blocks for production 

agriculture and forestry, rural economies, and all life. America’s soils, water supplies and range and forest 

ecosystems produce the raw materials for food, clothing, shelter, and energy. They also provide the settings 

for recreation and other activities valued by Americans. 

USDA is the steward of 192.5 million acres of National Forests and Grasslands. It also helps farmers and 

ranchers make sound conservation decisions on the 1.5 billion acres of private lands in the U.S. The 

Department’s activities are designed to help ensure that the Nation’s natural resources meet the long-term 

needs of a dynamic society with an increasing population. 

All of USDA’s conservation activities on public and private lands are cooperative efforts with State and local 

Governments, conservation districts, tribal governments and local interests. In the future, USDA will increase 

its emphasis on cooperative conservation. This will ensure that natural resource use and management 

decisions are made by the people most affected by the decisions and most knowledgeable about local 

conditions. 

OBJECTIVE 5.1: IMPLEMENT THE PRESIDENT’S HEALTHY FORESTS INITIATIVE AND OTHER 

ACTIONS TO IMPROVE MANAGEMENT OF PUBLIC LANDS

Exhibit 59: Resources Dedicated to Protect the Nation’s Resource Base and Environment 

FY 2004 

USDA Resources Dedicated to Objective 5.1 Actual Percent of Goal 5 

Program Obligations ($ Mil) 5,313.5 55.16% 

Staff Years 36,402 68.37% 

Introduction 

USDA and the U.S. Department of the Interior (DOI) are implementing tools provided by the Healthy Forests 

Initiative (HFI). They are also using authorities provided by the Healthy Forests Restoration Act of 2003 

(HFRA) to expedite planning for projects to reduce fire hazards. HFI provides land managers with the ability 

to reduce the accumulation of hazardous fuels and restore wildfire-damaged areas effectively. HFRA is 

designed to reduce the threat of destructive wildfires while upholding environmental standards. The USDADOI projects largely consist of removing excess vegetation and controlled burning (collectively, hazardous 

fuel treatment) to reduce the risk from catastrophic wildfires. In 2005, these wildfires burned more than 

7 million acres. The integration of the fire hazard reduction program with other restoration programs and the 
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overall increase in hazardous fuel treatment is the direct result of HFRA authorities and USDA leadership. 

The Department will continue to treat hazardous fuel and be adequately prepared to suppress wildland fires as 

the primary method of protecting the Nation’s natural resources. 

Overview 

USDA is implementing HFI and HFRA through collaboration among Federal, State and local Governments, 

and non-Governmental organizations. The Department is using HFRA authorities to work with communities 

to develop Community Wildfire Protection Plans (CWPP). CWPP reduce wildland fire hazards in areas 

surrounding communities. USDA’s partners are also engaged in this process. Additionally, the Department is 

working to integrate vegetation management programs better to achieve restoration goals. This effort will 

increase efficiency throughout the Department. USDA is also an active participant in the President’s 

Conference on Cooperative Conservation. This conference directs Federal agencies that oversee 

environmental and natural resource policies to promote cooperative conservation in full partnership with 

States, local Governments, tribes and individuals. This event will have lasting impact on USDA’s role in 

Federal land management and fire-risk reduction. The Department is also cooperating with DOI, State and 

local Governments, and non-Governmental partners to update the 10-year Comprehensive Strategy 

Implementation Plan. This plan identifies a collaborative approach for reducing wildland fire risks to 

communities and the environment. 

Other 2005 accomplishments include: 

Implementing more than 70 percent of hazardous fuel treatments in areas located near communities; 

Fuels reduction efforts remaining comparable from the previous year due to more work being done in 

high-priority locations around communities and areas with high resource values; 

The continued development of LandFire, an interagency landscape-scale fire, ecosystem and 

vegetation-mapping project. The information provided in LandFire will help land managers make 

informed decisions for reducing wildland fire risks across landscapes; 

Increased use of naturally ignited fires to achieve management objectives to more than 250,000 acres 

in 2005; and 

Initiated 9 pilot projects to develop a new performance measure. The measure will evaluate the 

effectiveness of strategically placed hazardous fuel reduction and other integrated vegetation 

treatments to change the undesired outcome of problem wildfires. The new performance measure 

will be finalized in 2006 for full implementation in 2007. 

Hazardous fuel reduction treatments help protect life and property by reducing the intensity of wildland fires. 

While the FY 2004 fire season was considered light with just a little more than 550,000 National Forest 

Systems acres burned, wildfires consumed more than 6.7 million acres nationally. These totals include 

508,751 acres in the Southern Nevada Complex and 49,515 acres, 109 residences and 106 other buildings in 

the School Fire in Washington State. This ongoing trend of catastrophic wildfire seasons indicates that the 

USDA, along with all other land-management agencies, must increase efforts to reduce fire hazards using 

hazardous fuels funds. Reduction of excess vegetation decreases fire hazards while also improving firefighter 

and public safety. In 2005, USDA treated 2.6 million acres to remove excess vegetation. Approximately 

1.66 million of these acres were treated specifically to reduce hazardous fuels. An additional 700,000 acres 
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112 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

were treated using other restoration and rehabilitation programs (i.e., wildlife habitat, watershed, timber and 

pest management that also reduced fire hazards). USDA also used naturally ignited fires to achieve 

management objectives on more than 250,000 acres. To improve upon this level of accomplishment in 2006 

and reduce the risk of future catastrophic wildland fires, USDA must use available resources to work 

collaboratively with all Federal, State and local entities. 

Selected Results in Research, Extension and Statistics 

Fire Research Findings Used to Update National Monument Fire Plan—The research in question 

comes from the findings of a USDA-supported Oregon State University project related to woodland 

expansion, fire history and plant community response following fire. The National Park Service, the Bureau of 

Land Management and the U.S. Fish and Wildlife Service have implemented the findings in their southeast 

Oregon, northeast California, and northwest Nevada locations. For example, the Lava Beds National 

Monument has incorporated the findings to develop fire prescriptions for different plant communities. 

USDA’s Paisley district implemented an aggressive fuels reduction program based on the fire history 

findings. Although the Winter Fire threatened the area, treated areas were easy to defend and burned at low 

intensity. 

Prescribing Fire Information to Promote Productive Land—Oklahoma landowners get prescribed 

fire information to restore their land to productive and biologically diverse states through an Oklahoma State 

University educational program. With partial funding from USDA, in the past 5 years, more than 200 field 

days have been presented based on this program, and attended by more than 10,000 participants. During this 

time, the number of acres burned in Oklahoma's forested habitat has increased by more than 100 percent to 

approximately 800,000 acres. This increase has resulted in habitat improvement for the endangered redcockaded woodpecker and black-capped vireo. The improvement also benefits the wild turkey and whitetailed deer. 

Integrating USDA Surveys to Evaluate Conservation Programs—A USDA project integrated two 

major surveys based on different sampling frames. This integration has enhanced the Department’s capacity to 

analyze the implications of its conservation programs. It has also improved the cost-effectiveness of USDA’s 

surveys and reduced respondent burden. 

Grass Islands Combat Invasive Weeds—USDA research indicates that planting grass in a series of 

small "seed source islands" across western rangelands might be the most environmentally friendly way to 

reclaim lands overrun by invasive weeds. To create the islands, scientists planted a small plot of the desired 

species—such as purple coneflower or cudweed sagewort—in the middle of a weedy area. These plots are 

fenced off for several years to allow new plants to grow. In the meantime, the weeds around the island either 

are eaten by livestock or removed by other means. Once the fence is removed, the desirable plant moves 

naturally into the area where weeds once grew. So far, the introduced plants have spread as far as 100 feet 

from the islands. Seed source islands keep costs down because only small areas have to be planted and they 

require fewer chemicals than other re-vegetation methods. 

Challenges for the Future 

Future challenges include ensuring public and firefighter safety while protecting lands still threatened by fire 

in forests dense with vegetation and fuel. Additional challenges are the continued drought conditions in many 
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western states and the expansion of communities into previously uninhabited wildlands. This expansion 

makes up what is known as the wildland-urban interface (WUI). The historical trend is for 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. 

Existing hazardous fuel treatment performance is currently based on outputs of acres treated and the number 

of acres treated as a result of local collaboration. The Office of Management and Budget (OMB) Performance 

Assessment Rating Tool (PART) determined in 2002 that the Wildland Fire Management Program did not 

demonstrate effective results. The PART, designed by OMB to assess and improve program performance, 

found that the program lacked baselines and targets for recently created performance measures developed as a 

result of the “10-year Comprehensive Strategy for the National Fire Plan.” Research has shown that 

treatments to remove excess vegetation for fire and restoration purposes can impact the size and behavior of 

wildland fires dramatically. The current performance measures for hazardous fuel treatment do not capture the 

results of treatments on the landscape. They track acres treated as an output measure. USDA and DOI are 

developing a new performance measure that demonstrates the impact of treatments beyond the direct area 

treated. This new performance measure is part of a pilot process to identify spatially explicit treatments for 

hazardous fuel reduction and the restoration of fire-adapted ecosystems at the landscape scale. For more 

information on the PART, visit www.whitehouse.gov/omb/budget/fy2004/pma/usdawildlandfire.pdf. 

Performance measures are being reviewed and improved by USDA and DOI in consultation with partners as 

part of the update of the 10-Year Comprehensive Strategy Implementation Plan. This plan was launched in 

2005 in response to the Wildland Fire Leadership Council. For more information, visit 

www.fireplan.gov/leadership/about.html. 

Recent research has identified 73 million acres administered by USDA and 59 million acres of privatelyowned forest land at high risk of ecologically destructive wildland fire. Commercial utilization of excess 

vegetation has been identified as one way to lower the cost of Government forest fuel-reduction treatments. A 

barrier to expanding forest biomass utilization is the limited market for this material because of reduced forest 

products’ processing capacity in much of the Western U.S. Much of this material is small diameter and nontraditional species. This factor presents a further barrier to utilization where forest products processing 

capacity remains. Title II of 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. USDA and DOI hope to promote 

the increased use of biomass as a domestic source of energy. They are developing a strategy to encourage 

biomass utilization. 

Key Outcome: Reduce the Risk from Catastrophic Wildland Fire 

Implementing HFI and other actions to improve management of public lands involves the integration of 

several key USDA programs that manage vegetation. The hazardous fuel reduction program is a key piece of 

the effort to implement HFI and HFRA. Strategically placed treatments by USDA and partners will continue 

to increase the Department’s ability to protect communities by reducing fire size and altering fire behavior. 
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Exhibit 60: Hazardous Fuel Reduction 

Fiscal Year 2005 

Annual Performance Goals and Indicators Target Actual* Result 

5.1.1 Number of acres of hazardous fuel treated that are in the 

wildland-urban interface and the percentage identified as high 

priority through collaboration consistent with the 10-year 

Comprehensive Strategy Implementation Plan 

1,281,000 1,187,854 Met 

5.1.2 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 and the percentage identified as high priority 

through collaboration consistent with the 10-year 

Comprehensive Strategy Implementation Plan1 

292,000 371,980 Exceeded 

5.1.3 Number of acres treated outside the wildland-urban interface as 

a secondary benefit of other vegetation management that 

contribute to an improvement in Condition Class 

927,000 1,085,408 Exceeded 

1 Fire regime condition class is an indicator for the degree of departure of forest areas from historical vegetation and disturbance patterns. 

*

 Estimated. 

Analysis of Results 

USDA met its 2005 performance goals for protecting the health of the Nation’s forests and other public lands 

through aggressive pro-active efforts. These increased efforts have significant value to all Americans. They 

protect human life and whole communities that reside in areas adjacent to national forests and other public 

lands. The 2.6 million acres treated in FY 2005 met the Department’s FY 2005 goal. Improved management 

tools and favorable weather conditions allowed teams to treat significantly more at-risk acreage. This 

Condition Class is in areas with frequent fire occurrence (Fire Regimes 1, 2, and 3). USDA is increasing 

emphasis on the contribution of all vegetation management programs toward the restoration of fire-adapted 

ecosystems and reducing the threat of catastrophic fire. Activities to restore forest health, wildlife habitat, 

watershed condition, and timber productivity in fire-adapted ecosystems contributed over 730,000 acres 

toward these goals in FY 2005. 

In FY 2006, USDA plans to reduce fire hazard on 1.8 million acres using direct funding and on an additional 

800,000 acres as a secondary benefit from other management activities. The USDA Strategic Plan proposes 

that the Department treat 11 million cumulative acres by FY 2007. The successes of FY 2005 moved USDA 

well on its way toward meeting this goal. 

Exhibit 61: Trends in Treatment of Hazardous Fuel 

Fiscal Year Actual 

Trends 2001 2002 2003 2004 2005 

Number of acres of hazardous fuel treated that are in 

the wildland-urban interface and the percentage that 

are identified as high priority through collaboration 

consistent with the 10-year Comprehensive Strategy 

Implementation Plan 

611,551 764,364 1,114,106 1,311,000 1,187,854 

Number of acres of hazardous fuel treated that are in 

Condition Classes 2 or 3 in Fire Regimes 1,2, or 3 

outside the wildland-urban interface and the 

percentage identified as high priority through 

collaboration consistent with the 10-year 

Comprehensive Strategy Implementation Plan 

N/A N/A 293,127 441,000 371,980 
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Fiscal Year Actual 

Trends 2001 2002 2003 2004 2005 

Number of acres treated outside the wildland-urban 

interface as a secondary benefit of other vegetation 

management that contribute to an improvement in 

Condition Class 

N/A N/A N/A 848,000 1,085,408 

USDA tracked hazardous fuel treatment with a single performance measure for all treatment activities prior to 

FY 2001 and initiation of the National Fire Plan. 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. Performance in FY 2004 and FY 

2005 included the contribution of improved Condition Class resulting from resource restoration activities and 

direct hazardous fuel reduction treatments. 

OBJECTIVE 5.2: IMPROVE MANAGEMENT OF PRIVATE LANDS

Exhibit 62: Resources Dedicated to Improving Management of Private Lands 

USDA Resources Dedicated to Objective 5.2 FY 2005 Actual Percent of Goal 5 

Program Obligations ($ Mil) 4,319.8 44.84% 

Staff Years 16,844 31.63% 

Introduction 

Non-Federal land makes up almost 70 percent of the total area of the U.S. The vast majority of that land is 

privately-owned cropland, rangeland, pastureland and forestland. Millions of individuals decide how to use 

and manage these lands. Their decisions form the foundation of a substantial and vibrant agricultural economy 

that provides food and fiber for the Nation. Thus, the productive and sustainable use of natural resources or 

private lands is a vital goal for the Nation. Achieving the dual goals of a productive and profitable agricultural 

sector and a high-quality environment requires good management based on sound science and practical 

technology. Sound environmental stewardship of private agricultural lands benefits wildlife and provides food 

and fiber to Americans and the rest of the world. Conserving the Nation’s cropland, forests and grazing land 

helps provide clean water and air, sustains productive capacity and protects soil productivity, and benefits 

human and wildlife populations. 

In 2005, USDA helped producers develop conservation plans for approximately 33 million acres. Its work 

provided producers with a management tool to know the capability of their soils, condition of their rangeland 

and woodlands, and requirements for irrigation. These plans provide the land user with the knowledge on how 

best to use the land to continue supporting healthy plant, animal and human communities. USDA also 

provided producers conservation cost-share benefits and incentive payments to help offset the cost of 

installing conservation covers, riparian and grassland buffers, and maintaining sound conservation practices 

while improving the productivity of agricultural lands. USDA’s most recent inventory of resource conditions 

on non-Federal lands indicated that progress in controlling erosion is being maintained and that the loss of 
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wetlands has been halted. It also showed that net wetland gains have been achieved on agricultural land. 

USDA’s technical and financial assistance to agricultural producers has been crucial in helping them address 

both of these resource concerns. 

Overview 

USDA helps farmers and ranchers improve their management of the soil, water and related resources on nonFederal lands. In 2005, the Department worked with natural resource managers to maintain and improve land 

productivity and environmental quality by providing: 

Technical assistance tailored to the needs of individual farmers and ranchers; 

Financial assistance in the form of cost shares and incentive payments to apply key practices on 

working land; 

Easements and rental payments to protect sensitive land; and 

Financial and technical assistance enabling producers to restore lands damaged by natural disasters. 

USDA also provides technical and financial assistance to State agencies. This assistance is designed to help 

non-industrial private forest landowners better manage, protect and utilize their forest resources. Additionally, 

the Department provides research, technology development, resources inventory and assessment programs. 

These activities provide the information and effective tools resource managers need to be good stewards of the 

Nation’s land and water. 

In 2005, USDA provided technical assistance to hundreds of thousands of producers in planning and applying 

conservation to better manage their soil and water resources. The Department’s assistance helped managers of 

private lands maintain soil quality, protect water and air quality, and enhance wildlife habitats. 

Selected Results in Research, Extension and Statistics 

Assessing the Impact of Open Space and Potential Local Disamenities on Residential 

Property Values—Researchers, with partial funding from USDA, are investigating the impact of open 

space on residential property values in Berks County, Pennsylvania. The project demonstrated the 

effectiveness of using the Geographic Information System (GIS). Researchers use GIS to investigate how 

space impacts land use. These interactions affect house prices and the pattern of development that occurs over 

time. Key findings provided Berks County officials with science-based knowledge to support their land use 

decisions. 

Cleaning the Water Supply—The prevention of agricultural pollution and mitigating existing pollutant 

contamination are critical to the improved management of private land. A USDA grant allowed a project in 

Florida to develop a scientific method of detecting the pathogen E. faecalis. This process will result in a new 

instrument that detects pathogens and their sources rapidly and at low cost. Over the longer term, identifying 

the sources of pathogens among agriculture, wildlife and human origin will enable strategically targeted 

remediation and prevention methods, resulting in cleaner water supplies. 

Understanding Use of Irrigation—USDA released the 2003 Farm and Ranch Irrigation Survey in 

November 2004. The survey supplements the basic irrigation data collected during the full Census of 

Agriculture. It provides one of the most complete, detailed profiles of irrigation in the U.S. The survey 
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features State-level data for irrigation practices and water usage. Results are available at 

www.nass.usda.gov/census/. 

Furrow Dikes Improve Water Infiltration for Crops—New preliminary data from USDA studies 

indicate that furrow dikes—small basins formed in loosened soil between crop rows—may lead to the greater 

absorption of water and reduced runoff during rain. This process will make more water available for crop use. 

USDA found that, even in a wet growing season, the use of furrow dikes resulted in better water infiltration 

and maintenance of soil moisture. Furrow diking is commonly used by farmers in the arid regions of the 

western and northwestern U.S. on crops such as cotton, sorghum and potatoes. USDA scientists are adapting 

furrow diking to accommodate the sloping crop sites often found in the southeastern states, where peanuts, 

cotton and corn are grown. Slopes in topography lead to quick water runoff and ponding at lower elevations. 

Furrow dikes capturing more rainfall could improve yield stability in non-irrigated cropping systems. 

Pond Water Used to Grow Forage Crop—USDA has developed a unique way to reduce space-stealing 

evaporation ponds in California—and nurture a new crop in the process. On the west side of California's San 

Joaquin Valley, for every nine acres of land in production, one is needed for an evaporation pond. Farmers 

who tend the region's heavily irrigated lands use these ponds to catch excess water runoff from saturated 

fields. Despite the excess runoff, the ponds have been found to contain concentrated salts and trace elements, 

including selenium, boron and arsenic. These elements can be toxic to wildlife and migratory birds seeking 

water in California's desert. Now, in the sixth year of the project, USDA scientists are using water pumped 

from evaporation ponds to nourish a tough and hardy forage crop—a salt-loving Bermuda grass—which 

supports a herd of beef cattle. This technique of drying the pond's waters benefits growers and wildlife, and 

helps make less-arable land profitable again. 

Drift Software Aids Pesticide Spray Control—USDA and its university collaborators have released the 

first user-friendly computer software for estimating droplet drift distances for pesticide spray applications. 

This draft simulator, or DRIFTSIM, can help farmers and educators minimize pesticide drift by helping them 

choose equipment, settings and techniques. To calculate the likelihood of pesticide drift, the program allows 

pesticide spray operators and manufacturers to specify wind speed, droplet size and speed, nozzle height, 

operating pressure, air temperature, and relative humidity. It also helps manufacturers design pesticide 

formulations and pesticide spraying equipment to minimize drift potential of their products. 

Wind Erosion Model Released—USDA is overseeing the implementation of the Wind Erosion Prediction 

System (WEPS). WEPS can simulate weather, soil and crop conditions, and wind erosion daily, and project 

the emission of the tiny dust particles. For the past 40 years, growers have made erosion-related decisions 

based on a simple equation that did not take into account new advances in erosion science and computer 

technology. Today, USDA personnel and farmers can use WEPS to formulate specific wind erosion control 

practices. WEPS is designed for establishing a soil-stabilizing crop cover, setting up windbreaks and barriers, 

and reducing the soil's erodibility by improving soil stability. 

Serving the Public 

Farmers, ranchers and private forest and other landowners manage two-thirds of the Nation’s land. They are 

the primary stewards of U.S. soil, air and water. USDA assists them in adopting environmentally sound 

management practices and provides information on soil quality, water management and quality, plant 
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materials, resource management and wildlife habitat. Additionally, USDA provides financial assistance to 

agricultural producers to promote good stewardship of agricultural and environmentally sensitive lands. 

USDA assists landowners and land managers in using this information and funding to implement sustainable 

production techniques. Those 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 2005, the Department assisted people in developing 

conservation plans for approximately 33 million acres of cropland and grazing lands, and creating or restoring 

260,000 acres of agricultural wetlands. USDA also administered long-term conservation contracts on over 

34 million acres, representing environmentally sensitive cropland in all 50 States and Puerto Rico. By 

establishing long-term conservation covers on cropland, USDA’s programs assure that Americans receive an 

environmental annuity at a reasonable cost. These programs target land for enrollment precisely where the 

conservation benefits are expected to have the greatest positive effect. 

USDA’s technical experts help people in communities work together to protect their shared environment. The 

assistance provided to State and local Governmental 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. The monies provided to these communities preserve and protect the environment, which benefits 

society as a whole. 

USDA conducts research and develops and transfers technology, including conservation standards, 

specifications and guidelines for conservation practices. The Department also collects and disseminates data 

on water and soil conditions and related resources. The information and technical tools USDA develops and 

the financial assistance it provides to resource managers help sustain natural resources. Department 

information reaches a wide and diverse audience, with increasing emphasis on electronic communications 

technology and web-enabled program application processes. 

Challenges for the Future 

Greater population densities exert greater pressures on the environment. As the landscape becomes a more and 

more dense mosaic of developed areas scattered within agricultural and forested land, the need for 

conservation increases while the options available to producers may be constrained. Additionally, 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. Natural 

disasters and prolonged drought conditions may also reduce the effectiveness of USDA’s conservation 

programs. USDA will continue to work with producers and conservation partners to implement conservation 

practices successfully and preserve the Nation’s resources and environment. 

Key Outcome: Maintain the Productive Capacity of the Resource Base and Quality of the 

Environment 

Privately owned cropland, grazing lands and forestland represent a substantial and vibrant agricultural 

economy that provides food and fiber for the Nation. In FY 2005, USDA’s conservation programs helped 

producers maintain the productive capacity of approximately 33 million acres by developing and 

implementing conservation plans on cropland and grazing land. This work helps support healthy and 
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productive plant, animal and human communities. Additionally, the conservation measures applied with 

USDA assistance in the past continue to protect the landscape. 

The basis for sound management of agricultural land is a conservation plan that helps each producer manage a 

specific production unit. Each producer needs to know the capabilities of the soil of the farm’s fields and the 

condition of rangeland and woodland that is part of the operation. In areas where irrigation is practiced, 

producers also need forecasts of water supply to plan the year’s crops. In FY 2005, USDA continued to 

increase emphasis on helping producers develop technically sound plans to provide a framework for their 

activities. Implementing a conservation plan is the first step toward good land stewardship. Plans one year 

beget better plans the next. Successfully implemented plans represent progress toward protecting soil, water 

and related resources. 

USDA’s conservation operations provide the basic resource inventory data, technical tools and 

comprehensive-planning approach producers need to manage their soil and water resources well. The 

Conservation Technical Assistance Program is the primary instrument through which USDA assists 

agricultural producers and other land managers to plan environmentally and economically sustainable 

operations. USDA provides technical and financial assistance to apply conservation practices through the 

Environmental Quality Incentives Program and other programs authorized by the Farm Security Rural 

Investment Act of 2002 (FSRIA). In FY 2005, USDA worked hard to ensure that this increasing level of 

public investment in conservation was directed to solving high-priority resource concerns. 

Exhibit 63: Maintain the Productive Capacity of the Natural Resource Base and the Quality of the 

Environment

Fiscal Year 2005 

Annual Performance Goals and Indicators Target Actual Result 

5.2.1 Conservation plans written for cropland and grazing lands 

(Mil acres) 

30 33 Met 

5.2.2 Cropland and grazing lands with conservation applied to protect the 

resource base and environment (Mil acres) 

8.5 9 Met 

5.2.3 Reduction in the acreage of cropland soils damaged by erosion 

(Mil acres) 

3 3 Met 

5.2.4 Number of comprehensive nutrient management plans applied 1,500 1,600 Met 

5.2.5 Increase Conservation Reserve Program (CRP) acres of riparian 

and grass buffers (Mil acres) 

1.75 1.75 Met 

Analysis of Results 

USDA met its FY 2005 goals for helping producers plan for conservation efforts on U.S. private lands. 

Conservation plans are essential to good management of soil and water resources. A conservation plan 

describes the schedule of operations and activities needed to solve natural resource problems and take 

advantage of opportunities. Conservation planning helps individual managers consider their operations within 

the larger landscape to which a farm or ranch belongs. It also helps land managers consider the effects of their 

actions on that wider environment. Managers can avoid actions that would damage natural resources offsite 

while meeting their economic targets for the operation. 
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The targets for application of conservation methods and programs were also met. The availability of technical 

expertise to help producers apply conservation methods is a major determinant of the rate at which producers 

can act. In FY 2005, USDA continued to encourage technical-assistance providers in the private sector to 

come forward to help the Department implement its conservation programs. The long-term goal is to have a 

land-management system that maintains a highly productive resource base for future generations. 

Annual targets for the assistance USDA will provide for planning and application are based on data about 

resource conditions and trends. This information was developed in resource inventories and covers priorities 

identified in local, State and national plans. Conservation needs and available program resources are evaluated 

to establish feasible annual targets. 

Exhibit 64: Trends in Planning and Application of Improved Management of Cropland and Grazing Lands 

Fiscal Year Actual 

Trends 2001 2002 2003 2004 2005 

Conservation plans written for cropland and 

grazing lands (Mil acres)1

N/A N/A 31.4 

Baseline 

37.9 33 

Grazing lands with conservation applied to protect 

the resource base and environment (Mil acres)2

N/A 9.0 

Baseline 

9.9 9.7 9 

Reduction in the acreage of cropland soils 

damaged by erosion (Mil acres)2

N/A 3.4 

Baseline 

3.3 3.3 3 

Comprehensive Nutrient Management Plans 

applied (number)2

N/A 2,292 

Baseline 

2,132 2,376 1,600 

Increase CRP acres of riparian and grass buffers 

(Mil acres) 

.95 1.24 1.45 1.65 

Baseline 

1.75 

1

 Includes all planning reported as assistance provided through the CTA. Data for FY 2001-2002 are not comparable to later years. In FY 

2003, policy on planning was revised and reporting instructions were clarified. 

2

 Data include only land where conservation was applied with assistance from CTA. 

USDA’s strategic plan for FY 2002-2007 set a strategic goal of helping producers apply needed conservation 

treatment on 130 million acres during that period. For the FY 2002-2005 period, USDA had provided 

assistance to improve management on almost 110 million acres. 

As a voluntary program, the characteristics of land enrolled in the Conservation Reserve Program (CRP) 

depend on which lands are offered for contracts. CRP provides technical and financial assistance to eligible 

farmers and ranchers to address soil, water and related natural resource concerns on their lands in an 

environmentally beneficial and cost-effective manner. Increasing the number of acres of riparian buffers and 

grass filters is essential to providing cleaner water. The system intercepts sediment and nutrients before they 

reach surface waters. USDA established a target of 1.75 million acres for FY 2005. This figure is an increase 

of 110,000 acres from the prior fiscal year. USDA exceeded this target. 

Challenges for the Future 

A major challenge is to develop a practical and reliable tool to document the effects of conservation practices 

on water and air quality. Better knowledge will enable USDA to focus programs on the most serious 

problems. In 2005, The Department analyzed the initial results from the interagency effort—the Conservation 

Effects Assessment Project (CEAP)—to identify areas in greatest potential need of conservation treatment. A 

preliminary report will be released in early 2006. It will be followed in subsequent years by more refined 
ANNUAL PERFORMANCE REPORT 

USDA

F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 121 

estimates of effects of conservation practices and systems. The information will cover reducing the movement 

of sediment, nitrogen and phosphorus from agricultural operations. 

Key Outcome: Ensure Diverse Wildlife Habitats 

Wetlands are among the most biologically diverse areas on earth. They provide habitat for a rich mixture of 

plants and animals, including many rare and endangered species. Wetlands also protect shorelines, filter 

impurities from water, help control floodwaters, regulate water flow and decrease soil erosion. Since the early 

1980s, USDA has focused increasing attention on protecting wetlands. The strategy for protecting wetlands 

and wetland wildlife habitat relies heavily on encouraging private landowners to protect wetlands under longterm or permanent easements offered through USDA’s Wetlands Reserve Program. This is a voluntary 

conservation program that offers landowners the means and opportunity to protect, restore and enhance 

wetlands on their property with the financial assistance of USDA. The Department also provides cost-share 

benefits and incentive payments to producers enrolled in USDA’s Conservation Reserve Program, the aim of 

which is to reduce agricultural runoff using riparian grassland buffers and to restore wetland acres. From the 

inception of these programs through the end of 2004, USDA enrolled 34.9 million acres in CRP. This figure 

includes 1.6 million acres of riparian buffers and grass filters and 1.9 million acres of wetlands and wetland 

buffers. These numbers represent increased prime wildlife habitat and water storage capacity, as well as a net 

increase in wetland acres on agricultural land. The Department also requires agricultural producers to protect 

wetlands in order to participate in other USDA programs. 

Exhibit 65: Ensure Diverse Wildlife Habitats 

Fiscal Year 2005 

Annual Performance Goals and Indicators Target Actual Result 

5.2.6 Agricultural wetlands created, restored or enhanced (thousand acres) 256.2 260 Met 

5.2.7 Increase CRP restored wetlands acres (Mil acres) 1.99 1.96 Met 

Analysis of Results 

The target for the measure was met. The measure includes all land on which wetlands restoration or 

improvement practices were applied in FY 2005 with technical or financial assistance. 

In 1990, the U.S. set a goal of preventing any net loss of wetlands. USDA’s 2003 National Resources 

Inventory found that the U.S. had reached and surpassed this goal, achieving net wetland gains on agricultural 

land between 1997 and 2003. This progress resulted from USDA’s efforts to help people restore wetlands and 

discourage conversion to agricultural and other uses. 

Exhibit 66: Trends in Wetland Protection 

Fiscal Year Actual 

Trends 2001 2002 2003 2004 2005 

Agricultural wetlands created, restored or 

enhanced (Thousand acres) 

N/A 321.2 

Baseline 

288.9 239.7 260 

Increase CRP restored wetlands acres (Mil 

acres) 

1.65 1.74 1.79 1.89 1.96 

Baseline 
ANNUAL PERFORMANCE REPORT 

USDA

122 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

USDA anticipates that this upward trend in wetlands protection will continue. The President has set a new 

goal of increasing the acreage of wetlands. During the next 5 years, the new goal includes: 

Restoring and creating at least 1 million acres of wetlands; 

Improving the quality of at least 1 million acres of wetlands; and 

Protecting at least 1 million acres of wetlands. 

The benefits of these outcomes will be enhanced by further efforts to improve associated uplands and river 

habitat. For example, ducks will have the wetland they need for food, as well as dry land habitat nearby for 

nesting. USDA will work in cooperation with U.S. Departments of the Interior and Transportation, the U.S. 

Environmental Protection Agency, the Army Corps of Engineers and the National Oceanic and Atmospheric 

Administration to achieve the President’s goals. 

One challenge in wetlands protection is developing better tools for tracking wetlands status and values. 

Another is improving coordination among Federal agencies with a role in wetlands protection. 

Additionally, better coordination is needed on remote sensing and ground-level data collection on wetlands 

gain, loss and quality. USDA will continue to work with other Federal agencies and conservation partners to 

ensure wetlands protection. 

CRP wetlands and wetland buffers increase prime wildlife habitat and water storage capacity, contributing to 

a net increase in wetland acres on agriculture land. USDA established a target of 1.99 million acres for FY 

2005. This target is an increase of 100,000 acres from the prior year. While the Department has reached 

98 percent of this target, it does not expect to meet it by the end of the fiscal year. 

Efforts to increase wetlands acres and provide adequate enrollment opportunities include several initiatives. 

One involves allowing the enrollment of larger wetland complexes and playa lakes beyond the 100-year 

floodplain. Playa lakes are areas that hold water for only a short period of time. Despite these efforts, there is 

an inherent uncertainty in knowing how soon these initiatives will start generating demand for enrollment in 

wetlands initiatives. One wetlands initiative, Bottomland Hardwoods, has had lower than anticipated 

enrollment to date. Another potential performance shortfall is the availability of technical assistance 

resources. USDA intends to use private-sector vendors, not-for-profit organizations and public-sector agencies 

as additional resources for providing technical assistance. 
ANNUAL PERFORMANCE REPORT 

F Y 2005 P ERFORMANCE AND A CCOUN

FISCAL YEAR 2005 PROGRAM OBLIGATIONS INCURREDThe following table depicts the component agencies and staff offices of the U.S. Department of Agriculture with total program level dollars for eobjective. The program level dollars are displayed in millions and have been rounded to the nearest tenth. These are current year obligations from include prior year upward or downward obligation adjustments. An account’s funding was allocated to more than one objective when the amoun

and could be identified. The table provides a general indication of the funding dedicated to each objective. Staff office and departmental manageall USDA objectives and, in most cases, have been reallocated equally among all strategic objectives. 

Exhibit 67: USDA Program Obligations 

USDA FY 2005 Program Obligations 

($ in Millions) 

Program Objectives 

Agency Account Obligations 1.1 1.2 1.3 1.4 2.1 2.2 3.1 3.2 4.1 

OSEC Office of the Secretary 15.0 0.8 0.8 0.8 0.8 1.5 1.5 1.5 1.5 1.0 OCFO OCFO 10.0 0.5 0.5 0.5 0.5 1.0 1.0 1.0 1.0 0.7 

Working Capital Fund 242.0 12.1 12.1 12.1 12.1 24.2 24.2 24.2 24.2 16.1 

OCIO OCIO 57.0 2.9 2.9 2.9 2.9 5.7 5.7 5.7 5.7 3.8 

Common Computing Environment 

337.0 16.9 16.9 16.9 16.9 33.7 33.7 33.7 33.7 22.5 

DA Agriculture Buildings and 

Facilities Rental Payments 

233.0 11.7 11.7 11.7 11.7 23.3 23.3 23.3 23.3 15.5 

Departmental Administration 37.0 1.9 1.9 1.9 1.9 3.7 3.7 3.7 3.7 2.5 Hazardous Materials Management 

5.0 0.3 0.3 0.3 0.3 0.5 0.5 0.5 0.5 0.3 

OCR Office of Civil Rights 23.0 1.2 1.2 1.2 1.2 2.3 2.3 2.3 2.3 1.5 OC OC 17.0 0.9 0.9 0.9 0.9 1.7 1.7 1.7 1.7 1.1 OIG OIG 81.0 4.1 4.1 4.1 4.1 8.1 8.1 8.1 8.1 5.4 

IG Assets Forfeiture Funds 1.0 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 

OGC OGC 38.0 1.9 1.9 1.9 1.9 3.8 3.8 3.8 3.8 2.5 OCE OCE 12.0 0.6 0.6 0.6 0.6 1.2 1.2 1.2 1.2 0.8 NAD NAD 14.0 0.7 0.7 0.7 0.7 1.4 1.4 1.4 1.4 0.9 OBPA OBPA 8.0 0.4 0.4 0.4 0.4 0.8 0.8 0.8 0.8 0.5 HSS Homeland Security Staff 1.0 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 
ANNUAL PERFORMANCE REPORT 

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124 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

USDA FY 2005 Program Obligations 

($ in Millions) 

Program Objectives 

Agency Account Obligations 1.1 1.2 1.3 1.4 2.1 2.2 3.1 3.2 4.1 

ERS Economic Research 76.0 21.6 2.0 3.0 10.0 4.3 4.3 1.5 2.4 2.8 NASS NASS 151.0 106.0 - - 7.9 29.7 - - 3.2 - ARS ARS Salaries and Expenses 1,179.0 - - 110.8 - - - 110.8 667.3 - 

Buildings and Facilities 113.0 - - 10.6 - - - 10.6 64.0 - ARS-No Year Funds 3.0 - - 0.3 - - - 0.3 1.7 - Miscellaneous Contributed Funds 

17.0 - - 1.6 - - - 1.6 9.6 - 

CSREES Extension Activities 467.0 32.7 18.7 42.0 23.4 23.4 23.4 23.4 56.0 - 

Research and Education Activities 

677.0 60.9 60.9 88.0 20.3 20.3 20.3 47.4 94.8 - 

Integrated Activities 49.0 0.0 0.0 0.6 0.6 0.6 0.6 3.9 23.5 - Native Americans Institutions Endowment Fund 

1.0 0.1 0.0 0.1 0.1 0.1 0.1 0.1 0.1 0.1 

Community Food Projects 5.0 0.4 0.2 0.5 0.3 0.3 0.3 0.3 0.6 0.4 Section 2501 6.0 - - - - - - - - - Biodiesel Fuel Education Program 

16.0 - - 16.0 - - - - - - 

APHIS Salaries and Expenses 1,292.0 155.0 - - - - - - 1,137.0 - 

Buildings and Facilities 4.0 - - - - - - - 4.0 - Trust Funds 27.0 - - - - - - - 27.0 - 

FSIS FSIS-Salaries & Expenses 813.0 - - - - - - 813.0 - - 

FSIS-No Year Funds 102.0 - - - - - - 102.0 - - Trust Funds 3.0 - - - - - - 3.0 - - 

GIPSA Salaries and Expenses 36.0 36.0 - - - - - - - - 

Inspection and Weighing Services 

37.0 37.0 - - - - - - - - 

AMS Marketing Services 78.0 78.0 - - - - - - - - 

Payments to States and Possessions 

4.0 4.0 - - - - - - - - 
ANNUAL PERFORMANCE REPORT 

F Y 2005 P ERFORMANCE AND A CCOUN

USDA FY 2005 Program Obligations 

($ in Millions) 

Program Objectives 

Agency Account Obligations 1.1 1.2 1.3 1.4 2.1 2.2 3.1 3.2 4.1 

 AMS (cont.) 

Payments to States and Possessions - Florida 

6.0 6.0 - - - - - - - - 

Perishable Ag. Commodities Act Fund 

10.0 10.0 - - - - - - - - 

Funds for Strengthening Markets/Income/Supply 

871.0 871.0 - - - - - - - - 

Wool Research Development and Promotion Trust Fund 

4.0 4.0 - - - - - - - - 

Expenses & Refunds, Inspection & Grading of Farm Products 

189.0 189.0 - - - - - - - - 

RMA Administrative and Operating 

Expenses 

70.0 - - - 70.0 - - - - - 

Federal Crop Insurance Corporation Fund 

4,180.0 - - - 4,180.0 - - - - - 

FSA Salaries and Expenses 1,299.0 - 201.3 - 1,097.7 - - - - - 

Salaries and Expenses /Transfer to CCC 

106.0 - 19.1 - 86.9 - - - - - 

State Mediation Grants 4.0 - - - 4.0 - - - - - Agricultural Credit Insurance Fund (Prog.) 

609.0 - - - 609.0 - - - - - 

Emergency Conservation Program/Transfer to CCC 

85.0 - - - 85.0 - - - - - 

Agricultural Credit Insurance Fund 

9.0 - - - 9.0 - - - - - 

Agricultural Credit Insurance Fund-Direct (Fin.) 

1,528.0 - - - 1,528.0 - - - - - 

Agricultural Credit Insurance Fund-Guar. (Fin.) 

150.0 - - - 150.0 - - - - - 

CCC Export Loans Program Account 

176.0 - - - 176.0 - - - - - 

CCC Export Loans Program Account (Admin.) 

4.0 - - - 4.0 - - - - - 

Commodity Credit Corporation 39,534.0 - - 4,744.1 34,789.9 - - - - - 
ANNUAL PERFORMANCE REPORT 

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126 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

USDA FY 2005 Program Obligations 

($ in Millions) 

Program Objectives 

Agency Account Obligations 1.1 1.2 1.3 1.4 2.1 2.2 3.1 3.2 4.1 

 FSA (cont.) 

CCC Export Guarantee Financing Account 

800.0 - - - 800.0 - - - - - 

CCC Export Guaranteed Loans Liquidating Account 

6.0 - - - 6.0 - - - - - 

CCC Tobacco Trust Fund 899.0 - - - 899.0 - - - - - CCC Farm Storage Facility Loans Financing Account 

87.0 - - - 87.0 - - - - - 

CCC Farm Storage Facility Loans Program Account 

14.0 - - - 14.0 - - - - - 

NRCS Conservation Operations 866.0 - - - - - 86.6 - - - 

Conservation Operations 26.0 - - - - - 2.6 - - - Watershed Rehabilitation Programs 

29.0 - - - - - 29.0 - - - 

Biomass Research and Development Program 

1.0 - - 1.0 - - - - - - 

Farm Security and Rural Investment Programs 

1,805.0 - - - - - - - - - 

Resource Conservation and Development 

52.0 - - - - - 26.0 - - - 

Watershed Surveys and Planning 

7.0 - - - - - 2.8 - - - 

Watershed and Flood Prevention Operations 

478.0 - - - - - 95.6 - - - 

Waterbank Program -1.0 - - - - - - - - - Forestry Incentives Program -3.0 - - - - - - - - - 

RD Rural Community 

Advancement Program 

849.0 - - - - 254.7 594.3 - - - 

Salaries and Expenses 653.0 - - - - 195.9 457.1 - - - 

RHS Rental Assistance Program 593.0 - - - - - 593.0 - - - 

Rural Housing Assistance Grants 

56.0 - - - - - 56.0 - - - 
ANNUAL PERFORMANCE REPORT 

F Y 2005 P ERFORMANCE AND A CCOUN

USDA FY 2005 Program Obligations 

($ in Millions) 

Program Objectives 

Agency Account Obligations 1.1 1.2 1.3 1.4 2.1 2.2 3.1 3.2 4.1 

RHS (cont’d) 

Mutual and Self-Help Housing Grants 

42.0 - - - - - 42.0 - - - 

Rural Housing Insurance Fund (Prog.) 

774.0 - - - - - 774.0 - - - 

Rural Housing Insurance Fund (Liq.) 

88.0 - - - - - 88.0 - - - 

Rural Housing Insurance Fund Direct (Fin.) 

2,372.0 - - - - - 2,372.0 - - - 

Rural Housing Insurance FundGuar. (Fin.) 108.0 - - - - - 108.0 - - - Rural Community Facility Loans-Direct (Fin.) 

839.0 - - - - - 839.0 - - - 

Farm Labor Housing 46.0 - - - - - 46.0 - - - Rural Community Facility Loans-Guar. (Fin.) 

8.0 - - - - - 8.0 - - - 

MFH Preservation Demo Revolving Fund 

6.0 - - - - - 6.0 - - - 

RBCS Rural Cooperative 

Development Grants 

24.0 - - - - 24.0 - - - - 

Renewable Energy Programs 23.0 - - - - 23.0 - - - - Rural Development Loan Fund (Prog.) 

20.0 - - - - 20.0 - - - - 

Rural Economic Development Grants 

8.0 - - - - 8.0 - - - - 

Rural Economic Development Loans (Prog.) 

5.0 - - - - 5.0 - - - - 

Rural Economic Development Loans (Fin.) 

30.0 - - - - 30.0 - - - - 

Rural Development Loan Fund -Direct (Fin.) 

53.0 - - - - 53.0 - - - - 

Rural Business and Industry Direct Loans (Fin.) 

11.0 - - - - 11.0 - - - - 

Rural Business and Industry Direct Loans-Guar. (Fin.) 

101.0 - - - - 101.0 - - - - 

Rural Empowerment Zones/Enterprise Communities 

12.0 - - - - 12.0 - - - - 
ANNUAL PERFORMANCE REPORT 

USDA

128 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

USDA FY 2005 Program Obligations 

($ in Millions) 

Program Objectives 

Agency Account Obligations 1.1 1.2 1.3 1.4 2.1 2.2 3.1 3.2 4.1 

RUS RETRF (Prog. Acct.) 280.0 - - - - 196.0 84.0 - - - 

Rural Telephone Bank Program Account 

5.0 - - - - 3.5 1.5 - - - 

Distance Learning and Medical Link Programs 

24.0 - - - - 16.8 7.2 - - - 

High Energy Cost Grants 20.0 - - - - 14.0 6.0 - - - Distance Learning Telemedicine Direct Loan (Fin. Acct.) 

124.0 - - - - 86.8 37.2 - - - 

Rural Development Insurance Fund (Liq. Acct.) 

11.0 - - - - 7.7 3.3 - - - 

Rural Telephone Bank (Fin. Acct.) 

214.0 - - - - 149.8 64.2 - - - 

RETRF (Fin. Acct. - Direct) 6,037.0 - - - - 4,225.9 1,811.1 - - - Rural Water & Waste Disposal Loans (Direct Fin. Acct.) 

1,359.0 - - - - 951.3 407.7 - - - 

RETRF (Liq. Acct.) 801.0 - - - - 560.7 240.3 - - - Rural Telephone Bank (Liq. Acct.) 

50.0 - - - - 35.0 15.0 - - - 

Appalachian Reg. Commission Transfer 

13.0 - - - - 9.1 3.9 - - - 

National Sheep Industry Improvement Center - Revolving and Program Account 

1.0 - - - - 0.7 0.3 - - - 

FAS Trade Adjustment Assistance 

for Farmers 

27.0 27.0 - - - - - - - - 

Salaries and Expenses 216.0 175.0 41.0 - - - - - - - McGovern-Dole International Food for Education 

87.0 - 87.0 - - - - - - - 

Title I Ocean freight Differential Grants 

4.0 - 4.0 - - - - - - - 

Miscellaneous Contributed Funds 

1.0 - 1.0 - - - - - - - 
ANNUAL PERFORMANCE REPORT 

F Y 2005 P ERFORMANCE AND A CCOUN

USDA FY 2005 Program Obligations 

($ in Millions) 

Program Objectives 

Agency Account Obligations 1.1 1.2 1.3 1.4 2.1 2.2 3.1 3.2 4.1 

FAS (cont’d) 

P.L.480 (Liq. Acct.) 23.0 - 23.0 - - - - - - - P.L.480 (Prog.) 105.0 - 105.0 - - - - - - - P.L 480 Title II 1,710.0 - 1,710.0 - - - - - - - P.L.480-Direct (Fin. Acct.) 179.0 - 179.0 - - - - - - - Debt Reduction (EAI) Fin. Acct. 489.0 - 489.0 - - - - - - - 

FNS Food Donations Programs 142.0 - 142.0 - - - - - - - 

Food Stamp Program 32,096.0 - - - - - - - - 31,877.8 Commodity Assistance Program 

200.0 - - - - - - - - 200.0 

Food Program Administration 142.0 - - - - - - - - - Special Supplemental Nutrition Program (WIC) 

5,200.0 - - - - - - - - 5,171.0 

Child Nutrition Programs 12,103.0 - - - - - - - - 12,069.5 

FS Land Acquisition Title VIII 3.0 - - - - - - - - - 

Capital Improvement and Maintenance 

617.0 - - - - - - - - - 

Forest and Rangeland Research 

336.0 - - - - - - - - - 

State and Private Forestry 432.0 - - - - - - - - - National Forest System 1,508.0 - - - - - - - - - Wildland Fire Management 1,848.0 - - - - - - - - - Payments to States 310.0 - - - - - - - - - Payments to States, Northern Spotted Owl Guarantee 

-1.0 - - - - - - - - - 

Management of National Forest Lands for Subsistence Uses 

6.0 - - - - - - - - - 

Working Capital Fund 188.0 - - - - - - - - - Land Acquisition 90.0 - - - - - - - - - 
ANNUAL PERFORMANCE REPORT 

USDA

130 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

USDA FY 2005 Program Obligations 

($ in Millions) 

Program Objectives 

Agency Account Obligations 1.1 1.2 1.3 1.4 2.1 2.2 3.1 3.2 4.1 

FS (cont’d) 

Federal Payment, Payments to States, National Forests Fund 

89.0 - - - - - - - - - 

Timber Roads, Purchaser Elections 

1.0 - - - - - - - - - 

Roads and Trails for States, National Forest Fund 

14.0 - - - - - - - - - 

Timber Salvage Sales 69.0 - - - - - - - - - Expenses, Brush Disposal 12.0 - - - - - - - - - Range Betterment Fund 2.0 - - - - - - - - - Acq. Of Lands for NF, Special Acts 

1.0 - - - - - - - - - 

Payment to Minnesota from the National Forests Fund 

2.0 - - - - - - - - - 

Restoration of Forest Lands 1.0 - - - - - - - - - Acq. of Lands to Complete Land Exchanges 

2.0 - - - - - - - - - 

Operation and Maintenance Quarters 

8.0 - - - - - - - - - 

Timber Sale Pipeline Restoration Fund 

2.0 - - - - - - - - - 

Recreation Fee Demonstration Program 

46.0 - - - - - - - - - 

Land Between the Lakes Management Fund 

3.0 - - - - - - - - - 

Legacy Fund 61.0 - - - - - - - - - Payments to Counties, National Grasslands 

7.0 - - - - - - - - - 

Cooperative Work Trust Fund 114.0 - - - - - - - - - Reforestation Trust Fund 31.0 - - - - - - - - - 

Total 134,373.0 1,870.3 3,140.0 5,075.1 44,714.5 7,186.0 9,069.6 1,230.9 2,204.2 49,396.9 Total by Goals 54,800 16,256 3,435 5*Goal and objective totals have been rounded to the nearest whole number. Totals may not add due to rounding. 
ANNUAL PERFORMANCE REPORT 

F Y 2005 P ERFORMANCE AND A CCOUN

FISCAL YEAR 2005 STAFF YEARSThe following table depicts the component agencies and staff offices of the U.S. Department of Agriculture with estimated staff years obligated been rounded to the nearest tenth and have been allocated to more than one objective when the amount of each objective was significant and coudepartmental management generally support all USDA objectives and, in most cases, have been reallocated equally among all objectives. 

USDA FY 2005 Staff Years 

Staff USDA Objectives 

Agency Years 1.1 1.2 1.3 1.4 2.1 2.2 3.1 3.2 4.1 4.2 4.3 

OSEC 87 4.4 4.4 4.4 4.4 8.7 8.7 8.7 8.7 5.8 5.8 OCFO 1524 76.2 76.2 76.2 76.2 152.4 152.4 152.4 152.4 101.6 101.6 10OCIO 1113 55.7 55.7 55.7 55.7 111.3 111.3 111.3 111.3 74.2 74.2 7DA 599 30.0 30.0 30.0 30.0 59.9 59.9 59.9 59.9 39.9 39.9 3OC 109 5.5 5.5 5.5 5.5 10.9 10.9 10.9 10.9 7.3 7.3 OIG 594 29.7 29.7 29.7 29.7 59.4 59.4 59.4 59.4 39.6 39.6 3OBPA 67 3.4 3.4 3.4 3.4 6.7 6.7 6.7 6.7 4.5 4.5 OGC 322 16.1 16.1 16.1 16.1 32.2 32.2 32.2 32.2 21.5 21.5 2OCE 71 3.6 3.6 3.6 3.6 7.1 7.1 7.1 7.1 4.7 4.7 HSS 7 0.4 0.4 0.4 0.4 0.7 0.7 0.7 0.7 0.5 0.5 OCR 191 9.6 9.6 9.6 9.6 19.1 19.1 19.1 19.1 12.7 12.7 1NAD 106 5.3 5.3 5.3 5.3 10.6 10.6 10.6 10.6 7.1 7.1 ERS 439 124.8 11.8 17.2 58.0 24.8 24.8 8.9 13.6 16.0 44.4 3NASS 1366 946.6 9.6 - 98.4 232.2 - 0.8 24.6 - - ARS 8919 - - 3,302.0 - - - 859.0 2,158.0 - 304.0 CSREES 451 9.0 3.0 30.0 15.0 100.0 24.0 41.0 18.0 85.0 10.0 4APHIS 6761 811.3 - - - - - - 5,949.7 - - FSIS 9761 - - - - - - 9,761.0 - - - GIPSA 690 690.0 - - - - - - - - - AMS 3029 3,029.0 - - - - - - - - - RMA 512 - - - 256.0 - - 256.0 - - - FSA 5566 - 640.6 - 4,564.0 - - - - - - FSA Non-Federal 10220 - 270.9 - 8,256.0 - - - - - - 
ANNUAL PERFORMANCE REPORT 

USDA

132 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

USDA FY 2005 Staff Years 

Staff USDA Objectives 

Agency Years 1.1 1.2 1.3 1.4 2.1 2.2 3.1 3.2 4.1 4.2 4.3 

NRCS 12346 - - - - - - - - - - RD 6666 - - - - 1,999.8 4,666.2 - - - - FAS 994 805.1 188.9 - - - - - - - - FNS/CNPP 1488 - - - - - - - - 425.0 241.0 82FS 35560 - - - - - - - - - - Total 109,558 6,655 1,364 3,589 13,487 2,836 5,194 11,406 8,643 845 919 1,2Total by Goals* 25,095 8,030 20,049 2,977 *Goal and objective totals have been rounded to the nearest whole number. Totals may not add due to rounding. 
ANNUAL PERFORMANCE REPORT

USDA

F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 133 

DATA ASSESSMENT OF PERFORMANCE MEASURES

STRATEGIC GOAL 1: ENHANCE ECONOMIC OPPORTUNITIES FOR AGRICULTURAL PRODUCERS

Objective 1.1: Expand International Marketing Opportunities 

Key Outcome: Improve International Marketing Opportunities 

1.1.1 Dollar value of trade preserved through FAS staff interventions and trade agreement 

monitoring ($Mil) 

Completeness of Data—Data for the World Trade Organization and tariff rates are projected 

estimates based on results posted to the performance tracking system within the Foreign Agricultural 

Service. Data for successfully retaining and assuring U.S. trade access to export markets are 

projected estimates based on results posted during the first three quarters of FY 2004. Fourth quarter 

estimates were derived using the average quarterly reporting and discounting the results to reflect any 

large, one-time annual events not expected to be repeated in the final quarter. If any trade access 

disputes are resolved successfully by the end of the fiscal year, USDA will update this data 

accordingly. 

The primary sources of trade data are U.S. Customs, which was absorbed into the U.S. Department 

of Homeland Security, information compiled by the U.S. Census Bureau, the USDA publication 

“Foreign Agricultural Trade of the United States,” and other databases. For some products, trade data 

are not recorded. Estimating the potential value of a sanitary and phytosanitary accomplishment may 

be a challenge, especially where new exports to a previously closed market are concerned. In arriving 

at these estimates, USDA considers such factors as similar exports by other countries, the importing 

countries’ respective purchasing power and sales into comparable markets. In addition to trade data, 

other sources include market reports compiled by USDA and industry estimates. 

Reliability of Data—Data are highly reliable and used by agency and Department officials to 

highlight successes in the trade-policy arena. 

Quality of Data—USDA uses an automated performance tracking system to collect and analyze 

actual performance data. The data are collected from the Department’s network of overseas offices 

and headquarters staff conducting trade compliance and enforcement activities, and providing trade 

negotiation support to the U.S. Trade Representative (USTR). An established procedure is 

maintained to review each reported success for verification and the prevention of double counting. 

There often is a lag time between reporting successful resolution of trade issues and reporting the 

estimated value to U.S. agriculture. This also can happen with independent verification through the 

U.S. Government’s official trade statistics. There is no known remedy immediately available to 

address this problem. 

Exhibit 68: Performance Threshold for 1.1.1 

Threshold Documentation Table 

Performance Goal Performance Thresholds Owner Target Exceeded Met Unmet 

1.1.1 Dollar value of trade preserved through FAS staff 

interventions and trade agreement monitoring ($Mil) 

FAS 2,000 > 2,500 2,500 to 

1,500 

<1,500 
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Threshold Documentation Table 

Performance Goal Performance Thresholds Owner Target Exceeded Met Unmet 

Rationale for Met Range: 

Annual targets for this measure, based on five years of program history, have demonstrated that the performance levels 

are controlled by international parties. USDA annual targets reflect U.S. expectations for successfully addressing 

international compliance with trade agreements and resolving actual U.S. trade access issues that arise so that domestic 

exports can continue. Additionally, the level of international cooperation and agreement with U.S. proposed trade 

negotiations depends on international parties. A met or exceeded target reflects USDA successes in addressing barriers 

to U.S. trade. An unmet target can mean that USDA monitoring activities prevented noncompliance. 

OBJECTIVE 1.2: SUPPORT INTERNATIONAL ECONOMIC DEVELOPMENT AND TRADE 

CAPACITY BUILDING

Key Outcome: Support Foreign Food Assistance 

1.2.1 Number of mothers, infants and school children receiving daily meals and take-home 

rations through McGovern-Dole International Food for Education and Child Nutrition 

Program 

The data for the McGovern-Dole International Food for Education and Child Nutrition Program are monitored 

and evaluated through the application of a biannual survey designed by the USDA’s NASS. The survey 

methodology and reporting details are listed in the Government Publication, “The Global Food for Education 

Pilot Program: A Review of Project Implementation and Impact,” Appendix 1, pages 289-305, February 2003.

Completeness of Data—All cooperating sponsors who participate as program delivery partners 

are required to follow an exact established survey methodology developed by the USDA. The survey 

covers data on food rations distributed and school enrollment and promotions to the next grade level. 

While the biannual survey results supplied cover the first and third quarters of the fiscal year, there is 

a 30-day lag time between the survey’s completion, coordination and delivery to USDA. Projected 

estimates between these times are provided through ongoing correspondence with the program 

organizations. All estimates and results are based on the previous year’s signed agreements since the 

signatures occur during the fourth quarter of the previous fiscal year. 

Annual performance targets take into account a one-year lag time for the food aid to arrive in the 

country. During the first quarter of FY 2004, the FY 2003 agreements for food were delivered to the 

countries. During the second quarter, approximately half of the agreements provided counties food 

for direct feeding. During the third quarter, all of the agreements provided food rations. For most of 

the fourth quarter, few food rations were distributed as schools are on summer break. 

Reliability of Data—Data are reliable, of good quality and used by Department officials to 

highlight successes in the trade policy arena. 

Quality of Data—Data collected following the USDA-developed and required survey tool depend 

on the program participant’s ability to interview food recipients. Access to recipients during the 

survey period may depend upon social conditions, civil unrest and weather and transportation 

conditions. 
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Exhibit 69: Performance Threshold for 1.2.1

Threshold Documentation Table 

Performance Goal Performance Thresholds Owner Target Exceeded Met Unmet 

1.2.1 Number of mothers, infants and school 

children receiving daily meals and takehome rations through McGovern-Dole 

International Food for Education and Child 

Nutrition Program 

FAS 2.2 > 1.50 1.50 to 

1.10 

< 1.10 

Rationale for Met Range: 

An initial annual threshold is set at 90 percent of the original pilot program target. A new threshold will be evaluated after 

three years of actual data are collected. 

OBJECTIVE 1.3 EXPAND ALTERNATIVE MARKETS FOR AGRICULTURAL PRODUCTS

Key Outcome: Increase the Purchases of Biobased Products by Federal Agencies, Resulting in 

Increased Demand for Farm Commodities and Increased Investment in 

Processing and Manufacturing Activity Based in Rural America 

1.3.1 Number of groupings of biobased products designed for procurement 

Data to support designation of biobased products for procurement by rulemaking are obtained from a number 

of sources. First, manufacturers and vendors of such products are identified and contacted. USDA asks for 

their cooperation in providing data and other product information necessary for the designation of an item by 

rulemaking. Second, product samples are requested from manufacturers and vendors for biobased content 

testing. Third, product-manufacturing information also is requested from manufacturers and vendors to 

support an analysis of several environmental factors associated with the use of the product and its life-cycle 

cost. Finally, the Department asks manufacturers and vendors for the results of industry-accepted performance 

tests against which their products have been tested. 

Completeness of Data—These data are used to develop the required information on generic 

groupings of biobased products for use in designation rulemaking. They are developed in cooperation 

with manufacturers and vendors of biobased products that fall under the umbrella of a designation. 

Data used meet the statutory requirements for designation rulemaking. 

Reliability of Data—Data are gathered from cooperating manufacturers and vendors. Then, these 

data are used in analyses to determine the biobased content of a range of products within a generic 

grouping and the environmental attributes and life-cycle costs of these products. The data are used in 

tests that determine American Society for Testing and Materials (ASTM) compliance. This 

compliance is named for ASTM International, a major standards-setting organization that develops 

consensus standards using participants from industry, academia and Government. Its standards are 

used widely around the world. The results from analyses of a range of products then are used to 

characterize the generic groupings considered consistent with statutory requirements. 

Quality of Data—The quality of the data used in analyses is high. Samples of products to be tested 

for biobased content are handled consistently with ASTM-specified processes. Information is 

gathered for analysis of environmental attributes and life-cycle costs, which is required to support an 
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ASTM-compliant analytic framework. Information is gathered from manufacturers and vendors for 

analysis of the environmental and health effects of using the products and the life-cycle costs 

associated with their use (life-cycle costs are measured over the life of the products, including 

disposal costs, and stated in current dollars), as opposed to simply the purchase price of the product. 

Exhibit 70: Performance Threshold for 1.3.1 

Threshold Documentation Table 

Performance Thresholds 

Performance Goal Owner Target Exceeded Met Unmet 

1.3.1 Number of groupings of biobased 

products designated for procurement 

OEPNU 4 > 3 1 - 3 < 1 

Rationale for Met Range: 

Ranges will be re-evaluated each year for reasonableness and identification of a historical trend. The current ranges 

reflect the cooperation level of manufacturers and vendors in working with OEPNU to develop data required for 

designation of generic groupings by rulemaking. 

OBJECTIVE 1.4: PROVIDE RISK MANAGEMENT AND FINANCIAL TOOLS TO FARMERS AND 

RANCHERS

Key Outcome: Improve Economic Viability of Farmers and Ranchers 

1.4.1: Increase the percentage of beginning, racial and ethnic minority farmers and women 

farmers financed by USDA 

1.4.2: Reduce average processing time for direct loans 

1.4.3: Reduce average processing time for guaranteed loans 

The Farm Loan Program (FLP) makes direct and guaranteed farm ownership and operating loans to familysize farmers and ranchers unable to obtain commercial credit. The data reside primarily in the Program Loan 

Accounting System (PLAS), Guaranteed Loan System (GLS) and FLP Databases. Web-based reports are the 

primary means of measuring Farm Loan Program performance. USDA reviews these reports quarterly to 

monitor progress toward achieving performance goals. 

Completeness of Data—Data reported are year-to-date actual as of September 30. 

Reliability of Data—Farm Loan Program data are considered reliable. To help ensure data 

reliability, internal controls are built into the systems. System enhancements and reviews also have 

contributed to the overall reliability. Additionally, USDA reviews system reports to monitor program 

performance. Comprehensive internal control reviews are conducted in State offices annually to 

ensure sound loan-making decisions and that program implementation complies with statutes and 

regulations. Finally, since most Farm Loan Program data originate from USDA’s accounting system, 

it is subject to an OIG audit. 

Quality of Data—The data used in this report are collected for multiple purposes. They are 

gathered throughout the normal lending process without significant additional burden or analytical 

resources needed.
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Exhibit 71: Performance Threshold for 1.4.1, 1.4.2 and 1.4.3 

Threshold Documentation Table 

Performance Thresholds 

Performance Goal Owner Target Exceeded Met Unmet 

1.4.1 Increase the percent of loans to 

beginning and socially disadvantaged 

farmer/ranchers 

FFAS/FSA 35% >35.5% 34.5 to 

35.5% 

<34.5% 

Rationale for Met Range: 

Management determination based on previous year results. 

1.4.2 Reduce average processing time for 

direct loans 

FFAS/FSA 40 >40.5 35.5 to 

40.5 

<35.5 

Rationale for Met Range: 

Management determination based on previous year results.

1.4.3 Reduce average processing time for 

guaranteed loans 

FFAS/FSA 14 >15.0 14.0 to15.0 <14.0 

Rationale for Met Range: 

Management determination based on previous year results.

Key Outcome: Reduce the Economic Risk of American Agricultural Producers 

1.4.4 Increase the value of risk protection provided to agricultural producers through 

FCIC-sponsored insurance 

The value of risk protection denotes the amount of insurance in effect protecting and stabilizing the 

agricultural economy. USDA’s value projection target is based on projections developed in November 2003, 

forecasted participation and conditions current at that time. The baseline model uses the latest information 

from the crop insurance program and combines it with USDA baseline projections for major crops. These 

crops include corn, wheat, soybeans, sorghum, barley, rice and cotton. In making the projections, the model 

holds various factors constant, such as premium rates and average coverage level. The model assumes that all 

non-major crops behave consistently with other USDA projections for major crops. The baseline model is a 

tool for developing budget projections contained in Presidential budget requests. The budget and performance 

projections for the crop insurance program mainly depend on the baseline projections from numerous USDA 

agencies. 

Completeness of Data—The data used in conjunction with performance information is based on 

actual data reported through the end of the third quarter. To provide the annual data, USDA projects 

the results for the fourth quarter of the fiscal year based on prior year performance. Analysis has 

shown that normally 99 percent of the final actual data will be reported to USDA during the first 

quarter of the next fiscal year. The Department receives the actual data from insurance companies. It 

then maintains data through two integrated processing systems that validate the information 

transmitted by insurance companies. The data then are sent through the system to generate all 

accounting functions. These processing systems provide a mechanism to ensure that data received are 

accurate, errors are corrected quickly and timely monthly accounting reports are provided. 

Reliability of Data—USDA deems this information to be reliable. The insurance companies 

receive data from the producers and transmit them to USDA. Once received, the Department takes 
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extensive steps to verify the data’s accuracy and validity. The Standard Reinsurance Agreement 

(SRA) also provides reinsured companies with disincentives for not following prescribed guidelines 

and procedures. While the data are deemed reliable, a recent audit by OIG found that the RMA 

information technology environment might be vulnerable to errors, misuse, abuse, unauthorized 

access, disruption of service and willful destruction. RMA generally agreed with these findings and 

has made substantial progress in implementing the agreed to recommendations. 

Quality of Data—Data are projected based on historical performance and the target information 

uses data dependent upon the baseline projections from numerous USDA agencies. To the extent that 

any of the USDA projections are inaccurate, the projection of value also will be inaccurate. 

Exhibit 72: Performance Threshold for 1.4.4 

Threshold Documentation Table 

Performance Thresholds 

Performance Goal Owner Target Exceeded Met Unmet 

1.4.4 Increase the value of risk protection 

provided to agricultural producers 

through FCIC-sponsored insurance 

($ Bil) 

FFAS/RMA 40.0 >42.0 38.0 to 42.0 <38.0 

Rationale for Met Range: 

Annual targets for this measure, based on five years of program history, have consistently seen a variability of plus or 

minus two for each fiscal year. 

STRATEGIC GOAL 2: SUPPORT INCREASED ECONOMIC OPPORTUNITIES AND IMPROVED 

QUALITY OF LIFE IN RURAL AMERICA

Objective 2.1: Expand economic opportunities through USDA financing of 

businesses 

Key Outcome: Improve Rural Quality of Life through Home Ownership Opportunities Provided 

Business program data are collected in various systems and ways. The finance office records and reports total 

loan and grant obligations as of the date the obligation is executed. These data are collected as part of the 

obligation process. Additionally, RD uses one of its own systems, Guaranteed Loan System (GLS), to collect 

additional information to satisfy reporting requirements, and for management and evaluation purposes. This 

information includes the number of jobs created or saved. Data on delinquency status mostly are reported by 

lenders directly to GLS. In other cases, USDA staff reports delinquency information. 

Completeness of Data—Business program data are considered final and complete as of 

September 30 each year. Other than year-end closing adjustments, once a year is reported, it is not 

revisited. 

Reliability of Data—While borrower financial performance is reported by hundreds of lenders 

semi-annually to RBCS, all lenders are not submitting required borrower financial performance. 

Additionally, there is inconsistency in the time periods represented by lender reports. In lieu of a 

reliable, consistent and complete data set from lenders, the Finance Office’s financial data have been 

found acceptable to OIG, as are State office-verified data on the financial performance of loans. Data 
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for jobs created or saved are obtained by State office staff from borrowers and lenders. They are 

entered into GLS at the same time that obligations are recorded. These data are reliable when they 

have been updated and verified by State staff. USDA reports the computed jobs saved or created 

based on underlying market and financial feasibility projections that support loan applications. The 

jobs are counted only in one fiscal year, the year the loan is obligated. The delinquency rate, which 

excludes loans in bankruptcy, is based on reports supplied by lenders on the performance of each 

loan. 

Quality of Data—While the percentage of States verifying third-party financial and jobs data have 

improved each year, further improvements are needed. They are designing and completing a model 

to compute and measure the impacts of business programs in rural communities better. These 

impacts include a fuller description of the economic impact and such “quality-of-life” issues as 

health and education. 

Exhibit 73: Performance Threshold for 2.1.1 

Threshold Documentation Table 

Performance Thresholds 

Performance Goal Owner Target Exceeded Met Unmet 

2.1.1 Create or save additional jobs through 

USDA financing of businesses 

RD/RBS 

(RCAP) 

63,856 >67,049 60,663 to 

67,049 

<60,663 

Rationale for Met Range: 

USDA has initiated a comprehensive study to verify the methodologies available to accurately track the outcomes of these 

programs. Until that study is complete and implemented, the Department will continue to track jobs. The job data is 

gathered when projects are obligated in GLS and the jobs projected are computed based on a formula driven by 

appropriations, each FY the formula is adjusted based on the historic numbers. A met range of 5 percent is used. 

Objective 2.2: Improve the Quality of Life Through USDA Financing of Quality 

Housing, Modern Utilities and Needed Community Facilities 

Key Outcome: 

2.2.1 Homeownership 

Completeness of Data—Homeownership data are actual, final and complete. The initial entry 

point for homeownership data is the web-based UniFi system. This centralized server application 

ensures viable data collection. It tracks performance and forecasts needs. Information entered into 

UniFi also uploads nightly into the MortageServ (a.k.a., Fasteller) system that is used to obligate 

funds, establish closed loans, administer escrow accounts, manage defaulted loans and perform other 

administrative functions. Brio, a query and reporting tool, serves as the interface between the data 

warehouse and RD staff. 

Reliability of Data—Homeownership data originate in systems used to obligate funding and are 

reliable. Data for initial placement of households into their own homes are reliable since they are 

linked directly to homeownership loans maintained in USDA’s financial accounting systems. No 

adjustments are made for later defaults and the resulting loss of homeownership. 
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Quality of Data—Homeownership data are based on loan obligations collected in the Dedicated 

Loan Origination and Servicing system and stored in USDA’s Data Warehouse. As such, the data on 

the number of households are auditable. Data represent the population served based on available U.S. 

census information. 

Exhibit 74: Performance Threshold for 2.2.1 

Threshold Documentation Table 

Performance Thresholds 

Performance Goal Owner Target Exceeded Met Unmet 

2.2.1 Home ownership opportunities 

provided 

 Increase financial assistance 

to rural households to buy a 

home 

RD/RHS 

(SFH) 

38,300 >42,130 34,470 to 42,130 <34,470 

 Increase the number of 

minority homeowners 

RD/RHS 

(SFH) 

7,660 >8,426 6,894 to 8,426 <6,894 

Rationale for Met Range: 

The range of 10 percent is based on the historical variance form the target during the past several years in the number of 

houses sold in the Guaranteed and Direct Single Family Housing loan programs. 

2.2.2 Telecommunications 

Completeness of Data—Data are actual, final and complete. The county data are collected from 

each approved loan application. Applicants are required to detail their proposed service territories. 

This includes the number of subscribers to be served in the location by county. Loan funds are 

advanced only for approved purposes. Measuring the extent to which broadband service is deployed 

in rural America on a county-by-county basis will enable USDA to assess improved economic 

conditions because of the availability of high-speed telecommunications network access for residents 

and business. 

The data on the number of counties to be served for each loan are derived from applicants’ loan 

applications. Data must be complete before loans can be approved. 

Reliability of Data—While applicants are required to perform market surveys of their proposed 

service areas, the actual counties served may vary from the plan if all funds are not used or the 

borrower later requests a change of purpose from the original loan application. Overall, the data on 

counties served are reliable. 

Quality of Data—All applications undergo an extensive review to determine eligibility. 

Additionally, all approved applications must show feasibility from a financial and technical 

standpoint. Applicants also are required to perform market surveys of their proposed service areas. 

Therefore, the data are reliable. As previously noted, the data on the number of counties to be served 

for each loan approved come from the applicant’s loan application. The data depend on the borrower 

drawing down loan funds and constructing the system as portrayed in the applicant’s loan design. 

Loan funds only may be used for the approved purposes for which the loan was made. Variance may 

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

specified in the plan. 

Exhibit 75: Performance Threshold for 2.2.2 

Threshold Documentation Table 

Performance Thresholds 

Performance Goal Owner Target Exceeded Met Unmet 

2.2.2 Customers served by new or improved 

telecommunications facilities 

(Thousands) 

(RD/RUS) 325 >348 303 to 348 <303 

Rationale for Met Range: 

Target based on utilization of approximately $600 million in broadband funding and $687 million in infrastructure funding. 

The number of subscribers is based on historical costs. Thus, fluctuations occur when plan investment per subscriber is 

significantly different from historical costs. They also occur when plant investment per subscriber is significantly different 

from historical costs from year to year. The met range of 50,000 allows for a modest 7 percent deviation below the 

estimated target. 

2.2.3 Water and the Environment 

Completeness of Data—The Water and Environmental Programs (WEP) collects data initially 

through the Community Programs Application Processing (CPAP) system. CPAP is a non-financial 

system in which the agency field staff input data about applicants, borrowers, funding and services 

provided. The data obligations flow through the Rural Utilities Loan Servicing System (RULSS) to 

the PLAS and through a data server to a data warehouse. 

Reliability of Data—USDA’s data warehouse stores historical information on Department 

programs and such non-agency data as census information. Program data are downloaded to the 

warehouse every evening from several accounting databases. Data generally are current through the 

previous day. The warehouse provides data about obligations and can be used to measure the number 

of loans, loan amounts, number of borrowers and funds advanced. The warehouse is an easy, 

accessible online method of extracting information and data for reports and analyses. 

Quality of Data—Based on information in CPAP, the number of subscribers receiving new or 

improved water or wastewater service can be extrapolated from the data warehouse. The WEP 

National Office and USDA field offices use data from CPAP, the data warehouse and Department 

accounting systems to review or evaluate the financial, operational and managerial programs of the 

utilities serving rural customers. 
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Exhibit 76: Performance Threshold for 2.2.3 

Threshold Documentation Table 

Performance Thresholds 

Performance Goal Owner Target Exceeded Met Unmet 

2.2.3 Customers served by new or improved 

water and waste disposal service (Mil) 

RD/RUS .650 Mil >.680 .680 to 

.610 

<.610 

Rationale for Met Range: 

Annual targets for this measure are based on historical activity and are adjusted according to the program level received 

each fiscal year. 

2.2.4 Electricity 

Completeness of Data—Electric Program data are collected from various Rural Utility Service 

(RVS) documents including RUS Forms 740c and 130, Borrower’s Statistical Profile, Information 

Publication 201-1 and the borrower’s loan application. The data are complete and accurate, and 

collected at the time of loan approval and reported annually. 

Reliability of Data—Applicants are required to report essential data to the Electric Program. These 

data are used to administer Department loan funds and to ensure the security of the loans. USDA is 

developing a new loan tracking and data collection system, Rural Utilities Loan Servicing System 

(RULSS). The Department will be able to capture and access this information in RULSS in FY 2006. 

Quality of Data—All applications undergo an extensive review to determine whether the borrower 

meets all eligibility requirements for the various loans, guarantees and grants offered by the Electric 

Program. All approved applications must show feasibility from a financial standpoint and ensure loan 

security. Loan funds may be used only for the approved purposes for which the loan was made. 

Exhibit 77: Performance Threshold for 2.2.4 

Threshold Documentation Table 

Performance Thresholds 

Performance Goal Owner Target Exceeded Met Unmet 

2.2.4 Customers served by new or improved 

electric service (Mil) 

RD/RUS 1.775 >1.864 1.686 to 

1.864 

<1.686 

Rationale for Met Range: 

Annual targets for this measure are based on historical activity and are adjusted according to the program level received 

each fiscal year. 

2.2.5 Community Facilities 

Completeness of Data—Community Facilities Program data are complete and final. They are 

collected by means of two streams of input. The finance office records and reports total loan and 

grant obligations as of the date of obligations. These data are collected as part of the obligation 

process. Additionally, USDA collects information for management and evaluation purposes. Data on 
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delinquency status are reported by the finance office for community facilities direct loans, and by 

lenders for the community Facilities guaranteed loans. 

Reliability of Data—Community Facilities data are entered into GLS by field staff as the program 

funds are obligated. Data are final, complete and reliable. They also represent the population served 

based on available U.S. census information. Population data served by community facilities are 

estimates. USDA screens data annually for irregularities. Given the variety of areas served by 

different types of community facilities (e.g., libraries, fire stations, health clinics), estimation is not a 

precise science. Population estimates served by community facilities are based on engineering 

studies used for the design of new or expanded public utilities systems. The Department is 

developing mapping technologies to improve the determination of service areas for community 

facilities. 

Quality of Data—As new programs are authorized, CPAP is used to create data systems that field 

staff can use to work directly and interactively with applicants. Planned system requirements can be 

developed quickly. CPAP contains a number of edit checks to enhance reliability. The data are stored 

on a server and moved nightly to the data warehouse for permanent storage and reporting. This 

manner of developing system plans greatly enhances data reliability since they are integral to 

program planning. 

Exhibit 78: Performance Threshold for 2.2.5 

Threshold Documentation Table 

Performance Thresholds 

Performance Goal Owner Target Exceeded Met Unmet 

2.2.5 Customers served by new or improved 

community facilities (Mil) 

RD./RHS 

(RCAP) 

12 >14 10 to 14 <10 

Rationale for Met Range: 

Because the number of residents served by each grant may vary widely, it is difficult, if not impossible, to estimate with 

any precision a range of residents served. One grant for a fire engine could serve 22,000 people whereas the same grant 

amount for a hospital could server 22,000. Therefore, USDA would consider its 2004 goal unmet if CF serves fewer than 

10 million people. 

STRATEGIC GOAL 3: ENHANCE PROTECTION AND SAFETY OF THE NATION’S AGRICULTURE AND 

FOOD SUPPLY

Objective 3.1: Reduce the Incidence of Foodborne Illnesses Related to Meat, 

Poultry and Egg Products 

Key Outcomes: Basing Policies on Science 

For the two Key Outcomes, USDA uses secure and accurate food safety data systems. The data are derived 

from sampling plans and analysis of product samples taken from meat and poultry plants by Department 

employees. The samples are analyzed by International Standards Organization (ISO) accredited laboratories to 

ensure accurate results. ISO is a network of the national standards institutes of 146 countries. These countries 

work with foreign organizations, Governments industry business and consumer representatives. Once the 

laboratories have the results, they enter them into the Laboratory Sample Flow System. The system then 
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forwards the results to the Microbiological and Residue Computer Information System. The results then are 

sent to the Pathogen Reduction Enforcement System (PREP). PREP uses the results to schedule future 

sampling at USDA-inspected plants. The data are considered to be extremely reliable. Policy, program 

decisions and resource allocation are based on this data. 

Improve Detection of Foodborne Hazards 

Data for developing systems for detecting foodborne hazards represent actual accomplishments to date and are 

highly reliable. Each research unit submits annual progress reports via USDA’s state-of-the-art electronic 

information and database system. Line and program managers review the information and report their findings 

to Congress, customers, stakeholders, partners and the general public. Progress reports are available at 

http://www.ars.usda.gov. Once there, click on the word “Research” located in the upper left-hand corner of 

the screen. The reports also are available at the Food Safety Research Information Office (FSRIO). This office 

is the source for all Federal food safety research information, including the role and duties of the Joint 

Institute for Food Safety Research. This group was created to coordinate Federal food safety research to 

ensure that valuable resources are directed to the most needed and most promising projects. Data from the 

USDA Food Safety Research Program must meet FSRIA’s quality standards. Customers and stakeholders 

provide the Department with continual feedback on the data’s quality, relevance, value and usefulness. 

Completeness, Reliability and Quality of Data 

 Pathogen Measures—All samples are logged in upon receipt, analyzed and then entered into 

the Laboratory Sample Flow System. A sample’s milestones are posted on an intranet site 

accessible by the sample collector and other agency personnel to monitor the sample’s progress. 

Reports are generated periodically to review sample status, cumulative results and other 

sampling data summaries. Any potential errors are brought immediately to the attention of the 

System Administrator for investigation and correction. 

 Viewing Measure—Audience viewings reflect a combination of documented Hotline calls, 

electronic mailboxes, web viewings, newsletter subscriptions, publication distributions, and the 

Agency Rep, “AskKaren” web-based initiative. Included is a percentage (20 percent) of various 

media (TV, radio, print) outlet audience tracking data as compiled by independent media 

outreach tracking services. 

Quality of Data 

 Pathogen measures—The laboratories are accredited through ISO 17025, which requires 

extensive quality procedures, documentation and review. 

 Viewing measure—Viewing data of food safety messages is based on a combination of actual 

documented records, reports and/or print-outs (daily, weekly and monthly) along with a 

percentage (20 percent) of the total various media circulation, listener and viewing audience 

figures provided through tracking services. 

Reliability of Data

 Pathogen measures—The data are reviewed thoroughly prior to posting annual summaries on 

the FSIS web site http://www.fsis.usda.gov, publications and published reports. 
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 Viewing measures—USDA defines viewings as a best estimate of the number of people 

exposed to food safety messages through all the means used to deliver these messages: print, 

radio or television media, conventions, presentations, newsletters, USDA web site visits, Meat 

and Poultry Hotline calls, food safety publications, the USDA Mobile and State partnerships. 

Data are reviewed weekly and/or monthly prior to inclusion in other reports. 

Exhibit 79: Performance Thresholds for 3.1.1, 3.1.2, 3.1.3 and 3.1.4 

Threshold Documentation Table 

Performance Thresholds 

Performance Goal/Measure Owner Target Exceeded Met Unmet 

3.1.1: Prevalence of Salmonella on broiler 

chickens 

FSIS 11.7% <10.0 10 to 12 >12 

Rationale for Met Range: 

For Salmonella in young chickens where existing prevalence is more than 10 percent, a regulatory prevalence of 10 to 12 

percent reflects a performance consistent with the target. 

3.1.2: Prevalence of Listeria monocytogenes on 

ready-to-eat meat and poultry products 

FSIS 0.8% <.7 .7 to .9 >.9 

Rationale for Met Range: 

For Listeria monocytogenes on ready-to-eat meat and poultry products where regulatory prevalence is already below 1 

percent, a regulatory prevalence of .7 to .9 percent reflects a performance consistent with the recommended target. 

3.1.3: Prevalence of E. coli 0157:H7 on ground 

beef 

FSIS 0.37% <.18% .18 to .9 > .9 

Rationale for Met Range: 

For E. coli 0157:H7 on ground beef products where regulatory prevalence is already below 1 percent, a regulatory 

prevalence of .18 to .9 percent reflects a performance consistent with the recommended target. 

3.1.4: Millions of viewings of food safety 

messages (Mil) 

FSIS 94M >100M 90M to 

100M 

<90M 

Rationale for Met Range: 

Achieving 90-100 Million viewings is recognized as a sound marketing strategy to raise awareness of safe food handling 

behaviors. 

OBJECTIVE 3.2: REDUCE THE NUMBER AND SEVERITY OF AGRICULTURAL PEST AND DISEASE 

OUTBREAKS

Key Outcome: Provide a Secure Agricultural Production System and Healthy Food Supply 

3.2.1 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 or humans 

The process of determining this performance result involves several steps: (1) routine monitoring and 

surveillance of world animal health problems; (2) investigating specific reports to identify if a new 

introduction of a significant foreign animal disease has occurred and testing to determine the extent of 

infection; and (3) evaluation to determine the severity of the damage and summarize the results count. 

(1) Routine Monitoring: Notice of the need to investigate a possible foreign animal disease may come from a 

wide variety of sources spread throughout the country. The National Animal Health Monitoring System 
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conducts planned surveys of diseases likely to have major impact on production and marketing. The National 

Animal Health Strategic Plan Objective 2 “Develop standards, quality control, and performance metrics for 

surveillance systems” states that key health indicator data will be collected annually starting in October 2005. 

Specific causes of loss by age group within each commodity will be gathered. In addition to conducting 

domestic surveys, USDA also maintains the presence of animal health professionals overseas to collect 

surveillance information on foreign animal diseases to prevent these diseases from entering the United States. 

(2) Foreign Animal Disease Investigations and Testing: USDA set a target of 550 foreign animal disease 

investigations for FY 2004. When an infection is reported and confirmed, area-wide testing is conducted 

around the foci of infection using a comprehensive system of statistically significant diagnostic samples. The 

samples are tested in state-of-the-art laboratories. Testing data are recorded in the Emergency Management 

Response System (EMRS), National Animal Health Monitoring System (NAHMS) and the National Animal 

Health Reporting System (NAHRS.) All susceptible animals within an appropriate distance of the foci of 

infection are tested. The appropriate area for testing is determined using data regarding disease agents and 

how those agents are spread (through the air by biological or mechanical). The anticipated spread rate is based 

on weather conditions and movements or contacts on and off of the infected premises, as well as the 

anticipated expectations of trading partners regarding testing and surveillance. Animals that are positive or 

have known exposure within at least two disease agent incubation periods are destroyed or retested until the 

quarantine is removed. If there are limited numbers of animals around the foci of infection the testing area 

may be expanded to ensure that no animals are infected, and trace out investigations and testing on all animals 

from the foci herd may be performed. 

Statistical sampling focuses on animals at slaughter and, concentration points if movement is being allowed, 

or in high risk areas. Door-to-door censuses are completed or requests are made that the public report any sick 

animals meeting a particular case description. Sampling data should be entered into the National Veterinary 

Services Laboratories (NVSL) databases, EMRS and National Animal Health Laboratory Network (NAHLN) 

databases. NVSL validates all samples found positive by other network laboratories. 

(3) Reporting and Summarizing Results: As data about introduction arrive, veterinarians on USDA’s 

Emergency Programs Staff analyze them and apply criteria to determine if the introductions are significant 

and have spread. All introductions of agents listed by World Organization for Animal Health (Office 

International des Epizooties (OIE)) and considered to be foreign to the U.S. are reported are reported to that 

body. 

Completeness of Data—The end-of-year data are complete, actual and final when the scheduled 

testing is finished, the samples are analyzed and the quarantined animals are tested and released. A 

cutoff time for the data, which are used for the final summary count, has been set at approximately 

one month before the required reporting date. If no data indicating an outbreak has spread have been 

received in the month preceding the decision, the decision based on that time period will be made. If 

additional data are submitted indicating an outbreak has spread, they will be considered for the next 

time period. 

Reliability of Data—The summary data are considered reliable when USDA’s Deputy 

Administrator of Veterinary Services’ has reviewed and approved them. 
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Quality of Data—The issues related to collection and reporting of performance information are 

described above. 

Exhibit 80: Performance Threshold for 3.2.1 

Threshold Documentation Table 

Performance Thresholds 

Performance Goal/Measure Owner Target Exceeded Met Unmet 

3.2.1 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 or humans. 

APHIS 0 Not possible 0 1 or 

above 

Rationale for Met Range: 

These foreign animal diseases are very serious. Veterinary Services seeks to prevent the spread of every single one. 

3.2.2 Percentage of facilities in complete compliance at the most recent inspection and 

3.2.3 Number of animals affected by noncompliances documented on inspection reports. 

The data source for these measures is the Licensing and Registration Information System (LARIS), which 

contains facility inspection results data on licensed and registered facilities. 

Animal Care field inspectors enter reports into LARIS using laptop computers. Copies of inspection reports 

are provided to facility personnel and reviewed by supervisory animal-care specialists. There is ample 

opportunity for correcting any errors. In FY 1999, reports were found to be present in LARIS for 99 percent 

of active facilities. The validity of the measures was established in 1996 using a team of front-line inspectors 

and input from stakeholder organizations. Totals are computed by an automated program. 

While the percentage of compliant facilities is an excellent, comprehensive, overall measure, it is not a perfect 

indicator of the welfare of animals. Minor problems that do not affect the welfare of animals directly count 

against the facilities. To compensate, a measure for animals affected by noncompliances was added. The 

number of inspections performed also is tracked and made available to managers. 

Completeness of Data—It takes animal welfare facility inspectors about a month to finalize their 

facility inspection data. If they fail to enter the data for a given facility, the computer program that 

counts the number of facilities in compliance will select the previous inspection report to see if the 

facility was in compliance on its previous inspection. If results data are required to be reported before 

the inspectors can enter their findings, the data on the percentage of compliant facilities, while still 

considered complete, will be based on a slightly earlier time period. This should not affect the results 

significantly. On the other hand, the computer program that counts the number of animals affected by 

violations will understate the results, and they will need to be adjusted to represent a full year of 

findings. 

Reliability of Data—While there will be some variation between inspectors in how strict they are, 

when all their tendencies are pooled, the differences offset each other. The inspectors must continue 

to use their best professional judgment in the same way each year for comparable results. 
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Quality of Data—These data are of highest quality. They are taken very seriously by the inspectors 

and facility owners or managers, and documented with signatures. If there are mistakes or 

disagreements, an avenue for appeal to the inspector’s supervisor exists. 

Exhibit 81: Performance Thresholds for 3.2.2 and 3.2.3 

Threshold Documentation Table 

Performance Thresholds 

Performance Goal/Measure Owner Target Exceeded Met Unmet 

3.2.2 Percent of facilities in complete 

compliance at the most recent inspection 

APHIS 340,000 >343,400 336,600 to 

343, 400 

<336,600 

3.2.3 Number of animals affected by 

noncompliances documented on 

inspection reports 

Baseline: 2001 = 588,961 

APHIS 70% >72% 72 to 68 < 68% 

Rationale for Met Range: 

With so many animals affected by noncompliance, it is reasonable that the results could vary by 1 percent more than or 

less than the target and still be considered to have met it. Anything beyond 1 percent would mean the target has been 

exceeded or not met. Note that the goal is to lower this result. 

A similar basis was used for the percent of facilities in compliance. There are more than 15,000 at any given time. A 

variation of 1 percent seems insignificant. 

Key Outcome: Improve Animal and Plant Diagnostic Laboratory Capabilities 

3.2.4 Expand the ability to detect plant diseases to protect the Nation from disease 

outbreaks 

3.2.5 Expand the ability to detect animal diseases to protect the Nation from disease 

outbreaks 

Completeness of Data—This measure is direct and verifiable and representative of the ultimate 

purpose of the Diagnostic Networks, i.e., to detect and identify disease threats. 

Reliability of Data—USDA action, other internal and external customers and stakeholders, and 

regulatory agencies routinely accept the data. 

Quality of Data—Most of the data released is published in scientific journals where they undergo 

peer review before publication. All data released to the public are governed by the USDA Data 

Quality Guidelines. 

Exhibit 82: Performance Thresholds for 3.2.4 and 3.2.5 

Threshold Documentation Table 

Performance Thresholds 

Performance Goal/Measure Owner Target Exceeded Met Unmet 

3.2.4 Expand the ability to detect plant diseases 

to protect the Nation from disease 

outbreaks 

 

 Specific plant diseases labs are 

prepared to detect 

CSREES 3 >4 2 to 4 <2 

3.2.5 Expand the ability to detect animal 

diseases to protect the Nation from 

 
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Threshold Documentation Table 

Performance Thresholds 

Performance Goal/Measure Owner Target Exceeded Met Unmet 

disease outbreaks 

 Specific animal diseases labs are 

prepared to detect 

CSREES 6 >7 5 to 7 <5 

Rationale for Met Range: 

The proposed range is reasonable, given the possibility of unanticipated barriers to research. 

Key Outcome: Reduce the Number and Severity of Agricultural Pest and Disease Outbreaks 

3.2.6 Provide scientific information to protect animals from pests, infectious diseases and 

other disease-causing entities that impact animal and human health 

Completeness of Data—Research is a continuum of discovery so it is constantly being updated. 

ARS does everything it can to ensure the completeness of its data at the time it is released. 

Reliability of Data—ARS data is routinely accepted by the USDA action and regulatory agencies. 

Quality of Data—Most of the data released by ARS is published in scientific journals where it 

undergoes peer review before publication. ARS data released to the public is governed by the USDA 

Data Quality Guidelines. 

Exhibit 83: Performance Thresholds for 3.2.6 

Threshold Documentation Table 

Performance Thresholds 

Performance Goal/Measure Owner Target Exceeded Met Unmet 

3.2.6 Provide scientific information to protect 

animals from pests, infectious diseases 

and other disease-causing entities that 

impact animal and human health. 

 

 Number of organisms or variants of 

the microorganisms sequenced each 

year. 

ARS 7055 >57 53 to 57 <53 

 Number of resistance markers for a 

variety of diseases identified. 

ARS 108 >9 7 to 9 <7 

 Number of tests that are transferred to 

universities, State laboratories, private 

industry or other countries for use. 

ARS 3 >4 2 to 4 <2 

Rationale for Met Range: 

With the possibility of unanticipated research barriers mitigating against achieving the target, it qualifies as a reasonable 

proposed range. 
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STRATEGIC GOAL 4: IMPROVING THE NATION’S NUTRITION AND HEALTH

Objective 4.1: Improve Access to Nutritious Food 

Key Outcome: Improve Nutrition through Increased Access and Utilization of These Vital 

Programs by Those Eligible to Participate 

4.1.1 Rates of eligible populations participating in the Food Stamp Program 

This rate is calculated by comparing estimates of eligible individuals with the number of actual participants. 

The resulting participation rates estimate the percentage of individuals eligible for FSP who choose to 

participate. 

Participation data are drawn from USDA administrative records. State agency reports are certified accurate 

and submitted to regional offices. There, they are reviewed for completeness and consistency. If the data are 

acceptable, the regional analyst posts them to the National Data Bank (NDB) Preload System. NDB is a 

holding area for data review prior to release. Otherwise, regional office personnel reject the report and the 

State agency is contacted. Data posted by regional personnel into NDB are reviewed at USDA. If data are 

reasonable and consistent with previous reports, they will be downloaded to NDB for public release. 

Otherwise, USDA works with regional offices and States to resolve problems and inconsistencies. This 

process of review and revision ensures that the data are as accurate and reliable as possible. 

The estimate of individuals eligible for the program is developed using a computer model of eligibility 

requirements applied to data from the U.S. Census Bureau’s annual Current Population Survey. This survey 

covers demographic characteristics of the U.S. population. It uses nationally representative sampling 

techniques. This data are supplemented with that on food stamp participant characteristics derived from the 

food stamp quality control (QC) process. Food stamp participant data are based upon statistically valid 

methodology (For more information on QC, see the assessment section for Objective 4.3.1). 

Completeness of Data—Because of the time required to collect and analyze the current 

population survey and the QC data, reporting on this measure is deferred to the following year’s 

report. Once available, data for both participants and eligible people are complete. Participation data 

are collected and validated monthly before being declared annual data. The current population survey 

and QC data represent statistically valid national samples. 

Reliability of the Data—The data are highly reliable. Participation data reporting is used to 

support program financial operations. All of the data are used in published analyses, studies and 

reports. They also are used to support dialogue with and information requests from the Government 

Accountability Office (GAO), the Office of Inspector General (OIG) and the Office of Management 

and Budget. 

Quality of the Data—As described above, the data used to develop this measure are used widely 

for multiple purposes, both within and outside USDA. The measure itself is reported in stand-alone 

publications as an important, high-quality indicator of program performance. 
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4.1.2 Rates of eligible populations participating in the School Breakfast Program 

This measure is calculated by comparing the average daily participation of children in SBP with estimates of 

total enrollment in U.S. public and private schools. The estimates originate from data collected and compiled 

by the U.S. Department of Education’s National Center for Educational Statistics (NCES). NCES collects and 

analyzes data related to education in the U.S. and other nations. 

Data on public school enrollment are drawn from the NCES Common Core of Data. This is a comprehensive, 

annual, survey-based national statistical database of information concerning all public elementary and 

secondary schools (approximately 100,000) and school districts (approximately 18,000). Data on private 

school enrollment is drawn from the private school universe survey. This survey represents a biennial data 

collection on the number of private schools, teachers and students in the U.S. 

Completeness of Data—Because of the time required to collect and report the NCES survey data, 

reporting on this measure is deferred to a subsequent year’s report. Once available, data for both 

participants and eligible people are complete. Participation data are collected and validated monthly 

before being declared annual data. The NCES survey data represent statistically valid national 

samples of public and private school enrollment. 

Reliability of the Data—The data are highly reliable. Participation data reporting are used to 

support program financial operations. NCES surveys are recognized nationally as definitive sources 

of information on U.S. schools. 

Quality of the Data—As described above, the data used to develop this measure are used widely 

for multiple purposes, both within and outside USDA. 

4.1.3 Rates of eligible populations participating in the Special Supplemental Nutrition 

Program for Women, Infants and Children 

Currently, the measure—specifically, a methodology to estimate the number of people eligible for WIC—is 

under development. Reporting on this measure will be deferred until data are available. 

Exhibit 84: Performance Threshold for 4.1.1, 4.1.2 and 4.1.3 

Threshold Documentation Table 

Performance Thresholds 

Performance Goal Owner Target Exceeded Met Unmet 

4.1.1 Rates of eligible populations participating 

in the Food Stamp Program 

FNS 59.1% ≥59.4 58.6 to 

59.3 

≤58.5 

4.1.2 Rates of eligible populations participating 

in the School Breakfast Program 

FNS 18.0 ≥18.1 17.9 to 

18 

≤17.8 

4.1.3 Rates of eligible populations participating 

in the Special Supplemental Nutrition 

Program for Women, Infants and Children 

FNS Measure 

under 

development 

Measure 

under 

development 

N/A N/A 

Rationale for Met Range: 

The participation rate threshold range of ±.5 percent from the target reflects a level of performance consistent with the 

target. 
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Objective 4.2: Promote Healthier Eating Habits and Lifestyles 

Key Outcome: Promote More Healthful Eating and Physical Activity across the Nation 

4.2.1: Improve the Healthy Eating Index (HEI) scores for the U.S. population 

USDA’s Healthy Eating Index (HEI) is an analysis of data from the U.S. Department of Health and Human 

Service’s National Health and Nutrition Examination Survey (NHANES). HEI determines the extent to which 

the diets of survey respondents are consistent with the recommendations of the Dietary Guidelines for 

Americans and the food guidance system. NHANES is a nationally representative survey that provides 

information on people’s consumption of foods and nutrients, health-related data and Americans’ demographic 

and socioeconomic characteristics. 

Completeness of Data—Because of the time required to collect, analyze and publish NHANES 

data, reporting on this measure is deferred to a subsequent year’s report. Once available, the HEI data 

are complete, reflecting a nationally representative sample of the population. 

Reliability of the Data—The data are highly reliable. NHANES uses a well-documented, 

consistent survey protocol. It is used as a basis for a wide range of peer-reviewed research reports. 

The HEI methodology is used consistently by USDA in analyses of data quality Nationwide and 

interactive tools designed to assess the diet quality of individuals. 

Quality of the Data—As described above, the data used to develop this measure are used widely 

for multiple purposes, both within and outside USDA. The HEI measure itself is published in 

publicly available reports and used as a national indicator of diet quality. 

Exhibit 85: Performance Threshold for 4.2.1 

Threshold Documentation Table 

Performance Thresholds 

Performance Goal Owner Target Exceeded Met Unmet 

4.2.1 Improve the Healthy Eating Index (HEI) scores 

for the U.S. Population: 

 

 HEI for People with Incomes under 130% 

of Poverty 

FNS 66 >67.3 64.7 to 

67.3 

<64.7 

 HEI for the U.S. Population CNPP 65 >65.5 65.5 to 

63.7 

<63.7 

Rationale for Met Range: 

HEI for People with Incomes under 130 percent of Poverty threshold is based on the 95 percent confidence interval 

centered on the HEI measure (mean). Though no FY 2004 target was set, the Exceed and Unmet thresholds would be 

derived from the confidence interval of ± 1.33 points above or below the annual target. Performance that falls within the 

range between the thresholds is considered to have met the target. 

HEI for the U.S. Population threshold is based on the 95 percent confidence interval centered on HEI measure (mean). 

The Exceed and Unmet thresholds are derived from the confidence interval of ± .95 points above or below the FY 2004 

target. Performance that falls within the range between the thresholds is considered to have met the target. 
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Key Outcome: Increase Nutrition Information Available to the Public 

4.2.2 Determine food consumption patterns of Americans, including those of different 

ages, ethnicity, regions, and income levels. Provide sound scientific analyses of U.S. 

food consumption information to enhance the effectiveness and management of the 

Nation's domestic food and nutrition assistance programs 

Each research project submits an annual project report. The report, which is reviewed by the appropriate area 

office and national program leaders, provides such performance information as achieving project milestones. 

Completeness of Data—Research is a continuum of discovery so it is being updated constantly. 

USDA does everything it can to ensure the completeness of its data at the time it is released. 

Reliability of Data—USDA action, other internal and external customers and stakeholders, and 

regulatory agencies routinely accept the data. 

Quality of Data—Most of the data released is published in scientific journals where they undergo 

peer review before publication. All data released to the public are governed by the USDA Data 

Quality Guidelines. 

Exhibit 86: Performance Threshold for 4.2.2 

Threshold Documentation Table 

Performance Thresholds 

Performance Goal/Measure Owner Target Exceeded Met Unmet 

4.2.2 Determine food consumption patterns of 

Americans, including those of different ages, 

ethnicity, regions, and income levels. Provide 

sound scientific analyses of U.S. food 

consumption information to enhance the 

effectiveness and management of the Nation's 

domestic food and nutrition assistance 

programs. 

 

 Number of reports from the USDA Food 

and Nutrient Database. 

ARS 4 >5 4 to 5 ≤3 

Rationale for Met Range: 

Data sets determined as the most valuable information from the survey. 

Objective 4.3: Improve Food Program Management and Customer Service 

4.3.1: Increase Food Stamp payment accuracy 

Food stamp payment accuracy data drawn from the Quality Control (QC) system are used annually to support 

performance incentives to promote payment accuracy. They are based upon statistically valid methodology. 

The QC process uses a systematic random sampling of Food Stamp Program (FSP) participants. The results of 

these activities are used to determine individual States’ combined payment error rate. This rate is composed of 

over-issuances and under-issuances of FSP benefits. A regression formula is applied to the results of the 

reviews to calculate official error rates. 

State agencies select cases monthly that are reviewed to determine the accuracy of the eligibility and benefitlevel determination. They include a client interview and verification of all elements of eligibility, and the basis 

of issuance of food stamp benefits. Federal reviewers validate a sample of the State’s reviews by conducting a 
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second review. State agencies can verify and validate data through an informal review process. This process 

and current protections designed to ensure the data’s accuracy are based on an agreement between the States 

and Federal reviewers. The process has proven to be a sound method of calculating reliable data. 

Completeness of Data—The most current data available for this measure are for FY 2003. 

Analysis of FY 2004 performance will be deferred until next year’s report. Once available, the data 

are complete and reliable. 

Reliability of Data—QC data are valid and accepted by State FSP agencies as a basis for 

performance-incentive payments and penalties. GAO and OIG also use it regularly. 

Quality of the Data—The data used to develop this measure, which are considered the most valid 

food nutrition intake information available, are used widely for multiple purposes, both within and 

outside USDA. The measure itself is frequently cited as an important, high-quality indicator of 

program performance. 

Exhibit 87: Performance Threshold for 4.3.1 

Threshold Documentation Table 

Performance Thresholds 

Performance Goal/Measure Owner Target Exceeded Met Unmet 

4.3.1 Food Stamp Payment Accuracy (%) FNS 93.5 >93.8 93.2 to 

93.8 

<93.2 

Rationale for Met Range: 

The 95 percent confidence interval around the estimate of payment accuracy is ±.33 percent. 

STRATEGIC GOAL 5: PROTECT AND ENHANCE THE NATIONS’ NATURAL RESOURCE BASE AND 

ENVIRONMENT

Objective 5.1: Implement the President’s Healthy Forests Initiative and Other 

Actions to Improve Management of Public Lands 

Key Outcome: Reduce the Risk from Catastrophic Wildland Fire 

5.1.1 Number of acres of hazardous fuel treated that are in the wildland-urban interface 

and percentage identified as high priority through collaboration consistent with the 

10-year Comprehensive Strategy Implementation Plan 

5.1.2 Number of acres of hazardous fuel treated that are in Condition Classes 2 or 3 in Fire 

Regimes 1,2, or 3 outside the wildland-urban interface and the percentage identified 

as high priority through collaboration consistent with the 10-year Comprehensive 

Strategy Implementation Plan 

5.1.3 Number of acres treated outside the wildland-urban interface as a secondary benefit 

of other vegetation management that contribute to an improvement in Condition 

Class 

The data for hazardous fuels treatments are reliable, of good quality and certified by the respective line 

officer. USDA wildfire and other program managers collected, compiled and analyzed the data. 

Completeness of Data—Data are based on actual data. 
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Reliability of Data—All data for hazardous fuels were reported through the National Fire Plan 

Operations and Reporting System. This system was co-developed by USDA and U.S. Department of 

Interior land-management agencies. Validation and oversight are accomplished through monthly 

conference calls between USDA and regional foresters. 

Quality of Data—Data quality has been assessed at greater than 90 percent for project data in all 

regions. The quality of these data is monitored continuously and being improved with focused 

training and policy direction on reporting requirements. 

Exhibit 88: Performance Threshold for 5.1.1, 5.1.2 and 5.1.3 

Threshold Documentation Table 

Performance Thresholds 

Performance Goal/Measure Owner Target Exceeded Met Unmet 

5.1.1 Number of acres of hazardous fuel 

treated that are in the wildland-urban 

interface and percentage identified as 

high priority through collaboration 

consistent with the 10-year 

Comprehensive Strategy 

Implementation Plan (thousand acres) 

NRE/FS 1,250 >1,300 1,225 to 

1,275 

<1,250 

Rationale for Met Range 

Annual targets for this measure, based on history, have seen a consistent variability of 100,000 acres. 

5.1.2 Number of acres of hazardous fuel 

treated that are in Condition Classes 2 

or 3 in Fire Regimes 1,2, or 3 outside 

the wildland-urban interface and the 

percentage identified as high priority 

through collaboration consistent with 

the 10-year Comprehensive Strategy 

Implementation Plan 

NRE/FS 259 >285 233 

to 

285 

<233 

5.1.3 Number of acres treated outside the 

wildland-urban interface as a 

secondary benefit of other vegetation 

management that contribute to an 

improvement in Condition Class 

NRE/FS 927 >1,020 834 

to 

1,020 

<834 

Rationale for Met Range 

This is a new performance measure for FY 2004. There is no historical information related to the target to establish 

thresholds. Based on the historical variability within the entire hazardous fuel program, plus or minus 10 percent of target 

is reasonable. 

OBJECTIVE 5.2: IMPROVE MANAGEMENT OF PRIVATE LANDS

Key Outcome: Maintain the Productive Capacity of the Resource Base and Quality of the 

Environment 

5.2.1 Conservation plans written for cropland and grazing lands (Mil acres) 

5.2.2 Cropland and grazing lands with conservation applied to protect the resource base 

and environment (Mil acres) 

5.2.3 Reduction in the acreage of cropland soils damaged by erosion (Mil acres) 

5.2.4 Number of comprehensive nutrient management plans applied (Mil acres) 
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5.2.5 Increase Conservation Reserve Program (CRP acres of riparian and grass buffers) 

(Mil acres) 

The chief sources of data for these performance measures are the Customer Service Toolkit, USDA’s primary 

conservation planning tool, and the Performance Results System (PRS). 

Completeness of Data—Numerous data quality mechanisms are in place within PRS to ensure 

the completeness of the performance information. This web-based application includes such 

integrated quality controls as data type, required fields defined pull-down menus and choice lists. 

Additionally, the system recognizes records that do not include data identified as critical and requires 

the user to complete the required data fields before the record can be uploaded to the national 

database. 

Reliability of Data—For FY 2004, more than 80 percent of the data reported for this performance 

measure was uploaded from the Customer Service Toolkit. All natural resource information in 

Toolkit is drawn from USDA databases. All data on conservation practices are developed in 

consultation with the client. This process ensures that the data accurately reflect the client’s 

operation, goals and status of the conservation plan. Data are date-stamped, geo-referenced and 

linked to an employee ID, enabling detailed quality-assurance reviews. Periodic reviews are 

conducted to assess the accuracy of reported data. Data entered directly through PRS rather than 

Toolkit also are linked to a specific land unit, enabling on-site reviews to determine the accuracy of 

data. Because this is the first year of implementation of the new system, not all quality checks that 

will be part of the fully implemented system were in place for FY 2004. 

Quality of Data—Overall quality of the performance data is good. The data are based on 

conservation plans, systems and practices planned and applied to land. The information is entered by 

field staff located onsite where the conservation is occurring. The staffs entering the data are trained 

and skilled in conservation planning and application suited to the local resource conditions. 

Within PRS, the conservation program responsible for each conservation practice is reported. 

Because these performance measures refer to conservation plans that include multiple measures, the 

linkage to specific programs is more complex. For FY 2004, methods were under development to 

estimate the contribution of each conservation program to planning and application. Overall quality 

of data is good. 

Exhibit 89: Performance Threshold for 5.2.1, 5.2.2, 5.2.3, 5.2.4 and 5.2.5 

Threshold Documentation Table 

Performance Thresholds 

Performance Goal Owner Target Exceeded Met Unmet 

5.2.1 Conservation plans written for cropland and 

grazing lands (Mil acres) 

NRCS 31.7 >33 30.1 to 33 < 30 

Rationale for Met Range: 

Variation of plus or minus 5 percent is considered reasonable at the national level. The range of variation is much greater 

at the state and local levels.

5.2.2 Cropland and grazing lands with 

conservation applied to protect the 

resource base and environment (Mil acres) 

NRCS 8.5 >8.9 8.1 to 8.9 < 8 
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Threshold Documentation Table 

Performance Thresholds 

Performance Goal Owner Target Exceeded Met Unmet 

Rationale for Met Range: 

Variation of plus or minus 5 percent is considered reasonable at the national level. The range of variation is much greater 

at the state and local levels. 

5.2.3 Reduction in the acreage of cropland soils 

damaged by erosion (Mil acres) 

NRCS 3 > 3.15 2.85 to 

3.15 

< 2.85 

Rationale for Met Range: 

Management determination based on previous year results.

5.2.4 Number of comprehensive nutrient 

management plans applied (Mil acres) 

NRCS 1,500 > 1,650 1,350 to 

1,650 

< 1,350 

Rationale for Met Range: 

Management determination based on previous year results.

5.2.5 Increase Conservation Reserve Program 

(CRP acres of riparian and grass buffers) 

(Mil acres) 

FFAS/FSA 1.75 >1.80 1.70 to 

1.80 

<1.70 

Rationale for Met Range: 

Management determination based on previous year results.

Key Outcome: Ensure Diverse Wildlife Habitats 

5.2.6 Agricultural wetlands created or restored through the Wetlands Reserve Program 

(Mil acres) 

Data for acreage enrolled in WRP are reported through a national database. 

Completeness of Data—Data are complete for all transactions related to WRP. 

Reliability of Data—Data are reported by USDA field and State office personnel. The national 

program manager reviews the data for accuracy. 

Quality of Data—Data are considered of good quality for making management decisions. 

Exhibit 90: Performance Threshold for 5.2.6 

Threshold Documentation Table 

Performance Thresholds 

Performance Goal/Measure Owner Target Exceeded Met Unmet 

5.2.6 Agricultural wetlands created or 

restored through the WRP (Mil acres) 

NRCS 1.7 *N/A 1.6 to 1.7 <1.6 

Rationale for Met Range: 

*Target cannot be exceeded because Congress sets it. 

5.2.7 Increase CRP restored wetlands acres (Mil acres) 

The data source for this measure is Farm Service Agency (FSA) national CRP contract and offer data files. 
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158 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Completeness of Data—Data is based on estimated results through September 30, 2005. The 

measure reports national acres under contract with the following types of conservation buffers: filter 

strips, riparian buffers, and wildlife habitat buffers on marginal pasture land.

Reliability of Data—FSA maintains the national CRP contract and offer data files at its Kansas 

City Computer Center. Active contract data are uploaded from county office files each week. FSA 

monitor’s the data on a monthly basis to evaluate progress. 

Quality of Data—FSA considers the overall quality of the performance data to be good. The data is 

used for making management decisions. 

Threshold Documentation Table 

Performance Thresholds 

Performance Goal/Measure Owner Target Exceeded Met Unmet 

5.2.7 Increase CRP restored wetlands acres 

(Mil acres) 

FFAS/FSA 1.99 >2.04 1.94 to 

2.04 

<1.94 

Rationale for Met Range: 

Management determination based on previous year results.
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F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 159 

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. 

USDA has assessed 56 programs for fiscal years 2004 through 2006. In February 2004, when the Fiscal year 

2005 Budget was published, OMB listed 31 USDA programs that were PARTed. These were listed in the

2004 Performance and Accountability Report. The PART summaries below are cumulative, including the 

initial 31 PARTed programs and programs PARTed in fiscal year 2005. This includes programs that were 

reassessed because the programs’ ratings were likely to change. The programs are summarized below by goal 

and Objective, in alphabetical order. Further detail on each of the programs can be found at 

http://www.whitehouse.gov/omb/budget/fy2006/part.html. 

Strategic Goal 1 

Strategic Goal 1 Enhance Economic Opportunities for Agriculture Producers 

Program Name Enhance Economic Opportunities for Agriculture Producers 

Ratings • FY 2006 : Moderately Effective 

Lead Agency • Agricultural Research Service 

Major Findings/ 

Recommendations 

• Ensure that funding is targeted to highest priority initiatives and projects, complete 

the development of the annual measures, and work with the Department of Energy 

to develop similar measures related to the overall goal of lowering the cost of 

producing biofuels. 

Actions Taken/Planned • Submitted agency estimates to OBPA, resubmitted the document on revised annual 

measures based on OMB’s responses on the Goal 3 PART Analysis and the 

discussions, and continue to meet with DOE to resolve remaining issues. 

Objective 1.1 

Strategic Objective 1.1 Expand International Market Opportunities 

Program Name CCC Export Credit Guarantees 

Ratings • FY 2006 : Moderately Effective 

Lead Agency • Foreign Agricultural Service 

Major Findings/ 

Recommendations 

• Programs are generally well managed and have demonstrated efficiencies and cost 

effectiveness in program administration. However, there are weaknesses in strategic 

planning and no independent evaluations of the programs are conducted on a 

regular basis. 

Actions Taken/Planned • FAS has taken measures to improve claims recoveries under the programs. Efforts 

continue to develop meaningful targets for efficiency measures and to establish an 

independent evaluation process. 
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Strategic Objective 1.1 Expand International Market Opportunities 

Program Name Commodity Grading and Certification Programs 

Ratings • FY 2006 : Adequate 

Lead Agency • Agricultural Marketing Service 

Major Findings/ 

Recommendations 

• Adjust the fee structure to recover the costs associated with reviewing, modifying 

and developing standards beginning in FY 2006. This change is the result of the 

recognition that the grade standards are integral to the agency's fee-for-service 

grading program. Develop improved annual and long-term performance measures. 

Develop improved baselines and targets that demonstrate progress towards 

achieving the programs stated performance goals. 

Actions Taken/Planned • Completed. Fees proposed. 

Strategic Goal 1 Enhance Economic Opportunities for Agriculture Producers 

Program Name Enhance Economic Opportunities for Agriculture Producers 

Ratings • FY 2006 : Moderately Effective 

Lead Agency • Cooperative State Research, Education, and Extension Service 

Major Findings/ 

Recommendations 

• None 

Actions Taken/Planned • NA 

Strategic Objective 1.1 Expand International Market Opportunities 

Program Name Perishable Agricultural Commodities Act 

Ratings • FY 2006 : Moderately Effective

Lead Agency • Agricultural Marketing Service 

Major Findings/ 

Recommendations 

• Identify and correct strategic planning deficiencies. Conduct an independent audit of 

program operations in 2004. Obtain a more independent review of the program that 

focuses on both annual and long-term performance goals and how progress in 

working towards these goals is measured. Reevaluate the cost of services provided 

by the program (in advance of the appropriated dollars being depleted) and 

determine how best to adjust future fees. Develop an outcome based long-term 

performance measure. 

Actions Taken/Planned • PACA performance measurement has been reviewed and incorporated into program 

strategic planning and operations. Program conducts regular periodic assessments. 

Fee increase expected in FY 2008 or later. Program identified and began 

implementing efficiency improvements to reduce program costs. The program will 

develop an additional outcome-based method of measuring its performance once 

efficiency improvements have been implemented. 

Strategic Objective 1.1 Expand International Market Opportunities 

Program Name Pesticide Data Program/Microbiological Data Program 

Ratings • FY 2005 : Adequate 

Lead Agency • Agricultural Marketing Service 

Major Findings/ 

Recommendations 

• Study the feasibility of charging a fee to industry beneficiaries to cover partial/full 

cost of the pesticide data program. Develop improved annual and long-term 

performance measures. Conduct an independent audit of program operations in 

2004. Development of additional, outcome-based performance measures. 

Actions Taken/Planned • Completed. 
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Objective 1.2 

Strategic Objective 1.2 Support International Economic Development and Trade 

Capacity Building 

Program Name USDA Foreign Food Aid Programs 

Ratings • FY 2006 : Moderately Effective 

Lead Agency • Foreign Agricultural Service 

Major Findings/ 

Recommendations 

• The programs have strategic planning deficiencies, including the need for a 

performance measure that links to government-wide long-term food aid performance 

goals. 

Actions Taken/Planned • FAS has worked with ERS and AID to develop a new food security annual 

performance measure and baselines. FAS has contracted for a review of food aid 

information and reporting systems that will identify areas for needed improvements in 

IT systems. 

Objective 1.3 

Strategic Objective 1.3 Expand Alternative Markets for Agricultural Products 

Program Name Bioenergy 

Ratings • FY 2005 : Adequate 

Lead Agency • USDA Farm Service Agency 

Major Findings/ 

Recommendations 

• Ensure a sufficient level of support to growing biodiesel industry. 

Actions Taken/Planned • FSA cannot address this recommendation due to the following: 1. Ethanol and 

biodiesel industries are experiencing record growth, while at the same time Program 

funding was cut to $100 million for Fiscal Year 2005. Combined, these factors are 

resulting in program payments being significantly reduced, approximately 60 percent 

for the first quarter, to hold them to available funding. 2. Program Agreements for the 

life of the program were executed with participants before this recommendation was 

made. The Agreement provisions limit our ability to address this recommendation. 

Objective 1.4 

Strategic Objective 1.4 Provide Risk Management and Financial Tools to Farmers and Ranchers 

Program Name Agriculture Credit Insurance Fund - Direct 

Ratings • FY 2006 : Adequate 

Lead Agency • USDA Farm Service Agency 

Major Findings/ 

Recommendations 

• Implement FSA's new Farm Business Plan in the fall of 2004 which will improve the 

agency's ability to collect detailed performance information. 

Actions Taken/Planned • FSA implemented the web based Farm Business Plan (FBP) management 

information system in FY 2004. FBP will enable FSA to better manage its loan 

portfolio, collect more detailed performance information, and provides the Agency 

with enhanced analytical tools to perform more in-depth portfolio analysis. 
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Strategic Objective 1.4 Provide Risk Management and Financial Tools to Farmers and Ranchers 

Program Name Agriculture Credit Insurance Fund 0151—Guaranteed 

Ratings • FY 2005 : Moderately Effective 

Lead Agency • USDA Farm Service Agency 

Major Findings/ 

Recommendations 

• Conduct a performance-focused review that will include, but is not limited to: analysis 

of program participants; length of time borrowers remain in program; number of 

borrowers who "graduate" and return to the program; effectiveness of targeted 

assistance; and the potential to reduce subsidy rates. 

Actions Taken/Planned • FSA has set a target date of 3/31/06 to publish a Request for Proposals in the 

Federal Register for an independent review of the guaranteed loan programs. 

Strategic Objective 1.4 Provide Risk Management and Financial Tools to Farmers and Ranchers 

Program Name CCC Marketing Loan Payments 

Ratings • FY 2005 : Effective 

Lead Agency • USDA Farm Service Agency 

Major Findings/ 

Recommendations 

• Discrepancies between county offices in the delivery of services to producers should 

be addressed. 

Actions Taken/Planned • Program policy handbooks and notices clarify CCC Marketing Assistance Loan 

Repayment Policies. FSA addresses problematic issues in delivery of services on an 

on-going basis and as problems arise. This is an ongoing process. 

Strategic Objective 1.4 Provide Risk Management and Financial Tools to Farmers and Ranchers 

Program Name Counter Cyclical Payments 

Ratings • FY 2006 : Adequate 

Lead Agency • USDA Farm Service Agency 

Major Findings/ 

Recommendations 

• Develop an independent evaluation process to be conducted once every three 

years. 

Actions Taken/Planned • The current legislation ends in FY 2007. The Office of Inspector General is currently 

conducting a review of the Direct and Counter-cyclical Program. This review is 

scheduled to be completed by October 2005. 

Strategic Objective 1.4 Provide Risk Management and Financial Tools to Farmers and Ranchers 

Program Name Crop Insurance 

Ratings • FY 2004 : Results Not Demonstrated (Adequate) 

Lead Agency • USDA Risk Management Agency 

Major Findings/ 

Recommendations 

• Identify improvements in the program that will get it closer to becoming a complete 

risk management tool for the agriculture sector, such as developing a successful 

livestock crop insurance plan. 

Actions Taken/Planned • Agency reviewing existing product portfolio and continuing existing pilot projects. 

Sales of the Livestock Risk Protection (LRP) pilot for Fed and Feeder Cattle and 

Livestock Gross Margin (LGM) pilots were suspended in 2004 due to potential 

program vulnerabilities. Sales resumed 9/30/04 after program modifications were 

made. 
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Strategic Objective 1.4 Provide Risk Management and Financial Tools to Farmers and Ranchers 

Program Name Dairy MILC Program 

Ratings • FY 2006 : Results Not Demonstrated 

Lead Agency • USDA Farm Service Agency 

Major Findings/ 

Recommendations 

• Conduct an audit evaluation that includes sampling the field application of dairy 

operation with samples from all states and counties to be completed in 2005. 

Actions Taken/Planned • The Office of the Inspector General completed an audit of MILC on August 13, 2004, 

and documented inconsistency in field determinations of "dairy operations." FSA 

developed proposed language, which would permit the Agency to establish a clear, 

consistent, Nationwide definition of a "dairy operation." The language is currently 

undergoing internal review. In addition, proposed legislation to add a payment 

limitation of $65,000, was included in budget (Budget Year 2006) submitted to 

Congress on February 7, 2005. The proposed limitation should eliminate some of the 

problems caused by the inconsistencies; i.e., the problem of large payments to 

Western producers who collect MILC payments from more than one operation. 

Strategic Objective 1.4 Provide Risk Management and Financial Tools to Farmers and Ranchers 

Program Name Dairy Price Support Program 

Ratings • FY 2006 : Results Not Demonstrated 

Lead Agency • USDA Farm Service Agency 

Major Findings/ 

Recommendations 

• Identify program improvements and alternatives that could more directly address 

current problems facing dairy producers. 

Actions Taken/Planned • ERS is currently evaluating the impact of dairy programs on dairy farmers around the 

world. FSA plans to meet with ERS concerning findings and any implications for the 

Agency's programs. Target is 12/30/2005. 

Strategic Objective 1.4 Provide Risk Management and Financial Tools to Farmers and Ranchers 

Program Name Direct Crop Payments 

Ratings • FY 2004 : Adequate 

Lead Agency • USDA Farm Service Agency 

Major Findings/ 

Recommendations 

• The limitations of the direct payment program will have to be dealt with legislatively. 

The Administration will reduce trade barriers through trade negotiations, to create 

new markets for U.S. agricultural exports, so that farmers will be less reliant on 

government income support. 

Actions Taken/Planned • The Secretary of Agriculture is conducting listening sessions to obtain input on the 

provisions of the next Farm Bill. The input from the listening sessions will be 

analyzed by the Agency, to identify any changes that can be proposed to address 

the limitations of this program. 

Strategic Goal 2 

Objective 2.1 

Strategic Objective 2.1 Provide Risk Management and Financial Tools to Farmers and Ranchers 

Program Name Business and Industry Guaranteed Loans 

Ratings • FY 2005 : Adequate 

Lead Agency • Rural Business Cooperative Service 

Major Findings/ 

Recommendations 

• Tie program performance to budget requests. 

Actions Taken/Planned • Budget request have been linked to existing performance measures, and the agency 

contracted for the development of a new model for developing more comprehensive 

measures. 
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Strategic Objective 2.1 Expand Economic Opportunities through USDA Financing of Businesses 

Program Name Intermediary Relending Program 

Ratings • FY 2006 : Adequate 

Lead Agency • Rural Business Cooperative Service 

Major Findings/ 

Recommendations 

• Establish more ambitious targets and finalize new methodology for measuring job 

creation. 

Actions Taken/Planned • Targets have been revised and the new methodology for measuring job creation has 

been implemented. 

Strategic Objective 2.1 Expand Economic Opportunities through USDA Financing of Businesses 

Program Name Rural Business Enterprise Grants 

Ratings • FY 2006 : Results Not Demonstrated 

Lead Agency • Rural Business Cooperative Service 

Major Findings/ 

Recommendations 

• Establish new performance measures. 

Actions Taken/Planned • The agency has contacted for the development of a new model for developing more 

comprehensive measures. 

Strategic Objective 2.1 Expand Economic Opportunities through USDA Financing of Businesses 

Program Name Value Added Producer Grants 

Ratings • FY 2006 : Results Not Demonstrated 

Lead Agency • Rural Business Cooperative Service 

Major Findings/ 

Recommendations 

• Establish new performance measures. 

Actions Taken/Planned • The agency revised the agreements it uses to make grants to provide for the 

collection of performance measure data. 

Objective 2.2 

Strategic Objective 2.2 Improve the Quality of Life in Rural America 

Program Name Community Facilities 

Ratings • FY 2005 : Results Not Demonstrated 

Lead Agency • Rural Housing Service 

Major Findings/ 

Recommendations 

• Conduct a program evaluation to assess the needs served by the program. 

Actions Taken/Planned • Because the program serves a diversity of needs, the agency plans to focus on the 

two highest program priorities – health care and public safety – and develop goals 

and performance measures specific to these priorities. 

Strategic Objective 2.2 Improve the Quality of Life in Rural America 

Program Name Distance Learning and Medical Link 

Ratings • FY 2006 : Adequate 

Lead Agency • Rural Utilities Service 

Major Findings/ 

Recommendations 

• Improve performance measures through independent reviews and additional data 

collection and periodic review of measurement models. 

Actions Taken/Planned • Milestones for implementing recommendations were established 
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Strategic Objective 2.2 Improve the Quality of Life in Rural America 

Program Name Multifamily Housing Direct Loans and Rental Assistance 

Ratings • FY 2004 : Results Not Demonstrated (Has been upgraded) 

Lead Agency • Rural Housing Service 

Major Findings/ 

Recommendations 

• Adequate long-term and annual goals and performance measures need to be 

developed. 

Actions Taken/Planned • New and improved goals and measures have been developed in concurrence with 

the Office of Management and Budget. 

Strategic Objective 2.2 Improve The Quality of Life in Rural America 

Program Name Mutual Self-Help Housing Grants 

Ratings • FY 2006 : Moderately Effective 

Lead Agency • Rural Housing Service 

Major Findings/ 

Recommendations 

• Establish more ambitious targets. 

Actions Taken/Planned • The agency revised its annual performance goals and measures to reflect more 

ambitious targets. 

Strategic Objective 2.2 Improve the Quality of Life in Rural America 

Program Name Rural Electric Utility Loans and Guarantees 

Ratings • FY 2004 : Adequate 

Lead Agency • Rural Utilities Service 

Major Findings/ 

Recommendations 

• Target programs to areas with high poverty and require borrowers to recertify that 

they serve rural areas, 

Actions Taken/Planned • Milestones for implementing the recommendations were established. 

Strategic Objective 2.2 Improve the Quality of Life in Rural America 

Program Name Rural Water and Wastewater Grants and Loans 

Ratings • FY 2004 :Results Not Demonstrated (Effective) 

Lead Agency • Rural Utilities Service 

Major Findings/ 

Recommendations 

• Create long-term goals that measure outcome. 

Actions Taken/Planned • The agency progressed toward establishing new and improved goals and measures, 

but did not fully complete this task. 

Strategic Objective 2.2 Improve the Quality of Life in Rural America 

Program Name Sec. 502 Single Family Housing (Direct) 

Ratings • FY 2006 : Moderately Effective 

Lead Agency • Rural Housing Service 

Major Findings/ 

Recommendations 

• Establish more ambitious performance targets. 

Actions Taken/Planned • The agency revised its annual performance goals and measures to reflect more 

ambitious targets. 
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Strategic Objective 2.2 Improve the Quality of Life in Rural America 

Program Name Sec. 502 Single Family Housing (Guaranteed) 

Ratings • FY 2006 : Moderately Effective 

Lead Agency • Rural Housing Service 

Major Findings/ 

Recommendations 

• Establish more ambitious performance targets. 

Actions Taken/Planned • The agency revised its annual performance goals and measures to reflect more 

ambitious targets. 

Strategic Objective 2.2 Improve the Quality of Life in Rural America 

Program Name Telecommunications 

Ratings • FY 2005 : Adequate 

Lead Agency • Rural Utilities Service 

Major Findings/ 

Recommendations 

• Determine whether “first come, first served” processing of applications is adequate to 

support highest priority needs and conduct periodic reviews on how well program is 

accomplishing long-term needs. 

Actions Taken/Planned • Milestones for implementing recommendations were established. 

Strategic Goal 3 

Strategic Goal 3 Protection and Safety of Agriculture Food Supply/Food Safety Research 

Program Name Enhance Economic Opportunities for Agriculture Producers 

Ratings • FY 2005 : Moderately Effective 

Lead Agency • Agricultural Research Service 

Major Findings/ 

Recommendations 

• None 

Actions Taken/Planned • NA 

Objective 3.1 

Strategic Objective 3.1 Reduce the Incidence of Foodborne Illnesses Related to Meat, 

Poultry and Egg Products 

Program Name Food Safety Inspection Service 

Ratings • FY 2004 : Adequate 

Lead Agency • Food Safety Inspection Service 

Major Findings/ 

Recommendations 

• FSIS will evaluate the impact of implementing a risk-based inspection system 

beyond the current pilot program. 

Actions Taken/Planned • FSIS submitted to OMB a qualitative analysis of the economic implications of 

implementing the poultry slaughter component of a risk-based food safety and food 

security verification system. The Agency submits a progress report to OMB on a 

quarterly basis on steps being taken to move toward a more risk-based inspection 

system. 
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Objective 3.2 

Strategic Objective 3.2 Reduce the Number/Severity of Agricultural Pest and Disease Outbreaks 

Program Name Animal Welfare 

Ratings • FY 2004: Results Not Demonstrated. FY 2005: Adequate 

Lead Agency • APHIS 

Major Findings/ 

Recommendations 

• Include at least one additional annual measure, to more closely link annual 

performance and long-term performance. 

Actions Taken/Planned • Complete. 

Strategic Objective 3.2 Reduce the Number/Severity of Agricultural Pest and Disease Outbreaks 

Program Name Monitoring and Surveillance Programs 

Ratings • FY 2005: Effective 

Lead Agency • APHIS 

Major Findings/ 

Recommendations 

• Add an additional efficiency measure, such as the average cost of an investigation. 

Actions Taken/Planned • Complete. 

Strategic Objective 3.2 Reduce the Number/Severity of Agricultural Pest and Disease Outbreaks 

Program Name Pest and Disease Exclusion Programs 

Ratings • FY 2006: Effective 

Lead Agency • APHIS 

Major Findings/ 

Recommendations 

• Continue to establish baselines for performance measures for pest and disease 

exclusions. 

Actions Taken/Planned • APHIS is continuing to do so. 

Strategic Goal 4 

Strategic Goal 4.0 Improve the Nation’s Nutrition and Health 

Program Name Commodity Supplemental Food Program (CSFP) 

Ratings • FY 2006: Results Not Demonstrated 

Lead Agency • Food and Nutrition Service 

Major Findings/ 

Recommendations 

• CSFP lacks performance measures, the food package could better address the 

nutritional needs of elderly persons, and oversight practices are insufficient to 

manage and improve program performance. 

Actions Taken/Planned • Measures are under development, the food package has been revised, process of 

developing a new CSFP-specific Management Evaluation Module which contains 

guidance for conducting management evaluations. 
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Strategic Goal 4.0 Improve the Nation’s Nutrition and Health 

Program Name Food Stamp Program (FSP) 

Ratings • FY 2005: Moderately Effective 

Lead Agency • Food and Nutrition Service 

Major Findings/ 

Recommendations 

• Overall the program is well run, with recommendations to develop a plan for the use 

of Federal and state program funds to improve nutrition among program participants, 

and demonstrate the impact of program participation on hunger and dietary status. 

Actions Taken/Planned • The nutrition education plan was completed and studies are underway to provide 

more current data demonstrating that program participation reduces the proportion of 

persons who are hungry and improves dietary status. 

Strategic Goal 4.0 Improve the Nation’s Nutrition and Health 

Program Name National School Lunch Program (NSLP) 

Ratings • FY 2005: Results Not Demonstrated 

Lead Agency • Food and Nutrition Service 

Major Findings/ 

Recommendations 

• NSLP needs to develop performance measures, needs performance-based 

reimbursement providing incentives for meals meeting the dietary guidelines, and 

needs improved accuracy of income information in household applications. 

Actions Taken/Planned • NSLP launched the HealthierUS Schools Challenge showcasing schools that 

promote healthy behaviors, all enacted provisions to improve certification accuracy 

while preserving program access for eligible people are being implemented 

(mandatory direct certification, household applications, annual applications, focused 

verification and verification follow-up), and projects have been initiated to estimate 

erroneous payments and assess the nutrient content of meals. 

Strategic Goal 4.0 Improve the Nation’s Nutrition and Health 

Program Name School Breakfast Program (SBP) 

Ratings • FY 2006: Moderately Effective 

Lead Agency • Food and Nutrition Service 

Major Findings/ 

Recommendations 

• SBP is well targeted to low-income children, participation is positively associated 

with improved nutrient intakes and the program has made progress improving the 

nutritional content of meals. SBP needs to continue work on improving the nutritional 

content of meals, and implement an improved certification process for determining 

free meal eligibility. 

Actions Taken/Planned • SBP continues work to improve nutritional content of meals and rules are under 

development to improve certification (eliminating cost accounting for severe need 

schools, district-wide Provision 2 and 3 option). Also SBP is working with 

cooperators on innovative delivery for low-income children and working on allocation 

to States of $4 million for review of error-prone School Food Authorities and related 

training. 
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Strategic Goal 5 

Objective 5.1 

Strategic Objective 5.1 Implement the President’s Healthy Forest Initiative and Other Actions to Improve 

Management of Public Lands 

Program Name Capital Improvement and Maintenance 

Ratings • FY 2004 : Adequate 

Lead Agency • Forest Service 

Major Findings/ 

Recommendations 

• Continue to improve the maintenance prioritization process and increase incentives 

aimed at decommissioning obsolete and underutilized infrastructure. 

Actions Taken/Planned • In April 2005, the agency submitted a legislative proposal to Congress for adoption 

of permanent conveyance authority and use of receipts for capital improvement and 

maintenance backlog needs. It also included authority to establish a working capital 

fund (WCF) for facility maintenance. The agency believes that, through assessment 

to other programs, agency managers will have added incentive to optimize space 

and eliminate poorly utilized facilities. Congress partially adopted the proposal by 

authorizing conveyance authority for projects initiated by FY 2008 (not permanent) 

and by authorizing a facility maintenance collection account in FY 2006 (in lieu of 

WCF). 

Strategic Objective 5.1 Implement the President’s Healthy Forest Initiative and Other Actions to Improve 

Management of Public Lands 

Program Name Forest Legacy 

Ratings • FY 2005 : Moderately Effective 

Lead Agency • Forest Service 

Major Findings/ 

Recommendations 

• To continue improvements to performance, the program will target the maintenance 

of working forests and use of appraisals, signed options, and monitoring protocols in 

making project selections. 

Actions Taken/Planned • The Forest Service is developing a field handbook to assist new FLP managers in 

initiating and maintaining FLP in their States. This document is intended to provide 

clear reference and guidance on aspects of program management. The handbook 

will include practical guidance on monitoring protocols and baseline documentation 

development as well as information on appraisals and standard option contracts and 

their execution. 

Strategic Objective 5.1 Implement the President’s Healthy Forest Initiative and Other Actions to Improve 

Management of Public Lands 

Program Name Invasive Species 

Ratings • FY 2004 : Results Not Demonstrated 

Lead Agency • Forest Service 

Major Findings/ 

Recommendations 

• Refine outcome-based performance measures for selected species; develop 

appropriate efficiency measures; and articulate the scientific or policy basis to 

demonstrate how those selected species measured represent a valid method to 

measure the total invasive species population and their impacts. 

Actions Taken/Planned • Data is being collected on the number of acres prioritized for treatment using various 

scientific assessments, protocols, and criteria to address a potential or existing 

invasive species infestation. Monitoring of the priority acres treated will provide an 

assessment of the number (and percentage) of the priority treated acres that were 

successfully protected (according to the project plan - where the target species was 

actually prevented, controlled, or eradicated). 
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170 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Strategic Objective 5.1 Implement the President’s Healthy Forest Initiative and Other Actions to Improve 

Management of Public Lands 

Program Name Land Acquisition 

Ratings • FY 2005 : Results Not Demonstrated 

Lead Agency • Forest Service 

Major Findings/ 

Recommendations 

• Establish processes that provide analyses of integrated spatial data sets on land 

management units, eco-regions, conservation lands, land cover, and species to 

identify gaps or needs that in turn highlight priority areas in need of habitat, 

ecosystem and biodiversity protection. These analyses will provide information on 

public benefits provided by acquisitions of private lands for Federal ownership and 

identify what lands the Federal agency could optimally target for land acquisition. 

Actions Taken/Planned • The agency has jointly published its DOI/FS National Land Acquisition Plan that 

provides a planning framework for land acquisition decisions in considering the 

priority and future needs of the program. 

Strategic Objective 5.1 Implement the President’s Healthy Forest Initiative and Other Actions to Improve 

Management of Public Lands 

Program Name Wildland Fire Management 

Ratings • FY 2004 : Results Not Demonstrated 

Lead Agency • Forest Service 

Major Findings/ 

Recommendations 

• Develop a new fire preparedness model that focuses on efficient allocation of 

available resources. 

Actions Taken/Planned • The Initial Response preparedness model was deployed. Refinements are 

continuing with major refinements scheduled for completion Fall 2005. All Fire 

Planning Units are scheduled to complete a Phase I analysis by late winter 2006. 

Another phase of the Fire Program Analysis is being explored that goes beyond 

initial preparedness. This will analyze extended response, large fire, prevention, 

rehabilitation and fuels. The scope document is complete; charter development and 

architecture design are ongoing. It will be developed in two stages concurrently. 

Stage 1 will analyze and develop extended response, large fire, and prevention; it is 

scheduled for release June 2007. Stage 2 will analyze and develop rehabilitation and 

fuels requirements; it is scheduled for release June 2008. 

Objective 5.2 

Strategic Objective 5.2 Improve Management of Private Lands 

Program Name Conservation Technical Assistance 

Ratings • FY 2005 : Results Not Demonstrated 

Lead Agency • NRCS 

Major Findings/ 

Recommendations 

• Develop long-term performance measures that are outcome-based. Improve annual 

measures to better reflect CTA activities. 

Actions Taken/Planned • Performance measures established and annual measures improved. 

Strategic Objective 5.2 Improve Management of Private Lands 

Program Name Farm and Ranch Lands Protection Program 

Ratings • FY 2004 : Results Not Demonstrated (Adequate) 

Lead Agency • NRCS 

Major Findings/ 

Recommendations 

• Design and implement an evaluation system that will provide outcome performance 

indicators. 

Actions Taken/Planned • Annual and long term performance measures developed. 
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Strategic Objective 5.2 Improve Management of Private Lands 

Program Name Emergency Watershed Protection 

Ratings • FY 2006 : Results Not Demonstrated 

Lead Agency • NRCS 

Major Findings/ 

Recommendations 

• Develop long-term, outcome-based performance measures that asses the program’s 

disaster recovery activities. Refine program’s efficiency measures and conduct an indepth program evaluation. 

Actions Taken/Planned • Final rule for EWP issued on 4/5/05 which will improve effectiveness of agency 

response to natural disasters. 

Strategic Objective 5.2 Improve Management of Private Lands 

Program Name Environmental Quality Incentives Program 

Ratings • FY 2006 : Moderately Effective 

Lead Agency • NRCS 

Major Findings/ 

Recommendations 

• Develop baselines and performance targets for the new long-term performance 

measures and improve/refine efficiency measures. 

Actions Taken/Planned • Activities were redefined in reporting system in order to improve the accuracy of cost 

information. 

Strategic Objective 5.2 Improve Management of Private Lands 

Program Name National Resources Inventory 

Ratings • FY 2005 : Results Not Demonstrated 

Lead Agency • NRCS 

Major Findings/ 

Recommendations 

• Develop long-term performance measures and set ambitious targets for the 

measures. Develop efficiency measures. 

Actions Taken/Planned • Long-term performance and efficiency measures developed based on NRI Logic 

Model. 

Strategic Objective 5.2 Improve Management of Private Lands 

Program Name Resource Conservation and Development 

Ratings • FY 2006 : Results Not Demonstrated 

Lead Agency • NRCS 

Major Findings/ 

Recommendations 

• Develop and implement improved outcome-based long term performance measures. 

Implement the recommendations developed by the NRCS oversight and evaluation 

review of the RC&D program. 

Actions Taken/Planned • National RC&D Program Evaluation required by the 2002 Farm Bill has been 

completed and is pending OMB approval. 

Strategic Objective 5.2 Improve Management of Private Lands 

Program Name Plant Materials Center 

Ratings • FY 2005 : Results Not Demonstrated (Moderately Effective) 

Lead Agency • NRCS 

Major Findings/ 

Recommendations 

• Develop long-term performance measures and set ambitious targets for the 

measures. Develop efficiency measures 

Actions Taken/Planned • Long-term performance and efficiency measures completed. Re-PART completed on 

4/15/05. 
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172 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Strategic Objective 5.2 Improve Management of Private Lands 

Program Name Soil Surveys 

Ratings • FY 2005 : Moderately Effective 

Lead Agency • NRCS 

Major Findings/ 

Recommendations 

• Develop program efficiency measures and improve long-term performance reporting. 

Actions Taken/Planned • Efficiency measures developed and targets updated. 

Strategic Objective 5.2 Improve Management of Private Lands 

Program Name Snow Surveys 

Ratings • FY 2005 : Moderately Effective 

Lead Agency • NRCS 

Major Findings/ 

Recommendations 

• Develop program efficiency measures and improve long-term performance reporting. 

Actions Taken/Planned • Program efficiency measure completed and targets updated. 

Strategic Objective 5.2 Improve Management of Private Lands 

Program Name Watershed Programs 

Ratings • FY 2006 : Adequate 

Lead Agency • NRCS 

Major Findings/ 

Recommendations 

• Continue to refine the new annual performance measures and establish baselines 

for the new efficiency measures. 

Actions Taken/Planned • Refinement of annual performance measures completed. Use of Direct Charge for 

time worked results in more accurate information for reporting program efficiencies. 

Strategic Objective 5.2 Improve Management of Private Lands 

Program Name Wildlife Habitat Incentives Program 

Ratings • FY 2004 : Results Not Demonstrated 

Lead Agency • NRCS 

Major Findings/ 

Recommendations 

• Develop efficiency measures and outcome-based performance measures and 

targets. Also, develop baselines for annual and long term measures. 

Actions Taken/Planned • Baseline completed and measures have been identified. 

Strategic Goals 1, 2, 3 and 5 

Strategic Goals 1, 2, 3 

and 5 

1. Enhance Economic Opportunities for Agriculture Producers 

2. Support Increased Economic Opportunities and Improved Quality of Life in 

Rural America 

3. Enhance Protection and Safety of the Nation’s Agriculture and Food Supply 

5. Protect and Enhance the Nation’s Natural Resource Base and Environment 

Program Name National Agricultural Statistics Service – All Activities 

Ratings • FY 2006 : Moderately Effective 

Lead Agency • National Agricultural Statistics Service (NASS) 

Major Findings/ 

Recommendations 

• None 

Actions Taken/Planned • NA. 
ANNUAL PERFORMANCE REPORT

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F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 173 

PROGRAM EVALUATIONS

Perform. 

Measure Title Findings and Recommendations/Actions Availability 

1.1.1 GAO Report, March 

2000, GAO/NSIAD-00-76 

- International Trade: 

Strategy Needed to 

Better Monitor and 

Enforce Trade 

Agreements. 

Findings: GAO recommended that the 

Office of the U.S. Trade Representative 

(USTR) and the U.S. Departments of 

Commerce and Agriculture jointly develop a 

strategy to manage the U.S. Government’s 

growing trade agreement monitoring and 

enforcement workload better. 

Actions: GAO and FAS Deputy 

Administrator for International Trade Policy 

activities are working to implement the GAO 

report recommendations.

Report is available at 

http://www.gao.gov/new.items

/ns00076.pdf 

GAO Report, October 6, 

2004, GAO/05-53 - U.S. 

China Trade: 

Opportunities to Improve 

U.S. Government Efforts 

to Ensure China's 

Compliance with WTO 

Commitments 

Findings: GAO recommended that the four 

key agencies (USTR, State, Commerce and 

Agriculture) undertake a range of actions, 

including steps to improve timeliness and 

participation in WTO's annual review of 

China's compliance, developing unit-level 

plans and measures that reflect agency plans 

and measures, and training staff effectively. 

Actions: USDA forwarded its formal 

Statement of Action to GAO and Congress on 

November 29, 2004. USDA continues to work 

on implementing the recommendations. 

Report is available at 

www.gao.gov/cgibin/getrpt?GAO-05-53

GAO Report, January 25, 

2005, GAO-05-209R - 

U.S. China Trade - 

Summary of 2003 WTO 

Transitional Review 

Mechanism for China 

Findings: Related to GAO-05-53, this 

report is GAO's response to Congress' 

request for detailed information about the 

Transitional Review Mechanism process in 

2003. The response is designed to allow 

Congress to gauge the level of activity and 

efficacy of the U.S. and other WTO members' 

efforts better to utilize it. 

Actions: No action required. 

Report is available at 

www.gao.gov/docdblite/summ

ary.php?rptno=GAO-05-

290R&accno=A16256 

GAO Report, February 4, 

2005, GAO-05-295T - 

U.S. China Trade - 

Observations on 

Ensuring China's 

Compliance with WTO 

Commitments 

Findings: This report contains GAO's 

testimony before the U.S.-China Economic 

and Security Review Commission. GAO 

discussed the key findings, conclusions and 

recommendations from its recently issued 

work on China-WTO issues. It also updated 

the commission on a number of ongoing GAO 

reviews on China trade and economic issues. 

Actions: No action required. 

Report is available at 

www.gao.gov/docdblite/summ

ary.php?rptno=GAO-05-

295T&accno=A16859 

GAO Report, March 25, 

2005, GAO-05-272 - 

International Trade - U.S. 

Agencies Need Greater 

Focus to Support 

Mexico's Successful 

Transition to Liberalized 

Agricultural Trade under 

NAFTA 

Findings: GAO recommends that the U.S. 

Department of State, in collaboration with 

USDA and other relevant agencies to (1) 

develop an action plan under the Partnership 

for Prosperity Initiative laying out specific 

collaborative efforts on rural development that 

would support NAFTA’s implementation, and 

(2) use the initiative to expand collaborative 

efforts with the Mexican Government to 

facilitate credit availability in rural Mexico. 

Actions: The U.S. Department of State has 

the lead on resolution and, as such, was the 

only agency required to submit a Statement 

of Action. 

Report is available at 

www.gao.gov/cgibin/getrpt?GAO-05-272 
ANNUAL PERFORMANCE REPORT

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174 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Perform. 

Measure Title Findings and Recommendations/Actions Availability 

1.1.1 

(cont’d) 

GAO Report, March 18, 

2005, GAO-05-166 - 

Free Trade Area of the 

Americas - Missed 

Deadline Prompts Efforts 

to Restart Stalled 

Hemispheric Trade 

Negotiations 

Findings: The report is informational in 

nature. GAO was asked to analyze the 

progress made in Free Trade Area of the 

Americas (FTAA) negotiations since GAO's 

last report (April 2003), the factors that have 

been influencing its progress and future FTAA 

prospects. GAO found that three key factors 

have been impeding progress in the FTAA 

negotiations: (1) the U.S. and Brazil have 

made little progress in resolving their basic 

differences on key negotiation issues; (2) 

member Governments have shifted energy 

and engagement from the FTAA to bilateral 

and multilateral trade agreements; and (3) 

mechanisms intended to facilitate a U.S.-

Brazil compromise have failed. 

Actions: No action required 

Report is available at 

www.gao.gov/cgibin/getrpt?GAO-05-166 

GAO Report, May 31, 

2005, GAO-05-538 - 

World Trade 

Organization - Global 

Trade Talks back on 

Track, But Considerable 

Work Needed to Fulfill 

Ambitious Objectives 

Findings: This informational report was a 

multi-agency review involving USDA and 

other agencies. FAS was the only agency 

contacted or visited for this review. 

Actions: No action required. 

Report is available at 

www.gao.gov/cgibin/getrpt?GAO-05-538 

GAO Report, June 20, 

2005, GAO-05-537 - 

International Trade - 

Further Improvements 

Needed to Handle 

Growing Workload for 

Monitoring and Enforcing 

Trade Agreements 

Findings: GAO's report does include 

recommendations for the Secretary of 

Agriculture. Specifically, GAO recommends 

that USDA, USTR, Commerce and State: (1) 

develop a strategy for improving trade 

compliance training; and (2) develop a 

resource strategy for monitoring and 

enforcing trade agreements. 

Actions: USDA's formal Statement of 

Action is pending signature by the Secretary. 

Report is available at 

www.gao.gov/cgibin/getrpt?GAO-05-537 

OIG-01001-02-Hy: 

Agricultural Marketing 

Service’s National 

Organic Program 

Findings: AMS needs to improve 

management controls for administering the 

National Organic Program (NOP). OIG made 

10 separate recommendations for 

strengthening policy/procedures to improve 

management control. 

Actions: AMS has agreed to strengthen 

controls over the NOP and, accordingly, is 

developing/clarifying policies and procedures 

to address OIG’s concerns. 

Report is available at: 

http://www.oig.usda.gov 

OIG-01099-31-Hy: 

Purchase Specification 

Requirements for Ground 

Beef 

Findings: AMS has opportunities to 

improve management controls to ensure that 

ground beef is purchased from qualified 

suppliers and meets quality standards. 

Actions: AMS already had implemented 

many of the proposed corrective actions and 

is resolving the other outstanding issues with 

OIG. 

Report is available at: 

http://www.oig.usda.gov
ANNUAL PERFORMANCE REPORT

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F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 175 

Perform. 

Measure Title Findings and Recommendations/Actions Availability 

1.1.1 

(cont’d) 

OIG-01099-4-Te: 

Livestock Mandatory 

Price Reporting System – 

Application Controls 

Findings: AMS has opportunities to 

improve the application controls with respect 

to the Livestock Mandatory Price Reporting 

System (LMPRS). Twelve specific/technical 

recommendations were made to improve 

control in this area. 

Actions: AMS reached management 

decision on all 12 recommendations and has 

implemented the necessary corrective 

actions. 

Report is available at: 

http://www.oig.usda.gov

1.2.1 GAO Report, February 

11, 2005, GAO-05-150 

Findings: GAO recommends that the 

Administrator of the U.S. Agency for 

International Development (USAID) and 

USTR act as co-chairs of the trade capacity 

building working group. In consultation with 

other agencies that fund and implement trade 

capacity building assistance, the two should 

develop a strategy to monitor and measure 

results systematically and evaluate the 

assistance’s effectiveness. GAO also 

recommends that USAID set milestones for 

completing its efforts to develop indicators for 

results measurement and periodic 

evaluations. There were no recommendations 

for USDA. 

Actions: No USDA action required. 

Report is available at 

www.gao.gov/cgibin/getrpt?GAO-05-150

1.3.1 GAO-040437, Improved 

USDA Management 

Would Help Agencies 

Comply with Farm Bill 

Purchasing 

Requirements 

Findings: 

Execute a management plan for completing 

the work. 

Identify and allocate the staff and financial 

resources needed. 

State the priority for the work’s completion 

clearly. 

Actions: USDA has executed a 

management plan for completing the 

implementation of the Federal Biobased 

Products Preferred Procurement Program 

and for the management of the program, 

once fully operational. This management plan 

has been provided to GAO. USDA has 

identified and allocated staff and financial 

resources needed to fully implement and 

operate the program. The model procurement 

program, for which USDA’s Office of 

Administration has responsibility, is not 

included in the OCE analysis and staff and 

financial resources determinations. USDA has 

placed a high priority on full implementation of 

the Preferred Procurement Program and on 

coordination between OCE and OA in 

facilitating successful development and 

operation of OA’s Model Procurement 

Program. 

Report is available on 

www.gao.gov/cgibin/getrpt?GAO-04-437
ANNUAL PERFORMANCE REPORT

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176 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Perform. 

Measure Title Findings and Recommendations/Actions Availability 

1.4.1 OIG-05401-13-FM, 

Financial Statements for 

Fiscal Years 2003 and 

2004 

Findings: RMA needs to improve 

information technology security controls, 

application program and database change 

controls, the preparation of the Statement of 

Budgetary Resources and Statement of 

Financing, and loss reserve estimates. 

Actions: RMA has implemented actions 

necessary to address the above items. 

Report is available at 

http://www.usda.gov/oig/rptsa

uditsrma.htm

OIG-05099-109-KC, 

Renegotiation of the 

Standard Reinsurance 

Agreement 

Findings: RMA needs to develop a 

detained strategy for implementing key 

provisions contained in the 2005 SRA. 

Actions: RMA has implemented actions 

necessary to address this finding. 

Report is available at 

http://www.usda.gov/oig/rptsa

uditsrma.htm 

OIG-05601-7-At, Survey 

of Cotton Crop Insurance 

Premium Rates 

Findings: RMA should improve its quality 

control of the ratemaking process. 

Actions: RMA generally agreed with this 

finding, and has initiated actions to address 

this matter. 

Report is available at 

http://www.usda.gov/oig/rptsa

uditsrma.htm

OIG-05601-12-Te, 

Survey of Pilot Programs 

Findings: RMA needs to strengthen its 

monitoring of pilot programs. 

Recommendations/Actions: RMA has 

completed the actions recommended by OIG 

to address this matter. 

Report is available at 

http://www.usda.gov/oig/rptsa

uditsrma.htm 

GAO-04-517, DATA 

MINING: Agencies Have 

Taken Key Steps to 

Protect Privacy in 

Selected Efforts, but 

Significant Compliance 

Issues Remain 

Findings: For the five agencies reviewed, 

efforts are needed to ensure adequate 

privacy and security protections are in place. 

Actions: While the agencies generally 

agreed with the majority of GAO’s 

recommendations, they disagreed with 

others. RMA continues taking action to 

address the recommendations. 

Report is available at 

http://www.gao.gov

1.4.2 Farm Service Agency 

Direct Farm Loan 

Effectiveness Study 

Findings: An independent evaluation of the 

Direct Farm Loan program was completed in 

FY 2005 by the University of Arkansas. The 

study found that current lending patterns, in 

terms of servicing targeted borrowers, are 

consistent with the program’s goals. In 

addition, consistent with the program’s 

intended design, the majority of borrowers 

uses the program on a temporary basis and 

does not become permanent clients.

Actions: Action plan is currently under 

development. 

Report is available on 

http://www.fsa.usda.gov/DAF

L/whatsnew.htm 

2.1.1 Business Programs 

Assessment Reviews 

(BPAR) 

Findings: National Office evaluations of the 

performance of individual State offices. 

Actions: Findings and recommendations 

vary widely by State. 

Summary of findings to be 

available on RD Intranet web 

site 2nd quarter of FY 2005. 

2.2.3 and 

2.2.4 

Telecommunications and 

Electric Data validation 

process

Findings: Subscriber growth is tracked 

quarterly on an aggregate basis for 

performance measurement reporting. 

Actions: Individual project data are 

examined periodically by the program line 

offices, and are verified by General Field 

Representatives when loans are in process. 

Performance data available in 

a variety of reporting 

documents and from the RUS 

BPI coordinator. 

Project data are available 

from the individual program 

line offices. Contact Electric 

Program at 202-720-9545 

Contact Telecommunications 

Program at 202-720-9554 
ANNUAL PERFORMANCE REPORT

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F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 177 

Perform. 

Measure Title Findings and Recommendations/Actions Availability 

3.1.2 Evaluation of the 

Implementation of 

Directive 10,240.4 

Regarding Listeria 

Monocytogenes 

Findings: FSIS evaluated the 

implementation of its Directive 10,240.4, 

which focused on verification of RTE 

establishments’ compliance with the Listeria 

Monocytogenes Interim Final Rule (68 FR 

34207). The evaluation report presented 

findings and recommendations that 

addressed whether inspection program 

personal had implemented the directive 

properly, and whether they received sufficient 

training to execute their verification 

responsibilities.

Actions: Completed December 20, 2004. 

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 

GAO-05-51: USDA and 

FDA Need to Better 

Ensure Prompt and 

Complete Recalls of 

Potentially Unsafe Food 

Findings: Even in the context of their 

limited recall authority, USDA and FDA can 

do a better job in executing their food-recall 

programs. The final report was released to 

the public, November 5, 2004. 

Actions: FSIS generally agreed with these 

findings and continues to take action to 

address them. 

Report available at 

www.gao.gov/new.items/d055

1.pdf

Program Evaluation and 

Improvement Staff 

USDA-FSIS 

202-720-6735 

OIG 24601-5 At: 

Hazard Analysis and 

Critical Control Point 

Implementation at Very 

Small Plants 

Findings: HACCP systems at very small 

plants need improvement to ensure the 

wholesomeness of the meat and poultry 

produced for consumers. The final report was 

issued, June 24, 2005. 

Actions: FSIS generally agreed with these 

findings and continues to take action to 

address them.

Report available at 

www.usda.gov/webdocs/24t0

1-05-AT.pdf

Program Evaluation and 

Improvement Staff 

USDA-FSIS 

202-720-6735 

3.1.3 FSIS Reviews of Foreign 

Meat and Poultry 

Establishments (2004) 

Findings: To export product to the U.S., 

foreign establishments must demonstrate 

equivalent inspection programs, including 

acceptable pathogen testing programs. FSIS 

reviews these programs to ensure 

equivalency standards are met. 

Actions: Reviews conducted at least once 

per year per exporting country, depending on 

compliance history. Countries and/or 

establishments may be listed or de-listed as 

approved exporters depending on these and 

other evaluations. 

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 

Evaluation of the 

Implementation of 

Directive 10,010.1 (2004) 

Findings: Program Evaluation and 

Improvement Staff (PEIS will conduct an 

evaluation of the implementation of FSIS 

Directive 10,010.1, concerning sampling for 

E. coli 0157:H7, approximately 6 months after 

its effective date. Although Office of Field 

Operations (OFO) implementation will be 

examined directly, the evaluation’s goal will 

be to determine if changes to inspection 

policy or the Directive itself are necessary to 

protect public health better. 

Actions: Completed December 20, 2004. 

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 
ANNUAL PERFORMANCE REPORT

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178 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Perform. 

Measure Title Findings and Recommendations/Actions Availability 

3.1.3 

(cont’d). 

Evaluation of Alternative 

Site Sampling of 

Condemned Cattle 

Findings: FSIS is evaluating the 

implementation of FSIS Notice 33-04, under 

which FSIS ensures that condemned cattle 

moved from Federal establishments to off-site 

locations for BSE testing by APHIS are tested 

and not diverted into the food supply. OPEER 

is conducted the evaluation specifically in 

response to an OIG audit. 

Actions: Completed August 2005. 

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 

3.1.4 FSIS Communications 

and Outreach to Small 

Businesses 

Findings: FSIS held a series of food-security 

workshops from May through July 2005. The 

workshops addressed various food-security 

issues relevant to small business owners and 

operators. Following these workshops, 

questionnaires were distributed to determine 

which modes of communication and FSIS 

activities workshop attendees found most useful. 

FSIS evaluated responses to these 

questionnaires to determine the most effective 

communication strategies. 

Actions: Completed August 2005. 

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 

GAO 05-213: 

Oversight of Food Safety 

Activities: 

Federal Agencies Should 

Pursue Opportunities to 

Reduce Overlap and 

Better Leverage 

Resources 

Findings: Federal agencies are spending 

some resources on overlapping food-safety 

activities designed to ensure the safety and quality 

of domestic and imported food. The final report 

was issued to the public, May 17, 2005. 

Actions: FSIS generally agreed with these 

findings and continues to take action to address 

them. 

The report is available at 

www.gao.gov/new.items/d052

13.pdf 

Program Evaluation and 

Improvement Staff 

USDA-FSIS 

202-720-6735 

3.2.1 “Animal Health 

Safeguarding Report” 

Findings: The National Association of 

State Departments of Agriculture (NASDA) 

conducted a review of the USDA’s Animal 

Health Safeguarding system, assessing the 

performance and efficacy of the infrastructure, 

activities, procedures, policies, partnerships 

and authorities that comprise the existing 

safeguarding system. 

Actions: The review found performance 

adequate in handling most assigned roles, 

and even heroic in some historical efforts to 

eradicate diseases that have infected U.S. 

livestock—but resources were fast becoming 

overwhelmed. The review called for: 

Improving areas that include, but are not 

limited to, staffing, equipment, surveillance, 

detection, applied research, communications 

and border security. 

Improving interagency and interdepartmental 

cooperation, and the resources to facilitate it. 

APHIS formed seven issue groups to develop 

action plans to address the issues raised in 

the NASDA review. 

NASDA’s final report was 

delivered to USDA officials in 

November 2001 and is available 

at 

www.aphis.usda.gov/vs/pdf_fi

les/safeguarding.pdf 

Progress achieved in 

implementing the Review is 

reported by these Issue Groups 
ANNUAL PERFORMANCE REPORT

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F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 179 

Perform. 

Measure Title Findings and Recommendations/Actions Availability 

“Exotic Newcastle 

Disease (END) After 

Action Review” (2004) 

Findings: An evaluation of APHIS’ 

response to Exotic Newcastle Disease led 

to general recommendations about USDA’s 

animal health emergency response systems. 

It was finalized on May 21, 2004. 

Actions: Four major areas were covered in 

the report: 

Preparedness; 

The Incident Command System; 

Human resources; and 

External engagement (Action: Pending) 

A copy of the report may be 

obtained from Dr. John 

Clifford, Deputy 

Administrator, USDA APHIS 

Veterinary Services, 202-720-

5193 

“Report of the 

Secretary’s Advisory 

committee on Foreign 

Animal and Poultry 

Diseases: Measures 

Relating to Bovine 

Spongiform 

Encephalopathy in the 

United States “Animal 

Health Safeguarding 

Report” 

Findings: At the request of the Secretary of 

Agriculture, an international expert Bovine 

Spongiform Encephalopathy (BSE) panel 

was convened to review actions taken by the 

United States in response to a single finding 

of BSE. The panel, which was organized as a 

subcommittee of the Secretary’s Foreign 

Animal and Poultry Disease Advisory 

Committee, provided its report on February 4, 

2004. 

Actions: Among the actions taken after this 

report was received were: 

Increased sampling for BSE

Animal Identification System – Listening 

Session; and 

web site development. 

The report is available at: 

http://www.animalagriculture.

org/BSE/Report_Sec_BSE_2

_13_04.htm

For information about actions 

taken see: 

http://www.aphis.usda.gov/lpa

/issues/bse_testing/index.htm

lhttp://www.aphis.usda.gov/vs

/pdf_files/safeguarding.pdf 

 

4.1.1 Food Stamp Participation 

Rates 2003 

Findings: This report presents the latest in 

a series on participation rates based on 

Current Population Survey and national 

participation rates for fiscal year 2003. The 

findings of this report indicate that 56 percent 

of the individuals eligible for food stamp 

benefits choose to participate. Thus, it 

appears that the Food Stamp Program (FSP) 

is reaching the neediest eligible individuals. 

Nationally, the participation rate among 

individuals rose almost 2 percent between 

2002 and 2003. 

Actions: The report contained no 

recommendations for further action by USDA. 

Available on the FNS web 

site at http://www.fns.usda. 

gov/oane/MENU/Published/F

SP/participation.htm

State Food Stamp 

Participation Rates For 

The working Poor in 

2002 

Findings: In general, the pattern of 

participation rates based on these estimates 

show that overall participation among the 

working poor vary widely across States. 

Some are higher than 60 percent while others 

are lower than 40 percent. In most States, 

participation among the working poor is 

significantly less among all eligible. 

Actions: The report contained no 

recommendations for further action by USDA. 

Available on the FNS website 

at http://www.fns.usda.gov/ 

oane/MENU/Published/FSP/p

articipation.htm
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180 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Perform. 

Measure Title Findings and Recommendations/Actions Availability 

Food Stamp Benefits and 

Participation Rates within 

Demographic Groups 

Findings: The analysis confirms that food 

stamp participation rates generally increase 

as benefit levels rise. Among several eligible 

non-participant groups and individuals in 

households with earnings are likely to qualify 

for substantial monthly benefit. 

Actions: The report contained no 

recommendation for further action by USDA. 

Available on the FNS web 

site at 

http://www.fns.usda.gov/oane

/MENU/Published/FSP/partici

pation.htm 

Reaching Those In Need: 

State Food Stamp 

Participation Rates in 

2002 

Findings: The report shows that FSP 

participation rates continue to vary among 

States. Additionally, some States consistently 

have high participation rates relative to 

others. 

Actions: The report contained no 

recommendation for further action by USDA. 

Available on the FNS web 

site at 

http://www.fns.usda.gov/oane

/MENU/Published/FSP/partici

pation.htm 

State Food Stamp 

Participation Rates for 

the Working Poor in 2001 

Findings: This report shows how rates for 

the working poor vary across States and how 

the rates differ between the working poor and 

all eligible people. 

Actions: This report did not contain 

recommendations for further action by USDA. 

Available on the FNS web 

site at 

http://www.fns.usda.gov/oane

/MENU/Published/FSP/partici

pation.htm

Assessing 

Implementation of the 

2002 Farm Bill’s Legal 

Immigrant Food Stamp 

Restorations 

Findings: This study examines the 

implementation of Legal Immigrant Food 

Stamp provisions given the different State 

and local approaches to restore eligibility of 

immigrant households into the program. 

Approximately 150,000 legal immigrants were 

added to food stamp case loads across 8 

States. The majority of those added were 

former State-funded food assistance 

participants. 

Actions: This report did not contain 

recommendations for further action by USDA. 

Available on the FNS web 

site at 

http://www.fns.usda.gov/oane

/MENU/Published/FSP/partici

pation.htm 

4.1.2 Evaluation of the School 

Breakfast Program (SBP) 

Pilot 

Findings: The study indicates that, on 

average, the current SBP improves academic 

or behavior outcomes. It also provides a 

program offering free school breakfast to all 

elementary school students. 

Actions: This report did not contain 

recommendations for further action by USDA. 

Available on the FNS web 

site at 

http://www.fns.usda.gov/oane

/MENU/Published/CNP/cnp. 

htm

4.2.2 Obesity, Poverty and 

Participation in Nutrition 

assistance Programs 

Findings: The report presents the 

conclusions of an expert panel to determine if 

there is scientific evidence of a relationship 

between program participants and excess 

weight. The panel concluded that it is 

necessary to separate the effects of poverty 

to determine, as measured by household, 

income associated with obesity. 

Actions: This report did not contain 

recommendations for further action by USDA. 

Available on the FNS web 

site at 

http://www.fns.usda.gov/oane

/MENU/Published/NutritionEd

ucation/NutEd.htm 
ANNUAL PERFORMANCE REPORT

USDA

F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 181 

Perform. 

Measure Title Findings and Recommendations/Actions Availability 

4.2.2 Fit Special Supplemental 

Nutritional Program for 

Women, Infants and 

Children 

(WIC): Programs to 

Prevent Childhood 

Overweight in Your 

Community. 

Findings: This project focused on how WIC 

could better address the problem of childhood 

obesity. Many parents of overweight 

preschool children did not see their children 

as overweight, nor were they particularly 

concerned about their child’s weight. Parents 

were eager to receive information on ways to 

promote healthy eating patterns in their 

families. 

Actions: Potential strategies include 

development of participant-centered 

assessment and education procedures, and 

expanding training for WIC staff. 

Available on the FNS web 

site at 

http://www.fns.usda.gov/oane

/MENU/Published/WIC/WIC. 

htm 

4.2.2 Team Nutrition 

Demonstration Project 

Findings: This report documents the 

process (steps, time and resources) for fully 

implementing Team Nutrition (TN) using the 

classroom and cafeteria as delivery channels. 

The results indicate that it is possible to 

implement TN throughout schools and involve 

parents, community and the media. 

Actions: This report did not contain 

recommendations for further action by USDA. 

Available on the FNS web 

site at 

http://www.fns.usda.gov/oane

/MENU/Published/Nutrition 

Education/Files/TNDP99-

03.htm 

4.2.2 Evaluation of the USDA 

Elderly Nutrition 

Demonstrations Volume 

II 

Findings: This report describes the results 

of a project to improve service to older people 

through the FSP. The projects succeeded in 

reaching some portion of their target 

population. Additionally, most projects 

showed that their effort generated new 

applications for food stamp assistance. 

Actions: This report did not contain 

recommendations for further action by USDA. 

Available on the ERS web 

site at http://www.ers.usda. 

gov/Publications/CCR9-2/

4.2.2 WIC Food Packages: 

Time for a Change 

Findings: USDA contracted with the 

Institute of Medicine to evaluate WIC food 

packages and recommend cost-neutral 

changes to improve the package to meet the 

nutrition needs of WIC participants better. 

Actions: The report recommended a range 

of WIC food package changes, now being 

considered by USDA. 

Available on the FNS web 

site at http://www.fns.usda. 

gov/oane/MENU/Published/W

IC/WIC.htm 

4.3.1 Impact of Food Stamp 

Payment Errors on 

Households Purchasing 

Power 

Findings: This analysis revisits a previous 

study that addressed the impact of payment 

errors on participating households. While the 

number of ineligible households was small, 

overpayments to these households had a 

large impact on their purchasing power. 

Actions: This report does not contain 

recommendations for further action by USDA. 

Available on the FNS web 

site at 

http://www.fns.usda.gov/oane

/MENU/Published/FSP/Progr

amIntegrity.htm 

Preliminary Report on the 

Feasibility of Computer 

Matching in the National 

School Lunch Program 

(NSLP) 

Findings: The study explores the feasibility 

of using computer technology in reducing 

NSLP over-certification. The preliminary 

findings indicate that computer matching for 

direct certification and verification is feasible. 

Actions: The study remains in progress. 

This report does not contain 

recommendations for further action by USDA. 

Available on the FNS web 

site at 

http://www.fns.usda.gov/oane

/MENU/Published/CNP/cnp. 

htm 
ANNUAL PERFORMANCE REPORT

USDA

182 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Perform. 

Measure Title Findings and Recommendations/Actions Availability 

American Samoa: 

Accounting for Key 

Federal Grants Needs 

Improvement 

Findings: American Samoa faced special 

challenges in using Federal grants and did 

not provide adequate accountability for grant 

funding. Problems identified included WIC 

vendor fraud. FNS was aware of the problem 

and had actions in place to address it. 

Actions: This report does not contain 

recommendations for further action by USDA. 

Available on the GAO web 

site at 

http://www.gao.gov/new.items

/d0541.pdf 

FSP States Have 

Reduced Payment 

Errors. Further 

Challenges Remain 

Findings: The FSP error rate has dropped 

nearly one-third over the past five years. 

Caseworkers cause about two-thirds and 

participants cause about one-third of errors. 

Actions: This report does not contain 

recommendations for further action by USDA. 

Available on the GAO web 

site at 

http://www.gao.gov/htext/d05

245.html 

Means Tested Programs: 

Information On Program 

Access Can be an 

Important Management 

Tool 

Findings: The report reviews factors that 

influence program participation and the 

balance between program integrity and 

access in 12 key Federal means-tested 

programs. 

Actions: The report recommends that FNS 

ensure that its methodology and estimates of 

WIC participation rates will be comparable 

over time. 

Available on the GAO web 

site at 

http://www.gao.gov/htext/d05

221.html 

An Evaluation of the 

Prime Vendor Pilot of the 

Food Distribution 

Program on Indian 

Reservations 

Findings: Evaluated the effectiveness of a 

USDA pilot project to use a single prime 

vendor responsible for accepting food orders 

directly from 23 Indian Tribal Organizations 

with the traditional Food Distribution Program 

on Indian Reservations Commodity 

Distribution System. 

Actions: This report does not contain 

recommendations for further action by USDA. 

Available on the FNS web 

site at 

http://www.fns.usda.gov/oane

/MENU/Published/CNP/FILE

S/FDPIRPrimeVendor.pdf

5.1.1, 

5.1.2 and 

5.1.3 

GAO-04-705 

Environmental Effects of 

Wildland Fire 

Findings: Develop and issue guidance, with 

CEO and taking into account any lessons 

learned from the CEQ demonstration 

program, to clarify the assessment and 

documentation of the risks of environmental 

effects associated both with conducting and 

not conduction fuel reduction activities. 

Actions: USDA reviewed the lessons 

learned from the CEQ demonstration program 

and determined that existing direction is 

generally adequate for implementing these 

lessons. Risks associated with not taking 

action to reduce fuels (the no action to reduce 

fuels (the no action alternative) are assessed 

with 

Available on the GAO web site: 

http://www.gao.gov/new.items/d

04705.pdf

5.1.1 GAO Report, January 

2005/GAO-05-147 

Wildland Fire 

Management: Important 

Progress Has Been 

Made, But Challenges 

Remain to Completing a 

Cohesive Strategy 

Recommendation: Provide the Congress 

with a joint (FS and DOI) tactical plan 

outlining the critical steps the agencies will 

take, together with related timeframes, to 

complete a cohesive strategy that identifies 

long-term options and needed funding for 

reducing and maintaining fuels at acceptable 

levels and responding to the nation’s wildland 

fire problems. 

www.gao.gov 
ANNUAL PERFORMANCE REPORT

USDA

F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 183 

Perform. 

Measure Title Findings and Recommendations/Actions Availability 

5.1.1 

(cont’d) 

Actions: The Forest Service is continuing 

to develop LANDFIRE and Fire Program 

Analysis (FPA)—both of which must be 

operational to accurately and effectively 

develop the type of plan GAO suggests. 

OIG-10601-6-Te: 

Controls over Funds 

Congressionally 

Earmarked for 

Conservation Projects 

Findings: A management accounting 

system is needed in NRCS to effectively track 

expenses associated with Congressionally 

earmarked funding. 

Actions: NRCS implemented a process 

through the Foundation Financial Information 

System to record and identify all obligations 

and expenses for Congressionally earmarked 

funds. 

Report is available on OIG 

website: www.oig.usda.gov

www.usda.gov/oig/webdocs/1

0601-6-Te.pdf

OIG-106019-68-KCTe: 

Compliance with Highly 

Erodible Land Provisions 

Controls over Funds 

Congressionally 

Earmarked for 

Conservation 

ProjectsGAO-04-705 

Environmental Effects of 

Wildland Fire 

Findings: Improvements in prescribed 

controls are needed to strengthen the 

agency’s ability to provide accurate and 

reliable assessments of producer compliance 

with the HELC provision A management 

accounting system is needed in NRCS to 

effectively track expenses associated with 

Congressionally earmarked funding. 

Report is available on OIG 

website: www.oig.usda.gov

www.usda.gov/oig/webdocs/100

601-6-Te.pdf99-8KC.pdf

Available on the GAO web site: 

http://www.gao.gov/new.items/d

04705.pdf

Actions: Web-based tracking system 

implemented. Policy revised and clarified 

NRCS implemented a process through the 

Foundation Financial Information System to 

record and identify all obligations and 

expenses for Congressionally earmarked 

funds. 

Findings: Develop and issue guidance, with 

CEO and taking into account any lessons 

learned from the CEQ demonstration 

program, to clarify the assessment and 

documentation of the risks of environmental 

effects associated both with conducting and 

not conduction fuel reduction activities. 

Actions: USDA reviewed the lessons 

learned from the CEQ demonstration program 

and determined that existing direction is 

generally adequate for implementing these 

lessons. Risks associated with not taking 

action to reduce fuels (the no action 

alternative) are assessed with The study 

examined outcomes of the verification 

process. It also made an independent 

assessment of income eligibility with specific 

verification outcomes. To do this, the study 

used data from in-person interviews with 

families.
ANNUAL PERFORMANCE REPORT

USDA

184 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Perform. 

Measure Title Findings and Recommendations/Actions Availability 

5.1.1, 

5.1.2 and 

5.1.3 

(cont’d) 

GAO-053-52418: 

Environmental Indicators 

Findings: NRCS and FSA should improve 

processes for reviewing compliance and 

enforcing requirements GAO found that 

federal and nonfederal organizations develop 

environmental indicator sets for several 

purposes. 

Actions: GAO recommends the Chair of the 

Council on Environmental Quality develop 

institutional arrangements needed to ensure a 

concerted, systematic, and stable approach 

to the development, coordination, and 

integration of environmental indicator sets. 

web-based tracking system implemented. 

Policy revised and clarified. 

Report is available on GAO 

website: www.gao.gov

www.gao.gov/new.items/d0341

8d0552.pdf 

Conservation Technical 

Assistance Program 

Evaluation 

Findings: Evaluation started FY 2005, to 

be completed early FY2006. Evaluating the 

efficiency and effectiveness of the program, 

including an assessment of program 

performance relative to unit costs and 

benefits, review the progress in addressing 

recommended actions resulting from PART, 

and analyze the linkages between inputs, 

activities, outputs, outcomes, and impacts in 

achieving the program’s intended purposes.

Actions: N/A; program evaluation ongoing. 

Report currently unavailable. 


USDA

F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 185 

III. Systems, Controls and Legal Compliance 

INSPECTOR GENERAL ACT AMENDMENTS OF 1988 

MANAGEMENT’S REPORT ON AUDIT FOLLOW-UP

BACKGROUND

During the fiscal year, Office of the 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 and/or recommendations. An agreement is reached during the 

management decision process. If management agrees with a recommendation, a written plan for corrective 

action with a target completion date is developed. The plan is then submitted to OIG for its concurrence. If 

both OIG and management agree that the proposed corrective action will correct the deficiency, management 

decision is achieved for that recommendation. Once management decision is reached for each 

recommendation in the audit, that audit is considered resolved. 

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 them for sufficiency and determines if final action is completed. 

FY 2005 Results 

USDA agencies closed 102 audits in FY 2005. The Department’s current inventory of audits that have 

reached management decision and require final action to close includes 60 new audits in FY 2005 and 104 

existing audits for a total of 164. Three of these audits are in appeal status. As shown in Exhibit 91, this is a 20 

percent decrease from the 206 audits that were open at the end of FY 2004. During the past 5 years, USDA’s 

total audit inventory decreased 33 percent. 

Exhibit 91: Decrease in Total Open Audit Inventory 

Note: The FY 2004 ending balance was revised from 185 to include 20 audits that reached management decision in September 2004. One 

additional audit was issued in FY 2004, but was not transmitted to OCFO until FY 2005. 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 93 and Exhibit 95. 
SYSTEMS, CONTROLS AND LEGAL COMPLIANCE 

USDA

186 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Audit Follow-Up Process 

The Inspector General Act Amendments of 1988 require an annual report to Congress providing status of 

resolved audits that remain open. Reports on resolved audits must include the elements listed in the first three 

bullets below. Resolved audits that remain open one year or more past the management decision date require 

an additional reporting element, as described in the last bullet below: 

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); and 

For each audit report that remains open more than one year past the management decision date, 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 92: 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; 

• 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 more than one year 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 past management 

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 
SYSTEMS, CONTROLS AND LEGAL COMPLIANCE 

USDA

F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 187 

actions, changes in planned actions, actual or revised completion dates, and explanations for any revised 

dates. 

The Office of Management and Budget revised Circular A-123, “Management’s Responsibility for Internal 

Control,” December 21, 2004. The revision is designed to further strengthen internal control in the Federal 

Government. As USDA implements the revised circular, greater emphasis is placed on documenting, 

monitoring, correcting and reporting on internal controls. These controls include audit follow-up. Special 

attention is given to correcting those audit recommendations that relate directly to potential material 

weaknesses identified in a component agency’s program or operations. Agencies now are required to 

crosswalk all audit recommendations OIG identifies as material to the corresponding potential material 

weakness. Agencies must document completion of final action on those recommendations before the material 

weakness can be considered corrected. 

Beginning and Ending Inventory for Audits with Disallowed Costs (DC) and Funds to 

Be Put to Better Use (FTBU)1

Of the 102 audits that achieved final action during the fiscal year, 34 contained disallowed costs (DC). The 

number of DC audits remaining in the inventory at the end of the fiscal year is 66 with a monetary value of 

$68,040,269. 

For audits with disallowed costs that achieved final action in FY 2005, OIG and management agreed to collect 

$24,459,052. Adjustments were made totaling $12,908,545 (53 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; 5) agency discovery; and 6) appeals. Management recovered 

the remaining $11,550,507. 

Exhibit 93: Inventory of Audits with Disallowed Costs 

Audits with Disallowed Costs # of Audits Amount ($) 

Beginning of the Period 84 85,705,402 

Plus: New Management Decisions 16 6,793,919 

Total Audits Pending Collection of Disallowed Costs 100 92,499,321 

Adjustments (12,908,545) 

Revised Subtotal 79,590,776 

Less: Final Actions (Recoveries) 34 (11,550,507)2

Audits with DC Requiring Final Action at the End of the 

Period 

66 68,040,269 

 

1 Exhibit 93 and Exhibit 95 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 93 and Exhibit 95 will not equal the total resolved audit inventory balance in Exhibit 91. 

2 This amount does not include $829,153 interest collected.
SYSTEMS, CONTROLS AND LEGAL COMPLIANCE 

USDA

188 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Exhibit 94: Distribution of Adjustments to Disallowed Costs 

Category Amount ($) 

Changes in Management Decision 368,019 

Legal Decisions 1,842,566 

Write-Offs 2,309,382 

Agency Documentation 7,012,909 

Agency Discovery 1,130,510 

Appeals 245,159 

Total 12,908,545 

Final action occurred on 15 audits that involved FTBU amounts. USDA projects more efficient use for 

99 percent of the amount identified based on the corrective actions implemented. The number of FTBU audits 

remaining in the inventory to date is 29 with a monetary value of $953,560,533. 

Exhibit 95: 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 39 1,308,483,017 

Plus: New Management Decisions 5 $9,067,436 

Total Audits Pending 44 1,317,550,453 

Less: Final Actions 15 363,989,920 

Audits with FTBU Requiring Final Action at the End of the Period 29 953,560,533 

Disposition of Funds to Be Put to Better Use: 

FTBU Implemented 359,075,460 

FTBU Not Implemented 4,914,460 

Total FTBU Amounts for Final Action Audits 363,989,920 

Audits Open One or More Years Past the Management Decision Date 

The number of audits open one or more years without final action continues to decline. These audits decreased 

25 percent in FY 2005 from 134 to 101 and 32 percent during the past 5 years. 

Exhibit 96: Decrease In Audits Open One or More Years Past Management Decision Date 
SYSTEMS, CONTROLS AND LEGAL COMPLIANCE 

USDA

F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 189 

Five audits are proceeding as scheduled, 65 are behind schedule and agencies have completed corrective 

actions on 31 audits that are pending collection of associated disallowed costs. While an additional three 

audits were scheduled for completion by September 30, 2005, final action documentation will not be 

evaluated this reporting period. 

Exhibit 97: 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 5 0 672,105,344 65 10,922,697 261,439,296 31 46,281,403 18,256,767 

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 actions: 

Issuance of policy/guidance; 

Conclusion of investigation, negotiation or administrative appeal; 

Receipt and/or processing of final action documentation; 

Systems development, implementation, reconciliation or enhancement; 

Results of internal monitoring or program review; 

Results of agency request for change in management decision; 

Office of General Counsel or OIG advice; 

Conclusion of external action; and 

Administrative action. 

MANAGEMENT’S REPORT ON AUDIT FOLLOW-UP

Exhibit 98: Audits Open One Year or More Past the Management Decision Date and Behind Schedule 

Monetary Amount 

Audits 

Date 

Issued 

Estimated 

Completion

Date Audit Title

DC 

(U.S. 

dollars) 

FTBU 

(U.S. dollars) 

(24) Pending issuance of policy/guidance 

03006-1-AT 09/19/95 10/01/05 FSA Management of the Dade County, 

Florida, ASCS Office 

684,642 - 

05099-1-TE 09/30/97 12/30/05 RMA Reinsured Companies Actual 

Production History Self-Reviews 

- - 

05099-8-KC 03/31/00 12/30/05 RMA Standard Reinsurance Agreement 

Reporting Requirements 

- - 

05600-1-TE 09/28/89 12/30/05 RMA Crop Year 1988 Insurance 

Contracts with Claims 

- - 

04601-1-KC 12/16/96 10/31/05 RHS Rural Rental Housing Program, 

Additional Servicing of Section 8/515 

Projects 

65,910 33,147,535 
SYSTEMS, CONTROLS AND LEGAL COMPLIANCE 

USDA

190 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Monetary Amount 

Audits 

Date 

Issued 

Estimated 

Completion 

Date Audit Title

DC 

(U.S. 

dollars) 

FTBU 

(U.S. dollars) 

04601-2-AT 03/25/99 12/31/05 RHS Guaranteed Rural Housing Loan 

Program 

5,928 139,146,407 

04801-4-CH 02/12/99 11/30/05 RHS Evaluation of Rural Rental Housing 

Tenant Income Verification Process 

- - 

08001-2-HQ 03/29/02 12/30/05 FS Aviation Security Over Aircraft 

Facilities 

- - 

08601-18-SF 03/01/97 03/31/06 FS Research Cooperative and Cost 

Reimbursable Agreements 

121,195 40,328 

08601-30-SF 03/31/03 03/31/06 FS Review of FS Security Over 

Explosives/Munitions/Magazines 

Located Within National Forest System 

- - 

10099-1-TE 02/01/02 09/30/06 NRCS Security Over IT Resources - - 

10099-10-

KC 

09/30/03 03/31/06 NRCS Homeland Security Protection of 

Federal Assets 

- - 

24099-4-HY 02/25/03 TBD FSIS Imported Meat and Poultry 

Inspection Process, Phase II 

- - 

24601-1-CH 06/21/00 TBD FSIS Laboratory Testing of Meat and 

Poultry Products 

- - 

27002-14-

CH 

01/14/02 12/31/05 FNS State Agencies Oversight of the 

Child and Adult Care Food Program 

- - 

27601-3-CH 03/22/96 03/31/07 FNS Food Stamp Program—Disqualified 

Recipient System 

- - 

27601-27-

CH 

04/30/02 03/31/06 FNS Food Service Management 

Companies 

- - 

34099-2-AT 09/14/01 06/30/06 RBS Business and Industry Loan 

Program, Omnivest Resources, Inc. 

4,052,351 - 

34601-1-HY 07/22/98 06/30/06 RBS Business and Industry Loan 

Program—Morgantown, West Virginia 

- - 

34601-3-CH 03/11/03 12/31/05 RBS Processing of Loan Guarantees to 

Members of the Western Sugar 

Cooperative 

- - 

34601-7-SF 12/04/02 06/30/06 RBS B&I Liquidation of Loans to the 

Pacific Northwest Sugar Company in 

Washington State 

- 14,000,000 

50401-28-

FM 

02/01/99 12/31/05 RHS FY 1998 Rural Development 

Financial Statements 

- - 

50601-3-CH 07/23/01 TBD APHIS Assessment of APHIS & FSIS 

Inspection Activities to Prevent the Entry 

of Foot and Mouth Disease 

- - 

89099-1-HQ 10/21/02 6/30/06 OPPM Audit of Compliance with the 

National Energy Conservation Policy Act 

of 1978, Energy Act of 1992 and 

Executive Order Number 13123 

- - 

(3) Pending conclusion of investigation, negotiation or administrative appeal 

04801-3-KC 03/31/99 12/30/05 RHS Bosley Management, Inc. – 

Sheridan, Wyoming 

146,690 85,516 

04801-6-HY 03/17/99 12/30/05 RHS Rural Rental Housing Program, 

Lewiston Properties, Fayetteville, New 

York 

- - 

34004-5-HY 02/18/00 TBD RBS Audit of Procurement Operations, 

Virginia State Office, Richmond, Virginia 

- - 
SYSTEMS, CONTROLS AND LEGAL COMPLIANCE 

USDA

F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 191 

Monetary Amount 

Audits 

Date 

Issued 

Estimated 

Completion

Date Audit Title

DC 

(U.S. 

dollars) 

FTBU 

(U.S. dollars) 

(23) Pending receipt and/or processing of final action documentation 

02007-1-AT 3/13/03 12/30/05 ARS Florida Agricultural and Mechanical 

University – Specific Cooperative 

Agreements for Establishment of a 

Science Center 

421,764 - 

03099-32-

KC 

12/22/99 09/30/05 FSA Controls Over Administrative 

Payment Operations 

- - 

04004-04-AT 7/15/04 11/30/05 RHS Local Government's Management 

of Multi-Family Housing Projects in 

North Carolina 

- - 

04601-2-HY 07/22/03 10/31/05 RHS Review of Project Funds for 

Progressive Property Management Inc. 

84,011 - 

04601-5-KC 08/08/02 11/30/05 RHS Rural Rental Housing Program 

Insurance Expenses, Phase III 

418,321 15,500,000 

04801-6-KC 12/18/00 12/30/05 RHS Rural Rental Housing Program 

Insurance Expenses, Phase I 

1,029,999 9,000 

08001-1-HQ 06/28/00 11/30/05 FS Implementation of the Government 

Performance and Results Act 

- - 

08003-2-SF 08/05/98 12/31/05 FS Toiyabe/Humboldt National Forest 

Land Adjustment Program 

- 27,900,000 

08003-5-SF 12/15/00 12/31/05 FS Land Acquisitions and Urban Lot 

Management Program 

- 10,329,300 

08016-1-SF 09/30/03 12/30/05 FS Follow-Up Review of FS Security 

Over Aircraft & Aircraft Facilities 

- - 

08401-1-FM 01/09/03 09/30/05 FS Audit of FY 2002 Financial 

Statements 

- - 

08601-25-SF 06/22/01 12/30/05 FS Working Capital Fund Enterprise 

Services 

- 2,600,000 

08801-2-TE 09/24/98 03/31/06 FS Assistance Agreements with 

Nonprofit Organizations 

140,497 1,173,925 

23099-2-FM 05/22/02 12/30/05 DA Security of Information Technology 

Resources at USDA Departmental 

Administration 

- - 

33099-4-CH 03/03/04 TBD APHIS Management and Security of 

Information Technology Resources 

- - 

34601-14-TE 09/27/02 10/30/05 RBS Business and Industry Direct Loan 

Program – Arkansas 

- - 

34601-15-TE 09/30/03 6/30/06 RBS National Report on the Business 

and Industry Loan Program 

50099-13-AT 03/29/02 12/30/05 Multi-Agency Audit Oversight and 

Security of Biological Agents at 

Laboratories Operated by USDA 

- - 

50099-14-AT 9/29/03 12/30/05 Homeland Security Controls Over 

Biological, Chemical and Radioactive 

Materials at Institutions Funded by 

USDA 

- - 

50601-9-KC 08/18/04 TBD APHIS Phase I Review of BSE 

Surveillance 

- - 

50801-2-HQ 2/27/97 12/30/05 Civil Rights Evaluation Report for the 

Secretary on Civil Rights Issues, Phase I 

- - 

50801-12-AT 9/9/02 12/30/05 HMMP Management of Hazardous 

Materials Management Funds 

- 1,813,809 

85401-9-FM 11/7/03 03/31/06 RD Financial Statements for FY 2003 

and 2002 

- - 
SYSTEMS, CONTROLS AND LEGAL COMPLIANCE 

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192 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Monetary Amount 

Audits 

Date 

Issued 

Estimated 

Completion 

Date Audit Title

DC 

(U.S. 

dollars) 

FTBU 

(U.S. dollars) 

(10) Pending systems development, implementation, or enhancement

03008-2-KC 9/25/03 09/30/06 FSA Review of FSA and CCC Bidding 

Procedures and Awards for 

Commodities 

- - 

03099-27-TE 5/24/01 10/01/06 FSA Payment Limitations – Majority 

Stockholders of Corporations 

- - 

05401-8-FM 03/30/00 12/30/05 RMA FY 1999 FCIC Financial 

Statements Report on Management 

Issues 

- - 

06401-16-

FM 

11/7/03 09/30/06 CCC Financial Statements for FY 2003 - - 

08099-6-SF 03/27/01 09/30/06 FS Security Over USDA Information 

Technology Resources 

- - 

08401-2-FM 02/28/03 09/30/06 FS Audit of FY 2002 Financial 

Statements – Summary of Information 

Technology Findings 

- - 

24099-1-FM 08/11/03 09/30/05 FSIS Security Over Information 

Technology Resources at FSIS 

- - 

27004-3-AT 11/09/01 12/31/05 FNS Florida Food Stamp Program, 

Tallahassee, Florida 

- 15,443,610 

50099-27-

FM 

03/30/01 3/31/06 OCIO Security Over USDA Information 

Technology Resources Needs 

Improvement 

- - 

50099-50-

FM 

9/10/02 12/31/05 OCIO Government Information Security 

Reform Act – FY 2002 

- - 

(1) Pending results of internal monitoring or program review

27401-8-HY 06/27/97 12/31/05 FNS FY 1996 Financial Statements - - 

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

33004-1-AT 03/07/00 TBD APHIS Plant Protection and Quarantine 

Activities in Florida 

- - 

(1) External Action Required 

27004-3-CH 08/14/98 12/31/05 FNS Administration of the Food Stamp 

Employment and Training Program – 

Columbus, Ohio 

2,921,556 - 

(1) Pending Administrative Action

23801-1-HQ 08/20/98 TBD OO Review of Office of Operations 

Contract with B&G Maintenance, Inc. 

- 249,866 

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

27010-11-SF 02/05/99 10/30/05 FNS Child and Adult Care Food 

Program – Culver City, California 

829,833 0 

Total Number Audits (65) Total $ 10,922,697 261,439,296 

FEDERAL MANAGERS’ FINANCIAL INTEGRITY ACT 

REPORT ON MANAGEMENT CONTROLS

BACKGROUND

While USDA made progress in correcting certain milestones for its existing material deficiencies, two of them 

remain outstanding at fiscal year-end. Additionally, one new material deficiency was added this year. USDA 

is committed to operating its programs efficiently and effectively in compliance with the Federal Managers’ 

Financial Integrity Act (FMFIA). FMFIA requires agencies to provide reasonable assurance that: 
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F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 193 

Obligations and costs comply with applicable laws and regulations; 

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

Transactions are accounted for and properly recorded. 

The 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 (see the Report on Financial Management 

Systems). The act requires that financial management systems comply substantially with: (1) Federal 

financial management system requirements; (2) applicable Federal accounting standards; and (3) the 

Standard General Ledger at the transaction level. 

FMFIA also requires a separate statement as to whether financial management systems conform to standards, 

principles and other requirements. This statement ensures that Federal managers have timely, relevant and 

consistent financial information for decision-making purposes. USDA’s goal was to eliminate material 

internal control weaknesses and financial system nonconformances by the end of FY 2005. While this result 

was not achieved fully, the Department made significant progress through: 

The continuous evaluation of its programs, operations and financial systems; 

Financial statement and other Office of Inspector General (OIG) and Government Accountability 

Office audits; 

Management and system reviews; 

Establishing an Information Technology Security Task Force to monitor corrective actions by USDA 

component agencies; and 

Prompt attention to correcting the causes of identified weaknesses. 

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

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

A–127, “Financial Management Systems.” 

USDA’s agency managers, at all levels, 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, USDA 

management works aggressively to determine the root causes of its material deficiencies and corrects 

them promptly and efficiently. The term “material deficiency” describes both material weaknesses and 

financial system non-conformances, collectively. 

FY 2005 Results 

The “Message from the Secretary” provides qualified assurance that USDA’s systems of internal control 

comply with FMFIA’s objectives. The Department’s internal control systems comply substantially with the 

objectives of FMFIA, with the exception of the material deficiencies described in this section. 
SYSTEMS, CONTROLS AND LEGAL COMPLIANCE 

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194 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

USDA agencies continue to report quarterly on progress in correcting existing material deficiencies. The 

agencies also provided annual assurance statements. Throughout the year, determinations are made as to 

whether newly identified weaknesses should be declared as agency-level material deficiencies. If an agencylevel material deficiency is declared, OCFO staff reviews the supporting documentation to determine whether 

it meets the criteria to be considered a Departmental material deficiency. The criteria for reportable condition, 

corrected and downgraded material deficiencies are outlined below. 

During the fiscal year, USDA implemented a number of corrective actions on the three material deficiencies 

declared in FY 2004. The scheduled completion dates for the two remaining material weaknesses have been 

delayed until FY 2006. Significant accomplishments are as follows: 

The Department gained approval for 14 security policies this fiscal year. These include policy 

guidance on: Certification and Accreditation, Capital Planning and Investment Controls, Privacy, 

Telework/Remote Access, Firewall, Encryption, Access Control, Risk Management Methodology, 

Personnel Security, Sensitive-but-Unclassified, IT Contingency Plans, Annual Security Plans and 

System Development Life Cycle; 

USDA’s component agencies continue to develop contingency plans for their IT major applications 

and general support systems with the support of USDA’s enterprise-wide system, Living Disaster 

Recovery Planning System; 

Approximately 70 percent of the disaster recovery and business resumption plans currently are 

tested; 

The Forest Service (FS) established policy and procedures on information security program 

management and implemented access controls. It also implemented monitoring to detect 

vulnerabilities and eliminate unauthorized applications, implemented a Memorandum of 

Understanding with the OCFO regarding the management, operations and security of connections 

between FS and NFC information systems, and tested continuity of operations plans; 

FS’ financial management internal control weakness was related to compliance with accounting 

standards for revenue recognition and reporting accruals. All corrective actions were implemented 

during the year; and 

FSA completed application-level contingency plans for its major applications, finalized security 

policies, and regularly scans its networks; it documented standard processes for recording obligation 

for programs with common business events, added or restructured transaction codes for obligations 

in the general ledger system to reduce manual postings, and completed a review of posting models 

for transactions that have a material impact on the financial statement. 

USDA’s FY 2006 goal is to eliminate the existing material deficiencies and correct any new material 

deficiencies within one year. 

Also, during the fiscal year, USDA’s Rural Utilities Service (RUS) reported a violation of the Anti-Deficiency 

Act. The act bars U.S. Government employees from making or authorizing an expenditure or obligation 

exceeding the amount available in an appropriation or fund for the expenditure or obligation. As required by 

section 1517(b) of Title 31, U.S. Code, the Department reported the violation of section 1517(a)(1) of Title 31 

of the Anti-Deficiency Act to OMB. The violation occurred in the Rural Electrification and 
SYSTEMS, CONTROLS AND LEGAL COMPLIANCE 

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F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 195 

Telecommunications Direct Loan Financing Account in the amount of $1 billion. RUS officials 

unintentionally executed a bond guarantee agreement and the related guarantee of payment prior to the 

approval of the official notification that funds were available for obligation. Financial management system 

controls prevented any attempts to disburse the funds and the violation was discovered. 

While no funds were disbursed, an Anti-Deficiency Act violation occurred because the obligation was made 

without an apportionment of the guaranteed loan level. To prevent future violations, the Office of the 

Assistant Administrator for Electric Programs will hold the unsigned note pending written verification that 

OMB has processed the apportionment of funds. 

In September 2005, the Department entered into a contract for assistance in the implementation of the new 

reporting requirements in Appendix A of OMB Circular A-123. USDA has established an Assessment 

Implementation Team to plan and execute the Department-wide assessment approach. This top-down 

approach will assess the key processes of those component agencies that contribute materially to the balances 

of selected significant accounts/line items in the key financial reports. An implementation plan has been 

developed that addresses the major tasks identified by OMB to implement the Department-wide assessment 

approach. 

USDA Guidelines for Reporting Material Deficiencies 

The criteria for Departmental material weaknesses and financial system noncomformances are described 

below. 

A Departmental material weakness is a deficiency in internal controls (Section 2 of FMFIA) that 

satisfies at least one of the following criteria: 

 Merits the attention of the Executive Office of the President and the relevant congressional 

oversight committees; 

 Violates statutory or regulatory requirements; 

 Deprives the public of needed services; 

 Significantly weakens safeguards against waste, loss, unauthorized use or misappropriation of 

funds, property or other assets; 

 Significantly impairs fulfillment of the Department’s mission; 

 Results in a conflict of interest; or 

 Is of a nature that omission from the annual Report on Management Controls could reflect 

adversely on USDA’s actual or perceived management integrity. 

A Departmental material financial system nonconformance (Section 4 of FMFIA) is a deficiency that 

satisfies one or more of the following criteria: 

 Merits the attention of the Executive Office of the President and relevant congressional oversight 

committees; 

 Prevents USDA’s primary financial management system from achieving central control over 

agency financial transactions and resource balances; or 
SYSTEMS, CONTROLS AND LEGAL COMPLIANCE 

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196 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

 Prevents compliance of the primary financial management system with standards published by 

OMB Circular A–127, which includes the availability of timely, consistent and relevant financial 

information for decision-making purposes. 

Material Weakness Reported Under FMFIA 

Information Technology (IT) security continues to be an issue for USDA. The Department depends on IT to 

deliver its programs efficiently and effectively, as well as to provide meaningful and reliable financial 

reporting. While further efforts are needed to address weaknesses within USDA’s information security 

program, the Department and its agencies have made significant progress toward improving security of IT 

resources. USDA, under the direction of the Office of the Chief Information Officer (OCIO), has worked 

diligently to assist agencies in complying with security mandates. OCIO plans to conduct an independent 

verification and validation of all information systems certified in FY 2005. The majority of the systems (86 

percent) have been certified and accredited. Other systems are being reviewed. Additionally, OCIO has 

become actively involved in the budget process to ensure that cyber security and FISMA requirements are 

addressed in IT acquisitions. 

USDA’s component agencies need to aggressively implement IT security requirements to reduce the level of 

vulnerability. The following exhibit describes areas of continued concern for the Department and summarizes 

corrective actions planned to eliminate this material deficiency. Additional corrective actions to address 

specific areas of concern will be identified by the end of the first quarter of FY 2006. 

Historical Data on Material Deficiencies 

Although USDA did not complete corrective actions on two of the existing material deficiencies, there was 

only one newly identified material deficiency for FY 2005. USDA has reduced the number of existing 

material deficiencies from a high of 19 in FY 2002 to 3 in FY 2005. This is an 84 percent decrease in the 

number of outstanding material deficiencies reported 3 years ago. 

SUMMARY OF MATERIAL DEFICIENCIES

Exhibit 99: Summary of Outstanding Material Deficiencies and Estimated Completion Dates 

Responsible 

Agency(ies) 

Material 

Deficiency 

Description 

Areas of 

Concern 

Corrective Actions 

Remaining To Be Taken 

Year 

Identified 

Current 

Estimated 

Completion

Date 

Section 2 Material Weakness 

Multiple Multi 00-01: USDA 

Information 

Security Weakness: 

Weaknesses have 

been identified in 

the Department’s 

ability to protect its 

assets from fraud, 

misuse and 

disruption. 

Policy, oversight 

and monitoring1 • OCIO will: Improve the 

quality and process for 

managing USDA 

information security 

vulnerabilities and 

actions; 

• Complete vulnerability 

assessments of all 

mission critical systems; 

FY 2000 FY 2006 
SYSTEMS, CONTROLS AND LEGAL COMPLIANCE 

USDA

F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 197 

Responsible 

Agency(ies) 

Material 

Deficiency 

Description 

Areas of 

Concern 

Corrective Actions 

Remaining To Be Taken 

Year 

Identified 

Current 

Estimated 

Completion

Date 

Multiple 

(cont’d) 

 • Continue to manage the 

USDA information 

survivability program to 

guide agencies in the 

development and testing 

of disaster recovery and 

business resumption 

plans for USDA’s highest 

priority mission critical 

systems; 

• Implement and maintain 

a robust Internet Protocol 

(IP) database that 

includes accurate, up-todate contacts for each IP 

address; 

• Refine policy and issue 

new policy; and 

• Ensure that security 

management personnel 

have the authority and 

cooperation of agency 

management to 

implement and manage 

security programs 

effectively. 

 

• FS will: Improve controls 

over the PRCH system 

data access, input, and 

integrity and segregation 

of duties. 

 General Control FY 2005 FY 2006 

Environment 

• NRCS will: Document 

change control 

processes, software 

changes, and testing 

processes for the 

ProTracts System. 

Improve controls and 

documentation of change 

control for payment 

specifications. Reconcile 

Protracts appropriations, 

obligations and payments 

to FFIS. 

FY 2005 FY 2006 

 • FSA/CCC will: 

Collaborate with OCIO to 

identify and implement 

additional improvements 

needed to improve the 

agency’s general control 

environment. 

FY 2004 FY 2006 

Multiple Multiple 05-01: 

Improvement 

needed in financial 

accounting and 

reporting policies, 

practices and 

procedures2

Inadequate 

Accountability for 

Undelivered 

Orders 

FS will determine specific 

actions to be taken. 

FY 2004 FY 2006 
SYSTEMS, CONTROLS AND LEGAL COMPLIANCE 

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198 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Responsible 

Agency(ies) 

Material 

Deficiency 

Description 

Areas of 

Concern 

Corrective Actions 

Remaining To Be Taken 

Year 

Identified 

Current 

Estimated 

Completion

Date 

Multiple 

(cont’d) 

Inadequate 

Accounting for 

Accrued Liabilities 

• FSA/CCC will: Reexamine existing accrual 

policies and analytical 

procedures with regard to 

Federal accounting 

standards and CCC 

business practices, 

determine where 

improvements need to be 

made, and implement 

improvements 

FY 2004 FY 2006 

Section 4 Financial Management System Nonconformance 

FSA/CCC MW 04-01: 

Improvement 

Needed in Funds 

Control 

Mechanisms 

N/A FSA/CCC will: 

• Document and evaluate 

current system of 

budgetary accounting 

controls, identify 

deficiencies and develop 

improved control 

processes. 

• Obtain training for staff, 

and implement 

organizational changes. 

• Identify compensating 

controls to address 

material weakness and 

ensure requirements are 

incorporated into the 

next generation of 

program feeder systems. 

• Enhance usage of 

existing web services for 

funds control. 

FY 2004 FY 2009 

1

Additional corrective actions have been provided by the agency. 

2

While deficiencies in this area were reported in FY 2004 financial statement audits, they did not give rise to a Departmental material 

weakness. 

Exhibit 100: Material Deficiencies Remain the Same 

Fiscal Year Corrected 

Deficiencies 

New 

Deficiencies 

Remaining 

Deficiencies 

2002 15 2 19 

2003 12 1 8 

2004 7 2 3 

2005 1 1 3 

Summary of Corrected or Downgraded Material Deficiencies 

Material deficiencies, for which corrective actions were completed or deemed no longer material as of 

September 30, 2005, are summarized below. 
SYSTEMS, CONTROLS AND LEGAL COMPLIANCE 

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F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 199 

Criteria to Downgrade FMFIA Material Deficiencies 

A material deficiency may be reassessed and downgraded for one of two reasons. The control vulnerability 

either is no longer considered to be material or no longer exists. Although downgraded from a material 

deficiency, it remains possible for these issues to be reported in other sections of this report (such as Improper 

Payments or Management Challenges). USDA component agencies will continue to monitor and assess 

downgraded deficiencies through completion of corrective actions. 

Guidelines for Reporting a Corrected or Downgraded Material Deficiency 

To report a material deficiency as corrected or downgraded, USDA agencies must: 

Demonstrate commitment of senior-level managers to resolve the material deficiency as evidenced 

by resource deployment and regular monitoring of corrective action progress; 

Provide substantial, timely and documented progress in completing corrective actions for the 

material deficiency; 

Complete the most significant corrective actions with the remaining ones being minor in scope and 

not having a material effect on the program or operation; and 

Implement corrective actions that eliminate or minimize the cause(s) of the material deficiency. 

Exhibit 101: Material Deficiencies Corrected or Downgraded 

Responsible 

Agency Number and Title of Material Deficiencies 

Year 

Identified 

Status 

Corrected/ 

Downgraded 

FS 04-01: Financial Management Internal Control Weaknesses: 

Controls inadequate to assure improvements in data quality. 

2004 Corrected 

RMA/RD/APHIS 00-01: Agency Specific Information Security Weaknesses: 

Weaknesses have been identified in the Department’s ability 

to protect its assets from fraud, misuse and disruption. 

2004 Corrected 

Material Weaknesses Corrected 

FS-04-01: Financial Management Internal Control Weaknesses 

Controls inadequate to assure data-quality improvements. 

During the fiscal year, FS completed the following corrective actions to close the weakness: 

Developed roles, responsibilities, staffing plans, migration plans, IT requirements and performance 

metrics for staff and processes migrating to the Albuquerque Service Center (ASC); 

Transitioned people and processes from the field and Washington, D.C., office to the ASC; 

Built training materials for transitioning staff; and 

Developed and implemented policy, procedures and reports for transitioning business processes. 

Multi 00-01: Agency Specific Information Security Weaknesses 

Weaknesses have been identified in the Department’s ability to protect its assets from fraud, misuse and 

disruption. Although the information security weakness remains open for the Department, several agencies 

completed agency-specific actions to eliminate component-level material weaknesses. They are as follows: 
SYSTEMS, CONTROLS AND LEGAL COMPLIANCE 

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200 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

RMA 

Implemented new security policies, formalized draft policies and developed additional policies as 

required. 

RD 

Entered into an Incidental Transfer Agreement and Memorandum of Understanding with OCIO 

delineating roles and responsibilities for infrastructure resources; initiated scanning and patching for 

the National Office and certain field offices, established and implemented hardening guides on 

Windows and Linux servers, completed a detailed review of all servers managed by RD, and 

mitigated vulnerabilities; and 

Completed certification and accreditation of the RUS legacy system. 

APHIS 

Completed the certification and accreditation of the User Fee Financial System. 

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 deficiencies in information security policies, procedures or practices to be substantially 

compliant with FFMIA (referred to as Section 4 in the table below). 

FY 2005 RESULTS

During FY 2005, USDA evaluated its financial management systems to assess substantial compliance with the 

act. The Department is not substantially compliant with the Federal Financial Management System 

Requirements, applicable Federal accounting standards, the Standard General Ledger at the transaction level 

or the FISMA requirement. As part of its financial systems strategy, USDA agencies will work continuously 

to meet FFMIA and FISMA objectives. During the fiscal year, the Office of the Chief Financial Officer 

(OCFO) and the Office of the Chief Information Officer (OCIO) formed a joint task force to address 

information technology (IT) security weaknesses in USDA’s financial systems. As a result, corrective actions 

were taken to eliminate/mitigate several significant deficiencies known as of July 31, 2005. In assessing 

FFMIA conformance, USDA considered all the information available. This information included the auditor’s 

opinions of component agencies’ financial statements, the work of independent contractors and progress made 

in addressing the material weaknesses identified in the FY 2004 Performance and Accountability Report - 

Report on Management Controls section. 
SYSTEMS, CONTROLS AND LEGAL COMPLIANCE 

USDA

F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 201 

While USDA’s FY 2004 and FY 2003 Consolidated Financial Statements received an unqualified audit 

opinion from the Office of the Inspector General (OIG), the auditor’s Report on Compliance with Laws and 

Regulations also disclosed that the Department was not substantially compliant with FFMIA requirements. 

OIG found material weaknesses for USDA’s financial and accounting systems and information security 

program. The Department has completed many of the FY 2005 initiatives to substantially comply with the 

act’s requirements. Additionally, USDA has added new initiatives with several milestones to improve the 

controls over the Commodity Credit Corporation’s financial management systems, and the Natural Resource 

Conservation Service’s application controls for the Program Contracts System (ProTracts) as reported below. 

The Department will continue monitoring progress on plans to improve its financial management systems. It 

will also work to comply fully with FFMIA and FISMA requirements. Significant accomplishments in FY 

2005 are listed in the exhibit below. 

Exhibit 102: Initiatives Completed 

Initiatives Completed to Achieve FFMIA Compliance 

Agency Initiatives Completed 

Completion 

Date 

Remediation 

Plan 

Reference 

Section 1—Federal Financial Management System Requirements 

RMA • Financial Management Planning and Assurance Process. 05/31/2005 1.1 

• Information Technology Security Controls. 08/31/2005 1.2 

• Application Program and System Software Change Controls. 12/31/2004 1.3 

APHIS • Certification & Accreditation for the User Fee System. 09/9/2005 1.5 

RD • Certification & Accreditation for of the RUS Legacy System. 05/23/2005 1.5 

• Strengthen Network Security and Logical Access Controls. 06/30/2005 1.6 

Section 4—Information Security Policies, Procedures or Practices1

1

Completed corrective actions for this initiative apply to both Section 1 (OMB Circular A-130) and Section 4 (information security policies, 

procedures or practices) noncompliances and therefore are not repeated in Section 4. 

Exhibit 103: Initiatives To Be Completed 

Outstanding Initiatives to Achieve FFMIA Compliance 

Initiative 

Section of 

Noncompliance Agency 

Target 

Completion 

Date 

Remediation 

Plan 

Reference 

Information Technology Security 

Controls. 

Section 1 and 4, OMB A-123, A127, A-130 and FISMA 

FSA/CCC 09/30/2006 1.4 

Improve General Control Environment Section 1 – OMB Circular A-130 FS 03/31/2006 1.7 

Application Controls – ProTracts (New) Section 1 – OMB Circular A-130 NRCS 12/31/2005 1.8 

Federal Accounting Standards Section 2 – SFFAS FS 10/30/2005 2.1 

Federal Accounting Standards Section 2 – SFFAS, OMB A-123 FSA/CCC 09/30/2009 2.1 

Funds Control Mechanisms Section 3 – Treasury Financial 

Manual and OMB Circulars A123 and A-127 

FSA/CCC 09/30/2009 3.1 

Sections: 

FFMIA: 

1 – Federal financial management system requirements. 

2 – Applicable Federal accounting standards. 

3 – Standard General Ledger at the transaction level. 

FISMA: 

4 – Information security policies, procedures or practices. 

OMB Circulars: 

A-123, Management Accountability and Control. 

A-127, Financial Management Systems. 

A-130, Management of Federal Information Resources 

(Appendix 3). 
SYSTEMS, CONTROLS AND LEGAL COMPLIANCE 

USDA

202 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Remediation Plans to Achieve Substantial Compliance 

As required by law, USDA, in consultation with OMB, develops remediation plans that will result in 

substantial compliance with FFMIA and improved financial management systems. These plans provide details 

of completed and planned actions as discussed in the table that follows. 

Area of Noncompliance/Proposed Corrective Actions 

Target 

Completion 

Date 

Revised 

Completion 

Date 

Actual 

Completion 

Date 

Section 1 – Federal Financial Management System Requirements 

1.1 Financial Management Planning and Assurance Process 

 Agency Point of Contact: RMA – Chief Financial Officer 

• Reviewed RMA/FCIC’s Financial Management Systems for 

compliance with financial management systems 

requirements. (OMB A-123, A –127) 

4/30/2005 4/30/2005 

• Provided documentation to the OCFO of RMA’s continuous 

monitoring effort to ensure compliance with the financial 

management systems requirements including a remediation 

plan for any areas of substantial noncompliance with the 

FFMIA (OMB A-123, A –127). 

5/31/2005 5/31/2005 

1.2 Information Technology (IT) Security Controls 

 Agency Point of Contact: RMA—Chief Financial Officer 

• Enforced newly implemented security policies, formalized 

draft policies and developed additional required policies. 

12/31/2004 5/31/2005 5/31/2005 

• Performed an agency-wide review of user IDs and access 

levels to monitor the effectiveness of existing controls. 

9/30/2005 9/23/2004 

• Performed regular and periodic comprehensive reviews of 

file, directory and user permissions in the UNIX environment.

11/30/2004 11/30/2004 

• Delegated sufficient authorities and provided adequate staff 

and other resources to the chief information officer to develop 

and oversee an effective IT system, organization and 

operation, and manage and administer RMA IT security 

activities properly. 

9/30/2004 5/31/2005 6/30/2005 

• Prescribed and applied a periodic review process to ensure 

that approved policies and procedures for RMA IT operations, 

processes, functions and activities are applied properly and 

enforced consistently agency-wide. 

12/31/2004 5/31/2005 6/30/2005 

• Identify and include RMA IT organizational and security 

weaknesses in the annual FMFIA report and subsequent 

reports until all material weaknesses have been corrected 

and IT operations substantially comply with applicable laws 

and regulations. 

5/31/2005 5/31/2005 

• Developed, documented and implemented an action plan 

with milestone dates for an overall strategy to address the 

weaknesses not cited in RMA’s FMFIA report. 

9/30/2004 5/31/2005 5/31/2005 

• Prepared and submitted quarterly status reports to OCIO until 

the FMFIA weaknesses were corrected. 

9/30/2005 8/31/2005 

• Developed internal written policies and procedures that 

established effective access controls for RMA-controlled 

users to follow in using RMA, NITC and NFC systems in 

accordance with applicable Federal guidance and 

Departmental regulation requirements. 

12/31/2004 5/31/2005 5/31/2005 

• Implemented stronger physical security. 9/30/2004 5/31/2005 5/31/2005 
SYSTEMS, CONTROLS AND LEGAL COMPLIANCE 

USDA

F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 203 

Area of Noncompliance/Proposed Corrective Actions 

Target 

Completion 

Date 

Revised 

Completion 

Date 

Actual 

Completion 

Date 

Section 1 – Federal Financial Management System Requirements 

• Prescribed and implemented in RMA’s formal directive 

system a System Development Lifecycle (SDLC) 

methodology in accordance with Departmental regulations, 

and provided senior management oversight to ensure that 

application managers properly implement the prescribed 

SDLC methodology and management controls. 

12/31/2004 5/31/2005 5/31/2005 

• Strengthened senior management oversight and periodically 

monitored and documented the effectiveness of agency-wide 

policies, procedures and management controls to ensure that 

IT services contract provisions conform to all applicable laws 

and regulations, and contract provisions are enforced. 

9/30/2004 5/31/2005 

• Added a contract provision requiring background 

investigations for all IT contractor employees and associated 

subcontractor employees, where applicable, and ensured 

they were completed satisfactorily before access to RMA 

systems, hardware and facilities was authorized. 

11/30/2004 11/30/2004 

• Amended the appropriate contract to describe the specific 

security services expected from contractor employees and 

record the details of the services or deliverables to be 

provided by them. 

9/30/2004 5/31/2005 5/31/2005 

• Prepared individual task orders and other needed supporting 

documentation to describe the specific security services 

expected from contractor employees and record the details of 

the services or deliverables provided by them. 

11/30/2004 11/30/2004 

• Developed and applied a policy to conduct routine and timely 

reviews of RMA’s firewall configuration and verify the 

effectiveness of FSA firewall protection. 

12/31/2004 12/30/2004 

• Improved network operating system policy and procedures. 12/31/2004 6/17/2005 6/17/2005 

• Secured funding for the Business Impact Assessment 

completed by a third party. 

12/31/2004 1/31/2005 1/31/2005 

1.3 Application Program and System Software Change Controls 

 Agency Point of Contact: RMA—Chief Financial Officer 

• Implemented enterprise-wide change management 

procedures. 

12/31/2004 12/31/2004 

1.4 Information Security 

 Agency Point of Contact: FSA/CCC—Director, Financial 

Management Division

 

• Estimated Resources Needed: FY 2006 FTE: 40, Dollars 

$3,200,000 and Contractors $2,600,000

• Updated AS400 log files to show trail of when user profiles 

were used or modified last. Granted access on a need-toknow basis using standard security request forms. 

9/30/2004 1/31/2005 1/31/2005 

• Developed and tested contingency plans for FSA/CCC 

financial applications. 

12/31/2004 12/31/2004 

• Worked with the new Information Technology Service to 

strengthen the physical security in field office computer 

rooms housing FSA/CCC applications. 

9/30/2004 1/31/2005 1/31/2005 

• Developed plan to perform security clearance and 

background checks on all personnel accessing FSA/CCC 

applications. 

10/31/2004 10/31/2004 

• FSA will collaborate with the Office of the Chief Information 

Officer to identify and implement additional improvements 

needed to improve USDA’s general control environment

9/30/2006 
SYSTEMS, CONTROLS AND LEGAL COMPLIANCE 

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204 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Area of Noncompliance/Proposed Corrective Actions 

Target 

Completion 

Date 

Revised 

Completion 

Date 

Actual 

Completion 

Date 

Section 1 – Federal Financial Management System Requirements 

1.5 Certification & Accreditation 

Agency Point of Contact: APHIS—Deputy Administrator, 

MRP Business Services 

 

• Completed Phases I & II of Certification & Accreditation for 

the User Fee System. 

12/30/2004 9/13/2005 9/9/2005

 Agency Point of Contact: RD—Deputy Chief Financial 

Officer 

 

 • Completed certification & accreditation of the RUS Legacy 

System. 

6/30/2005 5/23/2005 

1.6 Strengthen Network Security and Logical Access Controls 

 Agency Point of Contact: RD—Deputy Chief Financial 

Officer 

 

• Completed network security enhancements: 6/30/2005 6/30/2005 

 − Summarized the corrected vulnerabilities and rescanned 

to verify the corrections. 

 

• Strengthened logical access controls 6/30/2005 6/30/2005 

 − Established an Information Security-Point of Contact to 

serve as liaison with the Information Systems Security 

Staff (ISSS) on security matters and ensured the ISSS is 

staffed adequately. 

 

− Developed a logbook system to track and monitor access 

requests. Worked with the local access network (LAN) 

support personnel to differentiate between privileged 

users, and implemented procedures to restrict authority. 

− Worked with the LAN support personnel to implement 

policies and procedures for limiting privileged user’s 

accounts. Expanded the monthly user access verification 

and certification process to include reports for all user 

types. 

− Established a database for all current contractors and 

standardized logbook forms to track and monitor 

authorized access by contractors. 

− Implemented procedures to verify user identification and 

access reports. Attested the accuracy of the user IDs for 

their organizations. 

− Completed major project to strengthen controls over 

logical access to major applications and general support 

systems. 

− Conducted a review of the change control process for all 

major applications and general support systems to 

ensure the process complies with Departmental 

guidance. 

1.7 Improve General Control Environment 

 Agency Point of Contact: FS—Financial Management 

Systems Director 

 

• Implemented Information Security Program Management and 

Access Controls 

9/30/2004 8/3/2005 

• Software Management Controls 

− Replaced ISS with a suite of commercial scanning tools 

and a comprehensive monitoring infrastructure to detect 

enterprise-level vulnerabilities, and eliminate unused or 

unauthorized applications. 

8/31/2005 8/24/20051
SYSTEMS, CONTROLS AND LEGAL COMPLIANCE 

USDA

F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 205 

Area of Noncompliance/Proposed Corrective Actions 

Target 

Completion 

Date 

Revised 

Completion 

Date 

Actual 

Completion 

Date 

Section 1 – Federal Financial Management System Requirements 

− Develop and implement entity-wide software 

management policy and procedures. 

3/31/2006 

• Service Continuity 

− Tested the continuity of operations plan entity-wide. 9/30/2005 9/30/20051

1.8 Application Controls – ProTracts 

 Agency Point of Contact: NRCS—Chief Information Officer 

 Estimated Resources Needed: FY 2006 FTE: 1, Dollars 

$150,000 

• Document the ProTracts change control process. 11/15/2005 

• Document changes to the ProTracts software. 11/15/2005 

• Establish a ProTracts testing process. 12/31/2005 

• Changed the per-unit cost of the current program payment 

specifications. 

6/30/2005 6/30/2005 

• Establish a formally approved document for the ProTracts 

payment specifications. 

11/15/2005 

• Establish a schedule for the systematic reconciliation of 

ProTracts appropriations, obligations and payments with 

amounts recorded in FFIS. 

11/15/2005 

Section 2 – Applicable Federal Accounting Standards 

2.1 Federal Accounting Standards 

Agency Point of Contact: FS—Financial Management 

Systems Director 

• SFFAC 2 (OMB Bulletin No. 01-09) Improve financial 

statement note disclosures 

− Conducted training on OMB Bulletin No. 01-09 to ensure 

proper note disclosures to the financial statements. 

5/31/2005 5/25/2005 

• SFFAS 5 Accounting for Liabilities of the Federal 

Government 

− Changed cookbook certification reviews to a November, 

February, May, August quarterly cycle. 

5/31/2005 5/31/2005 

− Monitored compliance with the review and certification 

requirements for obligations and accruals. 

5/31/2005 5/31/20051

• SFFAS 6, 8 Proper accounting for leases, internal use 

software and non-monetary business processes 

− Established policy and procedures for the proper 

accounting treatment of leases, internal-use software and 

non-monetary business processes. 

5/31/2005 6/30/2005 9/30/2005 

− Conduct training and implement monitoring process for 

compliance with established policy and procedures. 

5/31/2005 10/30/20052 

• SFFAS 7, 21 Accounting for Revenue and Other Financing 

Sources and Reporting Correction of Errors and Changes in 

Accounting Principles 

− Issued memo and conducted training to re-emphasize the 

proper recording of revenue transactions. 

5/31/2005 5/31/2005 

− Implemented Department policy for the review and 

recording of prior period adjustments. 

5/31/2005 6/1/20051

− Conducted monthly Cumulative Results of Operations 

review and analysis. 

5/31/2005 6/15/2005 
SYSTEMS, CONTROLS AND LEGAL COMPLIANCE 

USDA

206 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Area of Noncompliance/Proposed Corrective Actions 

Target 

Completion 

Date 

Revised 

Completion 

Date 

Actual 

Completion 

Date 

Section 2 – Applicable Federal Accounting Standards 

Agency Point of Contact: FSA/CCC—Director, Financial 

Management Division

Estimated Resources Needed for Sections 2 and 3: FY 2006

FTE: 10, Dollars $800,000 and Contractors $2,000,000 

• SFFAS No. 5 — Accounting for Liabilities of the Federal 

Government 

− Developed and approved accrual policies and 

procedures. 

6/30/2005 6/30/2005 

• Improvement needed in controls to ensure funds control and 

budgetary transactions are properly supported, recorded 

timely and accurately 

9/30/2009 

− Document and evaluate current system of budgetary 

accounting controls, identify deficiencies, develop and 

implement improved, well-defined control processes, as 

part of OMB A-123 Appendix A assessment of CCC’s 

internal controls over financial reporting. 

9/30/2006 

− Obtain contractor training for financial management staff 

in budgetary accounting and analysis. 

9/30/2006 

− Implement organizational structure changes to leverage 

expertise and improve performance in financial and 

budgetary accounting policy documentation, 

reconciliations, analysis, and review. 

9/30/2006 

− Analyze current feeder systems to determine compliance 

with financial data requirements (and if required financial 

data are being transmitted to the Core financial system.) 

Identify feeder system gaps and costs to correct. 

9/30/2009 

− Identify compensating controls to address material 

weakness and ensure requirements are incorporated into 

the next generation of program feeder systems. 

9/30/2006 

− Enhance existing financial web services, such as the 

National Payment Service and e-Funds control systems, 

and increase CCC programs using these systems. 

9/30/2007 

− Implement a new integrated financial management 

system that includes funds control functionality, under 

OMB Financial Management-Line of Business. 

TBD 

1

 Based on the results of the recent audit, additional corrective actions are needed to address the weakness. 

2 This corrective action has been revised to align with the establishment of guidance on the accounting treatment of leases and on internal use 

software, which were completed on 9/30/2005. 

Area of Noncompliance/Proposed Corrective Actions 

Target 

Completion 

Date 

Revised 

Completion 

Date 

Actual 

Completion 

Date 

Section 3 – Standard General Ledger at the Transaction Level 

3.1 Funds Control Mechanisms 

Agency Point of /Contact: FSA/CCC – Director, Financial 

Management Division 

For Estimated Resources Needed see Sections 2.

• Corrected posting models to be compliant with the SGL. 

− Completed financial posting logic review of transactions 

and implemented all required changes to financial posting 

logic that may have a material impact on CCC’s Financial 

Statements. 

8/31/2004 6/30/2005 6/30/2005 
SYSTEMS, CONTROLS AND LEGAL COMPLIANCE 

USDA

F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 207 

Area of Noncompliance/Proposed Corrective Actions 

Target 

Completion 

Date 

Revised 

Completion 

Date 

Actual 

Completion 

Date 

Section 3 – Standard General Ledger at the Transaction Level 

− Implemented improved interface controls between feeder 

systems and the CORE accounting system. 

9/30/2004 11/30/2004 

• Developed standard operating procedures for feeder systems. 11/30/2004 11/30/2004 

• Expanded the obligation review and certification process to 

include all open obligations and programs having 

disbursements during the fiscal year. Identified and grouped 

programs with specific obligation and disbursement events. 

− Developed, distributed and provided necessary training on 

the new Funds Status Report to program managers and 

staff. The training consisted of providing an understanding 

of the report design, how the report can be used, 

Governmental finance/budgetary concepts and an 

overview of how information is recorded in CCC’s general 

ledger. 

6/30/2005 6/30/2005 

− Expanded the review and certification of obligations to 

include all programs with open obligation balances. The 

obligations team developed a process to implement the 

certification quarterly. 

6/30/2005 4/30/2005 

• Developed an approach for estimating obligations by business 

event. 

5/31/2005 5/31/2005 

• Identified and implemented changes to current financial 

management processes and systems to improve the accuracy 

and timeliness of obligation amounts in the core financial 

system. 

− Performed more timely and accurate identification and 

quantification of program obligations, and published 

updated policies and procedures for recording budgetary 

entries related to obligations. 

6/30/2005 6/30/2005 

− Reviewed and enhanced monthly general ledger budgetary 

account reconciliation to evaluate all program obligation 

and disbursement activity. 

6/30/2005 6/30/2005 

− Developed and implemented changes in the program and 

financial software to record obligations at the transaction 

level. 

TBD 1 Discontinued 

• Improvement needed in controls to ensure funds control and 

budgetary transactions are properly supported, recorded timely 

and accurately. 

9/30/2009 

− Document and evaluate current system of budgetary 

accounting controls, identify deficiencies, develop and 

implement improved, well-defined control processes, as 

part of OMB A-123 Appendix A assessment of CCC’s 

internal controls over financial reporting. 

9/30/2006 

− Obtain contractor training for financial management staff in 

budgetary accounting and analysis. 

9/30/2006 

− Implement organizational structure changes to leverage 

expertise and improve performance in financial and 

budgetary accounting policy documentation, 

reconciliations, analysis, and review. 

9/30/2006 

− Analyze current feeder systems to determine compliance 

with financial data requirements and if required financial 

data are being transmitted to the Core financial system. 

Identify feeder system gaps and costs to correct. 

9/30/2009 
SYSTEMS, CONTROLS AND LEGAL COMPLIANCE 

USDA

208 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Area of Noncompliance/Proposed Corrective Actions 

Target 

Completion 

Date 

Revised 

Completion 

Date 

Actual 

Completion 

Date 

Section 3 – Standard General Ledger at the Transaction Level 

− Identify compensating controls to address material 

weakness and ensure requirements are incorporated into 

the next generation of program feeder systems. 

9/30/2006 

− Enhance existing financial web services, such as the 

National Payment Service and e-Funds control systems, 

and increase CCC programs using these systems. 

9/30/2007 

− Implement a new integrated financial management system 

that includes funds control functionality, under OMB 

Financial Management-Line of Business. 

TBD 

1

 Additional transaction codes are being added to automate the liquidation of obligation balances. Reports have been developed to improve 

oversight of obligation balances and ensure activity is being recorded in a timely fashion. The actual posting process at the transaction level 

remains manual for most programs. USDA has determined that some changes cannot be made due to system or business process 

limitations. In those cases, USDA has implemented such compensating controls as program analysis, reviews of account balances and 

confirmations of balances with program managers. Obligation balances are being posted monthly and automated sources for data are being 

utilized. 

Section 4 – Information Security Policies, Procedures or Practices1

1

 Completed corrective actions for this initiative apply to both Section 1 (OMB Circular A-130) and Section 4 (information security policies, 

procedures or practices) noncompliance and therefore are not repeated in Section 4. 


USDA

F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 209 

IV. Financial Statements, Notes, Supplemental and Other Accompanying Information 

MESSAGE FROM THE CHIEF FINANCIAL OFFICER

I hope that you have received a clear snapshot of the significant role that USDA 

played in 2005 in enhancing so many aspects of American life. USDA is deeply 

committed to the performance and accountability process, and the ample 

opportunities it provides to have real visibility into our diverse operations and to 

continually improve the quality of services we provide to the American people. 

In making the most of this process, we are 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 continually more efficient 

ways, and possessing a clear sense of ongoing challenges that require 

management attention and focus. 

Through the individual leadership and collaborative efforts of USDA managers, employees, business partners 

and other stakeholders, we made significant strides in 2005 advancing the Department’s impressive recent 

record of excellence in financial management. Here are some highlights of our substantive results over this 

past fiscal year: 

Another clean financial audit opinion. Our ability to sustain this critical performance benchmark is 

powerful evidence of the Department’s improved accountability, internal control and data integrity; 

An 84 percent reduction in material deficiencies from FY 2002 to FY 2005. We are down from 19 

to 3, and we plan to eliminate the remaining trouble spots altogether in the year ahead; 

An effective strategic plan for USDA that will guide efforts throughout the Department to align 

strategic direction, operating budgets and performance measures to drive continued performance 

enhancements and clear accountability throughout the organization; 

Innovative information technology solutions relating to financial management and administrative 

systems that allow us to push more resources to the front lines of program delivery. Noteworthy 

among these is the integration of program data from the Food and Nutrition Service into the 

corporate financial system to consolidate processing, reduce costly reconciliations and eliminate 

legacy systems and the implementation of improved financial reporting systems; 

Cost-effective and secure payroll and other administrative services reliably and accurately provided 

Government-wide through our National Finance Center (NFC); and 

Successfully implementing our disaster recovery and continuity of operations plan in response to 

hurricane Katrina. During this disaster, NFC timely and accurately paid over 565,000 federal 

employees from an alternate location, and USDA financial systems and operations resumed to ensure 

that all fiscal year-end deadlines were met. 
CONSOLIDATED FINANCIAL STATEMENTS 

USDA

210 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

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 the performance and accountability 

reporting process. Our results are due to the hard work and innovative leadership of skilled career employees 

who take seriously their responsibility for the substantial resources entrusted to them by Congress and the 

American people to perform the important work of this Department. While we cannot yet give unqualified 

assurance of compliance with the Federal Managers’ Financial Integrity Act (FMFIA) or the financial systems 

requirements of the Federal Financial Management Improvement Act (FFMIA), we are redoubling our efforts 

in the coming fiscal year to resolve these deficiencies. 

In FY 2005, we made exceptional progress in financial management in USDA. As proud as we are of that 

record, we look forward to beating it next year as sound financial management continues to enhance all 

aspects of USDA’s vital work. 

Patricia E. Healy 

Acting Chief Financial Officer 

November 15, 2005 


USDA

F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 211 

Consolidated Financial Statements 

CONSOLIDATED BALANCE SHEET 

As of September 30, 2005 and 2004 

(in millions) 

2005 2004

Fund Balance with Treasury (Note 3) 42,327 $ 39,488 $ 

Investments (Note 5) 69 56

Accounts Receivable, Net (Note 6) 712 625

Other (Note 10) 1 1

Total Intragovernmental 43,109 40,170

Cash and Other Monetary Assets (Note 4) 242 165

Investments (Note 5) 15 15

Accounts Receivable, Net (Note 6) 9,442 2,478

Loans Receivable and Related Foreclosed Property, Net (Note 7) 75,176 73,841

Inventory and Related Property, Net (Note 8) 29 142

General Property, Plant, and Equipment, Net (Note 9) 4,885 4,914

Other (Note 10) 86 89

Total Assets (Note 2) 132,984 121,814

Accounts Payable 821 809

Debt (Note 12) 83,515 69,053

Other (Note 14) 18,591 18,861

Total Intragovernmental 102,927 88,723

Accounts Payable 4,292 3,430

Loan Guarantee Liability (Note 7) 1,214 1,188

Debt Held by the Public (Note 12) 1 1

Federal Employee and Veterans Benefits 834 836

Environmental and Disposal Liabilities (Note 13) 28 23

Other (Notes 14 & 15) 21,710 12,629

Total Liabilities (Note 11) 131,006 106,830

Commitments and Contingencies (Note 16)

Unexpended Appropriations 21,490 22,158

Cumulative Results of Operations (19,512) (7,174)

Total Net Position 1,978 14,984

Total Liabilities and Net Position $ 121,814 132,984 $ 

Intragovernmental:

Net Position:

Assets:

 Intragovernmental:

Liabilities:

The accompanying notes are an integral part of these statements. 
CONSOLIDATED FINANCIAL STATEMENTS 

USDA

212 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

CONSOLIDATED STATEMENT OF NET COST 

For the Years Ended September 30, 2005 and 2004 

(in millions) 

2005 2004

Enhance Economic Opportunities for Agricultural Producers:

Gross Cost 44,015 $ 19,942 $ 

Less: Earned Revenue 15,137 3,338

Net Cost of Goal 1 28,878 16,604

Support Increased Economic Opportunities and 

Improved Quality of Life in Rural America:

Gross Cost 5,358 6,102

Less: Earned Revenue 4,344 3,989

Net Cost of Goal 2 1,014 2,113

Enhance Protection and Safety of the Nation's

Agriculture and Food Supply:

Gross Cost 3,071 2,935

Less: Earned Revenue 630 520

Net Cost of Goal 3 2,441 2,415

Improve the Nation's Nutrition and Health:

Gross Cost 51,033 45,452

Less: Earned Revenue 46 41

Net Cost of Goal 4 50,987 45,411

Protect and Enhance the Nation's 

Natural Resource Base and Environment:

Gross Cost 8,580 8,234

Less: Earned Revenue 887 755

Net Cost of Goal 5 7,693 7,479

Total Gross Costs of Strategic Goals 112,057 82,665

Less: Total Earned Revenues 21,044 8,643

Net Cost of Operations (Note 17) $ 74,022 91,013 $ 

Strategic Goals:

The accompanying notes are an integral part of these statements. 
CONSOLIDATED FINANCIAL STATEMENTS 

USDA

F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 213 

CONSOLIDATED STATEMENT OF CHANGES IN NET POSITION 

For the Years Ended September 30, 2005 and 2004 

(in millions) 

Cumulative Cumulative

 Results of Unexpended Results of Unexpended 

Operations Appropriations Operations Appropriations

Beginning Balances $ 22,158 (7,174) $ (19,750) $ 22,192 $ 

Budgetary Financing Sources:

Appropriations Received 80,697 87,089

Appropriations Transfer In (Out) (507) 127

Other Adjustments(recissions, etc.) (2,937) (2,665)

Appropriations Used 77,921 (77,921) 84,588 (84,585)

Nonexchange Revenue 8 29

Donations and Forfeitures of Cash 2 2

Transfers In (Out) without Reimbursement 686 2,219

Other Budgetary Financing Sources (1) - 

Other Financing Sources:

Donations and Forfeitures of Property 31 4

Transfers In (Out) without Reimbursement (1,001) (1,074)

Imputed Financing from Costs Absorbed by Others 833 629

Other 196 201

Total Financing Sources 78,675 (668) 86,598 (34)

Net Cost of Operations (91,013) (74,022)

Net Change (12,338) (668) 12,576 (34)

Ending Balances $ 21,490 (19,512) $ (7,174) $ 22,158 $ 

2005 2004

The accompanying notes are an integral part of these statements. 
CONSOLIDATED FINANCIAL STATEMENTS 

USDA

214 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

COMBINED STATEMENT OF BUDGETARY RESOURCES 

For the Years Ended September 30, 2005 and 2004 

(in millions) 

Non-Budgetary Non-Budgetary

Financing Financing

Budgetary Accounts Budgetary Accounts

Budgetary Resources:

Budget Authority:

Appropriations Received 88,940 $ 94,316 $ 

Borrowing Authority (Notes 19 & 20) 45,357 10,886 $ 29,006 11,356 $ 

Net Transfers (35) - 

Unobligated Balances:

Beginning of Period (Note 21) 18,756 6,325 16,762 5,802

Net Transfers, Actual (872) (193)

Spending Authority From Offsetting Collections:

Earned

Collected 27,460 8,576 23,462 7,519

Change in Receivables from Federal Sources - (113) (672) 146

Change in Unfilled Customer Orders

Advances Received (1,383) 935

Without Advances from Federal Sources 15 2 99 (97)

Transfers from Trust Funds - Collected 899

Recoveries of Prior Year Obligations 6,243 559 5,256 634

Permanently not Available (39,871) (4,911) (47,065) (4,376)

Total Budgetary Resources 145,509 21,324 121,906 20,984

Status of Budgetary Resources:

Obligations Incurred (Note 18):

Direct 82,879 14,496 75,508 14,659

Reimbursable 43,460 27,642

Unobligated Balance:

Apportioned 5,919 5,672 6,396 5,921

Exempt from Apportionment 1,262 5 551 6

Unobligated Balance not Available 11,989 1,151 11,809 398

Total Status of Budgetary Resources 145,509 21,324 121,906 20,984

Relationship of Obligations to Outlays:

Obligated Balance, Net, Beginning of Period (Note 21) 21,010 17,136 21,194 14,871

Obligations Incurred 126,339 14,496 103,150 14,659

 Less:

 Recoveries of Prior Year Obligations 6,243 559 5,256 634

 Change from Federal Sources 15 (111) (573) 49

 Obligated Balance, Net, End of Period:

 Accounts Receivable (1,978) (205) (1,978) (316)

 Unfilled Customer Orders from Federal Sources (428) (635) (412) (635)

 Undelivered Orders 15,982 18,716 14,353 17,735

 Accounts Payable 12,979 326 9,047 352

Total Obligated Balance, Net, End of Period 26,555 18,202 21,010 17,136

 Disbursements 114,536 12,982 98,651 11,711

 Collected and Advances Received (26,976) (8,576) (24,397) (7,519)

 Outlays 87,560 4,406 74,254 4,192

 Less: Distributed Offsetting Receipts 1,445 722 1,928 600

Net Outlays 86,115 $ 3,684 $ 72,326 $ 3,592 $ 

2005 2004

The accompanying notes are an integral part of these statements.
CONSOLIDATED FINANCIAL STATEMENTS 

USDA

F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 215 

CONSOLIDATED STATEMENT OF FINANCING 

For the Years Ended September 30, 2005 and 2004 

(in millions) 

2005 2004

Resources Used to Finance Activities:

Budgetary Resources Obligated

Obligations Incurred $ 117,809 140,835 $ 

Less: Spending authority from offsetting collections and recoveries 42,258 37,282

Obligations net of offsetting collections and recoveries 98,577 80,527

Less: Distributed Offsetting receipts 2,167 2,528

Net Obligations 96,410 77,999

Other Resources

Donations and forfeitures of property 31 4

Transfers in(out) without reimbursement (1,001) (1,074)

Imputed financing from costs absorbed by others 833 629

Other 196 201

Net other resources used to finance activities 59 (240)

Total resources used to finance activities 96,469 77,759

Resources Used to Finance Items not Part of the Net Cost of Operations:

Change in resources obligated for goods, services and benefits ordered, but not yet provided 2,192 2,532

Resources that fund expenses recognized in prior periods 2,127 2,529

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 (14,921) (14,136)

Other (12,825) (10,259)

Resources that finance the acquisition of assets 31,208 23,151

Other resources or adjustments to net obligated resources that do not affect net cost of operations 2,789 1,509

Total resources used to finance items not part of the net cost of operations 10,570 5,326

Total resources used to finance the net cost of operations 85,899 72,433

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 - 49

Upward/Downward reestimates of credit subsidy expense (1,853) (341)

Increase in exchange revenue receivable from the public (7,791) 534

Other 9,151 1,587

Total components of Net Cost of Operations that will require or generate

 resources in future periods (Note 25) (493) 1,829

Components not Requiring or Generating Resources:

Depreciation and amortization 524 598

Revaluation of assets or liabilities (525) (633)

Other 5,608 (205)

Total components of Net Cost of Operations that will not require or generate resources 5,607 (240)

Total components of Net Cost of Operations that will not require or generate

 resources in the current period 5,114 1,589

Net Cost of Operations $ 74,022 91,013 $ 

The accompanying notes are an integral part of these statements. 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

USDA

216 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 30, 2005 and 2004 

(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 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) 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

USDA

F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 217 

RURAL DEVELOPMENT 

Rural Development (RD) 

• Rural Telephone Bank (RTB) – a corporation 

• Alternative Agricultural Research and Commercialization Corporation (AARC) 

The President’s Fiscal Year 2006 Budget proposes to establish the process and terms to implement dissolution 

of the RTB due to insufficient demand for the bank’s loans and the availability of adequate financing from 

other sources. Stockholders of the RTB will receive a cash payout for their stock at par value. In August 

2005, the RTB Board unanimously approved resolutions describing the process and terms to implement the 

liquidation and dissolution of the RTB, subject to there being no legal restrictions on redeeming Governmentowned Class A Stock. 

Consolidation 

The financial statements consolidate all the agencies’ results. The effects of intradepartmental activity and 

balances are eliminated, except for the Statement of Budgetary Resources that is presented on a combined 

basis. The financial statements are prepared in accordance with generally accepted accounting principles for 

the Federal Government. 

Reclassifications 

Certain reclassifications have been made to prior year amounts to conform to the current year presentation. 

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 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

USDA

218 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

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 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. 

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 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

USDA

F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 219 

occurring on or before the reporting date. The liability for long-term other post-employment benefits is the 

present value of future payments. 

Contingencies 

Contingent liabilities are recognized when a past event or exchange transaction has occurred, a future outflow 

or other sacrifice of resources is probable, and the future outflow or sacrifice of resources is measurable. 

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 Office of Management and Budget (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. 

NOTE 2. NON-ENTITY ASSETS

Non-entity assets include proceeds from the sale of timber payable to Treasury, and employer contributions 

and payroll taxes withheld for agencies serviced by the National Finance Center. 

FY 2005 FY 2004

Intragovernmental:

Fund balance with Treasury 140 $ 243 $ 

Accounts Receivable 1 1 

Subtotal Intragovernmental 141 244 

W ith the Public:

Cash and other monetary assets 91 81 

Accounts receivable 81 80 

Subtotal W ith the Public 172 161 

Total non-entity assets 313 405 

Total entity assets 132,671 121,409 

Total assets 132,984 $ 121,814 $ 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

USDA

220 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

NOTE 3. FUND BALANCE WITH TREASURY

Other Fund Types include special, 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 2005 FY 2004

Fund Balances:

 Trust Funds $ 648 759 $ 

 Revolving Funds 11,011 10,552 

 Appropriated Funds 30,009 27,584 

 Other Fund Types 548 704 

Total 39,488 42,327 

Status of Fund Balance with Treasury:

Unobligated Balance:

 Available 12,190 12,630 

 Unavailable 11,669 11,870 

Obligated Balance not yet Disbursed 26,357 20,579 

Clearing Account Balances 170 299 

Borrowing Authority not yet Converted to Fund Balance (8,700) (5,249) 

Total $ 39,488 42,327 $ 

NOTE 4. CASH AND OTHER MONETARY ASSETS

In fiscal 2005 and 2004, cash includes Federal crop insurance escrow amounts of $65 million and $83 million, 

funds held in escrow for single family housing borrowers of $90 million and $81 million, and other receipts of 

$87 million and $1 million, respectively. The other receipts of $87 million in fiscal 2005 include $26 million 

of interest-bearing deposits. 

FY 2005 FY 2004

Cash 242 $ 165 $ 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

USDA

F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 221 

NOTE 5. INVESTMENTS

FY 2005 Unamortized Market

Amortization Premium/ Investments, Value

Method Cost (Discount) Net Disclosure

Intragovernmental:

Non-marketable

Par value 64 $ - $ 64 $ - $ 

Market-based Straight Line 5 - 5 5 

Total 69 $ - $ 69 $ 5 $ 

With the Public:

AARC 15 $ - $ 15 $ 15 $ 

Total 15 $ - $ 15 $ 15 $ 

FY 2004 Unamortized Market

Amortization Premium/ Investments, Value

Method Cost (Discount) Net Disclosure

Intragovernmental:

Non-marketable 

Par value 52 $ - $ 52 $ - $ 

Market-based Straight Line 4 - 4 4 

Total 56 $ - $ 56 $ 4 $ 

With the Public:

AARC 15 $ - 15 $ 15 $ 

Total 15 $ - $ 15 $ 15 $ 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

USDA

222 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

NOTE 6. ACCOUNTS RECEIVABLE, NET

FY 2005

Accounts 

Receivable, 

Gross

Allowance for 

Uncollectible 

Accounts

Accounts 

Receivable, 

Net

Intragovernmental 712 $ - $ 712 $ 

With the Public 9,607 165 9,442 

Total 10,319 $ 165 $ 10,154 $ 

FY 2004

Accounts 

Receivable, 

Gross

Allowance for 

Uncollectible 

Accounts

Accounts 

Receivable, 

Net

Intragovernmental 625 $ - $ 625 $ 

With the Public 2,696 218 2,478 

Total 3,321 $ 218 $ 3,103 $ 

NOTE 7. DIRECT LOANS AND GUARANTEES, NON-FEDERAL BORROWERS

Direct Loans 

Direct loan obligation or loan guarantee commitments made pre-1992 and the resulting direct loans or loan 

guarantees are reported at net present value. 

Direct loan obligations or loan guarantee commitments made post-1991, and the 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 Loans Receivable and Related Foreclosed Property, Net is not necessarily 

representative of the proceeds that might be expected if these loans were sold on the open market. 

Loans Receivable and Related Foreclosed Property, Net at the end of FY 2005 was $75,176 million compared 

to $73,841 million at the end of FY 2004. Loans exempt from the Federal Credit Reform Act of 1990 

represent $1,057 million of the total compared to $2,092 million in FY 2004. Table 1 illustrates the overall 

composition of the Department’s credit program balance sheet portfolio by credit program for FY 2005 and 

2004. 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

USDA

F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 223 

During the fiscal year, the gross outstanding balance of the direct loans obligated post-1991 is adjusted by the 

value of the subsidy cost allowance held against those loans. Current year subsidy expense, modifications and 

reestimates all contribute to the change of the subsidy cost allowance through the year. The subsidy cost 

allowance moved from $6,256 million to $4,674 million during FY 2005, a decrease of $1,582 million. Table 

2 shows the reconciliation of subsidy cost allowance balances from FY 2004 to FY 2005. 

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 2005 was negative $783 million compared to negative $131 million in FY 

2004. Table 3 illustrates the breakdown of total subsidy expense for FY 2005 and 2004 by program. 

Direct loan volume increased from $6,430 million in FY 2004 to $7,740million in FY 2005. 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 2005 were $34,072 million in outstanding principal and 

$30,269 million in outstanding principal guaranteed, compared to $34,161 and $30,368 million, respectively 

at the end of FY 2004. 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 $1,188 million to $1,214 million during FY 2005, an increase of $26 million. The post-1991 liability 

moved from $1,183 million to $1,210 million, an increase of $27 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 2005 was negative $222 million compared to 

negative $312 million in FY 2004. Table 8 illustrates the breakdown of total subsidy expense for FY 2005 and 

2004 by program. 

Guaranteed loan volume decreased from $10,721 million in FY 2004 to $8,987 million in FY 2005. Volume 

distribution between mission area and program is shown in Table 9. 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

USDA

224 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

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 (FFAS) Mission Area 

The FFAS mission area helps keep America's farmers and ranchers in business as they face the uncertainties 

of weather and markets. FFAS delivers commodity, credit, conservation, disaster and emergency assistance 

programs that help strengthen and stabilize the agricultural economy. FFAS contributes to the vitality of the 

farm sector with programs that encourage the expansion of export markets for U.S. agriculture. 

FSA offers direct and guaranteed loans to farmers who are temporarily unable to obtain private, commercial 

credit and nonprofit entities that are engaged in the improvement of the nation's agricultural community. 

Often, FSA borrowers are beginning farmers who cannot qualify for conventional loans due to insufficient 

financial resources. Additionally, the agency helps established farmers who have suffered financial setbacks 

from natural disasters, or have limited resources to maintain profitable farming operations. FSA officials also 

provide borrowers with supervision and credit counseling. 

FSA’s mission is to provide supervised credit. FSA works with each borrower to identify specific strengths 

and weaknesses in farm production and management, and provides alternatives to address weaknesses. FSA is 

able to provide certain loan servicing options to assist borrowers whose accounts are distressed or delinquent. 

These options include reamortization, restructuring, loan deferral, lowering interest rate, acceptance of 

easements, and debt write-downs. The eventual goal of FSA's farm credit programs is to graduate its 

borrowers to commercial credit. 

CCC's foreign programs provide economic stimulus to both the U.S. and foreign markets, while also giving 

humanitarian assistance to the most-needy people throughout the world. CCC offers both guarantee credit and 

direct credit programs for buyers of U.S. exports, suppliers, and sovereign countries in need of food 

assistance. 

CCC permits debtor nations to reschedule debt under the aegis of the Paris Club (The Club). The Club is an 

internationally recognized organization 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 the world's most 

severely economically disadvantaged countries. The general premise of the Club's activities is to provide 

disadvantaged nations short-term liquidity relief to enable them to re-establish their credit worthiness. The 

Departments of State and Treasury lead the U.S. Delegation and negotiations for all U.S. Agencies. 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

USDA

F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 225 

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 

Guaranteed Sales Manager Credit Program 

Supplier Credit Guarantee Program 

Facility Program Guarantee 

P.L. 480 Title 1 Program 

Direct Farm Storage Facility 

Direct Sugar Storage Facilities 

The Rural Development (RD) Mission Area 

Each year, RD programs create or preserve tens of thousands of rural jobs and provide or improve the quality 

of rural housing. To leverage the impact of its programs, RD is working with State, local and Indian tribal 

Governments, as well as private and not-for-profit organizations and user-owned cooperatives. 

Through its rural housing loan and grant programs, RD provides affordable housing and essential community 

facilities to rural communities. Rural housing programs help finance new or improved housing for moderate, 

low, and very low-income families each year. The programs also help rural communities finance, construct, 

enlarge or improve fire stations, libraries, hospitals and medical clinics, industrial parks, and other community 

facilities. 

The Rural Business Program goal is to promote a dynamic business environment in rural America. RD 

partners with the private sector and community-based organizations to provide financial assistance and 

business planning. It also provides technical assistance to rural businesses and cooperatives, conducts research 

into rural economic issues, and provides cooperative educational materials to the public. 

The Rural Utilities Program helps to improve the quality of life in rural America through a variety of loan 

programs for electric energy, telecommunications, and water and environmental projects. This program 

leverages scarce Federal funds with private capital for investing in rural infrastructure, technology and 

development of human resources. 

RD programs provide certain loan servicing options to borrowers whose accounts are distressed or delinquent. 

These options include reamortization, restructuring, loan deferral, lowering interest rate, acceptance of 

easements and debt write-downs. The choice of servicing options depends on the loan program and the 

individual borrower. 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

USDA

226 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

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 

Rural Telephone Bank 

Federal Financing BankTelecommunications Guaranteed 

Distance Learning and Telemedicine 

Direct 

Broadband Telecommunications 

Services 

Discussion of Administrative Expenses, Subsidy Costs and Subsidy Rates 

Administrative Expenses 

Consistent with the Federal Credit Reform Act of 1990 as amended, subsidy cash flows exclude direct Federal 

administrative expenses. Administrative expenses for FY 2005 and 2004 are shown in Table 10. 

Reestimates, Default Analysis, and Subsidy Rates 

The Federal Credit Reform Act of 1990 as amended governs the proprietary and budgetary accounting 

treatment of direct and guaranteed loans. The long-term cost to the Government for direct loans or loan 

guarantees is referred to as "subsidy cost." Under the act, subsidy costs for loans obligated beginning in FY 

1992 are recognized at the net present value of projected lifetime costs in the year the loan is disbursed. 

Subsidy costs are revalued annually. Components of subsidy include interest subsidies, defaults, fee offsets, 

and other cash flows. 

Rural Development’s cashflow models are tailored for specific programs based on unique program 

characteristics. The models utilized are housing, guaranteed, and a direct model that covers the remaining 

portfolio with similar characteristics. Actual budgetary reestimates lag a year behind while the approximator 

method is used for financial statement purposes. For example, the FY 2004 and FY 2003 actual budgetary 

reestimates were recorded as of September 30, 2005 and 2004, respectively. The two exceptions to the 

method are the single family and multi-family housing programs whose reestimates are recorded in the current 

fiscal year. 

The annual reestimate process updates the budget assumptions with actual portfolio performance, interest 

rates and updated estimates for future loan performance. The FY 2005 reestimate process resulted in a $1,162 

million reduction in the post 1991 direct loan portfolio and a $519 million reduction in the post 1991 

guaranteed loan portfolio. 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

USDA

F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 227 

Table 3 discloses the direct loan subsidy expense including the $1.2 billion reduction due to reestimates. The 

reduction was most affected by a $751 million reduction in the housing program and $343 million reduction 

in the export program. The housing FY 2005 downward reestimates was largely due to model and data 

assumption changes that were implemented during the current fiscal year. After analyzing foreign credits 

government-wide, 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 significant downward subsidy reestimates for the food aid program 

Table 8 discloses the loan guarantee subsidy expenses including the $518 million reduction due to reestimate. 

The reduction was most impacted by the $475 million reduction in the export programs and $161 million 

reduction in the farm loan programs. After analyzing foreign credits government-wide, 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 significant downward 

subsidy reestimates for the export program. The reduction in the farm loan program has not been fully 

analyzed at this time. A detailed analysis will be performed during FY 2006. 

Based on sensitivity analysis conducted for each cohort or segment of a loan portfolio, the difference between 

the budgeted and actual interest for both borrower and Treasury remain the key components for the subsidy 

formulation and reestimate rates of many USDA direct programs. USDA uses the Government-wide interest 

rate projections provided by the Office of Management and Budget (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 100-percent allowance. 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 2005 and 2004 cohorts. These rates cannot be applied to 

the direct and guaranteed loans disbursed during the current reporting year to yield the subsidy expense. The 

subsidy expense for new loans reported in the current year could result from disbursements of loans from both 

current year cohorts and prior-year cohorts. The subsidy expense reported in the current year also includes 

reestimates. 

As a result of new guidance provided by the credit reform Treasury certificate training class, CCC chose to 

reflect interest on downward reestimates in the Statement of Changes in Net Position as other financing 

sources for FY 2005 and 2004, 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. 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

USDA

228 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

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, 2005 and 2004, foreclosed property consisted of 587 and 783 rural single-family housing 

dwellings, with an average holding period of 26 and 24 months, respectively. As of September 30, 2005 and 

2004, FSA-Farm Loan Program properties consist primarily of 100 and 133 farms, respectively. The average 

holding period for these properties in inventory for FY 2005 and 2004 was 57 and 60 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 

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 $18,200 and $18,300 million of RHS unpaid loan principal as of September 30, 2005, and 

2004 were receiving interest credit, respectively. If those loans receiving interest credit had accrued interest at 

the full-unreduced rate, interest income would have been approximately $1,100 million higher for FY 2005 

and 2004. 

Restructured Loans 

At the end of FY 2005 and 2004, the RD portfolio contained approximately 80,000 and 88,000 restructured 

loans with an outstanding unpaid principal balance of $2,600 and $2,500 million, respectively. At the end of 

FY 2005 and 2004, the farm loan portfolio contained approximately 25,008 and 27,259 restructured loans 

with an outstanding unpaid principal balance of $1,351 and $1,484 million, respectively. Direct credit and 

credit guarantee principal receivables in the food aid and export programs under rescheduling agreements as 

of September 30, 2005 and 2004, were $5.5 and $7.4 billion, respectively. 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

USDA

F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 229 

Table 1. Total Loans Receivable and Related Foreclosed Property, Net 

FY 2005 Loans Present Value of Assets

Direct Loans Receivable, Interest Foreclosed Value Related to

Gross Receivable Property Allowance Direct Loans

Obligated Pre-1992

Farm 2,336 $ 151 $ 21 $ (247) $ 2,261 $ 

Export 5,909 69 - (2,624) 3,354 

Food Aid - - - - - 

Housing 12,379 114 13 (5,112) 7,394 

Electric 12,308 25 - (1,599) 10,734 

Telecommunications 1,526 3 - (109) 1,420 

Water and Environmental 1,700 17 - (248) 1,469 

Business and Industry 1 - - (1) - 

Economic Development 52 - - (25) 27 

Pre-1992 Total 36,211 379 34 (9,965) 26,659 

Obligated Post-1991

Farm 4,562 141 3 (645) 4,061 

Export 2,794 37 - (1,391) 1,440 

Food Aid - - - - - 

Housing 14,423 73 19 (1,114) 13,401 

Electric 17,857 2 - (600) 17,259 

Telecommunications 2,533 3 - 24 2,560 

Water and Environmental 6,639 65 - (705) 5,999 

Business and Industry 83 - - (76) 7 

Economic Development 452 2 - (157) 297 

Post-1991 Total 49,343 323 22 (4,664) 45,024 

Total Direct Loan Program Receivables 85,554 702 56 (14,629) 71,683 

Defaulted Guarantee Loans

Pre-1992

Farm 9 - - (7) 2 

Export 1,401 15 - (122) 1,294 

Food Aid - - - - - 

Housing - - - - - 

Electric - - - - - 

Telecommunications - - - - - 

Water and Environmental - - - - - 

Business and Industry - - - - - 

Economic Development 3 1 - - 4 

Pre-1992 Total 1,413 16 - (129) 1,300 

Post-1991

Farm 26 1 - (18) 9 

Export 1,605 24 - (691) 938 

Food Aid - - - - - 

Housing 13 - - - 13 

Electric - - - - - 

Telecommunications - - - - - 

Water and Environmental - - - - - 

Business and Industry 167 1 - 8 176 

Economic Development - - - - - 

Post-1991 Total 1,811 26 - (701) 1,136 

Total Defaulted Guarantee Loans 3,224 42 - (830) 2,436 

Loans Exempt from Credit Reform Act:

Commodity Loans 1,031 - - - 1,031 

Other Foreign Receivables 26 - - - 26 

Total Loans Exempt 1,057 - - - 1,057 

Total Loans Receivable and Related Foreclosed Property, Net $ 75,176
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

USDA

230 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Table 1. Total Loans Receivable and Related Foreclosed Property, Net (cont’d) 

FY 2004 Loans Present Value of Assets

Direct Loans Receivable, Interest Foreclosed Value Related to

Gross Receivable Property Allowance Direct Loans

Obligated Pre-1992

Farm 2,799 $ 171 $ 28 $ (327) $ 2,671 $ 

Export 6,244 71 - (2,930) 3,385 

Food Aid - - - - - 

Housing 12,949 123 17 (5,558) 7,531 

Electric 13,283 28 - (1,780) 11,531 

Telecommunications 2,092 9 - (159) 1,942 

Water and Environmental - - - - - 

Business and Industry - - - - - 

Economic Development 2,176 21 - (347) 1,850 

Pre-1992 Total 39,543 423 45 (11,101) 28,910 

Obligated Post-1991

Farm 4,646 120 5 (598) 4,173 

Export 3,007 34 - (1,821) 1,220 

Food Aid - - - - - 

Housing 13,874 87 25 (2,066) 11,920 

Electric 14,675 4 - (748) 13,931 

Telecommunications 2,339 2 - (5) 2,336 

Water and Environmental 6,009 64 - (760) 5,313 

Business and Industry 89 - - (78) 11 

Economic Development 435 2 - (158) 279 

Post-1991 Total 45,074 313 30 (6,234) 39,183 

Total Direct Loan Program Receivables 84,617 736 75 (17,335) 68,093 

Defaulted Guarantee Loans

Pre-1992

Farm 10 1 - (8) 3 

Export 4,709 21 - (2,204) 2,526 

Food Aid - - - - - 

Housing - - - - - 

Electric - - - - - 

Telecommunications - - - - - 

Water and Environmental - - - - - 

Business and Industry - - - - - 

Economic Development 4 1 - - 5 

Pre-1992 Total 4,723 23 - (2,212) 2,534 

Post-1991

Farm 15 - - (11) 4 

Export 1,794 27 - (873) 948 

Food Aid - - - - - 

Housing 4 - - - 4 

Electric - - - - - 

Telecommunications - - - - - 

Water and Environmental - - - - - 

Business and Industry 176 - - (10) 166 

Economic Development - - - - - 

Post-1991 Total 1,989 27 - (894) 1,122 

Total Defaulted Guarantee Loans 6,712 50 - (3,106) 3,656 

Loans Exempt from Credit Reform Act:

Commodity Loans 1,798 - - - 1,798 

Other Foreign Receivables 294 - - - 294 

Total Loans Exempt 2,092 - - - 2,092 

Total Loans Receivable and Related Foreclosed Property, Net $ 73,841
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

USDA

F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 231 

Table 2. Schedule for Reconciling Subsidy Cost Allowance Balances (Post-1991) 

Direct Loans 

FY 2005 FY 2004

Beginning balance of the subsidy cost allowance 6,256 $ 6,654 $ 

Add: Subsidy expense for direct loans disbursed during the year by component

Interest rate differential costs (89) (83)

Default costs (net of recoveries) 141 211

Fees and other collections (7) (12)

Other subsidy costs 326 339

Total subsidy expense prior to adjustments and reestimates 371 455

Adjustments

Loan modifications 6 142

Fees received 20 17

Loans written off (191) (405)

Subsidy allowance amortization (527) (317)

Other (99) 437

Total subsidy cost allowance before reestimates 5,836 6,983

Add or subtract subsidy reestimates by component

Interest rate reestimate 108 275

Technical/default reestimate (1,270) (1,002)

Total reestimates (1,162) (727)

Ending balance of the subsidy cost allowance 4,674 $ 6,256 $ 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

USDA

232 F Y 2005 P ERFORMANCE AND 

A CCOUNTABILITY 

R EPORT

Table 3. Direct Loan Subsidy Expense by Program and Component 

FY 2005

Interest Fees and Other Subtotal Total Rate Technical 

Differential Defaults Collections Other Subsidy Modifications Reestimates Reestimates 

Direct Loan Programs

Farm (4) $ 97 $ - $ (18) $ 75 $ - $ (8) $ 42 $ 

Export 21 5 - 1 27 6 - (343) 

Food Aid - - - - - - - - 

Housing (176) 35 (7) 358 210 - (52) (699) 

Electric (23) 2 - (10) (31) - 126 (147) 

Telecommunications (2) 1 - (2) (3) - 27 (38) Water and Environmental 77 1 - (3) 75 - 16 (80) 

Business and Industry - - - - - - 1 (1) Economic Development 18 - - - 18 - (2) (2) 

Total Direct Loan Subsidy Expense (89) $ 141 $ (7) $ 326 $ 371 $ 6 $ 108 $ (1,268) $ 

FY 2004

Interest Fees and Other Subtotal Total Rate Technical 

Differential Defaults Collections Other Subsidy Modifications Reestimates Reestimates 

Direct Loan Programs

Farm (29) $ 163 $ - $ (10) $ 124 $ - $ (12) $ (194) $ 

Export 21 10 - 3 34 141 (2) (319) Food Aid - - - - - - - - 

Housing (148) 33 (12) 355 228 - (10) (23) 

Electric (19) 3 - (6) (22) - 352 (456) 

Telecommunications 2 1 - (1) 2 - 9 (46) Water and Environmental 73 1 - (3) 71 - (67) 5 

Business and Industry - - - - - - 5 37 Economic Development 17 - - - 17 - (2) (3) 

Total Direct Loan Subsidy Expense (83) $ 211 $ (12) $ 338 $ 454 $ 141 $ 273 $ (999) $ 

.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

USDA

F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 233 

Table 4. Total Amount of Direct Loans Disbursed (Post-1991) 

FY 2005 FY 2004

Direct Loan Programs

Farm $ 956 906 $ 

Export 60 - 

Food Aid - 20 

Housing 1,626 1,744 

Electric 2,600 3,600 

Telecommunications 567 445 

Water and Environmental 855 700 

Business and Industry 2 - 

Economic Development 46 43 

Total Direct Loans Disbursed 7,740 $ 6,430 $ 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

USDA

234 F Y 2005 P ERFORMANCE AND 

A CCOUNTABILITY 

R EPORT

Table 5. Loan Guarantees Outstanding 

Pre - 1992 Post - 1991 Total Pre - 1992 Post - 1991 

FY 2005 Outstanding Principal, Outstanding Principal, Outstanding Principal, Outstanding Principal, Outstanding Principal, 

Face Value Face Value Face Value Guaranteed Guaranteed 

Loan Guarantee Programs

Farm $ 115 $ 10,209 $ 10,324 $ 101 $ 9,170 Export - 4,240 4,240 - 4,098 Food Aid - - - - - Housing 6 14,788 14,794 11 13,287 Electric 233 220 453 233 220 Telecommunications - - - - - Water and Environmental - 32 32 - 26 Business and Industry 35 4,191 4,226 22 3,098 Economic Development 3 - 3 3 - 

Total Guarantees Disbursed $ 392 $ 33,680 $ 34,072 $ 370 $ 29,899 

Pre - 1992 Post - 1991 Total Pre - 1992 Post - 1991 

FY 2004 Outstanding Principal, Outstanding Principal, Outstanding Principal, Outstanding Principal, Outstanding Principal, 

Face Value Face Value Face Value Guaranteed Guaranteed 

Loan Guarantee Programs

Farm $ 152 $ 10,224 $ 10,376 $ 134 $ 9,182 Export 0 5,042 5,042 0 4,833 Food Aid 0 0 0 0 0 Housing 9 13,986 13,995 8 12,569 Electric 255 221 476 255 221 Telecommunications 4 0 4 3 0 Water and Environmental 0 33 33 0 27 Business and Industry 41 4,194 4,235 31 3,105 Economic Development 0 0 0 0 0 

Total Guarantees Disbursed $ 461 $ 33,700 $ 34,161 $ 431 $ 29,937 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

USDA

F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 235 

Table 6. Liability for Loan Guarantees (Present Value Method for Pre-1992 

Guarantees) 

FY 2005 Liabilities for Losses on 

Pre-1992 Guarantees 

Present Value

Liabilities for Loan 

Guarantees on Post1991 Guarantees 

Present Value

Total Liabilities for Loan 

Guarantees

Loan Guarantee Programs

Farm 2 $ 26 $ 28 $ 

Export - 260 260 

Food Aid - - - 

Housing - 556 556 

Electric - - - 

Telecommunications - - - 

Water and Environmental - - - 

Business and Industry 2 368 370 

Economic Development - - - 

Total Liability for Loan Guarantees 4 $ 1,210 $ 1,214 $ 

FY 2004 Liabilities for Losses on 

Pre-1992 Guarantees 

Present Value

Liabilities for Loan 

Guarantees on Post1991 Guarantees 

Present Value

Total Liabilities for Loan 

Guarantees

Loan Guarantee Programs

Farm 2 $ 162 $ 164 $ 

Export - 240 240 

Food Aid - - - 

Housing - 447 447 

Electric - - - 

Telecommunications - - - 

Water and Environmental - - - 

Business and Industry 3 334 337 

Economic Development - - - 

Total Liability for Loan Guarantees 5 $ 1,183 $ 1,188 $ 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

USDA

236 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Table 7. Schedule for Reconciling Loan Guarantee Liability 

FY 2005 FY 2004

Beginning balance of the loan guarantee liability 1,183 $ 876 $ 

Add:Subsidy expense for guaranteed loans disbursed during the year by component

Interest rate differential costs 35 35

Default costs (net of recoveries) 481 369

Fees and other collections (105) (106)

Other subsidy costs 0 -

Total of the above subsidy expense components 298 411

Adjustments

Loan modifications - - 

Fees received 116 103

Interest supplements paid (4) (10)

Claim payments to lenders (372) (360)

Interest accumulation on the liability balance 16 31

Other 847 498

Ending balance of the subsidy cost allowance before reestimates 1,728 1,905

Add or subtract subsidy reestimates by component:

Interest rate reestimate (202) (284)

Technical/default reestimate (520) (235)

Total of the above reestimate components (519) (722)

Ending balance of the loan guarantee liability 1,209 $ 1,183 $ 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

F Y 2005 P ERFORMANCE AND 

A CCOUN

Table 8. Guarantee Loan Subsidy Expense by Program and Component 

FY 2005

Interest 

Interest Fees and Other Total Rate Technical 

Loan Guarantee Programs Supplement Defaults Collections Other Subtotal Modifications Reestimates Reestimate

Farm 29 $ 58 $ (17) $ - $ 70 $ - $ (19) $ (14

$ 

Export - 181 (16) - 165 - (287) (18

 

Food Aid - - - - - - - 

 

Housing 6 93 (66) - 33 - 18 7

 

Electric - - - - - - - 

 

Telecommunications - - - - - - - 

 

Water and Environmental - - - - - - - 

 

Business and Industry - 36 (8) - 28 - 4 2

 

Economic Development - - - - - - - 

 

Total Loan Guarantee Subsidy Expense $ 35 $ 368 $ (107) $ - $ 296 $ - $ (284) $ (23

FY 2004

Interest 

Interest Fees and Other Total Rate Technical 

Loan Guarantee Programs Supplement Defaults Collections Other Subtotal Modifications Reestimates Reestimate

Farm 27 $ 64 $ (20) $ - $ 71 $ - $ 9 $ (3

$ 

Export - 271 (25) - 246 - (259) (54

 

Food Aid - - - - - - - 

 

Housing 8 90 (47) - 51 - 40 1

 

Electric - - - - - - - 

 

Telecommunications - - - - - - - 

 

Water and Environmental - - - - - - - 

 

Business and Industry - 54 (12) - 42 - 8 4

 

Economic Development - - - - - - - 

 

Total Loan Guarantee Subsidy Expense 35 $ 479 $ (104) $ - $ 410 $ - $ (202) $ (52

$ 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

USDA

238 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Table 9. Guaranteed Loans Disbursed 

Principal, Face 

Value 

Disbursed

Principal, 

Guaranteed 

Disbursed

Principal, Face 

Value Disbursed

Principal, 

Guaranteed 

Disbursed

Loan Guarantee Programs

Farm 2,191 $ 1,968 $ 2,347 $ 2,108 $ 

Export 2,956 2,678 3,873 3,373 

Food Aid - - - - 

Housing 3,130 2,813 3,555 3,193 

Electric 2 2 18 18 

Telecommunications - - - - 

Water and Environmental 5 4 4 3 

Business and Industry 703 550 924 725 

Economic Development - - - - 

Total Guaranteed Loans Disbursed 8,987 $ 8,015 $ 10,721 $ 9,420 $ 

FY 2005 FY 2004

Table 10. Administrative Expenses 

FY 2005 FY 2004

Direct Loan Programs 516 $ 567 $ 

Guaranteed Loan Programs 253 163

Total Administrative Expenses 769 $ 730 $ 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

USDA

F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 239 

Table 11. Subsidy Rates for Direct Loans (percentage) 

FY 2005 Interest 

Differential Defaults

Fees and 

Other 

Collections Other Total

Direct Loan Programs

Farm Operating 0.14 9.39 - 0.56 10.09 

Indian Land Acquisition 5.30 0.43 - (0.46) 5.27 

Emergency Disaster 17.55 2.46 - (7.07) 12.94 

Boll Weevil Eradication (4.08) (0.88) - (0.72) (5.68) 

Farm Ownership (0.40) 14.77 - (9.02) 5.35 

Farm Storage Facility Loan Program (1.68) 0.51 (0.11) (0.15) (1.43) 

Sugar Storage Facility Loan Program - - - - - 

Community Facility Loans 4.48 0.24 - (0.67) 4.05 

Water and Waste Disposal Loans 9.36 0.10 - (0.46) 9.00 

Distance Learning and Telemedicine Loans - 1.61 - (0.19) 1.42 

Broadband 4% Loans (Mandatory) 5.83 2.18 - - 8.01 

Broadband 4% Loans (Discretionary) 5.83 2.18 - - 8.01 

Broadband Treasury Loans (Mandatory) - 2.27 - (0.14) 2.13 

Broadband Treasury Loans (Discretionary) - 2.27 - (0.14) 2.13 

Electric Hardship Loans 3.19 0.03 - (0.18) 3.04 

Municipal Electric Loans 1.63 0.03 - (0.31) 1.35 

FFB Electric Loans (1.35) 0.01 - (0.89) (2.23) 

Treasury Electric Loans - 0.03 - (0.08) (0.05) 

Telecommunication Hardship Loans (1.25) 0.02 - 0.02 (1.21) 

FFB Telecommunications Loans (1.03) 0.12 - (1.04) (1.95) 

Treasury Telecommunication Loans - 0.05 - (0.01) 0.04 

Rural Telephone Bank Loans (1.43) 0.02 - (0.42) (1.83) 

Single-Family Housing Credit Sales 1.72 (21.08) - 3.13 (16.23) 

Multi-Family Housing Credit Sales 0.07 (18.85) - 67.22 48.44 

Section 502 Single-Family Housing 2.68 (17.35) - 26.25 11.58 

Section 504 Housing Repair 2.38 26.95 - (0.27) 29.06 

Section 515 Multi-Family Housing (18.03) 0.02 (0.05) 65.15 47.09 

Section 523 Self-Help Site Development (0.47) - - - (0.47) 

Section 524 Site Development (5.91) 0.96 - 0.01 (4.94) 

Section 514 Farm Labor Housing 45.87 0.02 - 1.17 47.06 

Intermediary Relending Program 46.64 - - (0.26) 46.38 

Rural Economic Development Loans 20.32 0.04 - (1.57) 18.79 

P. L. 480 Direct Credits 45.85 10.13 - - 55.98 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

USDA

240 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

FY 2004 Interest 

Differential Defaults

Fees and 

Other 

Collections Other Total

Direct Loan Programs

Farm Operating (3.05) 16.48 - 0.99 14.42 

Indian Land Acquisition (1.02) 0.76 - (0.52) (0.78) 

Emergency Disaster 18.10 2.15 - (6.42) 13.83 

Boll Weevil Eradication (6.73) 1.58 - (0.92) (6.07) 

Farm Ownership (6.48) 37.56 - (9.00) 22.08 

Farm Storage Facility Loan Program (0.97) 1.62 (0.11) 0.68 1.22 

Sugar Storage Facility Loan Program - - - - - 

Community Facility Loans (0.48) 0.19 - (0.42) (0.71) 

Water and Waste Disposal Loans 3.56 0.09 - (0.32) 3.33 

Distance Learning and Telemedicine Loans - - - - - 

Broadband 4% Loans (Mandatory) 2.79 2.15 - - 4.94 

Broadband 4% Loans (Discretionary) 2.79 2.15 - - 4.94 

Broadband Treasury Loans (Mandatory) - 2.28 - (0.10) 2.18 

Broadband Treasury Loans (Discretionary) - 2.28 - (0.10) 2.18 

Electric Hardship Loans (2.27) 0.03 - (0.09) (2.33) 

Municipal Electric Loans (2.26) 0.03 - (0.19) (2.42) 

FFB Electric Loans (1.35) 0.01 - (0.65) (1.99) 

Treasury Electric Loans - 0.03 - (0.09) (0.06) 

Telecommunication Hardship Loans (4.49) 0.02 - 0.03 (4.44) 

FFB Telecommunications Loans (1.04) 0.11 - (0.92) (1.85) 

Treasury Telecommunication Loans - 0.04 - 0.01 0.05 

Rural Telephone Bank Loans (4.29) 0.02 - (0.05) (4.32) 

Single-Family Housing Credit Sales 1.22 (21.54) - 2.86 (17.46) 

Multi-Family Housing Credit Sales 0.07 (21.32) - 65.45 44.20 

Section 502 Single-Family Housing 2.62 (19.23) - 25.88 9.27 

Section 504 Housing Repair 2.59 25.08 - (0.21) 27.46 

Section 515 Multi-Family Housing (20.70) 0.01 - 63.70 43.01 

Section 523 Self-Help Site Development 0.13 3.22 - (0.27) 3.08 

Section 524 Site Development (4.76) 3.37 - 1.36 (0.03) 

Section 514 Farm Labor Housing 42.74 0.03 - (0.04) 42.73 

Intermediary Relending Program 43.27 - - - 43.27 

Rural Economic Development Loans 19.61 0.04 - (1.04) 18.61 

P. L. 480 Direct Credits 42.49 24.53 - 11.88 78.90 

Table 12. Subsidy Rates for Loan Guarantees (percentage) 

FY 2005 Interest

Fees and 

Other

Differential Defaults Collections Other Total

Guaranteed Loan Programs

CCC Export Loan Guarantee Program - 7.48 0.65 - 8.13 

Farm Operating—Unsubsidized - 4.12 - (0.89) 3.23 

Farm Operating—Subsidized 10.31 3.07 - 13.31 (0.07) 

Farm Ownership—Unsubsidized - 1.43 - (0.90) 0.53 

Business and Industry Loans - 6.51 (1.47) 5.03 (0.01) 

Guaranteed Business & Industry NadBank Loans - 9.91 - (1.61) 8.30 

Community Facility Loans - 0.93 - (0.84) 0.09 

Water and Waste Disposal Loans - - (0.90) - (0.90) 

Electric Guaranteed Loans - 0.06 - - 0.06 

Local Television Loans (Discretionary) - - - - - 

Local Television Loans (Mandatory) - - - - - 

Guaranteed Broadband Loans (Discretionary) - 3.93 - - 3.93 

Guaranteed Broadband Loans (Mandatory) - 3.93 - - 3.93 

Section 502 Single-Family Housing Purchase - 3.07 (2.00) - 1.07 

Section 502 Single-Family Housing Refinance - 0.77 (0.50) - 0.27 

538 Multi-Family Housing-Subsidized 10.32 0.55 (7.39) 0.01 3.49 

Renewable Energy - 6.51 (0.78) - 5.73 

Rural Business Investment Program - - - - - 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

USDA

F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 241 

FY 2004 Interest

Fees and 

Other

Differential Defaults Collections Other Total

Guaranteed Loan Programs

CCC Export Loan Guarantee Program - 7.48 (0.66) - 6.82 

Farm Operating—Unsubsidized - 4.23 (0.90) - 3.33 

Farm Operating—Subsidized 10.18 3.48 (0.89) - 12.77 

Farm Ownership—Unsubsidized - 1.44 (0.90) - 0.54 

Business and Industry Loans - 6.33 (1.48) 0.01 4.86 

Guaranteed Business & Industry NadBank Loans - 4.53 - (1.59) 2.94 

Community Facility Loans - 0.23 - (0.83) (0.60)

Water and Waste Disposal Loans - - - (0.90) (0.90)

Electric Guaranteed Loans - 0.06 - - 0.06 

Local Television Loans (Discretionary) - 8.96 (0.50) - 8.46 

Local Television Loans (Mandatory) - 8.96 (0.50) - 8.46 

Guaranteed Broadband Loans (Discretionary) - 3.90 - - 3.90 

Guaranteed Broadband Loans (Mandatory) - 3.90 - - 3.90 

Section 502 Single-Family Housing Purchase - 3.07 - (1.50) 1.57 

Section 502 Single-Family Housing Refinance - 0.79 - (0.50) 0.29 

538 Multi-Family Housing-Subsidized 9.61 0.56 - (4.22) 5.95 

Renewable Energy - - - - - 

Rural Business Investment Program - - - - - 

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, 2005 and 2004 were $79 million and $25 million, 

respectively. In fiscal year 2005, tobacco loan forfeitures amounted to $985 million including accrued 

interest. 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

USDA

242 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Inventories - $ 1 $ 

Commodities: Volume Amount Volume Amount

Corn (In Bushels):

On hand at the beginning of the year 12 22 16 29 

Acquired during the year 99 204 19 52 

Disposed of during the year

Sales (97) (198) (22) (58) 

Donations (13) (25) - (1) 

Other - (1) (1) - 

On hand at the end of the year 1 2 12 22 

Wheat (In Bushels):

On hand at the beginning of the year 81 291 81 290 

Acquired during the year 68 287 56 240 

Disposed of during the year

Sales (71) (295) (51) (221) 

Donations (31) (112) (4) (16) 

Other - - (1) (2) 

On hand at the end of the year 47 171 81 291 

Nonfat Dry Milk (In Pounds):

On hand at the beginning of the year 661 594 1,440 1,294 

Acquired during the year 34 26 359 288 

Disposed of during the year

Sales (186) (164) (381) (344) 

Donations (276) (259) (436) (388) 

Other (129) (103) (321) (256) 

On hand at the end of the year 104 94 661 594 

Sugar (In Pounds):

On hand at the beginning of the year 32 8 - - 

Acquired during the year 48 10 32 8 

Disposed of during the year

Sales (80) (18) - - 

Donations - - - - 

Other - - - - 

On hand at the end of the year - - 32 8 

Tobacco (In Pounds):

On hand at the beginning of the year 2 2 96 278 

Acquired during the year 280 986 - - 

Disposed of during the year

Sales (200) (696) (2) (4) 

Donations (82) (292) - - 

Other - - (93) (272) 

On hand at the end of the year - - 1 2 

Other:

On hand at the beginning of the year 33 93 

Acquired during the year 5,675 871 

Disposed of during the year

Sales (5,507) (689) 

Donations (164) (239) 

Other - (3) 

On hand at the end of the year 37 33 

Allowance for losses (275) (809) 

Total Commodities 29 141 

Total Inventory and Related Property, Net 29 $ 142 $ 

FY 2005 FY 2004
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

USDA

F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 243 

NOTE 9. GENERAL PROPERTY, PLANT, AND EQUIPMENT, NET

FY 2005 Useful Net

Life Accumulated Book

Category (Years) Cost Depreciation Value

Land and Land Rights 76 $ - $ 76 $ 

Improvements to Land 10 - 50 4,958 2,596 2,362 

Construction-in-Progress 562 - 562 

Buildings, Improvements and Renovations 15 - 30 1,820 1,055 765 

Other Structures and Facilities 15 - 50 1,602 1,146 456 

Equipment 5 - 20 1,781 1,397 384 

Assets Under Capital Lease 3 - 20 40 17 23 

Leasehold Improvements 10 50 30 20 

Internal-Use Software 5 - 8 417 211 206 

Internal-Use Software in Development 29 - 29 

Other General Property, Plant and Equipment 5 - 15 2 - 2 

Total $ 6,452 11,337 $ 4,885 $ 

FY 2004 Useful Net

Life Accumulated Book

Category (Years) Cost Depreciation Value

Land and Land Rights 76 $ - $ 76 $ 

Improvements to Land 10 - 50 4,917 2,480 2,437 

Construction-in-Progress 438 - 438 

Buildings, Improvements and Renovations 15 - 30 1,766 983 783 

Other Structures and Facilities 15 - 50 1,544 1,092 452 

Equipment 5 - 20 1,842 1,378 464 

Assets Under Capital Lease 3 - 20 40 17 23 

Leasehold Improvements 10 46 26 20 

Internal-Use Software 5 - 8 335 163 172 

Internal-Use Software in Development 43 - 43 

Other General Property, Plant and Equipment 5 - 15 6 - 6 

Total $ 6,139 11,053 $ 4,914 $ 

NOTE 10. OTHER ASSETS

In fiscal 2005 and 2004, other assets include investments of $35 million in trust for loan asset sales. 

FY 2005 FY 2004

Intragovernmental:

Advances to Others 1 $ 1 $ 

Subtotal Intragovernmental 1 1 

With the Public:

Advances to Others 48 51 

Prepayments 1 1 

Other Assets 37 37 

Subtotal With the Public 86 89 

Total Other Assets 87 $ 90 $ 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

USDA

244 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

NOTE 11. LIABILITIES NOT COVERED BY BUDGETARY RESOURCES

In fiscal 2005 and 2004, other intragovernmental liabilities not covered by budgetary resources include 

accruals for Federal Employee Compensation Act (FECA) of $155 million and $161 million. Contract 

disputes claims payable to Treasury’s Judgment Fund of $10 million and $7 million, respectively. 

In fiscal 2005 and 2004, other liabilities with the public not covered by budgetary resources include, accruals 

for rental payments under the Conservation Reserve Program (CRP) of $1,858 million and $1,663 million, 

unfunded leave of $546 million and $526 million, Payments to States $378 million and $380 million, future 

funded indemnity cost of $479 million, and, contingent liabilities of $19 million and $10 million, respectively. 

There were no future funded indemnity costs in fiscal 2004. In fiscal 2005, CCC reported a long-term liability 

in the amount of $7,100 million under the TTPP. 

FY 2005 FY 2004

Intragovernmental:

Other 166 $ 168 $ 

Subtotal Intragovernmental 166 168 

With the Public:

Federal employee and veterans' benefits 834 836 

Environmental and disposal liabilities 28 23 

Benefits due and payable - 36 

Other 10,553 2,634 

Subtotal With the Public 11,415 3,529 

Total liabilities not covered by budgetary resources 11,581 3,697 

Total liabilities covered by budgetary resources 119,425 103,133 

Total liabilities 131,006 $ 106,830 $ 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

USDA

F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 245 

NOTE 12. DEBT

FY 2005 Beginning 

Balance Net Borrowing

Ending 

Balance

Intragovernmental:

Debt to the Treasury 41,439 $ 13,545 $ 54,984 $ 

Debt to the Federal Financing Bank 27,614 917 28,531 

Total Intragovernmental 69,053 14,462 83,515 

Agency Debt:

Held by the Public 1 - 1 

Total Debt 69,054 $ 14,462 $ 83,516 $ 

FY 2004 Beginning 

Balance Net Borrowing

Ending 

Balance

Intragovernmental:

Debt to the Treasury 53,440 $ (6,547) $ 46,893 $ 

Debt to the Federal Financing Bank 22,700 (540) 22,160 

 (7,087) 76,140 69,053 

Agency Debt:

Held by the Public 80 (79) 1 

Total Debt 76,220 $ (7,166) $ 69,054 $ 

NOTE 13. ENVIRONMENTAL AND DISPOSAL LIABILITIES

The Department is subject to the Comprehensive Environmental Response, Compensation, and Liability Act, 

the Clean Water Act, and the Resource Conservation and Recovery Act for cleanup of hazardous waste. The 

FS and CCC estimate the liability for total cleanup costs for sites known to contain hazardous waste to be $18 

million and $10 million in fiscal 2005, $8 million for FS and $15 million for CCC in fiscal 2004, 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 14. OTHER LIABILITIES

As of September 30, 2005 and 2004, other intragovernmental liabilities include; credit reform reestimates of 

$410 million and $382 million; and General Sales Manager (GSM) Program $23 million and $17 million 

respectively. 

Other liabilities with the public include estimated losses on crop insurance claims of $1,924 million and 

$2,320 million, stock payable to RTB borrowers of $1,390 million and $1,343 million, estimated underwriting 

gains on crop insurance of $740 million and $784 million, crop insurance premium subsidy deficiency reserve 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

USDA

246 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

of $371 million and $420 million, RTB dividend payable to treasury of $50 million and $49 million and 

peanut/tobacco programs of $33 million and $32 million respectively. 

FY 2005 Non-Current Current Total

Intragovernmental:

Other Accrued Liabilities 6 $ 1,018 $ 1,024 $ 

Employer Contributions and Payroll Taxes 1 38 39 

Unfunded FECA Liability 1 156 157 

Advances from Others - 21 21 

Liability for Deposit Funds, Clearing Accounts - 30 30 

Resources Payable to Treasury - 16,819 16,819 

Custodial Liability 22 46 68 

Other Liabilities - 433 433 

Subtotal Intragovernmental 30 18,561 18,591 

With the Public:

Contract Holdbacks - 2 2 

Other Accrued Liabilities 6 16,023 16,029 

Accrued Funded Payroll and Leave - 49 49 

Unfunded Leave 11 527 538 

Other Unfunded Employment Related Liability - 4 4 

Advances from Others 2 50 52 

Deferred Credits - 248 248 

Liability for Deposit Funds, Clearing Accounts 12 160 172 

Contingent Liabilities - 47 47 

Capital Lease Liability - 23 23 

Custodial Liability - 12 12 

Other Liabilities 1,409 3,125 4,534 

Subtotal With the Public 1,440 20,270 21,710 

Total Other Liabilities 1,470 $ 38,831 $ 40,301 $ 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

USDA

F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 247 

FY 2004 Non-Current Current Total

Intragovernmental:

Other Accrued Liabilities 19 $ 582 $ 601 $ 

Employer Contributions and Payroll Taxes 1 35 36 

Unfunded FECA Liability 39 124 163 

Advances from Others 3 15 18 

Liability for Deposit Funds, Clearing Accounts (1) 83 82 

Resources Payable to Treasury - 17,469 17,469 

Custodial Liability 34 59 93 

Other Liabilities - 399 399 

Subtotal Intragovernmental 95 18,766 18,861 

With the Public:

Other Accrued Liabilities 11 5,997 6,008 

Accrued Funded Payroll and Leave 3 2 3 7 9

Unfunded Leave 31 495 526 

Other Unfunded Employment Related Liability - 43 43 

Advances from Others - 41 41 

Deferred Credits - 309 309 

Liability for Deposit Funds, Clearing Accounts 20 614 634 

Contingent Liabilities 1 9 10 

Capital Lease Liability - 23 23 

Accounts Payable from Canceled Appropriations 1 - 1 

Custodial Liability - 16 16 

Other Liabilities 1,361 3,618 4,979 

Subtotal With the Public 1,427 11,202 12,629 

Total Other Liabilities $ 29,96 1,522 $ 31,490 8 $ 

NOTE 15. 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. 

Pursuant to the agreement, USDA retains that portion of GSA rental payments and makes it available for the 

operation, maintenance and repair of the building and expends such funds directly for the operation, 

maintenance or repair of the building or facility. At current market rate, the estimated yearly rental payment 

for the above mentioned space would be $52 million. This agreement is still in effect and as a result, USDA 

activities located in the Headquarter complex are not billed for rental costs. 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

USDA

248 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

FY 2005

Capital Leases:

Summary of Assets Under Capital Leases

Land and Building 38 $ 

Accumulated Amortization 17

Future Payments Due:

Land & 

Buildings

Machinery & 

Equipment Totals

Fiscal Year

2006 11 11 - 

2007 11 11 - 

2008 11 11 - 

2009 11 11 - 

2010 10 10 - 

After 5 Years 88 88 - 

Total Future Lease Payments 142 142 - 

Less: Imputed Interest 38 38 - 

Less: Executory Costs 48 48 - 

Less: Lease Renewal Options 33 33 - 

Net Capital Lease Liability 23 23 - 

Lease liabilities covered by budgetary resources 23 

Operating Leases:

Future Payments Due:

Fiscal Year

Land & 

Buildings

Machinery & 

Equipment Totals

2006 106 1 107 

2007 98 1 99 

2008 89 1 90 

2009 78 - 78 

2010 69 - 69 

After 5 Years 408 - 408 

Total Future Lease Payments 848 $ 3 $ 851 $ 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

USDA

F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 249 

FY 2004

Capital Leases:

Summary of Assets Under Capital Leases:

Land and Building 40 $ 

Accumulated Amortization 17

Future Payments Due:

Land & 

Buildings Totals

Fiscal Year

2005 11 11

2006 11 11

2007 11 11

2008 10 10

2009 10 10

After 5 Years 88 88

Total Future Lease Payments 141 141

Less: Imputed Interest 38 38

Less: Executory Costs 48 48

Less: Lease Renewal Options 32 32

Net Capital Lease Liability 23 $ $ 23

Lease liabilities covered by budgetary resources 23 $ 

Operating Leases:

Future Payments Due:

Fiscal Year Land & 

Buildings

Machinery & 

Equipment Totals

2005 101 1 102

2006 93 1 94

2007 85 1 86

2008 75 - 75

2009 67 - 67

After 5 Years 360 - 360

Total Future Lease Payments 781 $ 3 $ 784 $ 

NOTE 16. COMMITMENTS AND CONTINGENCIES

The Department is subject to various claims and contingencies related to lawsuits as well as commitments 

under contractual and other commercial obligations. 

For cases in which payment has been deemed probable and for which the amount of potential liability has 

been estimated, $47 million and $10 million has been accrued in the financial statements as of September 30, 

2005 and 2004, respectively. 

No amounts have been accrued in the financial statements for claims where the amount or probability of 

judgment is uncertain. The Department’s potential liability for these claims ranges from $114 million to $134 

million, as of September 30, 2005 and $475 million to $514 million as of September 30, 2004. 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

USDA

250 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

In fiscal 2005 and 2004, commitments under contractual and other commercial obligations were estimated to 

be $39,000 million and $66,000 million respectively. These consist of $2,000 million and $32,000 million in 

rental payments under the CRP; $2,000 million and $2,000 million in loan guarantees; and $19,000 million 

and $18,000 million of undelivered orders in direct loans, respectively. In addition, undelivered orders were 

$16,000 million for fiscal year 2005 and $14,000 million for fiscal 2004. 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

F Y 2005 P ERFORMANCE AND 

A CCOUN

NOTE 17.

SUBORGANIZATION 

PROGRAM 

COSTS/PROGRAM 

COSTS BY 

SEGMENT

FY 2005

Intragovernmental With the Public Intragovernmental With the Public Intragover

Strategic Goals:Enhance Economic Opportunities for AgriculturalProducers: - - - - 

 

Gross Costs 848 $ 1,129 $ 1,870 $ 34,623 $ 

$ 

Less: Earned Revenue 260 418 130 13,104 

 

Net Goal Cost 588 711 1,740 21,519 

 

 - - - - 

 

Support Increased Economic Opportunities and - - - - 

 

Improved Quality of Life in Rural America: - - - - 

 

Gross Costs - - - - 

 

Less: Earned Revenue - - - - 

 

Net Goal Cost - - - - 

 

 - - - - 

 

Enhance Protection and Safety of the Nation's - - - - 

 

Agriculture and Food Supply: - - - - 

 

Gross Costs - - - - 

 

Less: Earned Revenue - - - - 

 

Net Goal Cost - - - - 

 

 - - - - 

 

Improve the Nation's Nutrition and Health: - - - - 

 

Gross Costs - - - - 

 

Less: Earned Revenue - - - - 

 

Net Goal Cost - - - - 

 

 - - - - 

 

Protect and Enhance the Nation's Natural Resource - - - - 

 

Base and Environment: - - - - 

 

Gross Costs - - - - 

 

Less: Earned Revenue - - - - 

 

Net Goal Cost - - - - 

 

 - - - - 

 

Total Gross Costs 1,129 848 1,870 34,623 

 

Less: Total Earned Revenue 418 260 130 13,104 

 

Net Cost of Operations $ 711 588 $ 1,740 $ 21,519 $ 

$ 

FSA CCC 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

USDA

252 F Y 2005 P ERFORMANCE AND 

A CCOUNTABILITY 

R EPORT

FY 2005

Intragovernmental With the Public Intragovernmental With the Public Intragove

Strategic Goals:Enhance Economic Opportunities for AgriculturalProducers: - - - - 

 

Gross Costs 40 $ 3,678 $ - $ - $ 

$ 

Less: Earned Revenue - 1,019 - - 

 

Net Goal Cost 40 2,659 - - 

 

 - - - - 

 

Support Increased Economic Opportunities and - - - - 

 

Improved Quality of Life in Rural America: - - - - 

 

Gross Costs - - - - 

 

Less: Earned Revenue - - - - 

 

Net Goal Cost - - - - 

 

 - - - - 

 

Enhance Protection and Safety of the Nation's - - - - 

 

Agriculture and Food Supply: - - - - 

 

Gross Costs - - - - 

 

Less: Earned Revenue - - - - 

 

Net Goal Cost - - - - 

 

 - - - - 

 

Improve the Nation's Nutrition and Health: - - - - 

 

Gross Costs - - 1,093 50,513 

 

Less: Earned Revenue - - 5 24 

 

Net Goal Cost - - 1,088 50,489 

 

 - - - - 

 

Protect and Enhance the Nation's Natural Resource - - - - 

 

Base and Environment: - - - - 

 

Gross Costs - - - - 

 

Less: Earned Revenue - - - - 

 

Net Goal Cost - - - - 

 

 - - - - 

 

Total Gross Costs 3,678 40 1,093 50,513 

 

Less: Total Earned Revenue 1,019 - 5 24 

 

Net Cost of Operations $ 2,659 40 $ 1,088 $ 50,489 $ 

$ 

RMA FNS 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

F Y 2005 P ERFORMANCE AND 

A CCOUN

FY 2005

Intragovernmental With the Public Intragovernmental With the Public Intragove

Strategic Goals:Enhance Economic Opportunities for AgriculturalProducers: - - - - 

 

Gross Costs 82 $ 1,325 $ - $ - $ 

$ 

Less: Earned Revenue 3 189 - - 

 

Net Goal Cost 79 1,136 - - 

 

 - - - - 

 

Support Increased Economic Opportunities and - - - - 

 

Improved Quality of Life in Rural America: - - - - 

 

Gross Costs - - - - 

 

Less: Earned Revenue - - - - 

 

Net Goal Cost - - - - 

 

 - - - - 

 

Enhance Protection and Safety of the Nation's - - - - 

 

Agriculture and Food Supply: - - - - 

 

Gross Costs - - 252 1,063 

 

Less: Earned Revenue - - 20 462 

 

Net Goal Cost - - 232 601 

 

 - - - - 

 

Improve the Nation's Nutrition and Health: - - - - 

 

Gross Costs - - - - 

 

Less: Earned Revenue - - - - 

 

Net Goal Cost - - - - 

 

 - - - - 

 

Protect and Enhance the Nation's Natural Resource - - - - 

 

Base and Environment: - - - - 

 

Gross Costs - - - - 

 

Less: Earned Revenue - - - - 

 

Net Goal Cost - - - - 

 

 - - - - 

 

Total Gross Costs 1,325 82 252 1,063 

 

Less: Total Earned Revenue 189 3 20 462 

 

Net Cost of Operations $ 1,136 79 $ 232 $ 601 $ 

$ 

AMS APHIS 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

USDA

254 F Y 2005 P ERFORMANCE AND 

A CCOUNTABILITY 

R EPORT

FY 2005

Intragovernmental With the Public Intragovernmental With the Public Intragove

Strategic Goals:Enhance Economic Opportunities for AgriculturalProducers: - - - - 

 

Gross Costs - $ - $ - $ 5 $ 

$ 

Less: Earned Revenue - - (1) - 

 

Net Goal Cost - - 1 5 

 

 - - - - 

 

Support Increased Economic Opportunities and - - - - 

 

Improved Quality of Life in Rural America: - - - - 

 

Gross Costs - - 23 108 

 

Less: Earned Revenue - - 1 3 

 

Net Goal Cost - - 22 105 

 

 - - - - 

 

Enhance Protection and Safety of the Nation's - - - - 

 

Agriculture and Food Supply: - - - - 

 

Gross Costs - - - - 

 

Less: Earned Revenue - - - - 

 

Net Goal Cost - - - - 

 

 - - - - 

 

Improve the Nation's Nutrition and Health: - - - - 

 

Gross Costs - - - - 

 

Less: Earned Revenue - - - - 

 

Net Goal Cost - - - - 

 

 - - - - 

 

Protect and Enhance the Nation's Natural Resource - - - - 

 

Base and Environment: - - - - 

 

Gross Costs 929 4,902 433 1,953 

 

Less: Earned Revenue 265 524 80 45 

 

Net Goal Cost 664 4,378 353 1,908 

 

 - - - - 

 

Total Gross Costs 4,902 929 456 2,066 

 

Less: Total Earned Revenue 524 265 80 48 

 

Net Cost of Operations $ 4,378 664 $ 376 $ 2,018 $ 

$ 

FS NRCS 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

F Y 2005 P ERFORMANCE AND 

A CCOUN

FY 2005

Intragovernmental With the Public Intragovernmental With the Public Intragove

Strategic Goals:Enhance Economic Opportunities for AgriculturalProducers: - - - - 

 

Gross Costs 10 $ 360 $ 14 $ 26 $ 

$ 

Less: Earned Revenue 8 - 1 - 

 

Net Goal Cost 2 360 13 26 

 

 - - - - 

 

Support Increased Economic Opportunities and - - - - 

 

Improved Quality of Life in Rural America: - - - - 

 

Gross Costs 3 167 3 6 

 

Less: Earned Revenue 5 - - - 

 

Net Goal Cost (2) 167 3 6 

 

 - - - - 

 

Enhance Protection and Safety of the Nation's - - - - 

 

Agriculture and Food Supply: - - - - 

 

Gross Costs 9 275 1 3 

 

Less: Earned Revenue 6 - - - 

 

Net Goal Cost 3 275 1 3 

 

 - - - - 

 

Improve the Nation's Nutrition and Health: - - - - 

 

Gross Costs 2 131 6 11 

 

Less: Earned Revenue 4 - - - 

 

Net Goal Cost (2) 131 6 11 

 

 - - - - 

 

Protect and Enhance the Nation's Natural Resource - - - - 

 

Base and Environment: - - - - 

 

Gross Costs 5 201 4 8 

 

Less: Earned Revenue 4 - - - 

 

Net Goal Cost 1 201 4 8 

 

 - - - - 

 

Total Gross Costs 1,134 29 28 54 

 

Less: Total Earned Revenue - 27 1 - 

 

Net Cost of Operations $ 1,134 2 $ 27 $ 54 $ 

$ 

CSREES ERS 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

USDA

256 F Y 2005 P ERFORMANCE AND 

A CCOUNTABILITY 

R EPORT

FY 2005

Intragovernmental With the Public Intragovernmental With the Public Intragover

Strategic Goals:Enhance Economic Opportunities for AgriculturalProducers: - - - - 

 

Gross Costs - $ - $ 124 $ 271 $ 

$ 

Less: Earned Revenue - - 190 5 

 

Net Goal Cost - - (66) 266 

 

 - - - - 

 

Support Increased Economic Opportunities and - - - - 

 

Improved Quality of Life in Rural America: - - - - 

 

Gross Costs 3,314 1,730 49 106 

 

Less: Earned Revenue 416 3,920 74 2 

 

Net Goal Cost 2,898 (2,190) (25) 104 

 

 - - - - 

 

Enhance Protection and Safety of the Nation's - - - - 

 

Agriculture and Food Supply: - - - - 

 

Gross Costs - - 60 132 

 

Less: Earned Revenue - - 92 2 

 

Net Goal Cost - - (32) 130 

 

 - - - - 

 

Improve the Nation's Nutrition and Health: - - - - 

 

Gross Costs - - 35 77 

 

Less: Earned Revenue - - 54 1 

 

Net Goal Cost - - (19) 76 

 

 - - - - 

 

Protect and Enhance the Nation's Natural Resource - - - - 

 

Base and Environment: - - - - 

 

Gross Costs - - 77 168 

 

Less: Earned Revenue - - 118 3 

 

Net Goal Cost - - (41) 165 

 

 - - - - 

 

Total Gross Costs 1,730 3,314 345 754 

 

Less: Total Earned Revenue 3,920 416 528 13 

 

Net Cost of Operations $ (2,190) 2,898 $ (183) $ 741 $ 

$ 

RD DO 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

F Y 2005 P ERFORMANCE AND 

A CCOUN

FY 2005 Intradepartmental

Eliminations GRAND TOTAL

Strategic Goals:Enhance Economic Opportunities for AgriculturalProducers: - -Gross Costs (1,406) $ 44,015 $ Less: Earned Revenue (349) 15,137Net Goal Cost (1,057) 28,878

 - -

Support Increased Economic Opportunities and - -Improved Quality of Life in Rural America: - -Gross Costs (171) 5,358Less: Earned Revenue (77) 4,344Net Goal Cost (94) 1,014

 - -

Enhance Protection and Safety of the Nation's - -Agriculture and Food Supply: - -Gross Costs (181) 3,071Less: Earned Revenue (100) 630Net Goal Cost (81) 2,441

 - -

Improve the Nation's Nutrition and Health: - -Gross Costs (940) 51,033Less: Earned Revenue (48) 46Net Goal Cost (892) 50,987

 - -

Protect and Enhance the Nation's Natural Resource - -Base and Environment: - -Gross Costs (381) 8,580Less: Earned Revenue (168) 887Net Goal Cost (213) 7,693

 - -

Total Gross Costs 112,057 (3,079)

Less: Total Earned Revenue 21,044 (742)

Net Cost of Operations $ 91,013 (2,337) $ 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

USDA

258 F Y 2005 P ERFORMANCE AND 

A CCOUNTABILITY 

R EPORT

FY 2004

Intragovernmental With the Public Intragovernmental With the Public Intragovern

Strategic Goals:Enhance Economic Opportunities for AgriculturalProducers:Gross Costs 687 $ 665 $ 1,221 $ 12,115 $ 

$ 

Less: Earned Revenue 252 474 135 1,510 

 

Net Goal Cost 435 191 1,086 10,605 

 

Support Increased Economic Opportunities andImproved Quality of Life in Rural America:Gross Costs - - - - 

 

Less: Earned Revenue - - - - 

 

Net Goal Cost - - - - 

 

Enhance Protection and Safety of the Nation'sAgriculture and Food Supply:Gross Costs - - - - 

 

Less: Earned Revenue - - - - 

 

Net Goal Cost - - - - 

 

Improve the Nation's Nutrition and Health:Gross CostsLess: Earned Revenue - - - - 

 

Net Goal Cost - - - - 

 

Protect and Enhance the Nation's Natural ResourceBase and Environment:Gross Costs - - - - 

 

Less: Earned Revenue - - - - 

 

Net Goal Cost - - - - 

 

Total Gross Costs 665 687 1,221 12,115 

 

Less: Total Earned Revenue 474 252 135 1,510 

 

Net Cost of Operations $ 191 435 $ 1,086 $ 10,605 $ 

$ 

FSA CCC 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

F Y 2005 P ERFORMANCE AND 

A CCOUN

FY 2004

Intragovernmental With the Public Intragovernmental With the Public Intragovern

Strategic Goals:Enhance Economic Opportunities for AgriculturalProducers:Gross Costs 61 $ 3,810 $ - $ - $ 

$ 

Less: Earned Revenue - 745 - - 

 

Net Goal Cost 61 3,065 - - 

 

Support Increased Economic Opportunities andImproved Quality of Life in Rural America:Gross Costs - - - - 

 

Less: Earned Revenue - - - - 

 

Net Goal Cost - - - - 

 

Enhance Protection and Safety of the Nation'sAgriculture and Food Supply:Gross Costs - - - - 

 

Less: Earned Revenue - - - - 

 

Net Goal Cost - - - - 

 

Improve the Nation's Nutrition and Health:Gross Costs - - 1,040 45,056 

 

Less: Earned Revenue - - 1 17 

 

Net Goal Cost - - 1,039 45,039 

 

Protect and Enhance the Nation's Natural ResourceBase and Environment:Gross Costs - - - - 

 

Less: Earned Revenue - - - - 

 

Net Goal Cost - - - - 

 

Total Gross Costs 3,810 61 1,040 45,056 

 

Less: Total Earned Revenue 745 - 1 17 

 

Net Cost of Operations $ 3,065 61 $ 1,039 $ 45,039 $ 

$ 

RMA FNS 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

USDA

260 F Y 2005 P ERFORMANCE AND 

A CCOUNTABILITY 

R EPORT

FY 2004

Intragovernmental With the Public Intragovernmental With the Public Intragovernm

Strategic Goals:Enhance Economic Opportunities for AgriculturalProducers:Gross Costs 86 $ 840 $ - $ - $ 

$ 

Less: Earned Revenue 2 178 - - 

 

Net Goal Cost 84 662 - - 

 

Support Increased Economic Opportunities andImproved Quality of Life in Rural America:Gross Costs - - - - 

 

Less: Earned Revenue - - - - 

 

Net Goal Cost - - - - 

 

Enhance Protection and Safety of the Nation'sAgriculture and Food Supply:Gross Costs - - 241 980 

 

Less: Earned Revenue - - 31 332 

 

Net Goal Cost - - 210 648 

 

Improve the Nation's Nutrition and Health: -Gross Costs - - - - 

 

Less: Earned Revenue - - - - 

 

Net Goal Cost - - - - 

 

Protect and Enhance the Nation's Natural ResourceBase and Environment:Gross Costs - - - - 

 

Less: Earned Revenue - - - - 

 

Net Goal Cost - - - - 

 

Total Gross Costs 840 86 241 980 

 

Less: Total Earned Revenue 178 2 31 332 

 

Net Cost of Operations $ 662 84 $ 210 $ 648 $ 

$ 

AMS APHIS 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

F Y 2005 P ERFORMANCE AND 

A CCOUN

FY 2004

Intragovernmental With the Public Intragovernmental With the Public Intragovern

Strategic Goals:Enhance Economic Opportunities for AgriculturalProducers:Gross Costs - - - (8) 

 

Less: Earned Revenue - - 1 - 

 

Net Goal Cost - - (1) (8) 

 

Support Increased Economic Opportunities andImproved Quality of Life in Rural America:Gross Costs - - 21 110 

 

Less: Earned Revenue - - 3 1 

 

Net Goal Cost - - 18 109 

 

Enhance Protection and Safety of the Nation'sAgriculture and Food Supply:Gross Costs - - - - 

 

Less: Earned Revenue - - - - 

 

Net Goal Cost - - - - 

 

Improve the Nation's Nutrition and Health:Gross Costs - - - - 

 

Less: Earned Revenue - - - - 

 

Net Goal Cost - - - - 

 

Protect and Enhance the Nation's Natural ResourceBase and Environment:Gross Costs 1,207 4,712 406 1,497 

 

Less: Earned Revenue 121 538 58 16 

 

Net Goal Cost 1,086 4,174 348 1,481 

 

Total Gross Costs 4,712 1,207 427 1,599 

 

Less: Total Earned Revenue 538 121 62 17 

 

Net Cost of Operations 4,174 1,086 365 1,582 

 

FS NRCS 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

USDA

262 F Y 2005 P ERFORMANCE AND 

A CCOUNTABILITY 

R EPORT

FY 2004

Intragovernmental With the Public Intragovernmental With the Public Intragovern

Strategic Goals:Enhance Economic Opportunities for AgriculturalProducers:Gross Costs 12 $ 357 $ 16 $ 31 $ 

$ 

Less: Earned Revenue 13 4 1 1 

 

Net Goal Cost (1) 353 15 30 

 

Support Increased Economic Opportunities andImproved Quality of Life in Rural America:Gross Costs 3 163 4 7 

 

Less: Earned Revenue 9 2 - - 

 

Net Goal Cost (6) 161 4 7 

 

Enhance Protection and Safety of the Nation'sAgriculture and Food Supply:Gross Costs 9 263 1 2 

 

Less: Earned Revenue 9 1 - - 

 

Net Goal Cost - 262 1 2 

 

Improve the Nation's Nutrition and Health:Gross Costs 3 124 3 6 

 

Less: Earned Revenue 7 1 - - 

 

Net Goal Cost (4) 123 3 6 

 

Protect and Enhance the Nation's Natural ResourceBase and Environment:Gross Costs 6 197 4 7 

 

Less: Earned Revenue 7 1 - - 

 

Net Goal Cost (1) 196 4 7 

 

Total Gross Costs 1,104 33 28 53 

 

Less: Total Earned Revenue 9 45 1 1 

 

Net Cost of Operations $ 1,095 (12) $ 27 $ 52 $ 

$ 

CSREES ERS 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

F Y 2005 P ERFORMANCE AND 

A CCOUN

FY 2004

Intragovernmental With the Public Intragovernmental With the Public Intragovernm

Strategic Goals:Enhance Economic Opportunities for AgriculturalProducers:Gross Costs - - 127 227 

 

Less: Earned Revenue - - 152 11 

 

Net Goal Cost - - (25) 216 

 

Support Increased Economic Opportunities andImproved Quality of Life in Rural America:Gross Costs 3,339 2,407 55 98 

 

Less: Earned Revenue 349 3,620 66 5 

 

Net Goal Cost 2,990 (1,213) (11) 93 

 

Enhance Protection and Safety of the Nation'sAgriculture and Food Supply:Gross Costs - - 59 105 

 

Less: Earned Revenue - - 70 5 

 

Net Goal Cost - - (11) 100 

 

Improve the Nation's Nutrition and Health:Gross Costs - - 38 68 

 

Less: Earned Revenue - - 45 3 

 

Net Goal Cost - - (7) 65 

 

Protect and Enhance the Nation's Natural Resource

Base and Environment:Gross Costs - - 78 140 

 

Less: Earned Revenue - - 94 7 

 

Net Goal Cost - - (16) 133 

 

Total Gross Costs 2,407 3,339 357 638 

 

Less: Total Earned Revenue 3,620 349 427 31 

 

Net Cost of Operations (1,213) 2,990 (70) 607 

 

RD DO 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

USDA

264 F Y 2005 P ERFORMANCE AND 

A CCOUNTABILITY 

R EPORT

FY 2004 Intradepartmental GRAND TOTAL

Eliminations

Strategic Goals:Enhance Economic Opportunities for AgriculturalProducers:Gross Costs (1,334) $ 19,942 $ Less: Earned Revenue (301) 3,339Net Goal Cost (1,033) 16,603

Support Increased Economic Opportunities andImproved Quality of Life in Rural America:Gross Costs (125) 6,102Less: Earned Revenue (65) 3,990Net Goal Cost (60) 2,112

Enhance Protection and Safety of the Nation'sAgriculture and Food Supply:Gross Costs (172) 2,936

Less: Earned Revenue (85) 518Net Goal Cost (87) 2,418

Improve the Nation's Nutrition and Health:Gross Costs (994) 45,454

Less: Earned Revenue (40) 41Net Goal Cost (954) 45,413

Protect and Enhance the Nation's Natural ResourceBase and Environment:Gross Costs (299) 8,232Less: Earned Revenue (103) 756Net Goal Cost (196) 7,476

Total Gross Costs 82,666 (2,924)

Less: Total Earned Revenue 8,644 (594)Net Cost of Operations $ 74,022 (2,330) $ 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

USDA

F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 265 

NOTE 18. APPORTIONMENT CATEGORIES OF OBLIGATIONS INCURRED

FY 2005

Direct Reimbursable Total

Apportionment by Fiscal Quarter 65,399 $ 447 $ 65,846 $ 

Apportionment for Special Activities 30,937 42,982 73,919 

Exempt from Apportionment 1,039 31 1,070 

Total Obligations Incurred 97,375 $ 43,460 $ 140,835 $ 

FY 2004

Direct Reimbursable Total

Apportionment by Fiscal Quarter 69,234 $ 891 $ 70,125 $ 

Apportionment for Special Activities 19,897 26,702 46,599 

Exempt from Apportionment 1,036 49 1,085 

Total Obligations Incurred 90,167 $ 27,642 $ 117,809 $ 

NOTE 19. AVAILABLE BORROWING AUTHORITY, END OF PERIOD

Available borrowing authority at September 30, 2005 and 2004 was $29,073 and $38,828 million, 

respectively. 

NOTE 20. 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 notes. These notes are drawn upon daily when disbursements exceed 

deposits. Notes payable under the permanent indefinite borrowing authority have a term of one year. On 

January 1 of each year, USDA refinances its outstanding borrowings, including accrued interest, at the 

January borrowing rate. 

In addition, USDA has permanent indefinite borrowing authority for the foreign assistance and export credit 

programs to finance disbursements on post-credit reform, direct credit obligations, and credit guarantees. In 

accordance with the Federal Credit Reform Act of 1990 as amended, USDA borrows from Treasury on 

October 1, for the entire fiscal year, based on annual estimates of the difference between the amount 

appropriated (subsidy) and the amount to be disbursed to the borrower. Repayment under this agreement may 

be, in whole or in part, prior to maturity by paying the principal amount of the borrowings plus accrued 

interest to the date of repayment. Interest is paid on these borrowings based on weighted average interest rates 

for the cohort, to which the borrowings are associated. Interest is earned on the daily balance of uninvested 

funds in the credit reform financing funds maintained at Treasury. The interest income is used to reduce 

interest expense on the underlying borrowings. 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

USDA

266 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

USDA has authority to borrow from the Federal Financing Bank (FFB) and private investors in the form of 

Certificates of Beneficial Ownership (CBO) or loans executed directly between the borrower and FFB with an 

unconditional USDA repayment guarantee. CBO’s outstanding with the FFB and private investors are 

generally secured by unpaid loan principal balances. CBO’s outstanding are related to pre-credit reform loans 

and no longer used for program financing. 

FFB’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 21. ADJUSTMENTS TO BEGINNING BALANCE OF BUDGETARY RESOURCES

In fiscal 2004, RMA corrected errors in amounts previously reported. The effect of these corrections 

increased obligated and unobligated balances by $97 million and $3 million, respectively. 

In fiscal 2004, FS corrected errors in amounts previously reported. The effect of these corrections increased 

obligated and decreased unobligated balances by $82 million. 

Obligated Unobligated Obligated Unobligated

Beginning balances 38,146 $ 25,081 $ 35,886 $ 22,644 $ 

Adjustments - - 179 (80) 

Beginning balances, as adjusted 38,146 $ 25,081 $ 36,065 $ 22,564 $ 

FY 2005 FY 2004

NOTE 22. PERMANENT INDEFINITE APPROPRIATIONS

USDA has permanent indefinite appropriations available to fund 1) subsidy costs incurred under credit reform 

programs, 2) certain costs of the crop insurance program, and 3) certain costs associated with FS programs. 

The permanent indefinite appropriations for credit reform are mainly available to finance any disbursements 

incurred under the liquidating accounts. These appropriations become available pursuant to standing 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

USDA

F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 267 

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 FS programs is used to fund Recreation Fee Collection Costs, 

Brush Disposal, License programs, Smokey Bear and Woodsy Owl, Restoration of Forest Lands and 

Improvements, Roads and Trails for States, National Forest Fund, Timber Roads, Purchaser Elections, Timber 

Salvage Sales and Operations, and Maintenance of Quarters. Each of these permanent indefinite 

appropriations is funded by receipts made available by law, and is available until expended. 

NOTE 23. 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 24. DIFFERENCES BETWEEN THE STATEMENT OF BUDGETARY RESOURCES AND THE 

BUDGET OF THE UNITED STATES GOVERNMENT

The differences between the FY 2004 Statement of Budgetary Resources and the FY 2004 actual numbers 

presented in the FY 2006 Budget of the United States Government (Budget) are summarized below. The 

Budget excludes expired accounts that are no longer available for new obligations. 

Corrections of timing differences and errors were made subsequent to the Budget submission as follows: 

Rural Development — Error resulting from activity incorrectly recorded to Recoveries of Prior Year 

Obligations and Obligations Incurred when interest rate changes were processed due to market rate 

fluctuations. Forest Service — Cash adjustment, Supplemental 224, processed subsequent to the Budget 

submission. 

In addition, Food and Nutrition Service made a downward adjustment to the current period Grant account 

balances based on the historical relationship between the September 30 grant account balance and the final 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

USDA

268 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

grant account balance produced throughout the closeout process which does not occur for 3-9 months after the 

end of the fiscal year. 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 2005 Statement of Budgetary Resources and the fiscal 2005 actual numbers 

presented in the fiscal 2007 Budget cannot be performed as the fiscal 2007 Budget is not yet available. The 

fiscal 2007 Budget is expected to be published in February 2006 and will be available from the Government 

Printing Office. 

FY 2004

Budgetary

Resources Outlays

Combined Statement of Budgetary Resources 142,890 $ 78,446 $ 

Reconciling Items:

 Expired accounts (8) (8,236) 

 Food and Nutrition Service (453) - 

 Rural Development - (239) 

 Forest Service 0 154

 Native American Institutions (11) (10)

 Milk Market Orders Fund 49 5

 Other (47) 7

Budget of the United States Government 133,953 $ 78,594 $ 

NOTE 25. RELATIONSHIP BETWEEN LIABILITIES NOT COVERED BY BUDGETARY RESOURCES 

ON THE BALANCE SHEET AND THE CHANGE IN COMPONENTS REQUIRING OR GENERATING 

RESOURCES IN FUTURE PERIODS

The change in liabilities not covered by budgetary resources should be the same as the change in components 

requiring or generating resources in future periods, except for other components requiring or generating 

resources in future periods that are reported separately. The components requiring or generating resources in 

future periods as reported on the Statement of Financing differ from the components requiring or generating 

resources in future periods reflected below for the portion of liabilities not covered by budgetary resources. 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

USDA

F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 269 

FY 2005 FY 2004

Current year liabilities not covered by budgetary resources, 11,581 $ 3,697 $ 

as disclosed in Note 11

Prior year liabilities not covered by budgetary resources (3,697) (5,141) 

Increase (Decrease) in liabilities not covered by budgetary resources 7,884 (1,444) 

Upward/Downward Reestimates of Credit Subsidy Expense (1,853) (341) 

Increase in Exchange Revenue Receivable from the Public (7,791) 534 

Other 3,080 1,267 

Components requiring or generating resources in future periods,

as reported on the Statement of Financing (493) $ 1,829 $ 

NOTE 26. DESCRIPTION OF TRANSFERS THAT APPEAR AS A RECONCILING ITEM ON THE 

STATEMENT OF FINANCING

Allocation transfers that appear as reconciling items on the Statement of Financing include funds received 

from the Department of Labor for training underemployed youths; the Department of Transportation for 

maintenance and upkeep of federal highways traversing National Forest System lands; the Appalachian 

Regional Commission and Economic Development Administration for accounting services; and funds 

transferred to the Agency for International Development for transportation in connection with foreign 

commodity donations. 

NOTE 27. INCIDENTAL CUSTODIAL COLLECTIONS

The majority of custodial collections represent National Forest Fund receipts from the sale of timber and other 

forest products. The balance represents miscellaneous general fund receipts such as collections on accounts 

receivable related to canceled year appropriations, civil monetary penalties and interest, and commercial fines 

and penalties. Custodial collection activities are considered immaterial and incidental to the mission of the 

Department. 

Revenue Activity: FY 2005 FY 2004

Sources of Collections:

Miscellaneous 64 $ 62 $ 

Total Cash Collections 64 62 

Accrual Adjustments (7) 9 

Total Custodial Revenue 57 71 

Disposition of Collections:

Transferred to Others:

Treasury (8) (7) 

States and Counties (7) (52) 

( Increase )/Decrease in Amounts Yet to be Transferred (42) (12) 

Net Custodial Activity - $ - $ 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

USDA

270 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

NOTE 28. DEDICATED COLLECTIONS

Dedicated 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 dedicated collections is shown below. Following the descriptive 

narrative is the financial information for each of the significant dedicated collection funds. Donations are 

handled on the cash basis and all other collections are accounted for on the accrual basis. 

Commodity Credit Corporation 

Tobacco Transition Payment Program 

The Tobacco Transition Payment Program (TTPP) was authorized by the Fair and Equitable Tobacco Reform 

Act of 2004. The program terminates the New Deal-era tobacco quota program and establishes a 10-year 

transitional payment program funded through assessments of approximately $10 billion on domestic 

manufacturers of tobacco products and importers of foreign tobacco. The legislation authorizes the Farm 

Service Agency (FSA) to provide outreach, communication and other necessary services to ensure that all 

eligible producers and quota holders are familiar with the features of the TTPP. 

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 is automatically appropriated for expanding outlets for perishable, nonprice 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 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

USDA

F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 271 

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). 

Perishable Agricultural Commodities Act 

The act is intended to ensure equitable treatment to farmers and others in the marketing of fresh and frozen 

fruits and vegetables. Commission merchants, dealers, and brokers handling these products in interstate and 

foreign commerce are licensed. The fund is financed by license fees charged for the issuance of Federal 

licenses to dealers in perishable agricultural commodities who meet and maintain the financial stability 

necessary to ensure payment is made to producers of perishable agricultural commodities. License fees are 

deposited in this special fund and are used to meet the costs of administering the Perishable Agricultural 

Commodities and Produce Agency Act (7 U.S.C. 491-497, 499a-499s). 

Animal Plant Health Inspection Service 

Agricultural Quarantine Inspection User Fee Account 

This fund is used to record and report on 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). 

Miscellaneous Contributed Funds 

The revenue in this fund is collected, in advance of the work, from cooperators who request services for 

activities such as inspecting and pre-clearing certain fruits, vegetables, and nursery products before they are 

shipped to the United States, or for inspecting commercial birds in a Veterinary Services (VS) approved 

commercial bird quarantine facility. All costs incurred to provide these services are the responsibility of the 

cooperator, and are recorded in this fund. The authority is codified in 21 U.S.C. 111 and 134(c). 

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 USDA Forest Service. Cooperators include timber purchasers, notfor-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 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

USDA

272 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

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, revenue-sharing 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 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). 

Fees, Operations and Maintenance of Recreation Facilities 

This fund accumulates a portion of deposits derived from fees authorized by the Land and Water Conservation 

Fund Act and is available for expenditure by the USDA Forest Service only upon appropriation by Congress. 

Funds deposited are not appropriated under this heading and Congressional intent is to not use the deposits for 

activities over and above those amounts already provided in the National Forest System appropriation. The 

Land and Water Conservation Fund Act (16 U.S.C. 4601 et. seq.) authorized the establishment of this special 

fund and regulates admission and special recreation user fees at certain recreational areas. 

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 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

USDA

F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 273 

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. 

Federal-Aid Highways 

The Federal Highway Act, as amended (23 U.S.C. 120, 125, and 205) establishes the Federal Highway Trust 

Fund, managed by the Department of Transportation. Federal highway construction, maintenance, and other 

projects defined in the Act are financed from the Federal Highway Trust Fund. The Department of 

Transportation transfers these monies to the Forest Service for highway projects pertinent to National Forest 

System lands. The Secretary of Transportation, through the Federal Highway Administration (FHWA), 

requests through the U.S. Department of Treasury, to transfer trust funds to eligible Federal agencies that 

qualify under 23 U.S.C. 125. 

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). 

Roads and Trails for States, National Forest Fund 

The Roads and Trails for States, National Forest Fund receives annual deposits equal to ten percent of all 

revenues from the National Forest Fund. These amounts are then paid to the States, without regard to the 

State in which the amounts were derived, to repair or reconstruct roads, bridges, and trails on National Forest 

System lands. Also, to carry out and administer projects to improve forest health conditions, which may 

include the repair or reconstruction of roads, bridges, and trails on National Forest System lands in the wild 

land-community interface where there is an abnormally high risk of fire. The Roads and Trails for States, 

National Forest Fund is authorized by the Act of March 4, 1913, as amended (16 U.S.C. 501). 

National Forest Fund Receipts 

The Federal Lands Recreation Enhancement Act (FLREA) (Public Law 108-447) sets forth provisions for 

collection of recreation fees and retention of special recreation permit fees by the Forest Service. The Forest 

Service deposits 85 percent of special use permit revenues from these authorizations into the National Forest 

Fund. 

Reforestation Trust Fund 

The Reforestation Trust Fund receives periodic transfers of tariffs collected from exported timber from the 

U.S. Department of Treasury. Such deposits may not exceed $30 million dollars in a fiscal year. Amounts 

are invested and reinvested in United States Treasury interest-bearing Government securities. The interest 

income is added to the balance in the Reforestation Trust Fund for use by the Secretary of Agriculture for 

reforestation and timber-stand improvement activities. The Act of October 14, 1980, as amended (16 U.S.C. 

1606(a)(d)) established the Reforestation Trust Fund. 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

USDA

274 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

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. 

Payments to Counties, National Grasslands 

Credit receipts from Title III of the Bankhead-Jones Farm Tenant Act lands designated as either national 

grasslands or land utilization projects to a special account (sec. 60.1, para. 3). When the status of such lands 

is changed to that of a national forest, credit such receipts to the National Forest Fund. At the end of each 

calendar year, 25 percent of the net revenues from each national grassland or land utilization project are paid 

to the counties in which such lands are located. These payments are not payments in lieu of taxes (PILT); 

instead, they are national grassland or land utilization project receipts to be shared through grants with local 

governments for the purposes stated in the Act. 

Timber Sales Pipeline Restoration Fund 

The Timber Sale Pipeline Restoration Fund provides an additional source of funds for restoring the timber 

sale pipeline and addressing backlog recreation project needs. These funds are revenue from timber sales 

released under section 2001(k) of the fiscal year 1995 Supplemental Appropriations for Disaster Assistance 

and Recessions Act, minus payments to States and local governments and other necessary deposits (sec. 60.1, 

para. 27). Based on an Office of General Counsel opinion dated December 13, 2002, payments to States must 

be made from these receipts before net receipts are deposited into this fund (sec. 60.1, para. 28). The Forest 

Service and the Bureau of Land Management share in these revenues, referred to as first generation funds. 

Seventy-five percent of the net funds are deposited in an account for timber sale pipeline preparation and 25 

percent are deposited separately for the recreation backlog program. Revenues (less payments to States and 

other necessary deposits) generated by timber sales prepared using these funds are to be deposited back into 

the Timber Sale Pipeline Restoration Fund for additional timber sale preparation and backlog recreation work 

using the same 75 percent and 25 percent distributions, respectively. However, these second generation funds 

are not shared with the Bureau of Land Management. 

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 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

USDA

F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 275 

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. 

Agricultural Research Service 

Miscellaneous Contributed Funds 

This fund is used to promote research in food, agriculture and related areas; to enhance the accomplishment of 

technology transfer; and share the licensing and royalty fees resulting from patents. The Agricultural 

Research Service (ARS) may receive Miscellaneous Contributed Funds (MCF) from states, counties, 

municipal agencies, universities and colleges, associations, companies, organizations, and individuals for the 

purpose of supporting cooperative/in-house research or research related services of mutual interest to the 

agency and the contributing party. The duration of an incoming MCF is as specified in the agreement, but it 

must not exceed 5 years. Authorization to use these revenues and other financing sources are under statutory 

authority 7 U.S.C. 450(a), 3318(b), 450(b), 3319(c), 4501. 

Rural Development 

Alternative Agricultural Research and Commercialization Revolving Fund 

This fund was set up to expedite the development and market penetration of biobased industrial (nonfoodnonfeed) products from agricultural and forestry materials as well as assist in bridging the gap between the 

private sector for the research and commercialization of these biobased industrial (nonfood-nonfeed) products 

from farm and forestry materials and animal by-products. Funding is currently limited to the amounts 

collected from the recipients of the program and these funds are used to pay the costs of managing the closure 

of the fund and the remaining is returned to the United States Treasury. The authority to establish this fund 

occurred in the 1990 Farm Bill, P.L. 101-624, but was discontinued in fiscal year 1999. The Farm Security 

and Rural Investment Act of 2002, Section 6201, transferred the complete portfolio to Rural 

Development/Rural Business –Cooperative Service (RD/RBS) to manage the fund while safeguarding its 

assets. 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

USDA

276 F Y 2005 P ERFORMANCE AND 

A CCOUNTABILITY 

R EPORT

Dedicated Collections As of and for the year ended September 30, 2005 (in millions) 

Dedicated CollectionsAs of and for the year ended September 30, 2005

CCC RMA AMS AMS AMS APHIS APHIS FS FS FS 

(In Millions)

Tobacco 

Transition 

Payment 

Program

Federal Crop 

Insurance 

Corporation 

Fund

Funds for 

Strengthening 

Markets, 

Income, and 

Supply

Expenses 

and Refunds, 

Inspection 

and Grading 

of Farm 

Products

Perishable 

Agricultural 

Commodities 

Act

Agricultural 

Quarantine 

Inspection 

User Fee 

Account

Miscellaneous 

Contributed 

Funds

Cooperative 

Work

Land 

Acquisition

Payments to 

States, 

National 

Forests Fund

ASSETSFund Balance with Treasury - $ 1,537 $ 350 $ 44 $ 20 $ 91 $ 13 $ 624 $ 67 $ 165 $ 

Investments - - - - - - - - - - Accounts Receivable, Net 7,215 1,368 1 23 - 8 10 2 20 - Loans Receivable - - - - - - - - - - 

General Property, Plant, and Equipment, Net - - - 2 - 4 - 17 48 3 Other - 65 244 15 3 - - - - - TOTAL ASSETS 7,215 2,970 595 84 23 103 23 643 135 168 LIABILITIESAccounts Payable 341 13 1 3 - (3) - - - 1 Federal Employee and Veterans Benefits - - - 34 - - - - - - 

Other - 3,486 3 22 1 4 - 49 1 65 TOTAL LIABILITIES 341 3,499 4 59 1 1 - 49 1 66 Total Net Position 6,874 (529) 591 25 22 102 23 594 134 102 

TOTAL LIABILITIES AND NET POSITION 7,215 2,970 595 84 23 103 23 643 135 168 

CHANGE IN NET POSITION - - - - - - - - - - Beginning Balances - (205) 933 34 27 95 16 442 145 69 

Prior Period Adjustments - - - - - - - - - - 

Beginning Balances, as adjusted - (205) 933 34 27 95 16 442 145 69 

Budgetary Financing Sources:

Appropriations Received - 2,242 - - - - - - - - 

Appropriations Transfer In (Out) - (5) - - - - - - - - 

Other Adjustments (rescissions, etc.) - 49 - - - - - - - - 

Donations and Forfeitures of Cash - - - - - - - - - - 

Transfers In (Out) without Reimbursement - 5 749 - - (208) - 149 61 - 

Imputed Financing from Costs Absorbed by Others - - - 28 - - - - - - 

Other - 2 - - - - - - - - 

Total Financing Sources - 2,293 749 28 - (208) - 149 61 - Net Cost of Operations 6,874 (2,618) (1,090) (38) (4) 215 8 3 (72) 32 

Ending Balances 6,874 $ (530) $ 592 $ 24 $ 23 $ 102 $ 24 $ 594 $ 134 $ 101 $ 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

F Y 2005 P ERFORMANCE AND 

A CCOUN

Dedicated CollectionsAs of and for the year ended September 30, 2005

FS FS FS FS FS FS FS FS FS 

(In Millions)

Expenses, 

Brush 

Disposal

State, Private, 

and 

International 

Forestry, Land 

and Water 

Conservation 

Fund

Federal-Aid 

Highways 

Recreation Fee 

Demonstration 

Program

Roads and 

Trails for 

States, 

National 

Forest Fund

National 

Forest Fund 

Receipts

Reforestation 

Trust Fund

Restoration of 

Forest Lands 

and 

Improvements

Payments to 

Counties, 

National 

Grasslands

Timb

Pip

Res

F

ASSETSFund Balance with Treasury 57 $ 80 $ 24 $ 130 $ 29 $ 21 $ 26 $ 19 $ 54 $ 

$ 

Investments - - - - - - - - - 

 

Accounts Receivable, Net - - 28 1 - 7 - - 7 

 

Loans Receivable - - - - - - - - - 

 

General Property, Plant, and Equipment, Net - - 10 3 16 - - - - 

 

Other - - - 1 - - - - - 

 

TOTAL ASSETS 57 80 62 135 45 28 26 19 61 LIABILITIESAccounts Payable - - - 1 1 - - - - 

 

Federal Employee and Veterans Benefits - - - - - - - - - 

 

Other (1) 6 1 3 2 25 3 - 18 

 

TOTAL LIABILITIES (1) 6 1 4 3 25 3 - 18 

 

Total Net Position 58 74 61 131 42 3 23 20 43 

 

TOTAL LIABILITIES AND NET POSITION 57 80 62 135 45 28 26 20 61 

 

CHANGE IN NET POSITION - - - - - - - - - 

 

Beginning Balances 56 52 52 44 38 (1) 23 20 (1) 

 

Prior Period Adjustments - - - - - - - - - 

 

Beginning Balances, as adjusted 56 52 52 44 38 (1) 23 20 (1) 

 

Budgetary Financing Sources:

Appropriations Received - - - - - - - - - 

 

Appropriations Transfer In (Out) - - - - - - - - - 

 

Other Adjustments (rescissions, etc.) - - - - - - - - - 

 

Donations and Forfeitures of Cash - - - - - - - - - 

 

Transfers In (Out) without Reimbursement - 57 16 81 - - 30 - - 

 

Imputed Financing from Costs Absorbed by Others - - - - - - - - - 

 

Other - - - - - - - - - 

 

Total Financing Sources - 57 16 81 - - 30 - - 

 

Net Cost of Operations 1 (35) (6) 6 4 3 (30) - 44 

 

Ending Balances 57 $ 74 $ 62 $ 131 $ 42 $ 2 $ 23 $ 20 $ 43 $ 

$ 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

USDA

278 F Y 2005 P ERFORMANCE AND 

A CCOUNTABILITY 

R EPORT

Dedicated CollectionsAs of and for the year ended September 30, 2005

AARC

(In Millions)

Alternative 

Agricultural 

Research and 

Commercialization 

Revolving Fund Other Total

ASSETSFund Balance with Treasury - $ 83 $ 3,653 $ 

Investments 15 5 84Accounts Receivable, Net - 21 8,713Loans Receivable - - -

General Property, Plant, and Equipment, Net - 2 111

Other - - 328

TOTAL ASSETS 15 111 12,889LIABILITIESAccounts Payable - 1 358

Federal Employee and Veterans Benefits - 10 44Other 15 - 3,719

TOTAL LIABILITIES - 26 4,121

Total Net Position 15 85 8,769TOTAL LIABILITIES AND NET POSITION 15 111 12,890CHANGE IN NET POSITION - - -Beginning Balances 15 57 2,245Prior Period Adjustments - - -

Beginning Balances, as adjusted 15 57 2,245Budgetary Financing Sources:

Appropriations Received - 1 2,255

Appropriations Transfer In (Out) - 1 (4)

Other Adjustments (rescissions, etc.) - - 49

Donations and Forfeitures of Cash - - -

Transfers In (Out) without Reimbursement - 4 864

Imputed Financing from Costs Absorbed by Others - 10 38

Other 8 - 10

Total Financing Sources - 24 3,212Net Cost of Operations - 4 3,311

Ending Balances 15 $ 85 $ 8,768 $ 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

F Y 2005 P ERFORMANCE AND 

A CCOUN

Dedicated Collections As of and for the year ended September 30, 2004 (in millions) 

As of and for the year ended September 30, 2004

RMA AMS AMS AMS APHIS APHIS FS 

(In Millions)

Federal Crop 

Insurance 

Corporation Fund

Funds for 

Strengthening 

Markets, Income, 

and Supply

Expenses and 

Refunds, 

Inspection and 

Grading of Farm 

Products

Perishable 

Agricultural 

Commodities 

Act

Agricultural 

Quarantine 

Inspection User 

Fee Account

Miscellaneous 

Contributed 

Funds

Cooperative 

Work 

ASSETSFund Balance with Treasury 2,160 $ 453 $ 67 $ 27 $ 82 $ 15 $ 472 $ 

Investments - - - - - - - 

Accounts Receivable, Net 1,487 4 18 - 10 - 2 

Loans Receivable - - - - - - - 

General Property, Plant, and Equipment, Net - - 2 - 5 1 16 

Other 481 84 - 1 - - - 

TOTAL ASSETS 3,731 938 87 28 97 16 490 LIABILITIESAccounts Payable - 82 2 1 - - - 

Federal Employee and Veterans Benefits - - 35 - - - - 

Other 4 3,854 15 - 1 - 48 

TOTAL LIABILITIES 3,936 4 52 1 1 - 48 

Total Net Position 934 (205) 35 27 96 16 442 

TOTAL LIABILITIES AND NET POSITION 3,731 938 87 28 97 16 490 

CHANGE IN NET POSITION - - - - - - - 

Beginning Balances (451) 410 42 29 90 13 300 

Prior Period Adjustments - - - - - - - 

Beginning Balances, as adjusted (451) 410 42 29 90 13 300 

Budgetary Financing Sources:

Appropriations Received 3,366 - - - - - - 

Appropriations Transfer In (Out) (5) - - - - - - 

Other Adjustments (recissions, etc.) (78) - - - - - - 

Donations and Forfeitures of Cash - - - - - - - 

Transfers In (Out) without Reimbursement 5 1,148 - - (141) - 154 

Imputed Financing from Costs Absorbed by Others - - 27 - - - - 

Other - 2 - - - - - 

Total Financing Sources 3,290 1,148 27 - (141) - 154 

Net Cost of Operations (3,044) (624) (35) (2) 147 2 (12) Ending Balances $ 934 (205) $ 34 $ 27 $ 96 $ 15 $ 442 $ 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

USDA

280 F Y 2005 P ERFORMANCE AND 

A CCOUNTABILITY 

R EPORT

As of and for the year ended September 30, 2004

FS FS FS FS FS FS FS FS 

(In Millions)

Timber Salvage 

Sales

Fee, Operation 

and 

Maintenance of 

Recreation 

Facilities

Timber Roads, 

Purchaser 

Election

Expenses, 

Brush Disposal

State, Private, 

and International 

Forestry, Land 

and Water 

Conservation 

Fund

Federal-Aid 

Highways 

Recreation Fee 

Demonstration 

Program

Roads and 

Trails for 

States, National 

Forest Fund

ASSETSFund Balance with Treasury 98 $ 93 $ 62 $ 56 $ 55 $ 33 $ 42 $ 26 $ 

Investments - - - - - - - - 

Accounts Receivable, Net - 1 - - - 12 2 - 

Loans Receivable - - - - - - - - 

General Property, Plant, and Equipment, Net 1 - 1 - - 8 4 15 

Other - - - - - - - - 

TOTAL ASSETS 99 94 63 56 55 53 48 41 

LIABILITIESAccounts Payable (1) - - - - - 1 1 

Federal Employee and Veterans Benefits - - - - - - - - 

Other 12 5 - - 3 1 3 2 

TOTAL LIABILITIES 4 12 - - 3 1 4 3 

Total Net Position 95 82 63 56 52 52 44 38 

TOTAL LIABILITIES AND NET POSITION 99 94 63 56 55 53 48 41 

CHANGE IN NET POSITIONBeginning Balances 56 82 29 35 - 48 28 38 

Prior Period Adjustments - - - - - - - - 

Beginning Balances, as adjusted 56 82 29 35 - 48 28 38 

Budgetary Financing Sources:

Appropriations Received - - - - - - - - 

Appropriations Transfer In (Out) - - - - - - - - 

Other Adjustments (recissions, etc.) - - - - - - - - 

Donations and Forfeitures of Cash - - - - - - - - 

Transfers In (Out) without Reimbursement 35 - 35 20 64 12 14 (2) 

Imputed Financing from Costs Absorbed by Others - - - - - - - - 

Other - - - - - - - - 

Total Financing Sources 35 - 35 20 64 12 14 (2) 

Net Cost of Operations 5 - - 2 (12) (8) 2 2 

Ending Balances 96 $ 82 $ 64 $ 57 $ 52 $ 52 $ 44 $ 38 $ 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

F Y 2005 P ERFORMANCE AND 

A CCOUN

As of and for the year ended September 30, 2004

FS FS FS CSREES ARS AARC

(In Millions)

Restoration of 

Forest Lands 

and 

Improvements

Payments to 

Counties, 

National 

Grasslands

Timber Sales 

Pipeline 

Restoration 

Fund

Native 

American 

Institutions 

Endowment 

Fund

Miscellaneous 

Contributed 

Funds

Alternative 

Agricultural 

Research and 

Commercialization 

Revolving Fund Other Total

ASSETSFund Balance with Treasury 12 $ 17 $ 12 $ 5 $ 22 $ - $ 74 $ 4,159 $ 

Investments - - - 53 - 15 4 72

Accounts Receivable, Net 8 - - - - - 6 1,556

Loans Receivable - - - - - - - -

General Property, Plant, and Equipment, Net - - 2 - 2 - 2 109

Other - - - - - - - 566

TOTAL ASSETS 20 17 14 58 24 15 86 6,462LIABILITIESAccounts Payable - - - - - - - 87

Federal Employee and Veterans Benefits - - - - - - 9 44

Other 18 - 1 - 1 - 20 4,084

TOTAL LIABILITIES - 18 1 - 1 - 29 4,215

Total Net Position 20 (1) 13 58 23 15 57 2,247

TOTAL LIABILITIES AND NET POSITION 20 17 14 58 24 15 86 6,462

CHANGE IN NET POSITION - - - - - - - -

Beginning Balances 7 (1) 11 48 29 16 99 1,143

Prior Period Adjustments - - - - - - - -

Beginning Balances, as adjusted 7 (1) 11 48 29 16 99 1,143

Budgetary Financing Sources:

Appropriations Received - - - - - - 1 3,367

Appropriations Transfer In (Out) - - - - - - - (5)

Other Adjustments (recissions, etc.) - - - - - (1) - (80)

Donations and Forfeitures of Cash - - - - - - 1 1

Transfers In (Out) without Reimbursement - (6) 5 - - - (47) 1,461

Imputed Financing from Costs Absorbed by Others - - - - - - 10 37

Other - - - - - - - 2

Total Financing Sources - (6) 5 - - (1) (35) 4,783

Net Cost of Operations 13 6 (3) 10 (6) - (7) (3,678)

Ending Balances 20 $ (1) $ 13 $ 58 $ 23 $ 15 $ 57 $ 2,248 $ 
REQUIRED SUPPLEMENTARY STEWARDSHIP INFORMATION 

USDA

282 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

REQUIRED SUPPLEMENTARY STEWARDSHIP INFORMATION

USDA has stewardship responsibility for certain resources entrusted to it that do not meet the criteria for 

recognition in the financial statements. Information about these resources is important to understanding 

USDA’s mission, operations, and financial condition at the date of the financial statements and in subsequent 

periods. Costs of these stewardship-type resources are treated as expenses in the financial statements in the 

year the costs are incurred. However, these costs and resultant resources are intended to provide long-term 

benefits to the public and are included as required supplementary stewardship reporting to highlight their 

long-term benefit nature and to demonstrate accountability over them. 

Stewardship resources are categorized into two major groups, Stewardship Property, Plant and Equipment and 

Stewardship Investments as follows: 

STEWARDSHIP PROPERTY, PLANT AND EQUIPMENT

Stewardship PP&E consists of assets whose physical properties resemble those of general PP&E that are 

traditionally capitalized in financial statements. However, due to the nature of these assets, (1) valuation 

would be difficult and (2) matching costs with specific periods would not be meaningful. Stewardship PP&E 

includes heritage assets and stewardship land. 

Heritage Assets 

Category 

FY 2004 

(Sites) Condition 

Total Heritage Assets 318,259 Poor to Fair 

Eligible for the National Register of Historic Places 57,925 Poor to Fair 

Listed on the National Register 3,397 Fair 

Sites with Structures Listed on the National Register 1,874 Poor to Fair 

National Historic Landmarks 19 Fair to Good 

The FS estimates that more than 320,000 heritage assets are on land that it manages. Assets held at museums 

and universities are managed by those entities. This information was estimated from the nine FS regions and 

annual Department of the Interior report to Congress. Some of these assets are listed on the National Register 

of Historic Places, and some are designated as National Historic Landmarks. The FS 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. A module in the agency’s Real Property Management Infrastructure System (INFRA) has 

been developed and implemented for heritage assets. The Healthy Forests Initiative and competing budget 

priorities, however, have prevented full population of the database. Heritage assets include the following: 

Historic Structures 

Constructed works consciously created to serve some human purpose. They include buildings, monuments, 

logging and mining camps, and ruins. 
REQUIRED SUPPLEMENTARY STEWARDSHIP INFORMATION 

USDA

F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 283 

National Historic Landmarks 

Includes 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. 

National Register of Historic Places 

Includes properties, buildings, and structures that are significant in U.S. history, architecture, and archaeology, 

and the cultural foundation of the Nation. 

Eligible for the National Register 

Those sites formally determined as eligible for the National Register through the Keeper of the National 

Register or documented by consultation with State Historic Preservation Offices. 

Acquisition and Withdrawal of Heritage Assets 

The FS generally does not construct heritage assets, although in some circumstances important site-structural 

components may be rehabilitated or reconstructed into viable historic properties to provide forest visitors with 

use and interpretation. Heritage assets 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. 
REQUIRED SUPPLEMENTARY STEWARDSHIP INFORMATION 

USDA

284 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Stewardship Land 

The acquisition cost of stewardship land in FY 2005 and FY 2004 was $246 million and $113 million, 

respectively. 

Description FY 2005 

Balance Additions (+) Withdrawals (-) FY 2004 Balance

National Forest System Land (In acres):

National Forests 144,460,314 383,523 - 144,076,791 

National Forests Wilderness Areas 34,957,078 3,708 - 34,953,370 

National Forests Primitive Areas 173,762 - - 173,762 

National Wild and Scenic River Areas 930,633 - (20,273) 950,906 

National Recreation Areas 2,818,268 - (92,971) 2,911,239 

National Scenic–Research Areas 137,290 160 - 137,130 

National Game Refuges and Wildlife Preserve Areas 1,198,099 - - 1,198,099 

National Monument Areas 3,834,041 100 - 3,833,941 

National Grasslands 3,838,166 - (1,377) 3,839,543 

Purchase Units 370,031 5 - 370,026 

Land Utilization Projects 1,876 - - 1,876 

Other Areas 509,857 59,229 (9) 450,637 

Total National Forest System Land 193,229,415 446,725 (114,630) 192,897,320 

Conservation Easements (In acres):

Natural Resources Conservation Service

Wetlands Reserve Program 1,396,369 134,250 - 1,262,119 

Grassland Reserve Program 13,712 13,712 - - 

Emergency Wetlands Reserve Program 92,159 - - 92,159 

Emergency Watershed Protection Program 94,349 250 - 94,099 

Total Conservation Easements 1,596,589 148,212 - 1,448,377 

Description FY 2004 

Balance Additions (+) Withdrawals (-) FY 2003 Balance

National Forest System Land (In acres):

National Forests 144,076,791 233,515 - 143,843,276 

National Forests Wilderness Areas 34,953,370 124,868 - 34,828,502 

National Forests Primitive Areas 173,762 - - 173,762 

National Wild and Scenic River Areas 950,906 2,907 - 947,999 

National Recreation Areas 2,911,239 - - 2,911,239 

National Scenic–Research Areas 137,130 58 - 137,072 

National Game Refuges and Wildlife Preserve Areas 1,198,099 - - 1,198,099 

National Monument Areas 3,833,941 - - 3,833,941 

National Grasslands 3,839,543 376 - 3,839,167 

Purchase Units 370,026 10,675 - 359,351 

Land Utilization Projects 1,876 - - 1,876 

Other Areas 450,637 236 - 450,401 

Total National Forest System Land 192,897,320 372,635 - 192,524,685 

Conservation Easements (In acres):

Natural Resources Conservation Service

Wetlands Reserve Program 1,262,119 162,784 - 1,099,335 

Emergency Wetlands Reserve Program 92,159 - - 92,159 

Emergency Watershed Protection Program 94,099 - - 94,099 

Total Conservation Easements 162,784 1,448,377 - 1,285,593 

 
REQUIRED SUPPLEMENTARY STEWARDSHIP INFORMATION 

USDA

F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 285 

National Forest System 

The FS manages over 192 million acres of public land, the majority of which is classified as stewardship land. 

Stewardship land is valued for its environmental resources, recreational and scenic value, cultural and 

paleontological resources, vast open spaces, and resource commodities and revenue provided to the Federal 

government, states and counties. The National Forest System (NFS) is comprised of the following: 

National Forests 

A unit formerly established and permanently set-aside and reserved for National Forest purposes. The 

following categories of NFS lands have been set-aside for specific purposes in designated areas: 

National Forests Wilderness Areas: Areas designated by Congress as part of the National Wilderness 

Preservation System. 

National Forests 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 insure 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 by Congress for the protection of wildlife. 

National Monument Areas: Areas including historic landmarks, historic and prehistoric structures, 

and other objects for historic or scientific interest, declared by Presidential Proclamation or by 

Congress. 

National Grasslands 

A unit designated by the Secretary of Agriculture and permanently held by the USDA under Title III of the 

Bankhead-Jones Farm Tenant Act. 

Purchase Units 

A unit of land designated by the Secretary of Agriculture or previously approved by the National Forest 

Reservation Commission for purposes of Weeks Law acquisition. The law authorizes the federal government 

to purchase lands for stream-flow protection, and maintain the acquired lands as national forests. 

Land Utilization Projects and Research and Experimentation Areas 

Reserved and dedicated by the Secretary of Agriculture for forest and range research and experimentation. 

Other Areas 

Areas administered by the FS that are not included in one of the above groups. 
REQUIRED SUPPLEMENTARY STEWARDSHIP INFORMATION 

USDA

286 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Condition of NFS Lands 

The FS monitors the condition of NFS lands based on information compiled by two national inventory and 

monitoring programs. Annual inventories of forest status and trends are conducted by the Forest Inventory and 

Analysis program in 45 States covering 77 percent of the forested lands of the U.S. The Forest Health 

Monitoring program is active in 50 states providing surveys and evaluations of forest health conditions and 

trends. While most of the 193 million acres of forestland on NFS lands continue to produce valuable benefits 

(i.e. clean air, clean water, habitat for wildlife, and products for human use), significant portions are at risk to 

pest outbreaks and/or catastrophic fires. 

About 33 million acres of NFS forestland are at risk to future mortality from insects and diseases (based on 

the current Insect and Disease Risk Map). Nearly 73 million acres of NFS forestland are prone to catastrophic 

fire based on current condition and departure from historic fire regimes (Fire Regimes 1&2 and Condition 

Classes 2&3). Based on these two maps, approximately 9.5 million acres are at risk to both pest caused 

mortality and fire. Invasive species of insects, diseases and plants continue to impact our native ecosystems by 

causing mortality to, or displacement of native vegetation. The National Fire Plan has enhanced our efforts to 

prevent and suppress future fires adequately and restore acres that are at risk. Risk to fires was reduced by fuel 

hazard treatments on 1.5 million acres in fiscal year 2005 and another .4 million acres were treated to reduce 

risk from fire, improve wildlife habitat and prevent insect outbreaks for a total of 1.9 million acres of NFS 

lands. Insect and disease prevention and suppression treatments were completed on 1.7 million acres of NFS 

lands. 

Conservation Easements 

Wetlands Reserve Program 

The Wetlands Reserve Program (WRP) is a voluntary program established to restore, protect, and enhance 

wetlands on agricultural land. Participants in the program may sell a conservation easement or enter into a 

cost-share restoration agreement with CCC/NRCS in order to restore and protect wetlands. The landowner 

voluntarily limits the future use of the land, yet retains private ownership. The program provides many 

benefits for the entire community, such as better water quality, enhanced habitat for wildlife, reduced soil 

erosion, reduced flooding, and better water supply. 

To be eligible for WRP, land must be restorable and suitable for wildlife benefits. Once land is enrolled in the 

program, the landowner continues to control access to the land—and may lease the land—for hunting, fishing, 

and other undeveloped recreational activities. Once enrolled, the land is monitored to ensure compliance with 

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. 

CCC/NRCS records an expense for the acquisition cost of purchasing easements plus any additional costs 

such as closing transactions, survey, and restoration costs. Easements can be either permanent or 30-year 

duration. In exchange for establishing a permanent easement, the landowner receives payment up to the 

agricultural value of the land and 100 percent of the restoration costs for restoring the wetlands. The 30-year 
REQUIRED SUPPLEMENTARY STEWARDSHIP INFORMATION 

USDA

F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 287 

easement payment is 75 percent of what would be provided for a permanent easement on the same site and 75 

percent of the restoration cost. 

Withdrawals from the program are rare. The Secretary of Agriculture has the authority to terminate contracts, 

with agreement from the landowner, after an assessment of the effect on public interest, and following a 90-

day notification period of the House and Senate agriculture committees. 

Grassland Reserve Program 

The Grassland Reserve Program (GRP) is a voluntary program that helps landowners and operators restore 

and protect grassland, including rangeland, pastureland, and certain other lands, while maintaining the land’s 

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. The 

program is jointly administered by the Natural Resources Conservation Service (NRCS) and the Farm Service 

Agency (FSA). NRCS has the lead responsibility on technical issues and easement administration. FSA has 

the lead responsibility for rental agreement administration and financial activities. 

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. 

Participants have the opportunity to enroll acreage in rental agreements with varying lengths or long-term or 

permanent easements. With both easements and rental agreements, participants have the opportunity to utilize 

common management practices to maintain the viability of the grassland acreage. GRP participants are 

required to follow a conservation plan on all acres enrolled in the program. 

Enrollment options permit grazing on the land in a manner that is consistent with maintaining the viability of 

the natural grasses, shrubs, and forbs. Haying, mowing, or harvesting for seed production is also permitted 

except during the nesting seasons for birds in the area that are in significant decline. 

The various enrollment options are as follows: 

10-year, 15-year, 20-year or 30-year rental agreements: Rental payment amounts will not exceed 75 

percent of the grazing value for the length of the agreement. Rental payments are paid annually after 

the anniversary date of the agreement. Local grazing values are determined on a per county basis 

based on soil productivity and posted in USDA Service Centers. Payment rates are evaluated locally 

to determine whether the rates generally reflect local prevailing rental rates. 

Permanent easements: Easement duration is in perpetuity. Participants are provided an easement 

payment after the easement is filed. Easement payment amounts are based on the current market 

value of the land less the grazing value of the land encumbered by the easement. Land values are 

determined through a site specific appraisal. 

30-year easements or easements for the maximum duration permitted based on State law: 

Participants are provided an easement payment that is 30 percent of the amount determined for a 

permanent easement. 
REQUIRED SUPPLEMENTARY STEWARDSHIP INFORMATION 

USDA

288 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

For all easement options, the CCC pays for all the overhead costs associated with recording the easement in 

the local land records office including recording fees, charges for abstracts, surveys, appraisal fees, and title 

insurance. If NRCS and the landowner determine that restoration is necessary to return the vegetation to a 

desired condition, cost-share assistance is available. Participants may receive up to 90 percent of the cost of 

carrying out measures and practices on lands that have never been cultivated and not more than 75 percent of 

the cost on land that has been cultivated. 

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. 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. Easements purchased under EWRP are permanent in duration. In exchange for establishing a 

permanent easement, the landowner receives payment based on agricultural value of the land, a geographic 

land payment cap, or the landowner offer. Easement values are assessed on pre-disaster conditions. The 

landowner may receive up to 100 percent of restoring the wetland. There are no provisions in the easement to 

terminate the purchase. 

Emergency Watershed Protection Program 

The Emergency Watershed Protection Program (EWP) Floodplain Easements is administered by NRCS. A 

floodplain easement is purchased on flood prone lands to provide a more permanent solution to repetitive 

disaster assistance payments and achieve greater environmental benefits where the situation warrants when 

the affected landowner is willing to participate in the easement approach. The easement is to restore, protect, 

manage, maintain, and enhance the functions of wetlands, riparian areas, conservation buffer strips, and other 

lands. 

Easements purchased under this program meet the definition of stewardship land. NRCS records an expense 

for the acquisition cost of purchasing easements plus any additional costs such as closing, survey, and 

restoration costs. Easements purchased under EWP are permanent in duration. In exchange for establishing a 

permanent easement, the landowner receives payment based on agricultural value of the land, a geographic 

land payment cap, or the landowner offer. Easement values are assessed on pre-disaster conditions. The 

landowner may receive up to 100 percent of the installation and maintenance of land treatment measures 

deemed necessary and desirable to effectively achieve the purposes of the easement. The easements provide 

permanent restoration of the natural floodplain hydrology as an alternative to traditional attempts to restore 

damaged levees, lands, and structures. There are no provisions in the easement to terminate the purchase. 
REQUIRED SUPPLEMENTARY STEWARDSHIP INFORMATION 

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F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 289 

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. 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 2005 FY 2004 FY 2003 FY 2002 FY 2001

Expense Expense Expense Expense Expense

Non-Federal Physical Property:

Food and Nutrition Service

Food Stamp Program 22 $ 36 $ 39 $ $ 41 - $ 

Special Supplemental Nutrition Program 17 16 8 18 - 

Cooperative State Research, Education, and Extension Service

Extension 1890 Facilities Program 17 15 15 14 12 

Total Non-Federal Property $ 59 56 $ 70 $ 14 $ 71 $ 

Human Capital:

Cooperative State Research, Education, and Extension Service

Higher Education and Extension Programs 507 $ 502 $ 511 $ 532 $ 479 $ 

Food and Nutrition Service

Food Stamp Program 49 75 99 57 - 

Forest Service

Job Corps Program 161 106 118 104 101 

Agricultural Research Service

National Agricultural Library 21 21 21 20 21 

Risk Management Agency

Risk Management Education 10 7 4 - -

Total Human Capital $ 711 748 $ 753 $ 656 $ 658 $ 

Research and Development:

Agricultural Research Service

Plant Sciences $ - $ 394 - $ 384 $ 324 $ 

Commodity Conversion and Delivery - 185 - 182 194 

Animal Sciences - 194 - 102 146 

Soil, Water, and Air Sciences - 110 - 100 98 

Human Nutrition 84 83 78 80 77 

Integration of Agricultural Systems - 43 - 40 34 

Collaborative Research Program 6 5 6 11 11 

Product Quality/Value Added 105 104 -

Livestock Production 84 82 - - -

Crop Production 197 194 - - -

Food Safety 96 103 - - -

Livestock Protection 78 64 - - -

Crop Protection 193 183 - - -

Environmental Stewardship 219 216 - - -

Homeland Security 21 - - - -

Cooperative State Research, Education, and Extension Service

Land-grant University System 645 610 601 542 495 

Forest Service 295 312 233 227 200 

Economic Research Service

Economic and Social Science 74 71 69 67 66 

National Agricultural Statistics Service

Statistical 5 5 5 5 4 

Total Research and Development $ 2,046 2,088 $ 1,918 $ 1,740 $ 1,649 $ 
REQUIRED SUPPLEMENTARY STEWARDSHIP INFORMATION 

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290 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Non-Federal Physical Property 

Food and Nutrition Service 

FNS’ nonfederal physical property consists of computer systems and other equipment obtained by the State 

and local governments for the purpose of administering the Food Stamp Program. The total Food Stamp 

Program Expense for ADP Equipment & Systems has been reported as of the date of FNS’ financial 

statements. FNS’ nonfederal physical property also 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 839,218 work registrants subject to the 3 - month Food Stamp Program participant limit 

and 1,207,295 work registrants not subject to the limit in either job-search, job-training, job-workfare, 

education, or work experience. 

Forest Service 

The FS’ Job Corps Civilian Conservation (Job Corps) Centers, in coordination with the Department of Interior 

(DOI) National Parks Service, Fish and Wildlife Service, and Bureau of Reclamation, continued 

“Empowering Youth and Enhancing Communities and Natural Resources.” 
REQUIRED SUPPLEMENTARY STEWARDSHIP INFORMATION 

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F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 291 

In partnership with the U.S. Department of Labor (DOL), the FS operates 18 Job Corps Centers. Job Corps is 

the only Federal residential employment and education training program for economically challenged young 

people ages 16 to 24. The purpose of the program is to provide young adults with the skills necessary to 

become employable, independent, and productive citizens. The program is administered in a structured, 

coeducational, residential environment that provides education, vocational and life skills training, counseling, 

medical care, work experience, placement assistance and follow-up, recreational opportunities, and biweekly 

monetary stipends. Job Corps students choose from a wide variety of careers, such as urban forestry, heavy 

equipment operations and maintenance, business, clerical, carpentry, culinary arts, painting, cement and brick 

masonry, welding, auto mechanics, health services, building and apartment maintenance, warehousing, and 

plastering. 

Job Corps is funded from DOL annually on a program year; the fiscal year is July 1 to June 30. During Job 

Corps’ FY 2005, accomplishments included the following: 

8,889 participants received 4,441 placements with an average starting hourly wage of 43 cents more 

than the DOL national average. 

Approximately 1,500 female students received training in nontraditional vocations. 

482 students received high school diplomas, and 1,934 students obtained general equivalency 

diplomas. 

Approximately 1,100 Job Corps students and staff assisted the agency in its firefighting efforts. 

Students accomplished conservation work on NFS lands appraised at $20.3 million. 

Since 1964, the FS’ Job Corps Centers have trained and educated more than 300,000 young men and women. 

On January 10, 2005 the agency successfully transferred the Mingo Job Corps Center from DOI Fish and 

Wildlife Service to the USDA Forest Service. 

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, 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. 
REQUIRED SUPPLEMENTARY STEWARDSHIP INFORMATION 

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292 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

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 2005 and 2004, the RME worked toward the goals by funding risk management sessions, 

most of which targeted producers directly. The number of producers reached through these sessions is 

approximately 47,000 in fiscal year 2005 and 46,000 in fiscal year 2004. 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 $9.4 million for fiscal year 2005 and $9.8 million for fiscal year 

2004. The following table summarizes the RME initiatives since fiscal year 2001: 

(dollars in millions) 2005 2004 2003 2002 2001 

RME Obligations $ 9.4 10 9 6 5 

Number of producers attending RME sessions 47,000 46,000 62,000 50,000 50,000 

One of the directives of the Agricultural Risk Protection Act (ARPA) is to step up the FCIC’s educational and 

outreach efforts in certain areas of the country that have been historically underserved by the Federal crop 

insurance program. The Secretary determined that fifteen states met the underserved criteria. These states are 

Maine, Massachusetts, Connecticut, Wyoming, New Jersey, New York, Delaware, Nevada, Pennsylvania, 

Vermont, Maryland, Utah, Rhode Island, New Hampshire, and West Virginia. 

Research and Development 

Agricultural Research Service 

The 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 has five strategic goals and two major management initiatives (i.e., NAL and Buildings and Facilities). 

GOAL 1: Enhance Economic Opportunities for Agricultural Producers. Under this goal research 

focuses on: 
REQUIRED SUPPLEMENTARY STEWARDSHIP INFORMATION 

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F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 293 

Product Quality/Value Added—New products, new uses, and value-added processes that appeal 

to consumers will create additional demand-driven need for agricultural production, thus providing 

more opportunities for agricultural producers and businesses. Biobased technologies promise new 

opportunities for energy, industrial, and pharmacological markets for U.S. farmers. New markets are 

emerging for environmental activities and products that mitigate environmental concerns. 

Livestock Production—Intense competition in global markets emphasizes the need for American 

agriculture to pursue and market higher value animal products. Research must respond to consumer 

demands for more healthful and safe products to ensure a sustainable and profitable livestock 

production system that produces affordable value-added food, fiber, and industrial products. These 

superior technologies must effectively differentiate U.S. agricultural products from competing 

sources, and provide customers with value-added processes that enhance product quality. 

Crop Production—ARS will develop and disseminate science-based information to provide U.S. 

crop producers with increased flexibility to effectively manage unforeseen risks that impact 

profitability and product quality. U.S. agricultural production and marketability is constantly 

influenced by factors such as unpredictable weather, disease and pest outbreaks, and changing 

consumer demands. Use of genetically diverse germplasm resource collections and best 

management practices require research that helps improve production efficiency and productivity 

through the development of pest resistant varieties and information to facilitate decision-making. 

GOAL 2: Support Increased Economic Opportunities and Improved Quality of Life in Rural America. 

While ARS research has a positive impact on rural America, most of its research programs are organized 

around the other four programmatic strategic goals detailed here. 

GOAL 3: Enhance Protection and Safety of the Nation’s Agriculture and Food Supply. Under this goal 

research focuses on: 

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 in the 

United States has been a diverse, extensive, and easily accessible system. This open system is 

vulnerable to introduction of pathogens and toxins through natural processes, global commerce, and 

by intentional means. Thus, the food supply must be protected during production, processing, and 

preparation from pathogens, toxins, and chemical contamination that cause disease in humans. 

Livestock Protection—Economic sustainability of livestock production systems in both 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, continued 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. 

Crop Protection—Economic sustainability of agricultural crop production in both domestic and 

global markets is limited by the disease status of crops. Many factors affect the likelihood of 
REQUIRED SUPPLEMENTARY STEWARDSHIP INFORMATION 

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294 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

diseases to crops including, globalization and international commerce, presence of pathogen vectors, 

availability of protection systems, continued emergence of new diseases, genetic resistance of crops, 

and the availability of trained plant health specialists. Crop systems have limited diversity and will 

remain extensive and thereby more vulnerable to intentional exposure to pathogens. 

GOAL 4: Improve the Nation’s Nutrition and Health. Under this goal research focuses on: 

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. In addition, 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, 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. 

GOAL 5: Protect and Enhance the Nation’s Natural Resource Base and Environment. Under this goal 

research focuses on: 

Environmental Stewardship—Agriculture relies on a natural resource base whose sustainability 

depends on sound, science-based production practices. The management of our 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 our resources that can satisfy most competing concerns. The outcome will be 

technology and practices that will mitigate the adverse impact of agriculture on the environment, 

moderate the build up of greenhouse gasses that may contribute to climate change, and remove the 

necessity of farming environmentally sensitive marginal lands. 

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, policy-makers, teachers, and students. The Library’s program is organized to 

provide three kinds of services: 

Access to Information—Reference and research services, many Web-based; specialized 

information centers in Animal Welfare, Food, Nutrition and Food Safety, Alternative Farming, Water 

Quality, Technology Transfer, and Rural Revitalization; management of NAL collections including 
REQUIRED SUPPLEMENTARY STEWARDSHIP INFORMATION 

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F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 295 

Special Collections (responsible for rare and historical publications); document delivery services; 

desktop access for USDA staff to electronic information via the USDA Digital Desktop Library 

(DigiTop) initiative; leadership of the AgNIC (Agricultural Network Information Center) Alliance, 

an international partnership which provides collaboration access to agricultural information via the 

Web, and the www.invasivespecies.gov, www.nutrition.gov and www.science.gov Federal 

interagency Web portals. 

Information Management—Production of the AGRICOLA database; selection and acquisition of 

printed and electronic publications for the NAL collections and the USDA Digital Desktop Library 

(DigiTop) initiative; production of the NAL Thesaurus; and development and promulgation of 

standards for the creation, organization, and maintenance of computerized bibliographic data. 

Information Systems—Information technology support for the Library’s programs and services; 

preservation of digital publications; and digitization of printed materials. 

Management Initiative: Facilities 

ARS’ Facilities program is designed to meet the needs of its scientists and support personnel to 

accomplish the agency’s mission. 

ARS has over 100 laboratories, primarily located throughout the United States. The agency is in the 

process of modernizing and upgrading selected laboratories, many of which are badly outdated and 

no longer meet ARS’ requirements. 

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: 

Vegetation management and protection 

Wildlife, fish, watershed, and air 

Resource valuation and use research 

Forest Resources inventory and monitoring 

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 2005 accomplishments include the following: 

63 new interagency agreements and contracts 
REQUIRED SUPPLEMENTARY STEWARDSHIP INFORMATION 

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296 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

93 interagency agreements and contracts continued 

1,320 articles published in journals 

1,779 articles published in all other publications 

1 patents granted 

16 rights to inventions established 

Economic Research Service 

ERS provides economic and other social science research and analysis for public and private decisions on 

agriculture, food, natural resources, and rural America. Research results and economic indicators on these 

important issues are fully disseminated through published and electronic reports and articles; special staff 

analyses, briefings, presentations, and papers; databases; and individual contacts. ERS’ objective information 

and analysis helps public and private decision makers attain the goals that promote agricultural 

competitiveness, food safety and security, a well-nourished population, environmental quality, and a 

sustainable rural economy. 

National Agricultural Statistics Service 

Statistical research and service is conducted to improve the statistical methods and related technologies used 

in developing U.S. agricultural statistics. The highest priority of the research agenda is to aid the NASS 

estimation program through development of better estimators at lower cost and with less respondent burden. 

This means greater efficiency in sampling and data collection coupled with higher quality data upon which to 

base the official estimates. In addition, new products for data users are being developed with the use of 

technologies such as remote sensing and geographic information systems. Continued service to users will be 

increasingly dependent upon methodological and technological efficiencies. 
REQUIRED SUPPLEMENTARY INFORMATION 

F Y 2005 P ERFORMANCE AND A CCOUN

REQUIRED SUPPLEMENTARY INFORMATIONSTATEMENT OF BUDGETARY RESOURCES

FY 2005 FAS RMA FNS FS

Non-Budgetary Non-Budgetary

Financing Financing

Budgetary Accounts Budgetary Accounts Budgetary Budgetary Budgetary Budg

Budgetary Resources:Budget Authority:Appropriations Received 1,736 $ - $ 15,444 $ - $ 316 $ 2,314 $ 47,398 $ 

$ 

Borrowing Authority (Note 19 & 20) 1,723 - 45,357 688 - - - 

 

Contract Authority - - - - - - - 

 

Net Transfers - 50 - (2,171) 13 5,168 (1) 

Other - - - - - - - 

 

Unobligated Balances: - - - - - - - 

 

Beginning of Period (Note 21) 246 1,868 1,197 2,643 37 2,060 7,768 

 

Net Transfers, Actual - - - (665) - - - 

 

Anticipated Transfers Balances - - - - - - - 

 

Spending Authority From Offsetting Collections: - - - - - - - 

 

Earned - - - - - - - 

 

Collected 1,535 1,016 17,267 1,769 97 1,236 80 

 

Receivable from Federal Sources 13 - (158) (113) (24) - - 

 

Change in Unfilled Customer Orders - - - - - - - 

 

Advance Received (3) 3 (1,391) 3 - - - 

 

Without Advance from Federal Sources - - - (4) - - - 

 

Anticipated for the Rest of Year, Without Advances - - - - - - - 

 

Previously unavailable - - - - - - - 

 

Transfers from Trust Funds - - 899 - - - - 

 

Recoveries of Prior Year Obligations 70 70 2,837 3 761 5 391 

 

Temporarily not Available Pursuant to Public Law - - - - - - - 

 

Permanently not Available (1,368) (655) (33,582) (735) (3) (2) (2,511) 

 

Total Budgetary Resources 2,479 3,825 45,034 4,254 1,197 5,612 58,294 

 

Status of Budgetary Resources:

Obligations Incurred (Note 18):

Direct 1,678 1,714 2,954 1,556 926 4,255 51,157 

 

Reimbursable - 419 40,784 - 97 - 28 

 

Unobligated Balance: - - - - - - - 

 

Apportioned 1,692 176 333 2,523 76 1,355 526 

 

Exempt from Apportionment - - 872 5 1 - - 

 

Other Available - - - - - - - 

 

Unobligated Balance not Available 454 166 97 170 98 2 6,582 

 

Total Status of Budgetary Resources 2,475 3,824 45,040 4,254 1,198 5,612 58,293 

 

Relationship of Obligations to Outlays:Obligated Balance, Net, Beginning of Period (Note 21) 436 200 5,596 73 (229) 204 3,048 

 

Obligated Balance, Transferred, Net - - (216) - - - - 

 

Obligations Incurred 2,133 1,678 43,738 1,556 1,023 4,255 51,185 

 

Less: - - - - - - - 

 

Recoveries of Prior Year Obligations 70 70 2,837 3 761 5 391 

 

Change from Federal Sources 13 - (158) (117) (24) - - 

 

Obligated Balance, Net, End of Period: - - - - - - - 

 

Accounts Receivable (21) - (1,221) (205) (29) - - 

 

Unfilled Customer Orders from Federal Sources (10) (11) - - - - - 

 

Undelivered Orders 183 129 1,661 48 87 80 700 

 

Accounts Payable 314 68 7,988 1 19 188 3,240 

 

Total Obligated Balance, Net, End of Period 166 486 8,428 77 (156) 268 3,940 

 

Disbursements 2,079 1,564 38,011 1,591 281 4,186 49,902 

 

Collected and Advances Received (1,015) (1,536) (16,780) (1,768) (97) (1,236) (79) 

 

Outlays 28 1,064 21,231 184 (177) 2,950 49,823 

 

Less: Offsetting Receipts 322 - 1 722 - - - 

 

Net Outlays $ 28 742 $ 21,230 $ (899) $ 184 $ 2,950 $ 49,823 $ 

$ 

FSA CCC
REQUIRED SUPPLEMENTARY INFORMATION 

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298 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

FY2005 GIPSA FS NRCS ARS CSREES ERS NASS 

Non-Budgetary 

Financing 

Budgetary Budgetary Budgetary Budgetary Budgetary Budgetary Budgetary Budgetary Accounts 

Budgetary Resources:

Budget Authority:

Appropriations Received 37 $ 5,812 $ 1,354 $ 1,314 $ 1,195 $ 75 $ 130 $ 2,997 $ - $ 

Borrowing Authority (Note 19 & 20) - - - - - - - - 8,475 

Contract Authority - - - - - - - - - 

Net Transfers - 50 1,813 6 5 - - 1 - 

Other - - - - - - - - - 

Unobligated Balances: - - - - - - - - - 

Beginning of Period (Note 21) 7 1,738 313 342 148 2 5 3,751 1,814 

Net Transfers, Actual - 1 - - - - - - - 

Anticipated Transfers Balances - - - - - - - - - 

Spending Authority From Offsetting Collections: - - - - - - - - - 

Earned - - - - - - - - - 

Collected 36 448 1,637 67 30 1 23 4,737 5,272 

Receivable from Federal Sources 1 13 45 (1) - (7) 2 19 - 

Change in Unfilled Customer Orders - - - - - - - - - 

Advance Received - 3 - - - - - - - 

Without Advance from Federal Sources - 75 - 4 (7) - (3) - 6 

Anticipated for the Rest of Year, Without Advances - - - - - - - - - 

Previously unavailable - - - - - - - - - 

Transfers from Trust Funds - - - - - - - - - 

Recoveries of Prior Year Obligations 11 169 464 265 350 28 22 273 486 

Temporarily not Available Pursuant to Public Law - - - - - - - - - 

Permanently not Available (1) (67) (9) (14) (16) (2) (1) (2,812) (2,808) 

Total Budgetary Resources 91 8,242 5,617 1,983 1,698 104 178 8,966 13,245 

Status of Budgetary Resources:

Obligations Incurred (Note 18):

Direct 47 5,545 5,011 1,478 1,511 101 150 3,949 11,262 

Reimbursable 37 264 139 94 58 2 22 520 - 

Unobligated Balance: - - - - - - - - - 

Apportioned 5 1,804 306 395 101 - 3 362 1,457 

Exempt from Apportionment - - 4 11 14 - - - - 

Other Available - - - - - - - - - 

Unobligated Balance not Available 625 3 158 5 13 1 2 4,136 527 

Total Status of Budgetary Resources 92 8,238 5,618 1,983 1,697 104 177 8,967 13,246 

Relationship of Obligations to Outlays:

Obligated Balance, Net, Beginning of Period (Note 21) 1,493 9 1,437 476 1,192 29 15 6,527 16,929 

Obligated Balance, Transferred, Net - - 216 - - - - - - 

Obligations Incurred 84 5,809 5,150 1,572 1,569 103 172 4,469 11,262 

Less: - - - - - - - - - 

Recoveries of Prior Year Obligations 11 169 464 265 350 28 22 273 486 

Change from Federal Sources 1 88 45 3 - (14) 19 (1) 6 

Obligated Balance, Net, End of Period: - - - - - - - - - 

Accounts Receivable (6) (226) (99) (39) (9) (2) (6) (97) - 

Unfilled Customer Orders from Federal Sources - (192) (1) (38) - (57) - (3) (624) 

Undelivered Orders 5 1,226 3,506 462 1,329 24 18 5,852 18,485 

Accounts Payable 8 752 160 58 5 5 7 268 11 

Total Obligated Balance, Net, End of Period 7 1,560 3,566 443 1,268 27 16 6,023 17,872 

Disbursements 74 5,489 2,728 1,338 1,157 76 152 4,681 9,827 

Collected and Advances Received (36) (451) (1,637) (67) (30) (1) (23) (4,737) (5,272) 

Outlays 38 5,038 1,091 1,271 1,127 75 129 4,555 (56) 

Less: Offsetting Receipts - 426 - 15 3 - - 538 - 

Net Outlays 38 $ 4,612 $ 1,091 $ 1,256 $ 1,124 $ 75 $ 129 $ (594) $ 4,555 $ 

RD 
REQUIRED SUPPLEMENTARY INFORMATION 

F Y 2005 P ERFORMANCE AND A CCOUN

FY 2004 FAS RMA FNS FSIS 

Non-Budgetary Non-Budgetary

Financing Financing

Budgetary Accounts Budgetary Accounts Budgetary Budgetary Budgetary Budgetary 

Budgetary Resources:Budget Authority:Appropriations Received 1,514 $ - $ 24,941 $ - $ 273 $ 3,438 $ 42,592 $ 788 $ 

$ 

Borrowing Authority (Note 19 & 20) - 2,184 29,004 693 - - - - 

Contract Authority - - - - - - - - 

Net Transfers (6) - (1,781) - 15 - 4,715 (1) 

Other - - - - - - - - 

Unobligated Balances: - - - - - - - - 

Beginning of Period (Note 21) 173 2,315 1,340 2,095 61 1,857 8,077 65 

Net Transfers, Actual - - (2) - - - - - 

Anticipated Transfers Balances - - - - - - - - 

Spending Authority From Offsetting Collections: - - - - - - - - 

Earned - - - - - - - - 

Collected 1,169 1,485 13,931 1,090 55 928 84 124 

Receivable from Federal Sources (4) - (669) 150 19 - - (2) 

Change in Unfilled Customer Orders - - - - - - - - 

Advance Received - - 942 - - - 2 - 

Without Advance from Federal Sources (3) (1) - - - - - - 

Anticipated for the Rest of Year, Without Advances - - - - - - - - 

Previously unavailable - - - - - - - - 

Transfers from Trust Funds - - - - - - - - 

Recoveries of Prior Year Obligations 112 79 1,848 12 357 10 468 93 

Temporarily not Available Pursuant to Public Law - - - - - - - - 

Permanently not Available (728) (1,906) (40,856) (123) (2) (2) (2,369) (21) 

Total Budgetary Resources 2,227 $ 4,156 $ 28,698 $ 3,917 $ 778 $ 6,231 $ 53,569 $ 1,046 $ 

$ 

Status of Budgetary Resources:

Obligations Incurred (Note 18):

Direct 1,578 $ 2,289 $ 2,431 $ 1,274 $ 654 $ 4,171 $ 45,783 $ 847 $ 

$ 

Reimbursable 406 - 25,070 - 88 - 19 145 

Unobligated Balance: - - - - - - - - 

Apportioned 66 1,861 813 2,627 13 2,057 619 - 

Exempt from Apportionment - - 1 6 2 - - 1 

Other Available - - - - - - - - 

Unobligated Balance not Available 178 7 382 10 23 3 7,149 54 

Total Status of Budgetary Resources 2,228 $ 4,157 $ 28,697 $ 3,917 $ 780 $ 6,231 $ 53,570 $ 1,047 $ 

$ 

Relationship of Obligations to Outlays:

Obligated Balance, Net, Beginning of Period (Note 21) 263 $ 512 $ 5,789 $ (30) $ 137 $ 240 $ 2,796 $ 88 $ 

$ 

Obligated Balance, Transferred, Net - - - - - - - - 

Obligations Incurred 1,984 2,289 27,501 1,274 742 4,171 45,801 993 

Less: - - - - - - - - 

Recoveries of Prior Year Obligations 112 79 1,848 12 357 10 468 93 

Change from Federal Sources (7) (1) (669) 150 19 - - (2) 

Obligated Balance, Net, End of Period: - - - - - - - - 

Accounts Receivable (6) - (1,379) (316) (52) - - (22) 

Unfilled Customer Orders from Federal Sources (5) (16) - - - - - - 

Undelivered Orders 160 101 1,885 87 115 75 532 92 

Accounts Payable 50 351 5,090 1 11 129 2,517 31 

Total Obligated Balance, Net, End of Period 199 $ 436 $ 5,596 $ (228) $ 74 $ 204 $ 3,049 $ 101 $ 

$ 

Disbursements 1,942 $ 2,286 $ 26,515 $ 1,311 $ 429 $ 4,197 $ 45,081 $ 888 $ 

$ 

Collected and Advances Received (1,169) (1,485) (14,873) (1,090) (55) (928) (86) (124) Outlays 773 801 11,642 221 374 3,269 44,995 764 

Less: Offsetting Receipts 994 - - 601 - - - 3 Net Outlays (221) $ 801 $ 11,642 $ (380) $ 374 $ 3,269 $ 44,995 $ 761 $ 

$ 

FSA CCC
REQUIRED SUPPLEMENTARY INFORMATION 

USDA

300 F Y 2005 P ERFORMANCE AND 

A CCOUNTABILITY 

R EPORT

FY 2004 APHIS GIPSA FS NRCS ARS CSREES ERS NASS

Budgetary Budgetary Budgetary Budgetary Budgetary Budgetary Budgetary Budgetary

Budgetary Resources:Budget Authority:Appropriations Received 1,056 $ 36 $ 5,923 $ 1,182 $ 1,171 $ 1,095 $ 71 $ 129 $ 

Borrowing Authority (Note 19 & 20) - - - - - - - -

Contract Authority - - - - - - - -

Net Transfers 210 - (12) 1,616 6 6 - -

Other - - - - - - - -

Unobligated Balances: - - - - - - - -

Beginning of Period (Note 21) 327 10 1,256 150 455 207 3 3

Net Transfers, Actual - (194) 4 - - - - -

Anticipated Transfers Balances - - - - - - - -

Spending Authority From Offsetting Collections: - - - - - - - -

Earned - - - - - - - -

Collected 99 36 428 77 57 42 2 19

Receivable from Federal Sources (12) 1 (13) 2 13 - 1 (1)

Change in Unfilled Customer Orders - - - - - - - -

Advance Received - - (10) 1 - - - -

Without Advance from Federal Sources - - 20 4 (5) 4 3 (1)

Anticipated for the Rest of Year, Without Advances - - - - - - - -

Previously unavailable - - - - - - - -

Transfers from Trust Funds - - - - - - - -

Recoveries of Prior Year Obligations 318 8 97 533 244 730 10 21

Temporarily not Available Pursuant to Public Law - - (1) - - - - -

Permanently not Available - (6) (54) (7) (10) (18) (1) (1)

Total Budgetary Resources 1,798 $ 91 $ 7,638 $ 3,549 $ 1,940 $ 2,066 $ 85 $ 173 $ 

Status of Budgetary Resources:

Obligations Incurred (Note 18):

Direct 1,237 $ 47 $ 5,632 $ 3,181 $ 1,504 $ 1,837 $ 82 $ 142 $ 

Reimbursable 195 37 269 54 93 81 2 25

Unobligated Balance: - - - - - - - -

Apportioned 317 1 1,263 251 308 116 - 4

Exempt from Apportionment 24 - - 5 15 2 - (1)

Other Available - - - - - - - -

Unobligated Balance not Available 26 6 475 58 20 30 2 2

Total Status of Budgetary Resources 1,799 $ 91 $ 7,639 $ 3,549 $ 1,940 $ 2,066 $ 86 $ 172 $ 

Relationship of Obligations to Outlays:Obligated Balance, Net, Beginning of Period (Note 21) $ 3 410 $ 1,597 $ 1,192 $ 414 $ 1,134 $ 23 $ 10 $ 

Obligated Balance, Transferred, Net - - - - - - - -

Obligations Incurred 1,432 84 5,901 3,235 1,597 1,918 84 168

Less: - - - - - - - -

Recoveries of Prior Year Obligations 318 8 97 533 244 730 10 21

Change from Federal Sources (12) 1 7 (3) 17 3 - 2

Obligated Balance, Net, End of Period: - - - - - - - -

Accounts Receivable (25) (5) (213) (55) (40) (16) (2) (4)

Unfilled Customer Orders from Federal Sources - - (120) (1) (34) - (65) (7)

Undelivered Orders 387 11 1,233 1,408 498 1,266 22 18

Accounts Payable 73 3 594 85 52 6 9 8

Total Obligated Balance, Net, End of Period 435 $ 9 $ 1,494 $ 1,437 $ 476 $ 1,191 $ 29 $ 15 $ 

Disbursements 1,100 $ 69 $ 5,901 $ 2,460 $ 1,274 $ 1,127 $ 68 $ 140 $ 

Collected and Advances Received (99) (36) (418) (78) (58) (42) (2) (19)

Outlays 1,001 33 5,483 2,382 1,216 1,085 66 121

Less: Offsetting Receipts 16 - 384 - 14 2 - 1

Net Outlays 985 $ 33 $ 5,099 $ 2,382 $ 1,202 $ 1,083 $ 66 $ 120 $ 
REQUIRED SUPPLEMENTARY INFORMATION 

F Y 2005 P ERFORMANCE AND A CCOUN

FY 2004 DO

Non-Budgetary Non-Budgetary

Financing Financing

Budgetary Accounts Budgetary Budgetary Accounts

Budgetary Resources:

Budget Authority:

Appropriations Received 3,457 $ - $ 508 $ 94,315 $ - $ 

Borrowing Authority (Note 19 & 20) 8,480 2 - 29,006 11,357

Contract Authority - - - - -

Net Transfers 3 - 8 - -

Other - - - - -

Unobligated Balances: - - - - -

Beginning of Period (Note 21) 1,391 2,298 233 16,760 5,801

Net Transfers, Actual - - - - (192)

Anticipated Transfers Balances - - - - -

Spending Authority From Offsetting Collections: - - - - -

Earned - - - - -

Collected 5,852 4,943 509 23,460 7,518

Receivable from Federal Sources (16) 10 (4) 146 (671)

Change in Unfilled Customer Orders - - - - -

Advance Received - - (96) 935 (96)

Without Advance from Federal Sources - - 77 99 (1)

Anticipated for the Rest of Year, Without Advances - - - - -

Previously unavailable - - - - -

Transfers from Trust Funds - - - - -Recoveries of Prior Year Obligations 309 543 73 5,255 634

Temporarily not Available Pursuant to Public Law - - - - (1)

Permanently not Available (2,981) (2,347) (8) (47,066) (4,376)

Total Budgetary Resources 8,924 $ 12,910 $ 1,410 $ 121,900 $ 20,983 $ 

Status of Budgetary Resources:

Obligations Incurred (Note 18):

Direct 4,665 $ 11,096 $ 606 $ 75,508 $ 14,659 $ 

Reimbursable 509 - 599 27,642 -

Unobligated Balance: - - - - -

Apportioned 396 1,434 156 6,397 5,922

Exempt from Apportionment - - 2 551 6

Other Available - - - - -

Unobligated Balance not Available 3,355 381 48 11,811 398

Total Status of Budgetary Resources 8,925 $ 12,911 $ 1,411 $ 121,909 $ 20,985 $ 

Relationship of Obligations to Outlays:

Obligated Balance, Net, Beginning of Period (Note 21) 6,916 $ 14,389 $ 100 $ 21,194 $ 14,871 $ 

Obligated Balance, Transferred, Net - - - 0.00 0.00

Obligations Incurred 5,174 11,096 1,205 103,151 14,659

Less: - - - - -

Recoveries of Prior Year Obligations 309 543 73 5,255 634

Change from Federal Sources (16) (100) 87 (573) 49

Obligated Balance, Net, End of Period: - - - - -

Accounts Receivable (78) - (71) (1,976) (316)

Unfilled Customer Orders from Federal Sources - (618) (181) (413) (634)

Undelivered Orders 6,320 17,547 253 14,354 17,735

Accounts Payable 285 - 81 9,046 352

Total Obligated Balance, Net, End of Period 6,527 $ 16,929 $ 82 $ 21,011 $ 17,137 $ 

Disbursements 5,270 $ 8,113 $ 1,064 $ 98,651 $ 11,710 $ 

Collected and Advances Received (5,852) (4,943) (509) (24,396) (7,518)

Outlays 3,170 (582) 555 74,255 4,192

Less: Offsetting Receipts 387 - - 1,927 601

Net Outlays (969) $ 3,170 $ 555 $ 72,328 $ 3,591 $ 

RD TOTAL
REQUIRED SUPPLEMENTARY INFORMATION 

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302 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

DEFERRED MAINTENANCE

FY 2005 Cost to Return to 

Acceptable Condition

Cost of Critical 

Maintenance

Cost of Non-critical 

Maintenance

Asset Class

Forest Service

Bridges 115 $ 25 $ 90 $ 

Buildings 439 118 321 

Dam 26 9 17 

Developed Site (minor Constr. Features) - 89 89 

Fence 437 437 - 

Handling Facility 24 24 - 

Heritage 32 8 24 

Road 4,571 712 3,859 

Trail Bridge 9 4 5 

Wastewater 32 19 13 

Water 81 46 35 

Wildlife, Fish, TES 6 4 2 

Trails (FY 2001) 33 98 65 

General Forest Area (FY 2001) 1 4 3 

Total Forest Service 5,963 $ 1,440 $ 4,523 $ 

FY 2004 Cost to Return to 

Acceptable Condition

Cost of Critical 

Maintenance

Cost of Non-critical 

Maintenance

Asset Class

Forest Service

Bridges 121 $ 25 $ 96 $ 

Buildings 436 113 323

Dam 29 10 19

Developed Site (minor Constr. Features) 91 0 91

Fence 440 440 0

Handling Facility 24 24 0

Heritage 10 5 5

Road 5,159 749 4,410

Trail Bridge 83 5

Wastewater 31 19 12

Water 79 49 30

Wildlife, Fish, TES 6 4 2

Trails (FY 2001) 98 33 65

General Forest Area (FY 2001) 41 3

Total Forest Service 6,536 $ 1,475 $ 5,061 $ 

Deferred maintenance is maintenance that was scheduled to be performed and delayed until a future period. 

Deferred maintenance represents a cost that the government has elected not to fund and, therefore, the costs 

are not reflected in the financial statements. Maintenance is defined to include preventative maintenance, 

normal repairs, replacement of parts and structural components, and other activities needed to preserve the 

asset so that it continues to provide acceptable service and achieve its expected life. It excludes activities 

aimed at expanding the capacity of an asset or otherwise upgrading it to service needs different from, or 

significantly greater than, those originally intended. Deferred maintenance is reported for general PP&E, 

stewardship assets, and heritage assets. It is also reported separately for critical and non-critical amounts of 

maintenance needed to return each class of asset to its acceptable operating condition. 

The FS uses condition surveys to estimate deferred maintenance on all major classes of PP&E. There is no 

deferred maintenance for fleet vehicles and computers that are managed through the Agency’s working capital 

fund. Each fleet vehicle is maintained according to schedule. The cost of maintaining the remaining classes of 

equipment is expensed. 
REQUIRED SUPPLEMENTARY INFORMATION 

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F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 303 

Currently, no comprehensive national assessment of FS property exists. Deferred maintenance estimates for 

all assets are based on condition surveys performed on a 5-year maximum revolving schedule, with the 

exception of bridges which are a maximum of 2 years. Condition surveys were performed on a statistical 

sample of closed and very low traffic volume roads. 

The overall agency indirect cost for managing the program is 17.8 percent. 

Condition of Assets 

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. 

Roads and Bridges 

Conditions of roads and bridges with the National Forest System Road system are measured by various 

standards that include applicable regulations for the Highway Safety Act developed by the Federal Highway 

Administration, best management practices for road construction and maintenance developed by the 

Environmental Protection Agency and the states to implement the non-point source provisions of the Clean 

Water Act, road management objectives developed through the forest planning process prescribed by the 

National Forest Management Act, and the requirements of Forest Service Manuals and Handbooks. 

Dams 

The overall condition of dams is below acceptable. The condition of dams is acceptable when current design 

standards are met and no deficiencies that threaten the safety of the structure or public are detected. Managed 

according to Forest Service Manual 7500, Water Storage and Transmission, and Forest Service Handbook 

7509.11, Dams Management as determined by condition surveys. 

Buildings 

Comply with the National Life Safety Code, the Forest Service Health and Safety Handbook, and the 

Occupational Safety Health Administration as determined by condition surveys. 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. Approximately half of these buildings are obsolete or in poor condition, 

needing major repairs or renovation. Approximately a quarter of these buildings are in fair condition, and the 

remaining facilities are in good condition. 

Recreation Facilities 

This category includes developed recreation sites, general forest areas, campgrounds, trailheads, trails, 

wastewater facilities, interpretive facilities, and visitor centers. All developed sites are managed in accordance 

with Federal laws and regulations (CFR 36). Detailed management guidelines are contained in the Forest 

Service Manual (FSM 2330, Publicly Managed Recreation Opportunities) and regional and forest level user 

guides. Standards of quality for developed recreation sites were developed under the meaningful measures 

system and established for the following categories: health and cleanliness, settings, safety and security, 

responsiveness, and the condition of facility. 

Range Structures 

The condition assessment (fences and stock handling facilities) is based on: 1) a determination by 

knowledgeable range specialists or other district personnel that the structure performs as intended, and 2) a 
REQUIRED SUPPLEMENTARY INFORMATION 

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304 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

determination through the use of a protocol system to assess conditions based on age. A long-range 

methodology is used to gather this data. 

Heritage Assets 

These assets include archaeological sites that require determinations of National Register of Historic Places 

status, National Historic Landmarks, and significant historic properties. Some heritage assets may have 

historical significance, but their primary function within the agency is as visitation or recreation sites and, 

therefore, may not fall under the management responsibility of the heritage program. 

Trails 

Trails are managed according to Federal law and regulations (CFR 36). More specific direction is contained in 

the Forest Service Manual (FSM 2350, Trail, River, and Similar Recreation Opportunities) and the Forest 

Service Trails Management Handbook (FSH 2309.18). 

Wildlife, Fish and Threatened and Endangered Species Structures 

Field biologists at the forest used their professional judgment to determine deferred maintenance. Deferred 

maintenance was considered as upkeep that had not occurred on a regular basis. The amount was considered 

critical if resource damage or species endangerment would likely occur if maintenance was deferred much 

longer. 
REQUIRED SUPPLEMENTARY INFORMATION 

USDA

F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 305 

INTRAGOVERNMENTAL AMOUNTS

Assets 

FY 2005 Fund Balance with 

Treasury Investments

Accounts 

Receivable Other

Trading Partner (Code)

Unidentified (00) $ - - $ 140 $ (4) $ 

Department of Interior (14) - - 46 - 

Department of Justice (15) - - 2 - 

Department of Labor (16) - - 4 - 

Department of the Navy (17) - - 1 - 

U.S. Postal Service (18) - - 1 6 

Department of the Treasury (20) 42,327 69 7 - 

Department of the Army (21) - - 13 - 

Office of Personnel Management (24) - - 2 - 

General Services Administration (47) - - 30 - 

Environmental Protection Agency (68) - - 2 - 

Department of Transportation (69) - - 195 (1) 

Department of Homeland Security (70) - - 96 - 

Agency for International Development (72) - - 24 - 

Department of Health and Human Services (75) - - 1 - 

National Aeronautics & Space Admin. (80) - - 1 - 

Department of Energy (89) - - 2 - 

U.S. Army Corps of Engineers (96) - - 3 - 

Office of the Secretary of Defense-Defense Agencies (97) - - 8 - 

Treasury General Fund (99) - - 134 - 

Total Assets $ 69 42,327 $ 712 $ 1 $ 

FY 2004 Fund Balance with 

Treasury Investments

Accounts 

Receivable Other

Trading Partner (Code)

Unidentified (00) $ - - $ 143 $ (5) $ 

Department of Interior (14) - - 29 - 

Department of Justice (15) - - 1 - 

Department of Labor (16) - - - - 

Department of the Navy (17) - - 1 - 

U.S. Postal Service (18) - - - 6 

Department of State (19) - - - - 

Department of the Treasury (20) 39,488 56 10 - 

Department of the Army (21) - - 10 - 

Office of Personnel Management (24) - - 2 - 

General Services Administration (47) - - 7 - 

Federal Deposit Insurance Corporation (51) - - - - 

Department of Transportation (69) - - 298 - 

Department of Homeland Security (70) - - 9 - 

Agency for International Development (72) - - 54 - 

Department of Health and Human Services (75) - - - - 

Department of Energy (89) - - 2 - 

U.S. Army Corps of Engineers (96) - - 1 - 

Office of the Secretary of Defense-Defense Agencies (97) - - 12 - 

Treasury General Fund (99) - - 46 - 

Total Assets $ 56 39,488 $ 625 $ 1 $ 

.
REQUIRED SUPPLEMENTARY INFORMATION 

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306 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Liabilities 

FY 2005

Accounts 

Payable Debt

Resources 

Payable to 

Treasury Other

Trading Partner (Code)

Unidentified (00) 7 $ - $ - $ 171 $ 

Architect of the Capitol (01) - - - (5) 

Government Printing Office (04) - - - (4) 

Department of Commerce (13) - - - 1 

Department of Interior (14) - - - 128 

Department of Justice (15) - - - 32 

Department of Labor (16) - - - 199 

U.S. Postal Service (18) - - - 2 

Department of State (19) 1 - - (4) 

Department of the Treasury (20) - 83,515 - 19 

Department of the Army (21) - - - 4 

Office of Personnel Management (24) - - - 42 

Department of Veterans Affairs (36) - - - (1) 

General Services Administration (47) - - - 31 

Department of Transportation (69) - - - 1 

Department of Homeland Security (70) - - - 1 

Agency for International Development (72) 813 - - 5 

Department of Health and Human Services (75) - - - (2) 

National Aeronautics & Space Admin. (80) - - - - 

U.S. Army Corps of Engineers (96) - - - (176) 

Treasury General Fund (99) - - 18,147 - 

Total Assets $ 83,515 821 $ 18,147 $ 444 $ 

FY 2004

Accounts 

Payable Debt

Resources 

Payable to 

Treasury Other

Trading Partner (Code)

Unidentified (00) 4 $ - $ - $ 205 $ 

Architect of the Capitol (01) - - - (5) 

Government Printing Office (04) - - - - 

Department of Commerce (13) - - - 3 

Department of Interior (14) - - - 129 

Department of Justice (15) - - - 22 

Department of Labor (16) - - - 166 

Department of the Navy (17) - - - - 

U.S. Postal Service (18) - - - 1 

Department of State (19) - - - (4) 

Department of the Treasury (20) 1 69,053 - 20 

Department of the Army (21) - - - 5 

Office of Personnel Management (24) - - - 39 

General Services Administration (47) - - - 21 

Tennessee Valley Authority (64) - - - 1 

Environmental Protection Agency (68) - - - 1 

Department of Transportation (69) - - - 1 

Department of Homeland Security (70) - - - - 

Agency for International Development (72) 804 - - 1 

Department of Health and Human Services (75) - - - 30 

Department of Energy (89) - - - 1 

U.S. Army Corps of Engineers (96) - - - (133) 

Office of the Secretary of Defense-Defense Agencies (97) - - - 1 

Treasury General Fund (99) - - 17,469 887 

Total Liabilities $ 69,053 809 $ 17,469 $ 1,392 $ 
REQUIRED SUPPLEMENTARY INFORMATION 

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F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 307 

Non-exchange Revenue 

TransfersInTransfersOutTransfersInTransfersOut

Trading Partner (Code)

Unidentified (00) 473 $ (293) $ 395 $ (376) $ 

Department of Commerce (13) - (80) - (80) 

Department of Interior (14) 1 (5) 131 (13) 

Department of Justice (15) - - 1 - 

Department of Labor (16) 114 (3) 100 (1) 

Department of State (19) 6 - 5 - 

Appalachian Regional Commission (46) 12 - 16 - 

Department of Transportation (69) - - 12 - 

Department of Homeland Security (70) - (208) 30 (194) 

Agency for International Development (72) 13 (1,159) - (696) 

Arms Control & Disarmament Agency (94) - - 3 - 

Independent Agencies (95) 1 - - - 

Office of the Secretary of Defense-Defense Agencies (97) 40 - - - 

Treasury General Fund (99) 6,051 $ (5,785) $ 5,930 $ (3,991) $ 

$ (7,533) 6,711 $ 6,623 $ (5,351) $ 

. .

FY 2005 FY 2004
REQUIRED SUPPLEMENTARY INFORMATION 

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308 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Segment Information 

The Departmental Working Capital Fund and the FS Working Capital Fund are not separately reported in the 

consolidated financial statements. The following information summarizes the working capital funds’ financial 

condition and results of operations as of and for the fiscal years ending September 30, 2005, and 2004. 

FY 2005 Departmental Forest Service Total

Working Capital Working Capital Working Capital

Fund Fund Funds

Condensed Information

Fund Balance 56 $ 128 $ 184 $ 

Accounts Receivable 106 1 107 

Property, Plant, and Equipment 54 205 259 

Other Assets - - - 

Total Assets $ 334 216 $ 550 $ 

Liabilities and Net Position

Accounts Payable 2 $ - $ 2 $ 

Deferred Revenues - - - 

Other Liabilities 102 34 136 

Unexpended Appropriations 84 9 93 

Cumulative Results of Operations 28 291 319 

Total Liabilities and Net Position 216 $ 334 $ 550 $ 

Excess of

Cost of Goods Related Costs Over

and Services Exchange Exchange

Provided Revenue Revenue

Product or Business Line

Departmental Working Capital Fund:

Finance and Management 255 $ 233 $ 22 $ 

Communications 7 7 - 

Information Technology 193 185 8 

Administration 40 40 - 

Executive Secretariat 3 4 (1) 

Total Departmental Working Capital Fund 498 469 29 

Forest Service Working Capital Fund:

Other 238 178 60 

Total Working Capital Funds 736 $ 647 $ 89 $ 
REQUIRED SUPPLEMENTARY INFORMATION 

USDA

F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 309 

FY 2004 Departmental Forest Service Total

Working Capital Working Capital Working Capital

Fund Fund Funds

Condensed Information

Fund Balance 109 $ 139 $ 248 $ 

Accounts Receivable 29 3 32 

Property, Plant, and Equipment 52 242 294 

Other Assets 1 - 1 

Total Assets 191 $ 384 $ 575 $ 

Liabilities and Net Position

Accounts Payable 2 $ 1 $ 3 $ 

Deferred Revenues - - - 

Other Liabilities 77 24 101 

Unexpended Appropriations 87 9 96 

Cumulative Results of Operations 25 350 375 

Total Liabilities and Net Position 191 $ 384 $ 575 $ 

Excess of

Cost of Goods Related Costs Over

and Services Exchange Exchange

Provided Revenue Revenue

Product or Business Line

Departmental Working Capital Fund:

Finance and Management 257 $ 250 $ 7 $ 

Communications 11 11 - 

Information Technology 96 97 (1) 

Administration 34 33 1 

Executive Secretariat 3 3 - 

Total Departmental Working Capital Fund 401 394 7 

Forest Service Working Capital Fund:

Other 263 238 25 

Total Working Capital Funds 664 $ 632 $ 32 $ 

Departmental Working Capital Fund 

Services provided by the Departmental Working Capital Fund include the following: 

Administrative and Supply Services; 

Video, Teleconferencing, Graphic and Exhibit Services; 

Payroll, Accounting and Administrative Services and Thrift Savings Plan Support; 

ADP Services, Application Development, and Telecommunications Services; and 

Executive correspondence control and tracking. 

Major customers of the fund are the FSA and the FS in FY 2005 and the FS and the Thrift Savings Investment 

Board in FY 2004. 
REQUIRED SUPPLEMENTARY INFORMATION 

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310 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Forest Service Working Capital Fund 

Services provided by the FS Working Capital Fund include the following: 

Fleet services, rental, and maintenance; 

Aircraft services, operation, and maintenance; 

Supply services; and 

Computer services. 

Major customers of the fund are FS units. 


USDA

F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 311 

V. Report of the Office of Inspector General 
REPORT OF THE OFFICE OF INSPECTOR GENERAL 

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312 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT
REPORT OF THE OFFICE OF INSPECTOR GENERAL 

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REPORT OF THE OFFICE OF INSPECTOR GENERAL 

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314 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT
REPORT OF THE OFFICE OF INSPECTOR GENERAL 

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F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 315 
REPORT OF THE OFFICE OF INSPECTOR GENERAL 

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316 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT
REPORT OF THE OFFICE OF INSPECTOR GENERAL 

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F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 317 
REPORT OF THE OFFICE OF INSPECTOR GENERAL 

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318 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT
REPORT OF THE OFFICE OF INSPECTOR GENERAL 

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F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 319 
REPORT OF THE OFFICE OF INSPECTOR GENERAL 

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320 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT
REPORT OF THE OFFICE OF INSPECTOR GENERAL 

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REPORT OF THE OFFICE OF INSPECTOR GENERAL 

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322 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT
REPORT OF THE OFFICE OF INSPECTOR GENERAL 

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VI. Appendices 

APPENDIX A—MANAGEMENT CHALLENGES
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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 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 that enter into contracts 

with a total value of 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. 

Under this guidance, USDA has four programs required to report under Section 57 of A-11 and has identified 

an additional seven programs 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 2005 USDA achieved “yellow” status by completing the following 

items: 

Completed assessments of risk for all programs; 

Developed plans to measure improper payments for all high risk programs and received OMB 

approval; 

Developed corrective action plans to reduce improper payments and established both reduction and 

recovery targets for all high-risk programs; and 

Fully complied with reporting standards. 

USDA will be able to move to “green” status when error rates are available for all programs and it can 

demonstrate that reduction and recovery goals are being met. Due to budget and program constraints, this 

upgrade can be complicated. For the programs that have not yet estimated an error rate, USDA is working 

with OMB to develop interim methods to establish and track erroneous payment percentages. 

Additionally, USDA is implementing recovery auditing fully. The Department completed a pilot recovery 

auditing project at the Forest Service. Using an independent recovery audit contractor working on 

contingency, USDA identified $333,000 worth of improper payments. The Department has recovered 

$189,000 to date. These numbers represent a dramatic improvement in findings and collections from FY 2004. 

Based on these results, USDA is expanding the use of independent recovery audit contractors working on 

contingency to the entire Department. A second dramatic increase in findings and collections is expected in 

FY 2006. 

On August 23, 2005, 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. 
APPENDICES 

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F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 357 

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 premise and processes 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 number of improper payments needed to meet the reporting standards; 

A description of the program including purpose, basic eligibility requirements and how fund were 

disbursed; 

Improper Payments were defined specifically for the program; 

Program vulnerabilities to improper payments; 

Internal controls designed to offset the program vulnerabilities; 

Testing of the internal controls; 

A listing of significant reviews and audits; 

A final determination of risk; 

Planned future enhancements (optional); and 

A description of how improper payments are recovered (optional). 

The Office of Inspector General is in the process of reviewing the FY 2005 risk assessments and will make 

recommendations to USDA agencies for additional improvements to be used in the FY 2006 risk assessment 

process. 

USDA has identified the following 11 programs as susceptible to improper payments. 

Selection Methodology Agency Program 

Farm Service Agency (FSA), Commodity 

Credit Corporation (CCC) 

Marketing Assistance Loan Program

Food Stamp Program

School Lunch and Breakfast

Section 57 of OMB Circular A-11 

Food Nutrition Service (FNS)

Woman, Infants and Children

Farm Service Agency (FSA) Milk Income Loss Contract Program 

Loan Deficiency Payments 

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 Federal Crop Insurance Corporation 

Program Fund

USDA Identified as Risk-Susceptible 

Natural Resource Conservation Service 

(NRCS)

Farm Security and Rural Investment 

Programs
APPENDICES 

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358 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

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

The Marketing Assistance Loan (MAL) Program is composed of an application, review 

and payment phase. The application phase (Phase I) is the most complex of the three 

phases. It requires the demonstration of the applicant eligibility, the commodity (crop) 

eligibility and financial compliance with the terms of the program. 

In Phase II, the application then is reviewed by the FSA representative (county field 

office) and county committee to validate the application information. Phase III includes the 

authorization of the application, which then initiates the loan payment to the applicant. 

Statistical program sampling occurs today during Phase I, at the completion of Phase II 

and at the completion of Phase III as follows: 

• Phase I Statistical Sampling: During Phase I, the county field offices completed 

random spot checks on 2.5 percent of all loan value originating in the county office. 

The county requested additional background and supporting information to validate the 

application. Validation may include additional documentation, Geological Information 

System information on the farm acreage or viewing of the commodity and storage 

arrangements on the production site. 

• Phase II Statistical Sampling: Random statistical sampling was conducted by an 

outside contractor on all commodity loans granted within a selected crop year. The 

statistical analysis included reviewing randomly-selected loans approved during Phase 

II from all the loans made in the same crop year. The number of sample files chosen 

satisfied the OMB requirements for statistically significant sampling process. The files 

then were reviewed against USDA/FSA requirements for loan approval to determine 

whether the loan was compliant or a potential erroneous payment. 

• Phase III Sampling: The approved loan applications were reviewed for correct 

payment information as part of the contractor sampling process. The sampling 

included review of the loan dollar value, address and recipient name.

FNS Food Stamp 

Program (FSP)

The FSP payment-error rate is developed from a long-standing program-integrity process 

called Quality Control (QC). QC reviews and measures the accuracy of household 

certifications using a statistical-sampling process initially established in 1970. The system 

is mandated by the Food Stamp Act and further defined in program regulations and 

agency guidance. Specific procedures are established in three handbooks: Sampling 

Methodology, State Review Procedures and Federal Validation Reviews. This welldesigned and controlled process yields quality data with a confidence level for accuracy 

that complies with IPIA. 

During the process: 

• States select a statistical sample from all participating households. This occurs after 

the monthly issuance amount for households has been determined, and follows the 

Federally pre-approved sampling plan devised for that fiscal year; 

• State personnel conduct QC reviews on the cases selected; 

• States report the findings of all QC reviews to FNS; 

• FNS conducts validation reviews of a statistical sample of the completed State 

reviews; 

• The results of the Federal validation and State findings are used to calculate a final 

error rate for each State agency. These individual rates have been used previously to 

assess penalties against States with high rates and award incentives to those with low 

rates; and 

• Official State error rates are weighted annually to determine a national average error 

rate for the Food Stamp Program. 

FNS School Lunch 

and Breakfast

The School Lunch and Breakfast erroneous payments rate for School Year 2005-2006 is 

anticipated to be reported in the FY 2007 Performance and Accountability Report. The 

next section discusses estimating this rate and includes detailed, OMB-approved plans to 

calculate the rate as well as component rates in the future.
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F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 359 

Agency Program Sampling Process 

FNS Women, Infants 

and Children 

(WIC) 

A measurement of the dollar amount of erroneous payments associated with certification 

error in WIC is scheduled to be reported in the FY 2008 Performance and Accountability 

Report. The vendor management study currently underway will provide a dollar amount 

estimate for erroneous payments involving vendor charges. The next section discusses 

estimating these rates and includes detailed, OMB-approved plans to calculate these 

rates in the future.

FNS Child and Adult 

Care Food 

Program 

(CACFP)

The measurement of the dollar amount of erroneous payments in CACFP is anticipated to 

be reported in the FY 2010 Performance and Accountability Report. The next section 

discusses estimating this rate and includes detailed, OMB-approved plans to calculate a 

component rate in the future. Congress denied funding for this activity in FY 2006.

FSA Milk Income 

Loss Contract 

Program 

(MILC) 

MILC is composed of the application, market-rate evaluation and payment phases. The 

application phase (Phase I) occurs where producer eligibility and evidence of production 

is determined. The market rate evaluation phase (Phase II) occurs where the Boston 

Class I price for milk during any month falls below the $16.94 per hundredweight target. 

The payment phase (Phase III) occurs when the payment is calculated and payment 

limitation imposed. 

Four requirements were determined to be conclusive as to whether or not an improper 

payment was made. These four criteria can be grouped into one of the three phases as 

follows: 

• Phase I for consistent eligibility determination of "dairy operation" and quantity per 

operation based on evidence of production provided by the producer; 

FSA Milk Income 

Loss Contract 

Program 

(MILC) [cont’d] 

• Phase II for MILC Rate Accuracy; and 

• Phase III for MILC Payment Accuracy and to ensure that the maximum quantity 

payment was not exceeded. 

FSA Loan 

Deficiency 

Payments 

The Loan Deficiency Payment (LDP) Program is composed of an application, review and 

payment phase. The application phase (Phase I) is the most complex of the three phases 

and requires the demonstration of the applicant eligibility, the commodity (crop) eligibility, 

and financial compliance with the terms of the program. 

In Phase II, the application then was reviewed by the FSA representative (county field 

office) and the county committee to validate and approve the application information. 

In Phase III the producer determines the day the LDP request will be made. The decision 

initiates the LDP payment to the applicant. The producer has to provide evidence of 

production to support the quantity. The payment is calculated by multiplying the quantity 

by the difference between the loan rate and posted county price. 

Statistical program sampling occurs as follows: 

• Phase I Statistical Sampling: During Phase I, the county field offices complete an 

automated spot check process on 2.5 percent of all LDPs originating in the county 

office each month. The county requests additional background and supporting 

information to validate the application. Validation may include additional 

documentation, Geological Information System information on the farm acreage or 

viewing of the commodity and storage arrangements on the production site. 

• Phase II Statistical Sampling: Random statistical sampling was conducted by an 

outside contractor on all LDP payments made within a selected crop year. The 

statistical analysis included reviewing randomly-selected payments approved during 

Phase II from all the payments made in the same crop year. The number of sample 

files chosen satisfied the OMB requirements for statistically significant sampling 

process. The program files were reviewed against USDA/FSA requirements for LDP 

approval. This process was designed to determine if there is sufficient evidence of 

production and beneficial interest in the commodity. Such evidence would ensure that 

the request for the program payment either was compliant or a potential erroneous 

payment. 

• Phase III Sampling: The approved LDP payments also were reviewed for correct 

payment information as part of the contractor sampling process. The sampling 

included review of the LDP rate used to calculate the payment, dollar value calculated, 

the recipient name and address, and banking information if the payment was 

electronic. 
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360 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Agency Program Sampling Process 

FS Wildland Fire 

Suppression 

Management

A service need is identified and requested through the requisition process. After the 

services are performed and invoice received, the payment is completed. 

The FY 2005 statistical sample wild fire suppression payments was reviewed and 

evaluated against payment criteria. Documentation to support the review was gathered 

from the requisition through the payment process.

RD Rental 

Assistance 

Program

USDA provides rental assistance subsidies to more than a quarter-million households. To 

qualify for assistance, a household must submit an application to a multifamily borrower 

or his or her property management agent. The application process requires that the 

individual or family provide information on the amount and source(s) of income. A 

property agent will verify this information. This income determination is the primary 

determinant of a family's rent charge and, in turn, the amount of housing subsidy 

provided. The source of errors studied in the IPIA Report on Section 521 Rental 

Assistance was the borrowers’ analysis and computation of the housing subsidy amount. 

The Rural Housing Service conducted a sample audit from March through May 2005. 

Agency staff conducted the sample and input data to an on-line questionnaire. The 

questionnaire was monitored electronically for timely completion and automatic data 

calculation. Sample size was sufficient to achieve a 90-percent confidence level. 

RMA Federal Crop 

Insurance 

Corporation 

Program Fund

Under the terms of the Standard Reinsurance Agreement, the companies are provided a 

random sample of indemnity payments to review at the completion of each crop year. 

RMA selects the policies from the entire population of indemnities paid. The companies 

then are required to review the payments, correct errors according to procedure and 

report the results to RMA. For the current cycle, the companies reviewed 1,575 polices 

with $44,346,567 in indemnities. RMA will use this interim process for the 2004 and 2005 

reporting. Starting with the 2006 reporting cycle, RMA will begin using random policy 

selections from company operations reviews to develop a rolling program error rate. RMA 

will review all participating companies triennially. Accordingly, the first full review cycle will 

be completed for the FY 2008 Performance and Accountability Report.

NRCS Farm Security 

and Rural 

Investment 

Programs

The Farm Security and Rural Investment Programs were treated as eight different 

programs following the apportionment schedule (FRPP, WRP, CSP, EQIP-Base, EQIPGSWC, EQIP-Klamath, WHIP, and GRP). The statistical sample was identified separately 

based upon input from individual program managers. Improper payment criteria were 

identified. This identification incorporated statutory items common to all the programs and 

added causes unique to each specific program. 

Each national program manager was interviewed to determine potential areas of risk of 

Improper Payments. Statutory requirements and program rules were reviewed further for 

internal control measures to mitigate risks. 

Statistical samples were selected based upon a baseline estimate of rate of occurrence, a 

confidence level of 95 percent and precision range provided by the program managers. 

Payments then were reviewed for program, contract and statutory compliance. 

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 

Causes of Improper Payments 

Loan Rate Validity Essential Requirement: The correct loan rate must be applied for 

loan payment calculations. The loan rate must be for the correct commodity, county and 

crop year. It also should agree with the loan rate information contained on form CCC-677. 

Otherwise, the payment is considered improper. The statistical sample results indicate a 

.60-percent error rate for this requirement. 

Evidence of Production: A producer can certify or provide acceptable production 

evidence of the commodities pledged as collateral for a MAL. Within the file, form CCC666 (Farm Stored Loan Quantity Certification), CCC-677-1 or warehouse receipt must be 

completed to FSA minimum standards. The analysis team reviewed forms to verify the 
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Agency Program Corrective Actions Planned 

FSA/CCC 

(cont’d) 

Marketing 

Assistance 

Loan program 

commodity, type and quantity disclosed on the form. The form also requires the 

producer’s signature and date of certification. Commodities must meet the minimum 

United States Grain Standards to be eligible for a MAL. Production evidence must 

coincide with the form FSA-578 values for production quantities. If not, the calculation of 

the loan amount would be incorrect and the payment would be considered improper. The 

statistical sample results indicate a .60-percent error rate for this requirement. 

Corrective Action Plans 

The agency will remind State and county offices through notices and policy handbooks of 

the necessary policy requirements for receiving loan benefits. The agency also is 

developing new software and databases that will automate several manual processes to 

validate producer eligibility requirements. The centralized databases will help to alleviate 

manual data entry errors. Applicant eligibility “flags” would be set and read in “real time” to 

verify when eligibility. The new eligibility process will read such information as AD-1026 

and crop acreage files. 

The new automated process also will include a centralized loan rates table. Loan rates 

and other types of program payment data will be obtained directly from the loan rates 

table instead of entering loan rates manually.

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 are a cause of improper payments. 

An analysis of the FY 2004 completed statistical sample revealed that approximately 69 

percent of all variances occurred before or at the most recent 

certification/recertification. Additionally, 42 percent of the errors were client-caused. The 

majority of errors (50 percent) were income related and caused by the client misreporting 

or the agency misapplying the reported income. Misreporting or misapplying deductions 

was the second largest source of errors at 31 percent. 

Corrective Action Plans 

Program regulations require State agencies to analyze data. The agencies use this 

analysis to develop corrective action plans for reducing or eliminating 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 quality control 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. 

Specific strategies already exist which are designed to help States prevent erroneous 

payments. FSP builds upon and refines its activities in small increments absent a 

significant increase in funding for payment accuracy. Additionally, examples of activities 

determined to be both cost efficient and effective toward reducing payment errors are: 

• FNS, through its regional offices, informs States of the importance of payment 

accuracy and correct payments to its leadership. The agency also assists States in 

developing effective corrective action strategies to reduce payment errors. Regional 

offices provide many forms of technical assistance to States, such as: 

Data analysis; 

Reviewing and monitoring corrective action plans; 

Developing error-reduction and corrective action strategies; 

Participating on boards and in work groups; and 

Hosting, attending and supporting payment accuracy conferences. 

• FNS administers a State Exchange Program. The program provides funds to States to 

facilitate travel to obtain, observe and share 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 the development of effective corrective action. 
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362 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Agency Program Corrective Actions Planned 

FNS School Lunch 

and Breakfast 

Causes of Improper Payments 

In the National School Lunch and School Breakfast Programs, erroneous payments 

potentially can occur when ineligible households misreport income at application, are 

approved for free or reduced-price meals and then receive them. Such payments also can 

occur when a school incorrectly certifies a student as eligible for meal benefits, or submits 

inaccurate claims for meals that were misclassified, not served or failed to meet program 

requirements. 

In recent years, there has been growing evidence of errors in certifying students for 

subsidized school meals. While certification errors alone do not result in a loss to the 

Government – loss occurs when ineligible students actually receive meals – these errors 

represent a significant risk for erroneous payments. In response, FNS has participated in 

several demonstration projects to understand the extent and nature of the problem better. 

FNS also is working with program partners to improve certification in the context of current 

regulations, and exploring alternatives to and/or improvements in the process. 

Corrective Action Plans 

FNS has collected data on eligibility determination and verification efforts at the school 

food authority (SFA) level. States are expected to identify and resolve problems with the 

certification and verification processes based on these data. A number of key data 

elements are reported to FNS. These elements include certification type (direct 

certification or application), verifications conducted and results of verification activity. 

These efforts will be used to explore regulatory, policy and training efforts to improve the 

accuracy and reliability of the eligibility-determination process. The first required reports 

from all SFAs for School Year 2004-05 were due to FNS in April 2005. Some States 

experienced significant difficulties in implementing the new reporting requirements. FNS is 

working with these States to assist them in completing their reports. 

FNS also has secured resources and entered into a contract to conduct a nationally 

representative study of the NSLP/SBP eligibility determination process and establish the 

first erroneous-payments rate. An erroneous payments rate for School Year 2005-2006 is 

anticipated to be available in FY 2007. Because of the scope and cost of this study, it is 

more prudent to repeat it on a multi-year cycle. With appropriate funding approval, FNS 

will repeat this type of study and produce an erroneous payment measurement every five 

years. FNS also will develop a methodology that uses data available from other sources. 

This methodology will measure erroneous payments on a component of the National 

School Lunch Program annually. 

 In the interim (before the nationally representative erroneous payments rate is available in 

FY 2007), FNS is planning to monitor/assess two components of the program: 

Conducting annual on-site reviews focused on the certification and verification process. 

One important source of certification error that FNS has identified is SFA errors in 

certifying and verifying applications. In 2002, FNS conducted on-site reviews of the 

application verification process at 14 SFAs. It determined that 6 percent of the SFAs’ 

verification determinations were incorrect due to administrative errors. Training and 

technical assistance are being developed to help SFAs improve the accuracy of these 

processes. Beginning in FY 2005, FNS will review a statistical sample of SFA application 

eligibility determinations annually. This review will be used to measure changes in 

administrative error rates, allowing FNS to assess the impact of its corrective action, and 

target and focus future activities. Beginning in 2007, it is anticipated that this component 

also will become part of the formula used to develop the annual payment error estimate. 

Comparing annual demographic data on the number of children eligible for school meals 

with the number of children actually certified. One of the sources of data originally used to 

assess the extent of certification error was a comparison of national survey data on 

household income with administrative data on NSLP certification. FNS plans to resume 

the use and publication of this analysis annually. Data from the Survey on Income and 

Program Participation (SIPP) will be compared with State-reported administrative data on 

the number of free and reduced price certifications. The U.S. Census Bureau administers 

SIPP. While this comparison has some methodological weaknesses and cannot substitute 

for the payment error estimate required under IPIA, the comparison does provide an 
APPENDICES 

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F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 363 

Agency Program Corrective Actions Planned 

FNS 

(cont’d) 

School Lunch 

and Breakfast 

annual error indicator that will help gauge changes in the rate of certification error. It also 

will determine the effectiveness of administrative initiatives intended to improve 

certification accuracy. Results from analysis of 2001 and 2002 data will be reported in FY 

2005. Information based on 2003 data will be reported in FY 2006. 

FNS Special 

Supplemental 

Program for 

Women, 

Infants and 

Children (WIC) 

Causes of Improper Payments 

Erroneous WIC payments potentially can occur at the participant level (ineligible persons 

receive benefits) and/or the vendor level (WIC food instruments redeemed for foods not 

received, provided at excess prices or for unauthorized items). FNS periodically has 

constructed estimates relating to these types of errors. 

Corrective Action Plans 

FNS plans to continue periodic examinations of certification and vendor error in WIC. 

• Certification Error: The next decennial national study to measure WIC certification 

error is scheduled for 2008. This study will include a first measurement of the amount 

of erroneous payments associated with certification error. Previous studies did not 

include any value determination of erroneous payments. Selected demographic, 

income and other characteristic data were and continue to be collected on a near 

census of WIC participants biannually. From this, data that correlate most strongly with 

error, along with other administrative data and data from the 1998 study, were used to 

develop aged estimates of the WIC certification error rate since 1998. When the data 

from the 1998 decennial study is applied to the demographics, it provides a trend in the 

error rate over a six-year period. This error rate remains constant at 2.6 percent. A 

similar method or an improved alternative (conditional upon funding for its 

development) will be used to develop estimates for the years following the 2008 study. 

• Vendor Error: The vendor management study currently underway will provide a 

national erroneous payments estimate of vendor charges. This information, for FY 

2005 activity, will be available in 2006. Subsequently, FNS will generate an annual 

update for the improper payment measurement of this vendor component using 

statistical techniques. FNS is exploring options for aging this estimate for the years 

following this study using existing administrative data. Although FNS has not 

determined a specific approach, the agency is continuing to explore other options. 

These options include focusing on information on high-risk vendors and information 

from States which might serve as “sentinel sites.” If an acceptable method for aging 

cannot be developed using existing data, FNS could develop a regulatory proposal 

requiring limited new data collection and reporting by the States on not more than 1 

percent of WIC vendors. 

Since the 1998 measurements were made, FNS has taken substantial actions aimed at 

improving program operations and reducing improper payments, including: 

• Changing program rules so that WIC applicants now are required to document income; 

• Publishing a final rule in December 2000 on food-delivery systems that strengthened 

retail vendor management by establishing mandatory vendor selection criteria, price 

limitations on the amounts paid to vendors, vendor-training requirements, criteria to be 

used to identify high-risk vendors and such vendor-monitoring requirements as 

compliance investigations; and supporting the development of WIC electronic benefits 

transfer (EBT) systems. EBT is an electronic system that allows a recipient to authorize 

the transfer of his WIC benefits from a State account to a retailer account to pay for 

supplemental foods received. Because these systems require a personal identification 

number entry prior to retail transactions and the validation of WIC-authorized foods by 

Universal Product Codes, participant and vendor error are minimized. An evaluation of 

several WIC EBT pilot projects thus far indicates that participant and vendor error 

related to the retail transaction process virtually are eliminated.

FNS Child and Adult 

Care Food 

Program 

(CACFP) 

Causes of Improper Payments 

Payments and claim information in this program are transferred among FNS, State 

agencies, program sponsors and program sites. Each such transaction represents a risk 

for erroneous payments. Because requirements vary for each different type of program 

sponsor and site, a full and rigorous assessment of the rate of erroneous payments is 

extremely complex. 
APPENDICES 

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364 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Agency Program Corrective Actions Planned 

FNS 

(cont’d) 

Child and Adult 

Care Food 

Program 

(CACFP) 

Corrective Action Plans 

As the problems in the CACFP were identified, FNS initiated actions to address them, 

including: 

• Working with Congress to enact legislation to improve oversight and accountability. 

Interim regulations implementing these laws have been published; 

• Developing new management improvement guidance for program cooperators; 

• Training all State agencies on implementing statutory and regulatory changes, and 

new management improvement guidance materials; 

• Revising monitoring tools to evaluate State agencies’ and institutions’ implementation 

of CACFP better and support State agency oversight efforts; 

• Developing additional discretionary changes designed to improve management and 

accountability; and 

In July 2002 and September, 2004, published an interim rule implementing such changes. 

FNS has initiated the Child Care Assessment Project to measure the effectiveness of 

efforts to improve the integrity of CACFP family day care homes. Over a four-year period, 

begun in the spring of 2004, FNS will conduct comprehensive on-site assessments of a 

sample of participating family day care home sponsors. These assessments are designed 

to analyze the effectiveness of FNS regulatory and policy initiatives on program 

performance. It also will offer additional insights on the control points in the claiming and 

reimbursement process that cause or contribute to improper payments most frequently. 

Additionally, this information will help support the effort to develop measurement 

strategies to estimate CACFP erroneous payments pursuant to IPIA. 

FSA Milk Income 

Loss Contract 

Program 

(MILC) 

Causes of Improper Payments 

The statistical sample data specifically identified 2 erroneous payments out of 594 

contracts examined by the contractor. Both of these erroneous payments were caused by 

errors in the MILC payment calculation. They also occurred in the same office. Other 

causes identified through separate reviews of the program included input errors in 

recording production and not confirming that the maximum payment amount had not been 

exceeded.

Corrective Action Plans 

FY 2005 is the last year of the program. No payments will be made in FY 2006 unless 

there is legislation to extend the program and funding authorized by the Office of 

Management and Budget. No additional corrective actions or statistical samples currently 

are possible.

FSA Loan 

Deficiency 

Payments 

(LDP) 

Causes of Improper Payments 

The statistical sample data specifically identified three potential areas that contribute to 

erroneous payments. They are: 

1. Production Evidence (Quantity) 

A producer who receives an LDP must provide production evidence in accordance to the 

Commodity Credit Corporation (CCC) requirements. Production evidence includes: 

• Evidence of sales; 

• Warehouse receipts; 

• Load summary; and 

• Assembly sheets. 

Eligible commodities include: 

Barley, Small Chickpeas, Corn, Grain Sorghum, Honey, Lentils, Mohair, Oats, Dry Peas, 

Peanuts, Rice, Soybeans, Upland Cotton, Wheat, Wool and Other Oilseeds 

If the quantity reflected on form CCC 700 did not agree with the evidence of production 

presented, the quantity was considered inaccurate. Therefore, the payment was 

considered improper. 
APPENDICES 

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F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 365 

Agency Program Corrective Actions Planned 

FSA 

(cont’d) 

Loan 

Deficiency 

Payments 

(LDP) 

2. Loan Deficiency Payment Rate (Price) 

The CCC determines the local county market price on either daily or weekly for 

commodities eligible for Loan Deficiency Payment. This is referred to as the posted 

county price. 

The LDP rate equals the amount by which the applicable loan rate where the commodity 

is stored exceeds the alternative loan repayment rate for the respective commodity. 

The loan rate must be for the correct commodity, county and crop year. The loan rate 

information contained on form CCC 700 should agree with the prevailing rate published at 

the time of payment on the USDA/FSA Price Support Web site. Otherwise, the payment is 

improper. 

3. Loan Deficiency Payment Amount (Price) 

The LDP amount equals the rate multiplied by the quantity of the commodity for which the 

payment is requested. If this was calculated incorrectly, then the payment was considered 

improper. 

Corrective Action Plans 

The agency will continue to remind State and county offices through notices and policy 

handbooks of the necessary requirements for receiving LDP benefits. The agency has 

developed a new electronic loan deficiency payment process. The process has eliminated 

manual processes and validates producer eligibility and commodity reasonableness online. A 

customer profile is created based on the applicant’s eligibility, which includes the necessary 

eligibility requirements for receiving LDP benefits. The electronic loan deficiency payment 

(eLDP) process calculates the LDP rate and the LDP amount based on the information entered 

by the producer. The LDP rates are selected from a centralized rate table. 

The agency will continue to promote such Web-based programs as eLDP fully. These types of 

processes reduced the number of errors caused by manually entered data. The eLDP process 

validates the data entered against a customer profile that reads “real time” eligibility files. 

FS Wildland Fire 

Suppression 

Management 

Causes of Improper Payments 

There are three basic causes of improper payments listed below. 

• Payment for services not authorized under contract. 

• Invoice had wrong rate for services and error was not identified during field office 

review. 

• Failure to take early-payment discount. 

Corrective Action Plans 

A memo will be issued to all field offices, emphasizing the importance of comparing 

invoice rates to contract rates to ensure invoice accuracy. The memo also will emphasize 

the importance of taking early-payment discounts when advantageous to do so. All fire 

incident payments were consolidated in four centers Nationwide, effective May 15, 2005. 

Payment processing for invoices related to fire incidents will be consolidated in the 

Albuquerque Service Center (ASC) in the second quarter of FY 2006. 

RD Rental 

Assistance 

Program 

Causes of Improper Payments 

The statistical sample showed that insufficient file documentation was the most common 

source of all errors (36 percent of instances assigning fault did so for this reason), 

followed by management agent error, “other” and mathematical or transcription errors. 

The lack of documentation did not permit the analyzer to determine the accuracy of the 

tenant certification. File documentation is a requirement of the Sections 515, 514 and 516 

loan and grant programs. Failure to obtain and maintain such documentation is the fault of 

the borrower and his management agent. 

Corrective Action Plans 

After reviewing the most recent survey and determining the error findings, the national 

office will compile a list of these errors. The office then will submit the list to States that 

reported having either insufficient documentation to support the income reported on the 

tenant certification or management agent error in calculating the tenant’s income. As part 

of the agency’s follow-up, the field staff will review the list of errors and provide a report as 

to corrections that may or may not have been taken to correctly identify the errors. This 

report will be due back to the national office by December 31, 2005, for tabulation. 
APPENDICES 

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366 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Agency Program Corrective Actions Planned 

RD 

(cont’d) 

Rental 

Assistance 

Program 

The agency implemented a number of recommendations from the prior report. Its 

oversight of borrowers and management agents was improved through implementation of 

the 7 CFR 3560, the new Multi-Family Housing regulation. Borrowers and agents are 

responsible for ensuring tenant incomes are verified with sufficient supporting 

documentation. The new regulation took effect February 24, 2005. Specifically, the two 

recommendations that were implemented were: 

1. HB-2-3560, Multi-Family Housing Asset Management Handbook, Chapter 6, Section 

2: “Calculating Income and Initial Certification,” provides extensive guidance 

regarding the procedures that borrowers should follow to assure that proper 

verification and income calculations are done. 

2. HB-2-3560, Multi-Family Housing Asset Management Handbook, Chapter 9, Section 

9.14 provides guidance to the State offices regarding the use of wage and benefit 

matching with State Departments of Labor or similar agencies. 

Because of the regulation’s newness, the agency has not yet seen results of this 

improved guidance. 

While the agency responded to the prior report’s findings by implementing a corrective 

action plan, the timing of those actions and the FY 2005 survey overlapped to some 

degree. Thus, the results of the corrective actions are not reflected in this report and may 

have impacted the error rate positively. 

The agency trained field staff as partial implementation of the prior report’s training 

recommendation. It revised the survey instrument from the initial study to capture more 

responsive information. Quality assurance issues appeared to be less of a problem with 

this re-designed instrument. Consequently, the data reported in the FY 2005 report may 

be more reliable. 

Recommendations for the FY 2005 report will include the following: 

1. State offices must train field staff, borrowers and property managers in appropriate 

and required documentation. They also must follow-up with tenants and incomeverifiers. 

2. The national office will continue to pursue access to the HSS New Hires data to be 

shared with State Offices. This legislation currently is being prepared for OMB 

review. 

3. Recognizing that the New Hires data access process may take some time, State 

offices must participate with available wage matching programs and make such data 

available to borrowers if permitted. Office staff must ensure that this shared data is 

used by borrowers and property managers. The new regulation, 7 CFR 3560, 

requires State offices to report quarterly on their efforts to participate in wage 

matching, where available. 

4. The national office must complete its evaluation and restructuring of the supervisory 

visit procedure. These moves strengthen and provide more focus when reviewing 

tenant files. 

5. The national office should employ an independent contractor to undertake this study 

in the future. An independent contractor will provide objective and impartial analysis. 

6. The national office will add to the Multi-Family Housing Program’s Servicing Goals. 

This move is a requirement for the State offices to be more aggressive in educating 

and training borrowers/management agents on calculating and documenting tenant’s 

incomes.

RMA Federal Crop 

Insurance 

Corporation 

Program Fund 

Causes of Improper Payments 

While the majority of improper payments are caused by simple error, some are related to 

program abuse and fraud. 

RMA renegotiated the 2005 Standard Reinsurance Agreement (SRA) to include an entirely 

new process. This process requires companies to review policies identified as anomalous by 

data mining in accordance with the Agricultural Risk Protection Act of 2000. The 2003 

random sample conducted by the insurance companies required by the old SRA produced 

an error rate result smaller than anticipated, and therefore questioned. RMA will calculate 

the error rate in the FY 2006 reporting cycle. Performing the sample with RMA staff will 

provide more detailed information on the causes and magnitude of improper payments. 
APPENDICES 

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F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 367 

Agency Program Corrective Actions Planned 

RMA 

(cont’d) 

Federal Crop 

Insurance 

Corporation 

Program Fund 

Corrective Action Plans 

For 2005, RMA negotiated and entered into a new SRA with the companies who deliver 

crop insurance on behalf of the Federal Crop Insurance Corporation. The new SRA 

contains a range of new controls and requirements to improve program integrity and 

reduce program errors. The majority of the changes are found in Appendix III and 

Appendix IV to the SRA. Appendix III provides the submission requirements to the 

companies for the policies they write to be reinsured by FCIC. Appendix IV provides 

requirements and the authority for FCIC to have the companies review policies under a 

quality-control environment driven largely by data mining and the identification of 

anomalous financial behavior.

NRCS Farm Security 

and Rural 

Investment 

Programs 

Causes of Improper Payments 

A total of 1,193 payments were sampled statistically. Thirty-nine were determined to be 

improper. These improper payments resulted from: 

• Incomplete documentation, causing 20 improper payments; 

• Payment share miscalculations, causing 9 of the errors; and 

• Procedural errors accounting for the rest. 

Corrective Action Plans 

NRCS has developed a software feeder system as a tool to automate the contracting and 

payment process for many of the FSRIA 2002 programs. This tool incorporates 

automated edits that prevent many of the improper payment errors identified in the 

statistical sample. 

Beginning October 1, 2004, all contracts and payment processing for the Environmental 

Quality Incentives Program (Base, Klamath, and GSWC) were transferred from the Farm 

Service Agency (FSA) to NRCS. Of the improper payments found in the sample, 26 

payments (65 percent) would not have occurred if they were processed through our 

feeder system. 

Currently, NRCS is in the final stages of updating the Conservation Program Contracting 

Manual for programs using ProTracts. The procedures outlined in the manual include 

information specifically addressing IPIA and the need for preventing improper payments. 

The Financial Management Division’s (FMD) efforts to educate NRCS staff of the IPIA 

initiative will continue. Additionally, FMD is developing plans focused on improving the 

timing of field sampling and the amount of time given to return sample requests. These 

moves are designed to minimize the impact on NRCS field personnel. 

This was the first year IPIA sampling was performed by NRCS field offices. NRCS’ FMD 

has engaged senior agency and program managers in every step of the process. It is 

committed to continuing its efforts to educate NRCS employees of the entire improper 

payment issues. This education and communication initiative already has resulted in an 

increased sensitivity to the issues and ramifications of improper payments throughout the 

agency. 

IV. Based on the rate(s) obtained in Step III, set annual improvement targets through FY 

2007. 

Improper Payment Reduction Outlook FY 2004 – FY 2007 

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 2005 represent measures of FY 2004 

outlays and program activity. This change from FY 2004 reporting was implemented to comply with OMB 

Circular A-136 revised August 23, 2005. 
APPENDICES 

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368 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Improper Payment Sampling Results ($ in millions) 

FY 2003 Results 

Reported in FY 2004 

FY 2004 Results 

Reported in FY 2005 

Program Outlays IP% IP$ Outlays IP% IP$ 

Marketing Assistance Loan Program, FSA/CCC 8,768 B B 6,400 0.70% 45 

Food Stamp Program, FNS 21,371 6.64% 1,400 24,358 5.88% 1,432 

School Lunch and Breakfast, FNS 8,390 C C 8,187 C C 

Women, Infants and Children, FNS 4,764 C C 4,812 C C 

Child and Adult Care Food Program, FNS 1,989 C C 2,061 C C 

Milk Income Loss Contract Program, FSA 1,859 B B 245 0.09% 0.2 

Loan Deficiency Payments, FSA 650 B B 453 1.00% 5 

Wildland Fire Suppression Management, FS 625 B B 1,980 3.70% 73 

Rental Assistance Program, RD 710.3 2.59% 20 846 3.19% 27 

Federal Crop Insurance Corporation Program Fund, RMA 

(Note A) 

2,500 5.0% 125 3,170 0.89% 28 

Farm Security and Rural Investment Programs, NRCS 50 B B 1,027 1.55% 16 

The following table is a detailed breakout of the FY 2004 error rates (reported in FY 2005) by type of 

improper payment. 

Detailed Breakout of FY 2004 Improper Payment Rates reported in FY 2005 ($ in millions) 

Program 

Marketing 

Assistance 

Loan 

Program 

Food 

Stamps 

Milk 

Income 

Loss 

Contract 

Loan 

Deficiency 

Payments 

Wildland 

Fire 

Suppression 

Rental 

Assistance 

Program 

Farm 

Security 

and Rural 

Investment 

Programs 

Total $ % $ % $ % $ % $ % $ % $ % 

Payments 6,400 24,358 245 453 1,980 846 1,027 

Total Improper 

Payments 

0.70 5.88 0.09 1.00 3.70 3.19 1.55 

Overpayments 0.70 4.48 0.09 1.00 2.79 2.07 1.44 

Underpayments 0.00 1.41 0.00 0.00 0.91 1.12 0.10 

Other 0.00 0.00 0.00 0.00 0.00 0.00 0.01 

Improper Payment Reduction Outlook ($ in millions) 

FY 2006 Reporting 

FY 2005 Targets 

FY 2007 Reporting 

FY 2006 Targets 

FY 2008 Reporting 

FY 2007 Targets 

Program Outlays IP% IP$ Outlays IP% IP$ Outlays IP% IP$ 

Marketing Assistance Loan 

Program, FSA/CCC 10,132 0.69% 70 10,041 0.65% 65 9,743 0.60% 58 

Food Stamp Program, FNS 29,721 6.50% 1,932 33,079 6.20% 2,051 D E 

School Lunch and Breakfast, FNS 9,073 C 7,253 C D C 

Women, Infants and Children, FNS 5,070 C 5,394 C D C 

Child and Adult Care Food 

Program, FNS 2,065 C 2,161 C D C 

Milk Income Loss Contract 

Program, FSA 20 F F 0 F F 0 F F 

Loan Deficiency Payments, FSA 5,124 0.95% 49 4,444 0.90% 40 3,567 0.80% 29 

Wildland Fire Suppression 

Management, FS 1,782 3.00% 53 1,508 2.90% 44 700 2.80% 20 

Rental Assistance Program, RD 838 2.99% 25 855 2.79% 24 836 2.59% 22 
APPENDICES 

USDA

F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 369 

Improper Payment Reduction Outlook ($ in millions) 

FY 2006 Reporting 

FY 2005 Targets 

FY 2007 Reporting 

FY 2006 Targets 

FY 2008 Reporting 

FY 2007 Targets 

Program Outlays IP% IP$ Outlays IP% IP$ Outlays IP% IP$ 

Federal Crop Insurance 

Corporation Program Fund, RMA 

(Note A) 2,883 4.90% 141 3,358 4.80% 161 3,321 4.70% 156 

Farm Security and Rural 

Investment Programs, NRCS 1375 1.00% 14 1452 0.80% 12 1558 0.60% 9 

NOTE A: The amount reported for FY 2004 PAR for Federal Crop Insurance Corporation Program Fund was based on an internal RMA 

estimation methodology and is not comparable to other numbers. The amount reported in FY 2005 is based on an industry compliance 

program conducted the insurance companies. While this methodology has been criticized by both RMA and the Office of the Inspector 

General, it is comparable to other years. The comparable FY 2004 improper payment rate was 0.52 percent. RMA is developing a new 

compliance testing program that will begin reporting next fiscal year. RMA’s target rates are based on the expected results of this new 

compliance program. 

NOTE B: FY 2004 was the first year of implementing the Improper Payments Information Act. Marketing Assistance Loan, Wildland Fire 

Suppression Management and Farm Security and Rural Investment Programs did not complete a statistical sample in FY 2004. Milk Income 

Loss Contract Program and Loan Deficiency Payments first were determined to be high risk in FY 2005. The FY 2005 statistical sample 

created the baseline error rate for all of these programs. 

NOTE C: Due to the program complexity and cost of sampling, a comprehensive error rate has not been developed for School Lunch and 

Breakfast, WIC and CACFP. OMB has approved plans for these programs to develop an error rate to be used in the future. 

NOTE D: While OMB’s reporting template requires the reporting of three years of estimated outlays from the most recent President’s Budget, 

that budget only reports two years of estimated outlays. Internal USDA estimates have been provided where available. FY 2007 estimated 

outlays will be updated when the FY 2007 President’s Budget is issued. 

NOTE E: Food Stamp targets are developed during the budget process. The FY 2007 President’s Budget has not been issued. 

NOTE F: The Milk Income Loss Contract Program is scheduled to end with FY 2005. FY 2004 was the last year with significant 

disbursements for this program. Because the program is ending, no additional statistical samples will be completed and there is no need for 

future targets. 

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 conducted a recovery audit pilot program as the Forest Service using an independent recovery audit 

firm. USDA exempted all contracts except those in the Forest Service because the agency-developed recovery 

audit programs in FY 2004 were not cost effective. Additionally, the effectiveness of independent firms had 

yet to be proven. 

Using the independent recovery audit firm, USDA has been able to increase its findings and collections 

dramatically in FY 2005 while reducing the cost of administering the program. This trend is expected to 

continue in FY 2006. Due to the success of the Forest Service pilot, USDA will expand the use of independent 

recovery audit firms to the entire Department in FY 2006. 

Specific types of payment errors found during the course of the recovery audit process include: 

Duplicate payments; 

Unposted credit memos resulting from returned merchandise to vendors; 

Overpayment of various contractual charges, such as incorrect per diem rates; 

Improper rates charged for meals provided during fire suppression; and 

General and administrative expense recovery not provided by contract. 
APPENDICES 

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370 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Additional overpayment errors included the payment of both sales tax on tangible personal property purchased 

and a previously voided invoice. All recovery audit information and the underlying transactions will be 

communicated to all Forest Service employees to reduce future errors. 

FY 2005 Recovery Auditing Results ($ in Million) 

Agency 

Component 

Amount Subject 

to Review for 

FY 2004 

Reporting 

Actual 

Amount 

Reviewed and 

Reported 

Amounts 

Identified for 

Recovery 

Amount 

Identified / 

Actual Amount 

Reviewed 

FY 2004 

Amounts 

Recovered 

FY 2003 

Amounts 

Recovered 

Forest 

Service 2,428 2,428 0.333 0.0137% 0.189 0 

All Others 2,538 0 0 N/A 0 0 

USDA Total 4,965 2,428 0.333 0.0137% 0.189 0 

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. 

Food and Nutrition Service (FNS) 

FNS already has a corporate priority to improve stewardship of Federal funds. Within this priority are specific 

goals applicable to programs at high risk for erroneous payments. Each program’s goals and priorities are 

incorporated into each manager’s performance plan. 

The goal for the Food Stamp Program is to continue reducing the error rate. 

The goal for NSLP is to improve the accuracy of NSLP certifications; 

The goals for WIC are to maintain certification accuracy and continue to improve vendor 

management; and 

The goal for CACFP is to continue management improvements. 

Forest Service (FS) 

To ensure that FS management holds itself accountable for reducing and recovering improper payments, the 

agency has taken several steps: 

Hold accountable the entire Albuquerque Service Center (ASC) management team for compliance 

with IPIA through performance metrics in their performance elements; 

Issue specific policy guidance throughout the agency, emphasizing corrective actions to mitigate the 

causes of improper payments; 

Consolidate payment processing at ASC for more consistency; and 

Reduce future improper payments by communicating all information related to improper payment 

recoveries and the underlying transactions to all FS employees. 

Farm Service Agency (FSA) 

FSA has included performance based rating measures in each employee’s performance standards and 

appraisals. Managers are held accountable for program administration. 
APPENDICES 

USDA

F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 371 

Natural Resource and Conservation Service (NRCS) 

NRCS is updating performance plans that would tie back to the strategic goals of the agency. This includes 

measuring performance against results for all applicable elements of the President’s Management Agenda. 

The Financial Management Division of NRCS will continue to emphasize the education of NRCS staff on the 

importance of internal controls and eliminating improper payments. 

Rural Development (RD) 

Within the Multi-Family Program, the national office establishes and ensures implementation of policy, 

including the achievement of certain loan servicing goals. The State offices oversee area offices, whose 

responsibility it is to monitor the performance of the multi-family portfolio. Area office staff makes property 

inspections, performs supervisory site visits, approves the amount of subsidy (RA) request and generally 

oversees all activity at the properties. The servicing goals have been modified to include as a State office goal 

a reduction in the error rate by property managers in the calculation and documentation support of RA. 

Servicing goal achievement is monitored quarterly and reported back to the States, the Rural Housing Service 

administrator and the Undersecretary for Rural Development. State directors report directly to the 

Undersecretary. 

Risk Management Agency (RMA) 

RMA has revised its strategic plan to provide results intended to enhance accountability. These results also 

ensure that procedures are in place to ensure future corrective actions are taken to address program 

vulnerabilities. Additionally, a strategic objective element has been placed into every employee’s performance 

plan agreement for FY 2005. 

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. 

USDA has identified 11 high-risk programs in 6 USDA agencies. The issues of information systems and other 

infrastructure are determined at the agency level. USDA is working to complete or revise the statistical 

analysis of four high-risk programs. More system and infrastructure needs may be developed as more 

programs complete the statistical analysis. Currently, three agencies have identified information and 

infrastructure improvements needed to reduce improper payments. 

Farm Service Agency (FSA) 

Currently, the agency is reviewing business processes and automated systems associated with programs and 

program delivery. This project, entitled “MIDAS,” is scheduled to be implemented fully by the beginning of 

FY 2009. The completion date is subject to the business case being approved and funding availability to 

support the implementation. As part of this project, the agency reviewed current business practices and the 

associated software. 

Infrastructure improvements needed to reduce improper payments associated specifically with loan 

deficiency payments included additional funding to support the existing electronic loan deficiency 

payments (eLDP) software and the anticipated future enhancements. If additional funds are provided 

to support the eLDP Web-based software, the necessary enhancements can be made to ensure better 

compliance reviews and enhanced eligibility validation through mainframe centralized databases. 

Public and field office employees have praised eLDPs. The time savings have allowed field office 
APPENDICES 

USDA

372 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

employees to review other program-related issues in more detail. This benefit has resulted in 

decrease in errors associated with other programs; and 

Web-based software (e-MILC) has been developed to validate eligibility entries and monthly 

payment rates. This software is designed to reduce the occurrence of improper payments to MILC 

applicants. 

Systems also are needed to improve the collection of data-identifying improper payments. Currently the best 

measure the Agency has is reviewing the receivable activity and the statistical samples.

Food and Nutrition Service (FNS) 

While the infrastructure already exists for the Food Stamp Program, there is nothing in place for the other 

FNS programs. Until such time as baseline erroneous-payment estimates are produced for NSLP, WIC and 

CACFP, reduction targets cannot be established. 

Risk Management Agency (RMA) 

RMA recently has initiated work on a planned information technology (IT) architecture that will replace 

USDA’s current system. The new system is expected to have far more extensive and reliable edits and other 

controls to assist RMA in reducing errors. 

VII.B. If the agency does not have such systems and infrastructure, describe the resources 

the agency requested in its FY 2006 budget submission to Congress to obtain the 

necessary information systems and infrastructure. 

Farm Service Agency (FSA) 

FSA has requested $2.6 million in the FY 2006 President’s Budget to continue MIDAS. 

Food and Nutrition Service (FNS) 

In the President’s Budget for FY 2005, FNS requested $7 million and 77 staff years to enhance integrity in the 

Food Stamp and Child Nutrition Programs. Congress did not appropriate funds for this purpose at that time. 

Because the FY 2005 appropriation was not signed into law until well into FY 2005, FNS did not request 

additional resources in the budget for FY 2006, thinking that Congress would approve the new assets for FY 

2005. The resources for this activity are linked to the President’s Management Agenda item #3, “Improved 

Financial Performance,” and remain a critical factor in lowering erroneous payments. Until necessary funding 

is received, FNS will request resources to improve integrity in Food Stamps, School Lunch/Breakfast, WIC 

and CACFP. 

Risk Management Agency (RMA) 

RMA has requested $83 million the FY 2006 President’s Budget for system improvements. 

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. 

Farm Service Agency (FSA) 
APPENDICES 

USDA

F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 373 

Recoveries of improper payments are limited by the “Finality Rule.” 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.” 

The Farm Security and Rural Investment Act of 2002, Section 1502(d)(2), provides that the Secretary shall 

apply the same standards as were applied in implementing the dairy program under Section 805 of the 

Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act, 

2001. This provision precludes the agency from developing a definition of a single unit dairy operation that 

can be applied consistently among States. 

Food and Nutrition Service (FNS) 

In many instances, the mandated goal of providing easy access to benefits must be balanced against the goal 

of reducing improper and erroneous payments. Provisions that improve access can increase the risk of 

improper payments. While the risks involved vary by program, some general characterizations can be made: 

a. Program administration is highly decentralized and can involve a myriad of Governmental and 

non-Governmental organizations. For example, there are approximately 48,000 child and adult care 

centers, almost 1,000 family day care home sponsoring organizations and 158,000 family home day care 

providers through which benefits are distributed. Many of these simply do not have the capacity to 

develop robust accountability processes. This puts a special burden on Federal and State oversight and 

technical assistance systems. 

b. States and localities tend to focus on managing local funds, rather than Federal funds. One 

hundred percent of benefit costs and a significant portion of administrative expenses incurred by State 

agencies are funded by Federal appropriations. Although this distribution of costs has contributed to the 

strength of the nutrition safety net with national eligibility standards and program access, States and 

localities may be expected to put a higher priority on managing programs funded with local revenues than 

those subsidized by the Federal Government. 

c. Proper implementation of nutrition assistance programs requires a high degree of accuracy. This 

accuracy helps to ensure that benefits generally are well-targeted to those most in need, uniformity of 

access across the country and that benefits only can be used for food. Despite the standards, their exacting 

nature creates a significant number of opportunities for error. 

Rural Development (RD) 

The Rural Housing Service (RHS) is seeking legislation similar to that of the U.S. Housing and Urban 

Development. The legislation would permit access to the U.S. Health and Human Services’ “New Hires” data. 

RHS also wants the legislation to allow borrowers and their management agents to have access to the data. 

Borrowers and agents collect and verify the tenant’s income documentation. 
APPENDICES 

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374 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

APPENDIX C—TABLE OF EXHIBITS

Exhibit 1: Headquarters Organization ...................................................................................................... 1

Exhibit 2: FY 2005 and 2004 USDA Program Obligations Dedicated to Strategic Goals ....................... 6

Exhibit 3: FY 2005 and 2004 USDA Staff Years Dedicated to Strategic Goals ...................................... 6

Exhibit 4: USDA Scorecard for FY 2005................................................................................................. 7

Exhibit 5: Summary of Outstanding Material Deficiencies and Estimated Completion Dates............... 30

Exhibit 6: Resources Dedicated to Expand Alternative Markets for Agricultural Products 

and Activities ......................................................................................................................... 35

Exhibit 7: Increase U.S. Market Opportunities....................................................................................... 40

Exhibit 8: Expand and Retain Market Access ........................................................................................ 41

Exhibit 9: Resources Dedicated to Support International Economic Development and Trade 

Capacity Building .................................................................................................................. 41

Exhibit 10: Support Foreign Food Assistance .......................................................................................... 44

Exhibit 11: McGovern-Dole International Food for Education and Child Nutrition Program ................. 44

Exhibit 12: Resources Dedicated to Expand Alternative Markets for Agriculture Products 

and Activities ......................................................................................................................... 45

Exhibit 13: Increase the Use of Biobased Products .................................................................................. 48

Exhibit 14: Biobased Products Performance ............................................................................................. 49

Exhibit 15: Resources Dedicated to Providing Risk Management and Financial Tools to 

Farmers and Ranchers............................................................................................................ 50

Exhibit 16: Providing Credit Assistance................................................................................................... 54

Exhibit 17: Performance Trends: Lending to beginning, racial and ethnic minorities, and 

women farmers and timeliness of loan processing................................................................. 56

Exhibit 18: Expand Use of Risk Management Tools................................................................................ 58

Exhibit 19: Providing Risk Management and Financial Tools to Farmers and Ranchers......................... 58

Exhibit 20: Resources Dedicated to Support Expanding Economic Opportunities Through 

Financing of Businesses......................................................................................................... 59

Exhibit 21: Strengthen Rural Businesses.................................................................................................. 64

Exhibit 22: Trends in Creating or Saving Jobs ......................................................................................... 64

Exhibit 23: Resources Dedicated to Support Improving the Quality of Life in Rural America 

Through Financing Housing, Utilities and Community Facilities ......................................... 65

Exhibit 24: Improving Rural Quality of Life Through Homeownership Opportunities ........................... 67

Exhibit 25: Trends in Rural Homeownership ........................................................................................... 69

Exhibit 26: Support High-Speed Telecommunications Service................................................................ 70

Exhibit 27: Trends in the Number of Subscribers Served by High-Speed Telecommunications 

Service ................................................................................................................................... 70

Exhibit 28: Improving Water and Waste Disposal ................................................................................... 71

Exhibit 29: Trends in Water and Waste Disposal Service ........................................................................ 72

Exhibit 30: Connecting and Improving Electric Service .......................................................................... 73

Exhibit 31: Trends in Connecting and Improving Electric Service .......................................................... 73

Exhibit 32: Number of New and Improved Community Facilities........................................................... 74

Exhibit 33: Trends in New and Improved Essential Community Facilities.............................................. 75

Exhibit 34: Resources Dedicated to Enhance Protection of Meat, Poultry, and Egg Products 

Inspection............................................................................................................................... 76

Exhibit 35: Pathogen Reduction (Food Inspection).................................................................................. 80

Exhibit 36: Trends in Pathogen Reduction (Food Inspection).................................................................. 80

Exhibit 37: Public Health Outreach & Education..................................................................................... 83

Exhibit 38: Number of Viewings for Food Safety Messages ................................................................... 84

Exhibit 39: Resources Dedicated to Reducing Pest and Disease Outbreaks............................................. 84

Exhibit 40: Strengthen the Effectiveness of Pest and Disease Surveillance and Detection Systems........ 88
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Exhibit 41: Trends in Strengthening the Effectiveness of Pest and Disease Surveillance 

and Detection Systems........................................................................................................... 89

Exhibit 42: Ensure the Humane Care and Handling of Animals Used in Commerce............................... 90

Exhibit 43: Trends in Ensuring the Humane Care and Handling of Animals Used in Commerce ........... 91

Exhibit 44: Ensure the Capabilities of Plant and Diagnostic Laboratories are Improved......................... 92

Exhibit 45: Trends Improving the Capabilities of Diagnostic Laboratories ............................................. 92

Exhibit 46: Provide Scientific Information to Protect Animals from pests, Infectious Diseases, 

and Other Disease-Causing Entities that Impact Animal and Human Health........................ 93

Exhibit 47: Trends in Providing Scientific Information to Protect Animals from Pests, Infectious 

Diseases, and Other Disease-Causing Entities that Impact Animal and Human Health ........ 94

Exhibit 48: Resources Dedicated to Improving Access to Nutritious Food ............................................. 97

Exhibit 49: Improve Access to Nutritious Food ..................................................................................... 100

Exhibit 50: Trends in Improving Access to Nutritious Food................................................................... 101

Exhibit 51: Resources Dedicated to Promote Healthier Eating Habits and Lifestyles............................ 102

Exhibit 52: Promoting Healthier Eating Habits and Lifestyles............................................................... 105

Exhibit 53: Trends to Promote Healthier Eating Habits and Lifestyles.................................................. 106

Exhibit 54: Increasing Nutrition Information Available to the Public.................................................... 107

Exhibit 55: Trends in Determining Food Consumption Patterns............................................................ 107

Exhibit 56: Resources Dedicated to Improve Food Program Management and Customer Service........ 108

Exhibit 57: Increase Efficiency in Food Management............................................................................ 109

Exhibit 58: Trends in Increased Efficiency in Food Management.......................................................... 109

Exhibit 59: Resources Dedicated to Protect the Nation’s Resource Base and Environment .................. 110

Exhibit 60: Hazardous Fuel Reduction................................................................................................... 114

Exhibit 61: Trends in Treatment of Hazardous Fuel................................................................................ 114

Exhibit 62: Resources Dedicated to Improving Management of Private Lands ..................................... 115

Exhibit 63: Maintain the Productive Capacity of the Natural Resource Base and the Quality 

of the Environment .............................................................................................................. 119

Exhibit 64: Trends in Planning and Application of Improved Management of Cropland 

and Grazing Lands ............................................................................................................... 120

Exhibit 65: Ensure Diverse Wildlife Habitats ........................................................................................ 121

Exhibit 66: Trends in Wetland Protection................................................................................................ 121

Exhibit 67: USDA Program Obligations ................................................................................................ 123

Exhibit 68: Performance Threshold for 1.1.1 ......................................................................................... 133

Exhibit 69: Performance Threshold for 1.2.1 ......................................................................................... 135

Exhibit 70: Performance Threshold for 1.3.1 ......................................................................................... 136

Exhibit 71: Performance Threshold for 1.4.1, 1.4.2 and 1.4.3................................................................ 137

Exhibit 72: Performance Threshold for 1.4.4 ......................................................................................... 138

Exhibit 73: Performance Threshold for 2.1.1 ......................................................................................... 139

Exhibit 74: Performance Threshold for 2.2.1 ......................................................................................... 140

Exhibit 75: Performance Threshold for 2.2.2 ......................................................................................... 141

Exhibit 76: Performance Threshold for 2.2.3 ......................................................................................... 142

Exhibit 77: Performance Threshold for 2.2.4 ......................................................................................... 142

Exhibit 78: Performance Threshold for 2.2.5 ......................................................................................... 143

Exhibit 79: Performance Thresholds for 3.1.1, 3.1.2, 3.1.3 and 3.1.4 .................................................... 145

Exhibit 80. Performance Threshold for 3.2.1 ......................................................................................... 147

Exhibit 81: Performance Thresholds for 3.2.2 and 3.2.3 ........................................................................ 148

Exhibit 82: Performance Thresholds for 3.2.4 and 3.2.5 ........................................................................ 148

Exhibit 83: Performance Thresholds for 3.2.6........................................................................................ 149

Exhibit 84: Performance Threshold for 4.1.1, 4.1.2 and 4.1.3................................................................ 151

Exhibit 85: Performance Threshold for 4.2.1 ......................................................................................... 152

Exhibit 86: Performance Threshold for 4.2.2 ......................................................................................... 153

Exhibit 87: Performance Threshold for 4.3.1 ......................................................................................... 154
APPENDICES 

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376 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Exhibit 88: Performance Threshold for 5.1.1, 5.1.2 and 5.1.3................................................................ 155

Exhibit 89: Performance Threshold for 5.2.1, 5.2.2, 5.2.3, 5.2.4 and 5.2.5............................................ 156

Exhibit 90: Performance Threshold for 5.2.6 ......................................................................................... 157

Exhibit 91: Decrease in Total Open Audit Inventory ............................................................................. 185

Exhibit 92: Audit Follow-Up Definitions............................................................................................... 186

Exhibit 93: Inventory of Audits with Disallowed Costs......................................................................... 187

Exhibit 94: Distribution of Adjustments to Disallowed Costs................................................................ 188

Exhibit 95: Inventory of Audits with Funds to be Put to Better Use ...................................................... 188

Exhibit 96: Decrease In Audits Open One or More Years Past Management Decision Date................. 188

Exhibit 97: Distribution of Audits Open One or More Years Past the Management Decision 

Date, Disallowed Costs and FTBU...................................................................................... 189

Exhibit 98: Audits Open One Year or More Past the Management Decision Date and Behind 

Schedule............................................................................................................................... 189

Exhibit 99: Summary of Outstanding Material Deficiencies and Estimated Completion Dates............. 196

Exhibit 100: Material Deficiencies Remain the Same.............................................................................. 198

Exhibit 101: Material Deficiencies Corrected or Downgraded................................................................. 199

Exhibit 102: Initiatives Completed........................................................................................................... 201

Exhibit 103: Initiatives To Be Completed ................................................................................................ 201
APPENDICES 

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F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT 377 

APPENDIX D—ACRONYMS

ACC Afghan Conservation Corps e-LDP Electronic Loan Deficiency Payments 

AGOA African Growth and Opportunity Act EA Enterprise Architecture 

AGR Adjusted Gross Revenue EBT Electronic Benefits Transfer 

AHMS Animal Health Monitoring and Surveillance EFNEP The Expanded Food and Nutrition 

Education Program 

AMP Asset Management Plan EIS Environmental Impact Statement 

AMS Agricultural Marketing Service EMRS Emergency Management Response 

System 

APHIS Animal Plant and Health Inspection Service EONR Economically Optimal Nitrogen Fertilizer 

Rate 

ARMS Agricultural Resource Management Survey EPA U.S. Environmental Protection Agency 

ARS Agricultural Research Service EPP Emerging Plant Pest 

ASC Albuquerque Service Center ERS Economic Research Service 

AWA Animal Welfare Act EWP The Emergency Watershed Protection 

Program 

CAFTADR Central American Free Trade Agreement EWRP The Emergency Wetlands Reserve 

Program 

B&I Business and Industry E&T Employment and Training 

BFP The Norman E. Borlaug International 

Science and Technology Fellows Program 

EU European Union 

BRS Biotechnology Regulatory Service FAS Foreign Agricultural Service 

BSE Bovine Spongiform Encephalopathy FB4P The Federal Biobased Products Preferred 

Procurement Program 

CACFP Child and Adult Care Food Program FCIC Federal Crop Insurance Corporation 

CAP Combined Application Demonstration Project FDA United States Food and Drug 

Administration 

CATIE Tropical Agricultural Research and Higher 

Education Center 

FDW Financial Data Warehouse 

CCC Commodity Credit Corporation FFAS Farm and Foreign Agricultural Services 

CDC U.S. Centers for Disease Control and 

Prevention 

FFE The McGovern-Dole International Food for 

Education and Child Nutrition Program 

CNPP Center for Nutrition Policy FFMIA The Federal Financial Management 

Improvement Act 

CPAP Community Programs Application Processing 

System 

FISMA Federal Information Security Management 

Act 

CRP The Conservation Reserve Program FLP Farm Loan Program 

CSP Conversation Security Program FMD Foot and Mouth Disease 

CSREES Cooperative State Research, Education and 

Extension Service 

FMD Financial Management Division 

CWPP Community Wildlife Protection Plans FNS Food Nutrition Service 

DC Disallowed Costs FNSE Food Stamp Nutrition Education 

DHS United States Department of Homeland 

Security 

FRPC Federal Real Property Council 

DOI United States Department of the Interior FS Forest Service 

DOL U.S. Department of Labor FSA Farm Service Agency 
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378 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT

FSIS Food Safety and Inspection Service NAFTA North American Free Trade Agreement 

FSP Food Stamp Program NAHLN National Animal Health Laboratory Network 

FSRIA The Farm Security Rural Investment Act of 

2002 

NAHMS National Animal Health Monitoring System 

FSRIO Food Safety Research and Information Office NDB National Data Bank 

FTA Free Trade Agreement NECFE Northeast Center for Food 

Entrepreneurship 

FTAA Free Trade Area of the Americas NEPA National Environmental Policy Act 

FTBU Funds to Be Put to Better Use NFP National Fire Plan 

FY Fiscal Year NFS National Forest System 

GAO Government Accountability Office NAHRS National Animal Health Reporting System 

GEO Genetically Engineered Organisms NAIS National Animal Identification System 

GIPSA Grain Inspection, Packers and Stockyards 

Administration 

NAL National Agricultural Library 

GIS Geographic Information System NASS National Agricultural Statistics Service 

GLS Guaranteed Loan System NCES National Center for Educational Statistics 

GRIP Group Risk Income Protection NCIE National Center for Import and Export 

GRP Grassland Reserve Program NHANES National Health and Nutrition Examination 

Survey 

GSA General Services Administration NOP National Organic Program 

HACCP Hazard Analysis Critical Control Point NRCS Natural Resource Conservation Service 

HEI Healthy Eating Index NRE Natural Resources Environment 

HFI Healthy Forests Initiative NSLP National School Lunch Program 

HFRA Healthy Forest Restoration Act NSU National Surveillance Unit 

HFRA Healthy Forests Restoration Act of 2003 OCFO The Office of the Chief Financial Officer 

HPA Horse Protection Act OCIO The Office of the Chief Information Officer 

HPP High-Pressure Processing OGC The Office of the General Counsel 

HSPD Homeland Security Presidential Directive OIG The Office of the Inspector General 

IP Internet Protocol OMB The Office of Management and Budget 

IPIA Improper Payments Information Act OPM The Office of Personnel Management 

ISSS International Society of Soil Science PAR Performance and Accountability Report 

IT Information Technology PART Performance Assessment Rating Tool 

LAN Local Access Network PCR Polymerase Chain Reaction 

LARIS Licensing and Registration Information 

System 

PHV/IIC Senior Veterinary Medical 

Officer/Inspector-in-Charge 

LCMV Lymphocytic Choriomeningitis Virus PLAS Program Loan Accounting System 

LDP Loan Deficiency Payment PP&E Property, Plant and Equipment 

LPAI Low Pathogenic Avian Influenza PMA President’s Management Agenda 

MBDA Minority Business Development Agency POINTS Program Operations Information Tracking 

System 

MCR Management Control Review PPQ Plant Protection and Quarantine 

MILC Milk Income Loss Contract Program PRA Pest-Risk Assessments 

MITS Management Information Tracking System QC Quality Control 

MRP Marketing and Regulatory Programs RA Amount of Subsidy 

NACMCF National Advisory Committee on 

Microbiological Criteria for Foods 

RD Rural Development 
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REE Research, Education and Economics SRA Standard Reinsurance Agreement 

RFI Request for Information SRDC Southern Rural Development Center 

RHS Rural Housing Service SSOP Sanitation Standard Operating Procedures 

RMA Risk Management Agency TIGR The Institute for Genetic Research 

RME Risk Management Education TN Team Nutrition 

RPC Real Property Council TPA Trade Promotion Authority 

RTE Ready-to-Eat TRADE Trade for African Enterprise and 

Development Initiative 

RULSS Rural Utilities Loan Servicing System UM&R Uniform Standards and Rules 

RUS Rural Utilities Service USAID United States Agency for International 

Development 

SAML Security Assertion Markup Language USDA United States Department of Agriculture 

SARE Southern-Region Sustainable Agriculture 

Research and Education Program 

USTR Office of the United States Trade 

Representative 

SBP School Breakfast Program WAOB World Agricultural Outlook Board 

SDF Small Disadvantaged Farmers WEP Water and Environmental Programs 

SDLC System Development Life Cycle WEPS Wind Erosion Prediction System 

SEBAS Socio-Economic Benefit Assessment System WFP World Food Program 

SFA School Food Authority WIC The Special Supplemental Nutritional 

Program for Women, Infants and Children 

SIPP Survey on Income and Program Participation WTO World Trade Organization 

SPR Surface Plasmon Resonance WUI Wildland-Urban Interface 

SPS Sanitary and Phytosanitary 
APPENDICES 

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380 F Y 2005 P ERFORMANCE AND A CCOUNTABILITY R EPORT