USDA

F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT
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F Y 2006 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 ....................................................................................................................................................5

Performance Goals, Objectives and Results................................................................................................6

Management Challenges .............................................................................................................................8

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

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

Financial Statement Highlights .................................................................................................................28

Systems, Controls and Legal Compliance.................................................................................................31

Management Assurances..................................................................................................................31

Federal Managers’ Financial Integrity Act Report on Management Control ...................................32

Federal Financial Management Improvement Act Report on Financial Management Systems.......37

Inspector General Act Amendments of 1988 Management’s Report on Audit Follow-Up..............39

Management’s Report on Audit Follow-Up.....................................................................................42

II. Annual Performance Report........................................................................................ 47

Strategic Goal 1: Enhance International Competitiveness of American Agriculture ................................48

Strategic Goal 2: Enhance the Competitiveness and Sustainability of Rural and Farm Economies .........59

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

Rural America ...........................................................................................................................................72

Strategic Goal 4: Enhance Protection and Safety of the Nation’s Agriculture and Food Supply..............82

Strategic Goal 5: Improve the Nation’s Nutrition and Health...................................................................96

Strategic Goal 6: Protect and Enhance the Nation’s Natural Resource Base and Environment..............108

Program Assessment Rating Tool (PART) Evaluations..........................................................................129

Program Evaluations ...............................................................................................................................138

III. Financial Statements, Notes, Supplemental and Other Accompanying 

Information.................................................................................................................. 145

Message from the Chief Financial Officer ..............................................................................................145

Report of the Office of Inspector General...............................................................................................147

Consolidated Balance Sheet....................................................................................................................175

Notes to the Consolidated Financial Statements .....................................................................................180

Required Supplementary Stewardship Information ................................................................................246

Required Supplementary Information.....................................................................................................254
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ii F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

IV. Other Accompanying Information ............................................................................269

Appendix A—Management Challenges.................................................................................................. 269

Appendix B—Improper Payment and Recovery Auditing Details ......................................................... 298

Appendix C—Table of Exhibits.............................................................................................................. 319

Appendix D—Acronyms ........................................................................................................................ 321
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F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT iii 

Message from the Secretary 

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

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

made on your behalf during the past year. 

From enhancing economic opportunities for agricultural producers, to protecting the 

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

resources and environment, USDA has a proud record of accomplishment in FY 2006. We 

are pleased to share the highlights of our efforts in this FY 2006 Performance and 

Accountability Report. 

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

The 143-year-old USDA is one of the most complex departments in the Federal 

Government, with more than 300 programs. Annually, we spend more than $75 billion of 

our fellow Americans’ money. In 2006, these resources helped: 

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

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

Security and Rural Investment Act of 2002; 

Provide access to a healthy diet for needy households; 

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

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

Implement the President’s Healthy Forests Initiative; 

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

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

while reducing our Nation’s dependence on foreign fuel; 

Improve and expand conservation programs; 

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

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

country’s growing obesity epidemic; 

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

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

who need them, with minimal expense and maximum impact. 
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iv F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

The USDA Senior Management Control Council, co-chaired by the Deputy Secretary and the Chief Financial Officer, 

oversees and administers the Department’s assessment of internal controls for our programs, financial systems and 

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

Management Improvement Act (FFMIA). I am proud to report that USDA fully implemented the requirements to assess 

and report on internal control for financial reporting this year — a significant accomplishment given the scope of our 

activities and the complexity of our operations. Our assessment identified four material weaknesses in our financial 

reporting controls for which we have created and begun executing corrective actions plans. As such, I provide qualified 

assurance that, except for the material weaknesses described in the Management Assurances section of this report, 

USDA management controls, financial systems and financial reporting controls meet the objectives of FMFIA and 

FFMIA. The financial and performance information presented herein is complete and accurate, and in accordance with 

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

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

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

I also want to thank you for your interest in USDA and its work. I am pleased to share this information with all of our 

stakeholders, and I look forward to reporting even more progress in the year ahead. 

Mike Johanns 

Secretary of Agriculture 

November 15, 2006 
USDA

F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT v 

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 2006 Performance and Accountability Report is the year-end progress report of the United States Department of 

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

fiscal year and compares initial targets to actual performance. The data used by USDA to measure actual performance is 

collected using standardized methodology that has been vetted by Federally employed scientists and policymakers and, 

ultimately, by the undersecretaries of the respective mission areas, all of whom attest to the completeness, reliability and 

quality of the data. 

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

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

decisions. 

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

strives to provide transparency to all Americans interested in the workings of their government and USDA’s ability to 

“manage for results” in performing its many vital public functions. 
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vi F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT
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F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 1 

I. 

Management’s Discussion and Analysis 

An Overview of the United States Department of Agriculture 

he United States Department of Agriculture (USDA) 

is a diverse and complex organization with 

programs that touch the lives of all Americans every 

day. More than 100,000 employees deliver more than $75 

billion in public services through USDA’s more than 300 

programs worldwide, leveraging an extensive network of 

Federal, State and local cooperators. 

Founded by President Abraham Lincoln in 1862, when 

more than half of the Nation’s population lived and 

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

economy. Today, USDA improves the Nation’s economy 

and quality of life by: 

Enhancing economic opportunities for U.S. farmers 

and ranchers; 

Ensuring a safe, affordable, nutritious and accessible 

food supply; 

Caring for public lands and helping people care for 

private lands; 

Supporting the sound, sustainable development of 

rural communities; 

Expanding global markets for agricultural and forest 

products and services; and 

Working to reduce hunger and improve America’s 

health through good nutrition. 

Addressing these timeless concerns in the modern era 

presents its share of challenges. America’s food and fiber 

producers operate in a global, technologically advanced, 

rapidly diversifying and highly competitive business 

environment that is driven by sophisticated consumers. 

This report provides information on USDA’s core 

performance measures as described in its revised FY 2006 

Annual Performance Plan/Performance Budget. There are 

six strategic goals that guide the Department today. 

Strategic goals one and two contribute to the economic 

opportunities for agricultural producers. They are: 

To enhance international competitiveness of 

American agriculture; 

To enhance the competitiveness and sustainability of 

rural and farm economies; 

To support increased economic opportunities and 

improved quality of life in rural America; 

To enhance protection and safety of the Nation’s 

agriculture and food supply; 

To improve the Nation’s nutrition and health; and 

To protect and enhance the Nation’s natural resource 

base and environment. 

For the purposes of this report, it should be noted that 

USDA adopted its new strategic plan in the spring of 

2006. The new strategic plan is to be implemented by the 

revised FY 2006 Annual Performance Plan/Performance 

Budget. As detailed in the revised budget, goals one and 

two are reported separately and aggregate to the major 

goal to Enhance Economic Opportunities for Agricultural 

Producers for performance aspects of the report. 

However, the financial statements and other graphic 

T 
MANAGEMENT’S DISCUSSION AND ANALYSIS 

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2 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

presentations follow the approved FY 2006 Annual 

Performance Plan/Performance Budget depicting five 

goals. 

The primary legislative authority guiding USDA’s efforts 

today is the Farm Security and Rural Investment Act 

(Farm Bill) of 2002. 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 leadingedge 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 improving 

farm environmental practices; 

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. 
MANAGEMENT’S DISCUSSION AND ANALYSIS 

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F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 3 

Exhibit 1: Headquarters Organization 

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. 

USDA’s FY 2006 key milestones include: 

Issuing of $1.8 billion in Conservation Reserve 

Program rental payments, which compensate 

producers an average of $4,143 per farm enrolled in 

the program; 

Sponsoring a food safety education conference to help 

educate doctors, nurses and health officials about 

those most at risk to foodborne illness, including 

young children, older adults, pregnant women and 

people with weakened immune systems; 

Reopening markets overseas for U.S. beef and beef 

products; 

Completing negotiations with Japan to end its 

decades-old ban on the import of U.S. fresh potatoes; 

Partnering with the U.S. Department of Energy and 

the U.S. Environmental Protection Agency to sponsor 

a renewable energy conference; 

Working with the U.S. Department of the Interior and 

the U.S. Department of Health and Human Services to 

enhance a national framework for the early detection 

of highly pathogenic avian influenza in wild 

migratory birds in the U.S. This effort expanded and 

unified ongoing efforts among Federal, State, regional 

and local wildlife agencies; and 

Unveiling of new grant programs designed to help 

improve and expand domestic farmers markets, 

roadside stands, community-supported agriculture 

programs and other direct producer-to-consumer 

market opportunities. 

MISSION AREAS

To ensure that USDA’s efforts focus squarely on meeting 

its real world objectives, the Department’s work is 

organized by mission areas, which are a collection of 

agencies that work together to achieve USDA’s 

aforementioned strategic goals. A description of USDA’s 

seven mission areas follows. 

Natural Resources and Environment 

The Natural Resources and Environment (NRE) mission 

area consists of the Forest Service (FS) and the Natural 

Resources Conservation Service (NRCS). These agencies 

work to ensure the health of the land through sustainable 

management. FS manages 193 million acres of national 

forests and grasslands for the American people. NRCS 

assists farmers, ranchers and other private landowners in 

managing their acreage for environmental and economic 

sustainability. Both agencies work in partnership with 

Tribal, State and local Governments, communities, related 

groups and other Federal agencies to protect the Nation’s 

soils, watersheds and ecosystems. 

Farm and Foreign Agricultural Services 

The Farm and Foreign Agricultural Services (FFAS) 

mission area is comprised of the Farm Service Agency 

(FSA), which delivers most traditional farm programs, the 

Foreign Agricultural Service (FAS), which assists with 

U.S. agricultural exports, and the Risk Management 

Agency (RMA), which predominately handles programs 

that help farmers and ranchers address the unavoidable 

challenges inherent in agriculture, such as natural 

disasters. 

This mission area also includes two Government-owned 

corporations. The Commodity Credit Corporation (CCC) 

works to stabilize farm income and prices to help ensure 

an adequate, affordable supply of food and fiber. This 

corporation is the financial mechanism by which 

agricultural commodity, credit, export, conservation, 

disaster and emergency assistance is provided. The 
MANAGEMENT’S DISCUSSION AND ANALYSIS 

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4 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Federal Crop Insurance Corporation (FCIC) improves the 

economic stability of agriculture through a sound system 

of crop insurance. 

Rural Development 

The Rural Development (RD) mission area focuses on 

creating economic opportunities and improving the 

quality of life in rural America. This mission area unites a 

variety of valuable programs including housing programs 

and economic development initiatives. Rural 

infrastructure projects that finance the delivery of 

everything from safe, running water to high-speed 

Internet access also come together in this mission area. 

Collectively, these programs demonstrate core Federal 

efforts to ensure that rural communities are full 

participants in modern America. 

Food, Nutrition and Consumer Services 

The Food, Nutrition and Consumer Services (FNCS) 

mission area is comprised of the Food and Nutrition 

Service (FNS), which administers Federal nutrition 

programs, and the Center for Nutrition Policy and 

Promotion (CNPP), which provides science-based dietary 

guidance to the Nation. USDA’s 15 Federal nutrition 

assistance programs include the Food Stamp Program, 

Child Nutrition Programs, such as school lunches and 

breakfasts, and the Special Supplemental Nutrition 

Program for Women, Infants and Children. These 

programs provide vital access to nutritious food and 

support for better dietary habits for one in five Americans. 

USDA’s nutrition research and promotion efforts aid all 

Americans by linking cutting-edge scientific research to 

the nutritional needs of consumers. 

Food Safety 

USDA’s Food Safety and Inspection Service (FSIS) is the 

public health agency responsible for ensuring that the 

Nation’s commercial supply of meat, poultry and egg 

products is safe, wholesome and labeled and packaged 

correctly. 

Research, Education and Economics 

The Research, Education and Economics (REE) mission 

area brings together all of the efforts underway 

throughout USDA to advance a safe, sustainable and 

competitive U.S. food and fiber system through science 

and the translation of science into real-world results. This 

mission area is integrally involved with every aspect of 

USDA’s work. REE is comprised of the Agricultural 

Research Service (ARS), the Cooperative State Research, 

Education and Extension Service (CSREES), the 

Economic Research Service (ERS), the National 

Agricultural Statistics Service (NASS), and the National 

Agricultural Library. 

Marketing and Regulatory Programs 

The Marketing and Regulatory Programs (MRP) mission 

area is made up of the Agricultural Marketing Service 

(AMS), the Animal and Plant Health Inspection Service 

(APHIS) and the Grain Inspection, Packers and 

Stockyards Administration (GIPSA). This mission area 

facilitates the domestic and international marketing of 

U.S. agricultural products, including food and fiber, 

livestock and grain through a wide variety of efforts, 

including the development of domestic and foreign 

agricultural trade standards via Federal, State and foreign 

cooperation. This mission area also conducts increasingly 

critical and sophisticated efforts to protect U.S. 

agriculture from plant and animal health-related threats, 

and ensures the humane treatment of animals. 

DEPARTMENTAL OFFICES

Department-level offices provide centralized leadership, 

coordination and support for USDA’s policy and 

administrative functions. Their efforts maximize the 

energy and resources agencies devote to the delivery of 

services to USDA customers and stakeholders. 
MANAGEMENT’S DISCUSSION AND ANALYSIS 

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F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 5 

Resources 

Congressional appropriations are the primary funding source for USDA operations. FY 2006 program obligations 

totaled $130.7 billion, an increase of $4.4 billion compared to FY 2005. These are current year obligations from 

unexpired funds. They do not include prior year upward or downward obligation adjustments. Staff year resources 

totaled 106,716, a decrease of 3,185 compared to FY 2005. 

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

USDA Program Obligations Dedicated to Strategic Goals 

FY 2006 Actual FY 2005 Actual 

Enhance Economic

Opportunities for 

Agricultural Producers 

— 35%

Protect and Enhance 

the Nation’s Natural 

Resource Base and 

Environment — 8%

Improve the Nation’s 

Nutrition and Health 

— 41%

Enhance Protection 

and Safety of the 

Nation’s Agriculture 

and Food Supply —

2%

Support Increased 

Economic 

Opportunities and 

Improved Quality of 

Life in Rural America

— 14%

Enhance Economic

Opportunities for 

Agricultural Producers 

— 35%

Protect and Enhance 

the Nation’s Natural 

Resource Base and 

Environment — 8%

Improve the Nation’s 

Nutrition and Health 

— 41%

Enhance Protection 

and Safety of the 

Nation’s Agriculture 

and Food Supply —

2%

Support Increased 

Economic 

Opportunities and 

Improved Quality of 

Life in Rural America

— 14%

2006 PROGRAM OBLIGATIONS

Enhance Economic

Opportunities for 

Agricultural Producers 

— 34%

Protect and Enhance 

the Nation’s Natural 

Resource Base and 

Environment — 8%

Improve the Nation’s 

Nutrition and Health 

— 40%

Enhance Protection 

and Safety of the 

Nation’s Agriculture 

and Food Supply

— 3%

Support Increased 

Economic 

Opportunities and 

Improved Quality of 

Life in Rural America

— 15%

Enhance Economic

Opportunities for 

Agricultural Producers 

— 34%

Protect and Enhance 

the Nation’s Natural 

Resource Base and 

Environment — 8%

Improve the Nation’s 

Nutrition and Health 

— 40%

Enhance Protection 

and Safety of the 

Nation’s Agriculture 

and Food Supply

— 3%

Support Increased 

Economic 

Opportunities and 

Improved Quality of 

Life in Rural America

— 15%

2005 PROGRAM OBLIGATIONS BLIGATIONS

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

USDA Staff Dedicated to Strategic Goals 

FY 2006 Actual FY 2005 Actual 

Support Increased 

Economic Opportunities 

and Improved Quality of

Life in Rural America 

— 6%

Enhance Economic 

Opportunities for 

Agricultural Producers 

— 20% Protect and Enhance 

the Nation’s Natural 

Resource Base and 

Environment — 52%

Improve the Nation’s 

Nutrition and Health

— 2%

Enhance Protection 

and Safety of the 

Nation’s Agriculture 

and Food Supply

— 20%

2006 Staff Years

Support Increasede

Economic Opportunities 

and Improved Quality of 

Life in Rural America 

— 7%

Enhance Economic 

Opportunities for 

Agricultural Producers 

— 23%

Protect and Enhance 

the Nation’s Natural 

Resource Base and 

Environment — 49%

Improve the Nation’s 

Nutrition and Health

— 3%

Enhance Protection 

and Safety of the 

Nation’s Agriculture 

and Food Supply

— 18%

Support Increasede

Economic Opportunities 

and Improved Quality of 

Life in Rural America 

— 7%

Enhance Economic 

Opportunities for 

Agricultural Producers 

— 23%

Protect and Enhance 

the Nation’s Natural 

Resource Base and 

Environment — 49%

Improve the Nation’s 

Nutrition and Health

— 3%

Enhance Protection 

and Safety of the 

Nation’s Agriculture 

and Food Supply

— 18%

2005 Staff Years 2005 Staff Years
MANAGEMENT’S DISCUSSION AND ANALYSIS 

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6 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Performance Goals, Objectives and Results 

Of the 38 performance goals contained in USDA’s FY 2007 and Revised FY 2006 Budget Summary and Annual 

Performance Plan, 32 were met or exceeded, 1 was reported as deferred and 5 were unmet. The following Performance 

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

performance results. Additional analyses of these results can be found in the Performance Section of this report. 

Exhibit 4: USDA Scorecard for FY 2006 

Performance Scorecard for FY 2006 

Objectives Annual Performance Goals Result 

Strategic Goal 1: Enhance International Competitiveness of American Agriculture 

1.1 Expand and Maintain International Export 

Opportunities 

1.1.1 Dollar value of agricultural trade expanded through trade 

agreement negotiation, monitoring, and enforcement (Non-Sanitary 

and Phytosanitary) 

Unmet 

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 under McGovern-Dole 

Exceeded 

1.2.2 Number of recipient countries that make substantive improvements 

in national trade policy and regulatory frameworks that increase 

market access 

Met 

1.3 Improved Sanitary and Phytosanitary (SPS) 

System to Facilitate Agricultural Trade 

1.3.1 Increase the dollar value of trade expanded through negotiation or 

preserved through USDA staff intervention and trade agreement 

monitoring activities (Sanitary and Phytosanitary) ($ in millions) 

Exceeded 

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

2.1 Expand Domestic Market Opportunities 2.1.1 Number of items designated as biobased for Federal procurement Met 

2.2 Increase the Efficiency of Domestic 

Agricultural Production and Marketing 

Systems 

2.2.1 Agricultural Statistics Board reports released on time Met 

2.3 2.3.1 Increase the value of Federal Crop Insurance Corporation (FCIC) 

risk protection coverage provided through FCIC-sponsored 

insurance ($ in billions) 

Exceeded 

2.3.2 Increase percentage of program benefits delivered through a Web 

environment 

Met 

2.3.3 Increase percent of loans to beginning farmers, racial and ethnic 

minorities, and women farmers financed 

Exceeded 

2.3.4 Reduce average processing time for direct loans Exceeded 

Provide Risk Management and Financial 

Tools to Farmers and Ranchers 

2.3.5 Reduce average processing time for guaranteed loans Exceeded 

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

3.1 Expand Economic Opportunities by Using 

USDA Financial Resources to Leverage 

Private Sector Resources and Create 

Opportunities for Growth 

3.1.1 Jobs Created or Saved Exceeded 

3.2 3.2.1 Homeownership opportunities provided Unmet 

3.2.2 Customers served by new or improved water and waste disposal 

facilities 

Exceeded 

3.2.3 Customers served by new or improved community facilities Exceeded 

3.2.4 Customers served by new or improved electric facilities Exceeded 

Improve the Quality of Life Through USDA 

Financing of Quality Housing, Modern 

Utilities, and Needed Community Facilities 

3.2.5 Customers served by new or improved telecommunications 

facilities 

Exceeded 
MANAGEMENT’S DISCUSSION AND ANALYSIS 

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F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 7 

Performance Scorecard for FY 2006 

Objectives Annual Performance Goals Result 

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

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

poultry products 

Exceeded 

4.1.2 Prevalence of E. coli 0157:H7 in ground beef Exceeded 

4.1 Reduce the Incidence of Foodborne 

Illnesses Related to Meat, Poultry, and 

Egg Products in the U.S. 

4.1.3 Number of consumers reached with food safety messages Met 

4.2.1 Improve the capabilities of animal and plant diagnostic laboratories Met 

4.2.2 Number of significant introductions of foreign animal diseases and 

pests that spread beyond the original area of introduction and cause 

severe economic or environmental damage, or damage to the health 

of animals 

Met 

4.2 Reduce the Number and Severity of 

Agricultural Pest and Disease Outbreaks 

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

has not been contained within the quarantine area 

Unmet 

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

5.1 Improve Access to Nutritious Food 5.1.1 Eligible populations participating in the major Federal nutrition 

assistance programs 

Met 

5.2 Promote Healthier Eating Habits and 

Lifestyles 

5.2.1 Application and usage level of nutrition guidance tools (pieces of 

nutrition guidance distributed) 

Exceeded 

5.3 Improve Nutrition Assistance Program 

Management and Customer Service 

5.3.1 Increase Food Stamp payment accuracy Deferred 

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

6.1.1 Number of Comprehensive Nutrients Management Plans applied Met 

 Conservation Technical Assistance 

6.1 Protect Watershed Health to Ensure Clean 

and Abundant Water 

 Environmental Quality Incentives Program 

6.1.2 Increase Conservation Reserve Program (CRP) acres of riparian and 

grass buffers 

Met 

6.2 Enhance Soil Quality to Maintain 6.2.1 Conservation plans for cropland written, million acres Met 

Productive Working Cropland 6.2.2 Reduction in acreage of cropland soils damaged by erosion, millions 

of acres 

 Conservation Technical Assistance Program 

 Environmental Quality Incentives Program 

Met 

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

urban interface 

Unmet 

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

Classes 2 or 3 in Fire Regimes I, II or III outside the wildland-urban 

interface 

Unmet 

6.3.3 Number of acres of other hazardous fuel treated that are outside the 

wildland-urban interface 

Exceeded 

Protect Forests and Grasslands 

6.3.4 Conservation plans written for grazing lands Exceeded 

6.3.5 Grazing lands with conservation applied to protect the resource base 

and environment, Conservation Technical Assistance, millions of 

acres 

Exceeded 

6.3.6 Grazing lands with conservation applied to protect the resource base 

and environment, Environmental Quality Incentives Program, millions 

of acres 

Exceeded 
MANAGEMENT’S DISCUSSION AND ANALYSIS 

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8 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Performance Scorecard for FY 2006 

Objectives Annual Performance Goals Result 

Strategic Goal 5 (Cont’d): Protect and Enhance the Nation’s Natural Resource Base and Environment 

6.4 Wetlands created, restored or enhanced 

6.4.1 Conservation Technical Assistance Exceeded 

Protect and Enhance Wildlife Habitat to 

Benefit Desired, At-Risk And Declining 

Species 6.4.2 Wetlands Reserve Program Exceeded 

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 been successful in pursuing its strategic objective to improve the Nation’s 

nutrition and health, 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 2006. Sometimes circumstances 

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

approach in ways that enhance its service to the public, but 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. 

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, if applicable, 

responds by providing accomplishments for the current fiscal year and/or planned actions for the upcoming fiscal year. 

All of the challenges identified in FY 2005 remain for FY 2006, and one new challenge was added. However, the OIG 

has removed issues associated with certain challenges because of the improvements made by the Department. The 

following table identifies only those challenges that changed from FY 2005 to FY 2006. 

FY 2005 Management Challenges FY 2006 Changes 

(1) Interagency Communication, Coordination and Program Integration 

Need Improvement 

Issue Removed—Implementation of a Department-wide research 

misconduct policy. 

Issue New—Increase organizational communication and understanding 

among the agencies that administer the farm and conservation programs. 

Issue New—Improve communication and strengthen controls for beef 

exported to Japan. 

Issue Moved to Challenge #5—Ensure that animal disease surveillance 

program policies and procedures are well defined and supportable, and 

terminology and practices are consistent with public announcements. 

(2) Implementation of Strong, Integrated Management Control 

(Internal) Systems Still Needed 

Issue New—Capitalize on Farm Service Agency (FSA) and CCC 

compliance activities to improve program integrity. 

(3) Departmental Efforts and Initiatives in Homeland Security Need to 

be Maintained 

Issue Removed—Establish Department-wide policies and procedures for 

defining sensitive and dual-use information and implement adequate 

controls to protect such information. 
MANAGEMENT’S DISCUSSION AND ANALYSIS 

USDA

F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 9 

FY 2005 Management Challenges FY 2006 Changes 

Issue New—Develop a comprehensive approach for surveillance and 

monitoring for outbreak of avian influenza, including live bird markets or 

other “off-farm” environments. 

Issue Moved from challenge #1—Ensure animal disease surveillance 

program policies and procedures are well defined and supportable. 

Issue New—Develop an information system to better track 

noncompliance violations related to specified risk materials. 

Issue New—Improve security and accountability of explosives and 

munitions.

(4) Department-wide Efforts and Initiatives on Genetically Engineered 

Organisms Need to be Strengthened 

Issue Removed—Strengthen germplasm policies and procedures.

Issue New—Develop a comprehensive strategy for increasing exports of 

genetically engineered crops. 

Challenge #7 Added—USDA’s Response to the 2005 Hurricanes Needs 

Ongoing Oversight: 

• Provide sufficient oversight to ensure that monies allocated for 

housing, food stamps, conservation and farm programs are used 

effectively. 

The following table includes FY 2006 accomplishments and/or FY 2007 planned actions. 

USDA’s Management Challenges 

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

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

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

Fiscal Year 2006 Accomplishments 

− Developed a Web-based notification system to allow FSA county offices and approved insurance providers to communicate on reported 

discrepanices in information provided by producers and to track the progress in resolving the discrepancies. 

− FSA and RMA improved the 2001 Reconciliation Process by working together on recommendations to standardize RMA and FSA common 

business elements and reporting requirements. 

− NRCS and FSA met to strengthen interagency communication in regard to the Wetland Reserve Program (WRP) implementation, and the

effect on issuing payments under the Direct and Counter-Cyclical (DCP) Program. Clarification of notification to producers for WRP 

participation was addressed and corrected in September 2006. 

Planned Actions for Fiscal Year 2007

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

provided by producers to RMA and FSA; 

− FSA will update procedures for reconciliations, obtain data from RMA to conduct reconciliations, and provide results to RMA; 

− FSA and NRCS managers will meet once a week to improve communication and to assure that one agency’s actions do not adversely 

affect the other agency’s programs; 

− Publish Routine Uses for System of Records in the Federal Register to allow producer information to be disclosed to RMA and 

subsequently to approved insurance providers, their agents and loss adjusters under contract with RMA; and 

− Continue to develop and implement CIMS; 

− Establish a FSA/RMA working group to review and implement consistent crop reporting dates; 

− Enhance FSA/RMA transition tables to compare State, county and crop data; 

− Continue efforts to design, build and implement new functionality within the Conservation Programs ProTracts application to streamline 

and integrate program management and program payments associated with easement programs better. This new functionally will leverage 

cross-agency Web services; 

− Develop an integrated application for USDA’s Grants Management Line of Business. This initiative will establish business processes and 

technology-based services to improve customer access, submission processes, decision-making and reporting; 

− Continue cross-agency coordination meetings to address data sharing opportunities, common development practices, increase awareness 

of agency information systems and help eliminate duplicate information management systems. Current data sharing efforts include 

geospatial, eligibility Web services, land and tract information, payment information and customer files; and 

− Continue efforts to incorporate data mining technology into its business applications to detect anomalies and potential for erroneous payments. 
MANAGEMENT’S DISCUSSION AND ANALYSIS 

USDA

10 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

• Improve communication and strengthen controls for beef exported to Japan. 

Fiscal Year 2006 Accomplishments 

− Posted approved products listed for all export verification (EV) programs on shared internal Web site; 

− Signed a Memorandum of Understanding outlining the responsibilities of both AMS and FSIS pertaining to the EV program; 

− Issued a revised policy notice (#19-06) that describes the process for certifying beef products under export verification programs; and 

− Provided training to responsible inspection program personnel and conducted audits of all plants approved for shipments to Japan. 

Planned Actions for Fiscal Year 2007 

− Continue to provide training to employees who are responsible for EV. 

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

• Strengthen the quality control in the Federal Crop Insurance Programs. 

Fiscal Year 2006 Accomplishments 

− RMA completed a review of selected approved insurance providers operations to determine their compliance with quality control guidelines 

outlined in the Standard Reinsurance Agreement and associated Appendix IV. 

Planned Actions for Fiscal Year 2007 

− Continue reviews of selected Approved Insurance Provider operations to determine their compliance with quality control guidelines outlined 

in the Standard Reinsurance Agreement and associated Appendix IV. 

• 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. 

Fiscal Year 2006 Accomplishments 

− Completed actions to improve controls over unliquidated obligations and accruals which reduced the material weaknesses to reportable 

conditions; 

− Established accountability and implemented management controls to ensure performance reporting accuracy; 

− Developed plans and schedules to accomplish unmet targets and goals from the FY 2006 Program Directive; 

− Resolved key issues regarding further implementation of the Performance Accountability System (PAS); 

− Conducted comprehensive internal control risk assessment for FS programs and developed plans to address identified risks; and 

− Developed and installed additional security features needed to meet the minimum security standards at aviation facilities. 

Planned Actions for Fiscal Year 2007 

− Conduct oversight reviews on performance accountability in various regions and annual risk assessments of all financial/mixed financial 

systems; 

− Implement corrective actions identified through OMB Circular A-123, Appendix A, and OIG audits; and 

− Improve oversight of national firefighting contract crews. 

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

Planned Actions for Fiscal Year 2007 

− Review results from the County Operations Review Program monthly and address internal control weaknesses;

− Monitor progress toward remediation of control weakness identified in the OMB Circular A-123, Appendix A assessment; and

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

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

• Emphasize security program planning and management. 

Fiscal Year 2006 Accomplishments 

− Developed a Department-wide FISMA Cyber Security scorecard that is issued monthly to Senior IT leadership and executive management 

within the Department; 

− Implemented an automated tool (ASSERT) for management of IT Systems Security categorization in accordance with FIPS 199 and 

management of Plan of Action and Milestones (POAMs) for the resolution of identified security vulnerabilities; and

− Implemented a Cyber Security Liaison Program to assist USDA agencies in the implementation and management of IT risk management

programs. 

Planned Actions for Fiscal Year 2007 

− Establish an Executive Management Committee to address all issues of the IT material weaknesses and issue action lists for corrections to 

eliminate USDA’s material weaknesses; and 

− Complete a full review of the Cyber Security Departmental manual and revise its policies, procedures and requirements as needed to 

closely align with NIST and other Federal regulations and laws. 
MANAGEMENT’S DISCUSSION AND ANALYSIS 

USDA

F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 11 

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

Fiscal Year 2006 Accomplishments 

− Developed the Capital Planning and Investment Process throughout USDA; and 

− Identified a matrix organizational structure within OCIO in which subject matter experts who work closely with systems owners and 

program offices to ensure all Federal control requirements are incorporated into a system’s lifecycle. 

Planned Actions for Fiscal Year 2007 

− Implement an internal control program that includes the continuous monitoring required by systems and processes covered under A-123. 

In addition, USDA will conduct agency-level security reviews and verify POAM closures. 

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

Fiscal Year 2006 Accomplishments 

− Performed periodic on-site compliance reviews. 

Planned Actions for Fiscal Year 2007 

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

− Update policy and procedure, implementing new scorecard reporting elements, and conduct risk assessments in ASSERT. 

• Improve access controls. 

Fiscal Year 2006 Accomplishments 

− Established a program office responsible for implementing the Homeland Security Presidential Directive-12; and 

− Ensured that OCIO network monitoring and system patching programs have resulted in a reduction of security incidents in comparison to 

previous years. 

Planned Actions for Fiscal Year 2007 

− Increase oversight of configuration control processes. 

• Implement appropriate application and system software change control. 

Fiscal Year 2006 Accomplishments 

− Reviewed Configuration Control Board charters and meeting minutes from all USDA component agencies. 

Planned Actions for Fiscal Year 2007 

− Increase oversight of configuration control processes within the Department. 

• Develop disaster contingency (service continuity) plans. 

Fiscal Year 2006 Accomplishments 

− Successfully tested 97 percent of agency Continuity of Operations Plans. 

Planned Actions for Fiscal Year 2007 

− Fully implement the Living Disaster Recovery Plan System. 

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

• Assign sufficient resources and provide management oversight. 

Fiscal Year 2006 Accomplishments 

− Implemented the Management Initiatives Tracking System (MITS) scorecard module (MITS is an interactive Web-based database 

designed to allow Department management to monitor progress toward achieving management initiatives); and 

− Enhanced the statistical sampling process to include FSA County Office Review Program (CORP) Staff. 

Planned Actions for Fiscal Year 2007 

− Develop plans to measure improper payments for high risk programs. 

• Strengthen program risk assessment methodology to identify and test the critical internal controls over program payments totaling more than 

$100 billion. 

Fiscal Year 2006 Accomplishments 

− Developed a list of all USDA programs and completed scheduled risk assessments;

− Completed statistical sampling process required for high-risk programs and developed corrective action plans; 

− Updated risk assessment, measurement plan and corrective action plan guidance; 

− Received OMB concurrence to remove several subcomponents from the high risk list; 

− Established a team to review field operations and make recommendations to improve processes to reduce improper payments; 

− Identified critical program requirements and internal controls for eligible payment; and 

− Tested internal controls to ensure they were working as intended. 

Planned Actions for Fiscal Year 2007 
MANAGEMENT’S DISCUSSION AND ANALYSIS 

USDA

12 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

− Complete all risk assessments;

− Develop testing criteria to complete the statistical sampling for the FY 2007 review cycle; and

− Review effectiveness of mitigating controls and develop a plan to remediate controls, as applicable.

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

Fiscal Year 2006 Accomplishments 

Implemented a process for the statistical sampling of high-risk programs.

Planned Actions for Fiscal Year 2007 

− Conduct a statistical sample for specific high risk programs, initiate corrective actions and set improvement targets; and

− Identify the types of administrative errors affecting improper payments and remediate weaknesses.

• Develop and implement a corrective action plan to address the weaknesses that allowed the improper payments to occur. 

Planned Actions for Fiscal Year 2007 

− Establish a field operation team to evaluate field vulnerabilities; and

− Develop and implement recommendations from the field operations team to reduce improper payments.

• Agencies that have identified programs that are susceptible to improper payments need to develop and implement action plans to reduce the 

amount of these payments. 

Fiscal Year 2006 Accomplishments 

− Chartered a Task Force consisting of a cross-section of field office representatives to study, analyze results and make recommendations to 

improve program delivery and reduce improper payments; 

− Identified training needs for National, State and county office staffs; and 

− Issued notices to all offices pertaining to the Improper Payment Improvement Act and findings associated with reviews of the Loan 

Deficiency Payments, Marketing Assistance Loans, Crop Disaster, Direct and Counter Cyclical Programs. 

Planned Actions for Fiscal Year 2007 

− Revise performance standards for field operations staff and program managers to include responsibilities for reducing improper payments 

as a element; 

− Implement a quarterly review process for service center staff to ensure quality of work; 

− Implement a training course to assist service center employees in understanding the impact of completing all the needed actions prior to 

making program payments; 

− Complete review and update national instructions to remove ineffective controls; and

− Monitor the action plans to respond to areas of weaknesses identified by the sampling results.

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

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

Department manages, transports, stores and distributes; and 

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

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

Planned Actions for Fiscal Year 2007 

− Host bi-weekly homeland security discussions with mission area representatives; 

− Require bi-weekly updates on homeland security projects from component agencies, and quarterly status reports on Homeland Security 

Presidential Directive 9 tasks from mission areas; 

− Conduct CARVER + Shock risk assessment (CARVER + Shock is a risk tool designed to identify vulnerabilities and rate the risk 

associated with those vulnerabilities) to determine appropriate levels of security needed to USDA-owned agricultural commodities; and 

− Analyze risk assessment findings and identify changes needed to existing policies and procedures, and issuing revised policies and 

procedures. 
MANAGEMENT’S DISCUSSION AND ANALYSIS 

USDA

F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 13 

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

• Strengthen GEO field testing process. 

Fiscal Year 2006 Accomplishments: 

− Developed the Plant Made Pharmaceutical and Plant Made Industrial guidance. 

Planned Actions for Fiscal Year 2007 

− Prepare updated guidance for developers of agricultural biotechnology that will specify required field data reports; 

− Publish an environmental impact statement (EIS) on the APHIS regulation revisions; 

− Coordinate with the Biotechnology Regulatory Services on inspections of notifications and permit field tests; 

− Continue bilateral and multilateral activities to provide continuity and sustained presence needed to assure market access for U.S. 

agricultural exports and to foster the global acceptance of agricultural biotechnology, as well as targeting new activities in support of free 

trade discussions; 

− Maintain rapid response mechanisms to address evolving and emergency issues, implement programs, and coordinate biotech initiatives 

with broader USDA and USG trade policy initiatives; and 

− Initiate activities that inform new areas of biotechnology research and product development. 

• To promote export of genetically engineered crops, develop a coordinated global market strategy that will guide negotiations with countries 

reluctant to import genetically engineered crops and open new markets willing to import American agricultural products. 

Fiscal Year 2006 Accomplishments: 

− Drafted strategy for inter-U.S. Government agency review aimed at advancing the international development of science and rule-based 

regulatory systems for the products of agricultural biotechnology and adherence to WTO principles. This is intended to help foster global 

market access for U.S. agricultural products produced through genetic engineering; 

− Provided strategy and rationale for funding proposal to the FAS Emerging Markets Program for international outreach programs intended 

to help foster global market access for U.S. agricultural products produced through genetic engineering; 

− Met regularly with other USDA agencies and other U.S. Government agencies to plan and coordinate responses to biotechnology policy 

issues and to plan international biotechnology outreach and promotion activities; and 

− Undertook numerous bilateral and multilateral activities aimed at advancing the development of science and rule-based regulatory systems 

and to maintain liberal trade policies and market access for U.S. genetically engineered crops. 

Planned Actions for Fiscal Year 2007 

− Continue bilateral and multilateral activities to provide continuity and sustained presence needed to assure market access for U.S. 

agricultural exports and to foster the global acceptance of agricultural biotechnology, as well as targeting new activities in support of free 

trade discussions; 

− Maintain rapid response mechanisms to address evolving and emergency issues, implement programs, and coordinate biotech initiatives 

with broader USDA and USG trade policy initiatives; and 

− Initiate activities that inform new areas of biotechnology research and product development. 

7) USDA’s Responses to the 2005 Hurricanes Needs Ongoing Oversight.

• Provide sufficient oversight to ensure that monies allocated for housing, food stamps, conservation and farm programs are used effectively. 

Fiscal Year 2006 Accomplishments 

− Community programs has developed a Duplicate Assistance Disclosure Statement. The statement certifies that the applicant has not 

previously received Federal funds from another Federal agency for the same purpose that Community programs will be utilized. The 

statement is included with the application package which is to be signed by the applicant during the pre-aplication, obligation and closing 

stages of the loan; 

− Published Federal regulations and procedures for administering programs under Section 32 of the Agricultural Act of August 24, 1935; and 

− Drafted Federal regulations and procedures for Supplemental Disaster Programs. 

Planned Actions for Fiscal Year 2007 

− Close out acceptance of applications for disaster assistance authorized under Section 32 and Supplemental Disaster Programs, obligate 

funds and issue payments; 

− Establish a Memorandum of Understanding with applicable States for Catfish Grant Program and distribute block grants to States for 

catfish feed losses; 

− Publish Federal regulations and program procedure Supplemental Disaster Programs; 

− Develop plans to correct deficiencies noted in OIG and GAO reports; 

− Discuss disaster issues at National Food Stamp Director’s Conference; 

− Modify the Disaster Assistance Web site to better reflect food assistance mission and role; 

− Update the Disaster Food Assistance Handbook; and 

− Perform periodic inspections to ensure compliance with guidance.
MANAGEMENT’S DISCUSSION AND ANALYSIS 

USDA

14 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Future Demands, Risks, Uncertainties, 

Events, Conditions and Trends 

USDA is influenced by many of the same forces that 

shape the American economy—globalization of markets, 

scientific advances and fundamental changes in the 

Nation’s family structure and workforce. U.S. farmers and 

food companies operate in highly competitive markets 

with constantly changing demand for high quality food 

with a variety of characteristics, including convenience, 

taste and nutrition. 

Additionally, homeland security is a significant, ongoing 

priority for USDA. The Department is working with the 

U.S. Department of Homeland Security to help protect 

agriculture from intentional and accidental acts that might 

affect America’s food supply or natural resources. 

External factors that challenge USDA’s ability to achieve 

its desired outcomes include: 

Weather-related hardships and other uncontrollable 

events at home and abroad; 

Domestic and foreign macroeconomic factors, 

including consumer purchasing power, the strength of 

the U.S. dollar, and political changes abroad that can 

impact domestic and global markets greatly at any 

time; 

The availability of funds for financial assistance 

provided by Congress and the local and national 

economies; 

Sharp fluctuations in farm prices, interest rates and 

unemployment also impact the ability of farmers, 

other rural residents, communities and businesses to 

qualify for credit and manage their debts; 

The impact of future economic conditions and actions 

by a variety of Federal, State and local Governments 

that will influence the sustainability of rural 

infrastructure; 

The increased movement of people and goods, which 

provides the opportunity for crop and animal pests 

and diseases, such as avian influenza and bovine 

spongiform encephalopathy, to move quickly across 

national and foreign boundaries; 

Potential exposure to hazardous substances, which 

may threaten human health and the environment, and 

the ability of the public and private sectors to 

collaborate effectively on food safety, security and 

related emergency preparedness efforts; 

The risk of catastrophic fire is dependent on weather, 

drought conditions and the expanding number of 

communities in the wildland-urban interface; and 

Efforts to reduce hunger and improve dietary 

behaviors depend on strong coordination between 

USDA and a wide array of Federal, State and local 

partners. 
MANAGEMENT’S DISCUSSION AND ANALYSIS 

USDA

F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 15 

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 FY 2005-2010, USDA plans to: 

Ensure an efficient, high-performing, diverse 

workforce, aligned with mission priorities and 

working cooperatively with partners and the private 

sector; 

Enhance internal controls, data integrity, management 

information and program and policy improvements as 

reflected by an unqualified audit opinion; 

Reduce spending and burden on citizens, partners and 

employees by simplifying access to the Department’s 

information. This enhancement is added by 

implementing business processes and information 

technology needed to make its services available 

electronically; 

Link budget decisions and program priorities more 

closely with program performance and consider the 

full cost of programs and activities; 

Reduce improper payments by developing targets and 

implemented corrective action plans; 

Efficiently and effectively manage its real property; 

Transform IT enterprise infrastructure to be cost 

effective and consistent across all agencies and 

geographic regions; 

Improve its research and development investments by 

using objective criteria; and 

Support the essential work of faith-based and 

community organizations. 

USDA employees are charged with executing these 

management initiatives, which they do with an emphasis 

on customer service. The PMA calls for the U.S. Office of 

Management and Budget (OMB) to score departments on 

each initiative. Green indicates success, yellow indicates 

mixed results and red indicates an unsatisfactory score. 

There are two scores awarded. “Status” indicates that a 

department is meeting the standards established for 

success. “Progress” indicates that it is progressing 

adequately in meeting established deliverables and 

timelines. 

Status HUMAN CAPITAL Progre

ss 

The PMA calls on Federal Government leaders to think 

boldly and strategically about ways to improve the 

management and performance of government. 

This applies to a key initiative of the PMA, strategic 

management of human capital. 

USDA is pleased to report that it has fully or substantially 

completed most of the human capital objectives included 

in its 2004 Human Capital Strategic Plan. Thus, USDA 

has earned a “green” for status and a “green” for progress 

for Human Capital. Through the implementation of the 

Human Capital plan, USDA achieved the following: 

Conducted a USDA-wide skills gap analysis; 

Developed and implemented new performance and 

awards policies; 

Transitioned all mission areas to a multi-level 

performance appraisal program this year; 

Achieved a hiring timeline of 21.3 days, one of the 

lowest in the Federal Government, exceeding the 45-

day hiring standard for General Schedule employees; 

and 

Developed and maintained a diverse and talented 

workforce capable of achieving the USDA mission. 
MANAGEMENT’S DISCUSSION AND ANALYSIS 

USDA

16 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

In the future, USDA will work with its human capital 

partners, OMB and the Office of Personnel Management, 

and other agencies to help create programs that will 

enhance employee development, increase the use of 

human capital flexibilities for managers in the areas of 

recruitment and retention, streamline processes for more 

efficient and faster service, and ensure that its workforce 

has the skills to meet the challenging demands of the 21st

century. USDA is committed to lead by example and 

serving as the vanguard of the Federal Government’s 

overall human capital transformation efforts. 

USDA has scored green for status and yellow for progress 

on the September 30, 2006 scorecard. 

Actions taken by USDA in FY 2006 to achieve these 

results include: 

Moving aggressively to improve its human capital 

and increase workforce capacity. These 

improvements have benefited employees and resulted 

in better systems to hire, retain and reward 

employees. 

 USDA recruits thousands of individuals every 

year. In the past, many talented individuals were 

lost in the recruitment process due to lengthy 

hiring timelines. To improve this process, USDA 

revamped its hiring processes leading to 

substantial reductions in the time it takes to hire 

employees. For general schedule employees, 

hiring timelines dropped from more than 40 days 

to an average of just over 21 days, making it the 

best hiring timeline for a Cabinet-level agency in 

the Federal Government. For senior executive 

employees, hiring timelines decreased from more 

than 100 days 2 years ago to only 43 days. This 

is also one of the best hiring timelines in 

government; 

 On the 2004 Federal Human Capital survey, 

USDA employees indicated a concern that they 

were not being rewarded according to level of 

performance. Some employees receiving 

satisfactory ratings were getting performance 

awards equal to those receiving outstanding 

ratings. As a first step to correct this and ensure 

that performance awards are given according to 

level of performance, all agencies in USDA have 

transitioned to a multi-level performance 

appraisal system to allow for distinctions in 

performance. Additionally, USDA has issued 

guidance that performance awards tie to level of 

performance; 

 Under-representation continues to improve. Last 

year, USDA improved in the representation of 

Hispanics, American Indians and Asian 

Americans; 

 The USDA online training system, AgLearn, 

continues to expand. Close to 90,000 employees 

have desktop access to more than 1,800 courses, 

some leading to certificates and university 

degrees; 

 USDA has 19 mission critical occupations that tie 

directly to the accomplishment of the strategic 

goals of the organization. Occupations in the 

areas of general biological science, soil 

conservation, forestry, veterinary medicine, 

consumer safety, nutrition, statistics, food 

inspection and others are critical to the success of 

USDA’s mission. As a result of an effort to 

identify and close skill gaps in these mission 

critical occupations, USDA closed gaps in all but 

1 mission critical occupation, GS-404, Biological 

Science Technician, to less than 3 percent; and 

 Agencies in USDA such as the Forest Service and 

Food Safety and Inspection Service are moving 

forward with new leader development training 

programs to ensure that leaders and managers 

have the skills they need to manage the workforce 

of the future. 

These are just some of the improvements in human capital 

during the past year. These improvements and others are 

benefiting employees and contributing to mission 

accomplishments. 
MANAGEMENT’S DISCUSSION AND ANALYSIS 

USDA

F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 17 

Status COMPETITIVE SOURCING Progre

ss 

USDA’s Competitive Sourcing is overseen by the Office 

of the Chief Financial Officer (OCFO). 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 the competitive 

sourcing process by ensuring that the studies it conducts 

reflect more strategically grouped and related functions to 

maximize the impact of this initiative. USDA required 

that a feasibility study, including cost-benefit analysis, be 

completed prior to conducting a competitive sourcing 

study. This ensures that functions selected for publicprivate 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 positions to 

identify those that can be studied to achieve efficiency 

and/or quality improvement. 

As a result of its achievements and improvements in the 

Competitive Sourcing Program, USDA has earned a 

“green” for status and a “green” for progress. 

Actions taken by USDA to achieve this result include: 

(Competitive Sourcing results are reported to Congress 

annually on December 31 for the preceding fiscal year. 

The results provided in this report are for FY 2005 as 

reported to Congress on December 31, 2005.) 

Completed competitions to improve productivity and 

produce annual savings; 

 REE-ARS completed 2 studies on 270 FTEs in 

FY 2005. Estimated gross savings is $8.1 million 

over a 5-year period with annualized savings of 

$1.62 million for competitive sourcing studies 

completed in FY 2005. Actual savings on the 

studies completed in FY 2005 totaled $568,000; 

 The Forest Service (FS) implemented the publicprivate competition of Information Technology 

services, which is expected to save $146.7 million 

over 5 years demonstrating the Department’s 

ability to use the competitive sourcing 

management tool to achieve positive results. FS 

achieved actual savings of $16.8 million in FY 

2005; and 

 In FY 2006, conducted feasibility studies 

covering more than 3,000 FTEs. If the results of 

the feasibility studies indicate a favorable return 

on investment and market research indicates 

potential qualified vendors exist, then an A-76 

competition will be conducted. If the results are 

not favorable, competitions will not be conducted. 

Conducted training on feasibility studies, most 

efficient organization and FAIR Act inventory; and 

Convened a Department-wide group to review the 

FAIR Act inventory justifications for similar positions 

among different agencies Department-wide and 

addressed inconsistencies in the classification of like 

functions. 

Challenges 

FS Legislative Restrictions—House 

Appropriations Committee’s Interior, Environment 

and Related Agencies Subcommittee limitations on 

competitive sourcing. 
MANAGEMENT’S DISCUSSION AND ANALYSIS 

USDA

18 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Farm Service Agency and Rural Development 

Legislative Restriction—The Appropriations Act 

prohibits funds to be used to study, complete a study 

of, or enter into a contract with a private party to 

execute, without specific authorization in a subsequent 

Act of Congress, a competitive sourcing activity of the 

Secretary of Agriculture, including USDA support 

personnel, relating to rural development or farm loan 

programs. 

Status 

FINANCIAL 

PERFORMANCE Progre

ss 

USDA’s Financial Performance is overseen by the OCFO, 

which works in partnership with all USDA agencies and 

staff offices to ensure the Department’s financial 

management reflects sound business practices. The PMA 

requires all Federal agencies to 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 2006. 

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. The OCFO works to improve financial 

management, in partnership with the chief financial 

officers (CFOs) of USDA agencies, as a core attribute of 

the Department’s operating culture. OCFO is working 

closely with USDA agencies to eliminate all material 

weaknesses. 

OCFO will lead efforts to improve financial management 

information by helping USDA’s agencies develop and 

access useful and timely information. This information 

includes monthly financial reports, on-line access to realtime information and program cost reporting. By 

enhancing the integrity of financial and administrative 

data, the Department will protect corporate assets and 

conserve scarce resources. 

Financial Management Modernization Initiative 

(FMMI)—FMMI’s primary objective is to improve 

financial management performance by efficiently 

providing USDA agencies with a modern, core financial 

management system that both complies with Federal 

accounting and systems standards and provides maximum 

support to the USDA mission. FMMI targets replacement 

of the Foundation Financial Information System (FFIS) 

and the replacement of the legacy financial and program 

ledgers used in the USDA programs. Replacing FFIS, the 

core financial management system, and program 

ledgers with a modern, Web-based core financial 

management system is also expected to eliminate the need 

to operate and maintain many of USDA’s legacy feeder 

systems as well as the data warehouse currently required 

to produce timely external financial statements. 

The FMMI investment has the following key attributes: 

Integration with existing and emerging eGovernment 

initiatives such as eGovernment Travel Services, 

ePayroll, Grants.gov, eLoans, (e.g., asset management 

and procurement), and program-specific systems that 

are subsidiary to the general ledger (e.g., 

programmatic loan systems); 

Integration with performance management and 

budgeting, allowing USDA to meet the President’s 

Management Agenda and Government and 

Performance Results Act (GPRA) requirements; and 

Compliance with the Federal Financial Management 

Improvement Act (FFMIA), including Federal 

financial management system requirements, 

applicable Federal accounting standards, and U.S. 

Government Standard General Ledger at the 

transaction level performance and highest measure of 

accountability of taxpayer-dollar use. 

Reducing the Number of Financial System 

Feeders—USDA’s current financial management 
MANAGEMENT’S DISCUSSION AND ANALYSIS 

USDA

F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 19 

system portfolio uses administrative systems to “feed” 

data into and provide an integrated financial system 

solution. Until the legacy applications are retired and 

replaced, they will be kept compliant with the Financial 

Systems Integration Office core financial systems 

requirements. 

The Department began to modernize and retire the legacy 

administrative systems in FY 2003. USDA has retired 

several of the legacy applications including the 

Transportation System, the FTS Telephone System 

Program, Billings and Collections System, Fedstrip 

System and the Motor Pool System. The Personal 

Property System, Equipment Management System and 

Energy Reporting Systems are to be retired and replaced 

by a different portfolio and investment. The Personal 

Property System is to be retired at the end of FY 2007 and 

the Equipment Management System at the end of FY 

2008. The Energy System will be retired when the data 

are integrated into another application during FY 2008. 

The Purchase Order System will be retired in FY 2007 

following the implementation of the Integrated 

Acquisition System. The Travel (TDY Portion) and 

Government Transportation System applications will be 

replaced and retired by the eGovernment Travel 

Application Service provider during FY 2008. The 

Purchase Card Management System may be replaced in 

FY 2009 by an Application Service Provider since the 

purchase cards, which are part of the GSA Smartpay 

process will be renegotiated and in place by that time. 

Telephone and Utilities applications are being reviewed to 

be replaced by an Application Service Provider during FY 

2007. 

FSA/CCC MIDAS The Modernize and Innovate 

the Delivery of Agricultural Systems (MIDAS)—

MIDAS will transform the delivery of farmer benefits 

through a direct linkage with USDA’s FMMI system. 

This link will help reduce erroneous payments. MIDAS 

will increase staff productivity through streamlined and 

automated farm program procedures. Fewer staff will be 

needed to handle the current program volume as staff will 

be freed from cumbersome manual processing, 

duplicative data entry, and daily system maintenance 

activities required by the legacy environment. County 

office employees can focus on serving the customer while 

meeting program requirements. MIDAS also leverages 

modern technology to enable Web user interface and 

strengthens USDA’s considerable investment in 

geospatial technology. MIDAS will provide automated 

real-time centralized payment eligibility determination, 

thorough documentation of business 

ownership/participation, and automated adjustments to 

payments for outstanding producer obligations. This will 

reduce timeframes from application to receipt of benefits; 

add self-service channels via the Internet; and store data 

centrally so that the customer is not bound to a single 

service center. In addition, the computer system will 

provide a repository of data and legal transaction records 

that will allow real-time queries to support the needs of 

Congress, FSA headquarters, the Office of Management 

and Budget, and other Federal agencies and organizations. 

FFMIA Financial System Strategy—USDA has 

evaluated its financial management systems to assess 

compliance with the FFMIA. Currently, the Department 

is not compliant with the Federal Financial Management 

System Requirements, applicable Federal accounting 

standards, the Standard General Ledger at the transaction 

level or the Federal Information Security Management 

Act (FISMA) requirement. USDA’s financial systems 

strategy is to continue working in FY 2007 to meet 

FFMIA and FISMA objectives. The Office of Inspector 

General identified material weaknesses for USDA’s 

information technology security and controls in FY 2006. 

The Department added new initiatives with several 

milestones to improve the controls over the CCC’s 

information security program and financial management 

systems and reporting, and the NRCS’ application 

controls for the Program Contracts System. While USDA 

has completed many of the FY 2006 initiatives to comply 

with statutory requirements, it will continue monitoring 

progress on plans to improve its financial management 

systems. The Department also will work to comply fully 

with FISMA requirements. 
MANAGEMENT’S DISCUSSION AND ANALYSIS 

USDA

20 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

USDA’s plans to improve financial management include: 

Maintaining an unqualified audit opinion on its 

financial statements; 

Continuing to work toward eliminating all material 

weaknesses; 

Improving financial reporting procedures and 

systems; and 

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

USDA has scored red for status and green for progress on 

the September 30, 2006 scorecard. 

Actions taken by USDA in FY 2006 to achieve these 

results include: 

Sustained an unqualified audit opinion on its FY 2006 

consolidated financial statements; 

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; 

Began Web enablement of USDA Corporate 

Financial and Performance Reporting, a quarterly 

performance system that the Secretary of Agriculture 

and his senior executives use to drive program results; 

Implemented the Account Relationship Tool (ART) 

dashboard, which is the OCFO’s new research and 

analysis application, designed to improve financial 

management practices and mitigate weaknesses 

identified in previous audits. The ART dashboard 

provides financial managers, Department-wide, a 

standard analysis tool for quickly identifying where 

and why general ledger account relationships are out 

of sync, which promotes timely corrective action and 

more accurate financial reporting; 

Trained nearly 300 of the Department’s 

approximately 2,500 financial managers to use ART. 

Initial user reactions indicate significant time savings 

when researching relationship anomalies allowing 

more time for analysis and corrective action; 

Improved agencies’ financial performance measures, 

targets and milestones as part of their efforts to 

expand the use of financial information for decisionmaking; 

Continued reviews and analysis of year-end adjusting 

entries, standard general ledger abnormal balances, 

financial statement line-item variance and other 

aspects of financial statement preparation to assure 

quality of financial statement data throughout the 

fiscal year; 

Partnered with the U.S. Department of Veterans 

Affairs Financial Services Center in Austin, Texas, to 

process USDA telephone and utility bills through the 

Electronic Data Interchange (EDI) process. This new 

process will allow for the invoices to be received 

electronically rather than by mail in a paper invoice 

form. More than 250,000 bills will be processed 

annually through EDI. In addition, a vendor inquiry 

system will be implemented, which will allow USDA 

vendors and agencies to check on the status of 

invoices and submit electronic ones. The 

implementation of this process will greatly increase 

efficiency in the processing of requests for payments 

from utility and telephone service providers. 

During the past 18 months, replaced 350,000 paper 

checks, which previously would have been issued for 

payments to vendors, with electronic funds transfers 

(EFT), saving the taxpayer more than $250,000 and 

providing better and faster service to customers and 

suppliers. USDA directly deposits funds into 

customers’ and suppliers’ accounts faster than they 

would have received a check and reduces costly 

manual effort and potential mistakes; and 

USDA completed all Risk Assessments, 

Flowcharts/Narratives, IT Information Gathering, 

Risk and Control Matrices, Entity-level Controls, 

General Computer Controls, Katrina Controls, 

Process and IT Test Plans and results as required to 
MANAGEMENT’S DISCUSSION AND ANALYSIS 

USDA

F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 21 

implement A-123 Appendix A, “Internal Control over 

Financial Reporting.” USDA agencies have finalized 

remediation summaries and corrective action plans to 

address reportable conditions and material 

weaknesses. USDA will track critical path activities 

related to its assessment of internal control over 

financial reporting and make monthly status reports 

on progress toward correcting material weaknesses. 

Status 

ENHANCING 

EGOVERNMENT Progre

ss 

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 information and services and reducing 

costs. USDA participates in 22 of the 26 Presidential 

eGovernment Initiatives and 8 of the 9 lines of business.

USDA is using its Enterprise Architecture (EA) to inform 

and guide its decision making. (EA refers to a strategic 

information asset base.) The base 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 activities for FY 2006 support the following goals: 

Provide customers with single points of access to 

information and shared services; 

Simplify and unify business processes spanning 

multiple agencies; 

Establish information and service-delivery standards; 

and 

Consolidate redundant IT services and systems 

through the use of shared USDA or Government-wide 

services. 

USDA has scored red for status and yellow for progress 

on the September 30, 2006 scorecard. 

Actions taken by USDA in FY 2006 to achieve these 

goals include: 

Expanding the IT capital planning process to include 

EA, IT governance, earned-value management and 

independent baseline reviews of all major IT 

investments;

Receiving certification of USDA’s eAuthentication 

Service as one of four GSA-approved, Governmentwide credential service providers. This certification 

enables USDA to provide Level 2 credentials to other 

Federal agencies; 

Integrating USDA’s eAuthentication Service with 

Grants.gov. Previously, the Service was integrated 

with the U.S. Department of Commerce 

(www.export.gov), the National Park Service 

(Research Permit Reporting System), U.S. 

Department of Housing and Urban Development 

(FHA Connection mortgage lending) and National 

Science Foundation (FastLane); 

Integrating USDA’s eAuthentication Service with 

another 78 USDA Web-based applications, bringing 

the total number of integrated applications to 211 — 

exceeding both the FY 2006 target of 175 and the 

FY 2007 target of 200; 

Authorizing more than 95,000 employees and 

110,000 customers for USDA’s eAuthentication 

Service; 

Continuing the promotion of AgLearn as USDA’s 

official training system (AgLearn is the Department’s 

implementation of the eTraining Presidential 

eGovernment Initiative). In a typical month, 45,000 

employees completed 760 different courses on 

AgLearn;

Integrating the USDA Graduate School’s catalog of 

courses into AgLearn;

Initiating a data feed from AgLearn to OPM to 

transmit mandatory employee training data 
MANAGEMENT’S DISCUSSION AND ANALYSIS 

USDA

22 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

electronically. This information is then accessible 

through the Electronic Official Personnel Folder;

Providing Department-wide, agency-specific 

mandatory training, e.g., security, privacy and ethics 

training, through AgLearn;

Offering more than 3,000 agency-specific courses on 

AgLearn;

Negotiating a volume discount for AgLearn that 

reduced the cost per license by 28 percent; 

Launching the Enterprise Correspondence 

Management Module (ECMM) to replace the legacy 

Staff Action system to manage the Secretary’s 

correspondence. ECMM is designed to track 

incoming correspondence from public, private or 

political sources. Several agencies now use ECMM to 

track their own correspondence; 

Converting more than 730,000 staff action documents 

to ECMM. More than 120,000 documents have been 

created since ECMM launched at the beginning of FY 

2006; 

Moving 20 business applications to the Enterprise 

Shared Services platform provided by USDA’s 

National Information Technology Center (NITC). 

NITC operates 24 hours a day, 7 days a week, offers 

Level 4 security clearances and hosts 

GovBenefits.gov; 

Converting more than 40 agency Web sites to the 

standardized format established by the Department. 

Another 46 Web sites are in the planning/building 

phase; and

Migrating four agencies (Animal and Plant Health 

Inspection Service, Foreign Agricultural Service, 

Farm Service Agency and Food Safety and Inspection 

Service) to the Federal Docket Management System 

(FDMS) in partnership with the E-Rulemaking 

Presidential Initiative. FDMS makes all information 

pertaining to Federal regulation available to the public 

via the Internet. All remaining USDA rulemaking 

agencies will convert to FDMS in FY 2007. 

Status 

BUDGET AND 

PERFORMANCE 

INTEGRATION Progre

ss 

USDA continues to improve how it integrates 

performance information into its budget decisions and 

throughout the budget process. This integration includes 

the use of the Program Assessment Rating Tool (PART) 

to assess and improve program performance and 

efficiency to achieve better results. USDA establishes its 

budget priorities based on the strategic goals and desired 

outcomes included in the Department’s strategic plan. 

USDA continues to improve its ability to measure 

performance with an emphasis on measuring gains in 

efficiency. 

USDA plans to: 

Continue using performance information during all 

stages of the budget process; 

Systematically evaluate programs and integrate the 

results of those evaluations into the budget decisionmaking process, i.e., rely upon PART assessments in 

budget formulation; 

Improve measurement of program performance and 

efficiency improvements; and 

Develop the Department’s budget focusing on 

achieving the goals and outcomes contained in the 

new strategic plan. 

USDA has scored yellow for status and green for progress 

on the September 30, 2006, scorecard. 

Actions taken by USDA in FY 2006 to achieve these 

results include: 

Publishing a new Strategic Plan for 2005-2010 that 

identified key policy and management objectives. It 

focuses on providing effective management of the 

Department’s resources to deliver its multifaceted 

programs most effectively; 

Working with OMB, USDA conducted 33 PART 

assessments during FY 2006 – 20 of these were new 

PARTs and 13 were reassessments of programs that 
MANAGEMENT’S DISCUSSION AND ANALYSIS 

USDA

F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 23 

had previously earned a “Results Not Demonstrated” 

(RND) rating. Now less than 3 percent of funding 

goes to programs that have RND PART ratings. 

Additionally, no USDA programs have an 

“Ineffective” rating; 

Working with agencies to ensure that the specific 

plans and milestones developed to address PART 

recommendations are reasonable and detailed enough 

to fully address PART recommendations. The 

Department uses the internal scorecard process to 

track agency progress toward meeting performance 

targets and addressing PART recommendations; 

Developing budget requests and making budget 

decisions supported by sound and thorough analysis. 

This analysis considered the effects of funding 

decisions on costs and performance. These budget 

decisions were presented and justified to Congress 

and others using performance information; 

Improving its ability to track and demonstrate the 

efficient delivery of its programs. USDA worked with 

OMB to identify the cost savings related to efficiency 

measures and developed new ones for several 

programs; and 

Developing a new Management Initiatives Tracking 

System to enable more active and efficient 

participation by senior Department officials during 

the integration of budget and performance. This 

system will provide the ability to track 

implementation of the Budget and Performance 

Integration Initiative. System features include the 

implementation of PART improvement plans and 

achievement of performance targets. 

Status REAL PROPERTY Progre

ss 

Executive Order 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 recognize the 

importance of real property resources through increased 

management attention, the establishment of clear goals 

and objectives, improved policies and levels of 

accountability and other appropriate actions. As the 

foundation of USDA’s real property asset management 

program, the following strategic objectives will be used 

for real property management improvement: 

USDA Real Property Asset Management Strategic 

Objectives 

1. Department’s holdings support agency missions and strategic 

goals and objectives 

2. Maximize facility utilization by co-locating agency operations 

when possible 

3. Accurately inventory and describe real property assets using the 

Corporate Property Automated Information System 

4. Use performance measures as part of the asset management 

decision process 

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

decision-making process 

6. Provide appropriate levels of investment 

7. Eliminate unneeded assets 

8. Use appropriate public and commercial benchmarks and best 

practices to improve asset management 

9. Advance customer satisfaction 

10. Provide for safe, secure and healthy workplaces 

USDA’s plans include: 

Obtaining approval of the USDA Asset Management 

Plan (AMP), which features 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; 

Implementing the approved USDA AMP and 

accompanying agency building block plans (BBPs); 

Continuing to gather data to establish baselines and 

draft goals and targets for asset management 

performance measures; 
MANAGEMENT’S DISCUSSION AND ANALYSIS 

USDA

24 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Identifying and analyzing best internal USDA 

practices for possible implementation Departmentwide; 

Ensuring that agencies close any remaining data gaps 

for constructed asset-level reporting; 

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; 

Continuing to draft the three-year rolling timeline for 

meeting goals and objectives of the AMP and BBPs. 

The timeline will include an initial list of assets for 

disposition and an investment prioritization list for 

mission critical and dependent assets; 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.

USDA has scored red for status and yellow for progress 

on the September 30, 2006, scorecard. 

Actions taken by USDA in FY 2006 to achieve these 

results include: 

Submitting and receiving approval of the 

comprehensive AMP, including agency-specific 

BBPs; 

Implementing the USDA AMP and agency BBPs; 

Establishing baselines and draft goals and targets for 

asset management performance measures; 

Identifying best internal USDA practices and 

including implementation plans in the AMP initiatives 

for those determined to be for Department-wide 

implementation; 

Ensuring that USDA agencies continued closing data 

gaps in constructed asset-level reporting; 

Maintaining a comprehensive inventory and profile of 

agency real property; 

Providing timely and accurate information for 

inclusion into the Government-wide real property 

inventory database; and 

Finalizing the three-year timeline for meeting goals 

and objectives of the AMP and agency BBPs, and 

included an initial list of assets for disposition and an 

investment prioritization list for mission critical and 

dependent assets. 
MANAGEMENT’S DISCUSSION AND ANALYSIS 

USDA

F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 25 

Status 

RESEARCH AND 

DEVELOPMENT 

INVESTMENT CRITERIA Progre

ss 

This program initiative calls on Federal agencies to apply 

a framework for planning and assessing research 

programs 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); 

National Agricultural Statistics Service; and Forest 

Service Research and Development—have moved 

aggressively to integrate this framework into their 

program planning and management processes. The use of 

the criteria is an effective means to ensure that programs 

are addressing the right issues, meeting high-quality 

standards and accomplishing their respective goals. 

USDA’s plans include: 

Continuing to apply the investment criteria in 

program planning, management and assessment; 

Promoting coordination among research agencies to 

ensure common criteria and performance measures 

are used when appropriate; and 

Using the results of program assessments to inform 

program management and budget decision making. 

USDA has scored green for status and green for progress 

on the September 30, 2006 scorecard. 

Actions taken by USDA in FY 2006 to achieve these 

results include: 

CSREES completed the last of 14 portfolio reviews 

covering its entire program. The reviews have 

stimulated additional program level activity, such as 

preparation of new strategic plans, reallocation of 

resources, hiring decisions and budget requests. Ongoing annual self-assessments of the portfolios assess 

progress; 

The FS Research and Development (R&D) Division 

designed its program assessment process based on the 

R&D criteria and completed its first program review. 

It also completed its first customer-satisfaction 

survey; 

ERS completing its first program review and drawing 

on the recommendations to enhance the program. A 

second review has begun; 

ARS continuing to conduct program reviews and 

establishing and filling a position to coordinate the 

program-review process; and 

ARS and CSREES using the R&D criteria in their 

PART analyses. 

Status 

ELIMINATE IMPROPER 

PAYMENTS Progre

ss 

The Improper Payments Information Act (IPIA) was 

implemented in FY 2004 and became a President’s 

Management Agenda (PMA) initiative in FY 2005. IPIA 

requires that agencies measure their improper payments 

annually, develop improvement targets and corrective 

action plans and track the results annually to ensure that 

the corrective actions are effective. OCFO has issued 

specific policy guidance including templates and 

timelines for implementing IPIA and meeting the goals of 

the PMA initiative. 

Based on recent audit estimates, Federal agencies make 

annually improper payments totaling more than $37.2 

billion. USDA’s FY 2006 sampling estimated that the 

Department’s improper payments totaled $4.634 billion. 

Of this amount, $1.975 billion was due to incorrect 

disbursements amounts and $2.659 billion was due to 

incomplete paperwork. USDA has identified 15 programs 

that are at risk for improper payments. Of these 15 

programs, the Department has measured 13. The 

Department has prepared corrective action plans for these 

programs to reduce and recover improper payments. 

Reductions in improper payments include decreasing 

errors for direct benefit programs and 

contracting/administrative payments. 
MANAGEMENT’S DISCUSSION AND ANALYSIS 

USDA

26 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Improper payment sampling in FY 2006 showed that 2 

USDA high-risk programs no longer meet the 2.5 percent 

error rate needed to be considered susceptible to improper 

payments. They are the Farm Security and Rural 

Investment Programs and Wildland Fire Suppression 

Management. Based on these results, USDA met with 

OMB to discuss removing these programs from the highrisk list. Based on this meeting, USDA will be requesting 

that 5 of the 6 subcomponents of the Farm Security and 

Rural Investment Programs be removed from the high-risk 

list. It is anticipated that this request will be approved. The 

last component of the Farm Security and Rural Investment 

Programs and the Wildland Fire Suppression Management 

program will remain on the high-risk list and be statistically 

tested in FY 2007. It is expected that these programs will be 

removed from the high-risk list in future years if they 

continue to perform below the 2.5 percent error rate. Below 

is a breakout of the two programs. 

Farm Security and Rural Investment Programs (no 

longer high risk) 

 Wildlife Habitat Incentive Program (no longer 

high risk) 

 Conservation Security Program (remains high risk 

in FY 2007) 

 Grassland Reserve Program (no longer high risk) 

 Wetlands Reserve Program (no longer high risk) 

 Farm-Ranch Lands Protection Program (no longer 

high risk) 

 Environmental Quality Incentive Program (no 

longer high risk) 

Wildland Fire Suppression Management (remains 

high risk in FY 2007) 

The Farm Service Agency (FSA) made improvements to the 

quality of its risk assessments and statistical sampling. 

Unfortunately, these improvements resulted in significant 

increases in improper payment rates for programs already 

designated as high risk, and four additional programs being 

declared susceptible to improper payments. The improved 

statistical sampling focused on verifying program eligibility 

and uncovered administrative weaknesses that prevent FSA 

from determining if payments are proper. Thus, CCC is 

reporting more than $2.8 billion in estimated potential 

improper payments in this report. Aggressive corrective 

action plans are being developed to improve the quality of 

documentation for program eligibility. 

USDA’s plans include: 

Assessing the risk of improper payments in all its 

programs (programs and activities) annually; 

Working at the Department and agency levels to 

reduce the number of improper payments made; 

Recovering, where possible, overpayments made to 

individuals and organizations; 

Creating aggressive correction plans with measured 

performance; 

Reporting and prosecuting fraud; 

Training field personnel on key controls and teaching 

the importance of control procedures and the potential 

risks of noncompliance. Training will be delivered 

through various means including in person and via 

AgLearn, a USDA enterprise-wide learning 

management system. Communications and job aids 

then will follow to help facilitate compliance to 

controls; 

Enhance individual accountability of controls by 

performing quarterly control testing on each 

employee’s program-related payment transactions. A 

sample of five producer payments will be selected for 

each employee for quarterly testing. The results from 

these tests will be included as part of the employee’s 

annual performance plans for the county, district and 

State executive directors; 

Integrate the employee’s individual results into his or 

her annual performance rating; and 

Reiterating current program policies regarding 

program compliance through the issuances of national 

notices to State and county office personnel. 

USDA has scored yellow for status and green for progress 

on the September 30, 2006, scorecard. 
MANAGEMENT’S DISCUSSION AND ANALYSIS 

USDA

F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 27 

Actions taken by USDA in FY 2006 to achieve these 

results include: 

Consolidated small and similar programs together for 

improved focus in the risk assessment process. USDA 

moved from 286 programs in FY 2005 to 146 

programs in FY 2006; 

Revised risk assessment processes to allow stable 

programs previously determined to be at low risk and 

with no significant changes to reassess the risk of 

improper payments triennially. In FY 2006, 94 stable 

low-risk programs relied on the conclusions reached 

in FY 2005; 

Reassessed the risk of improper payments in 41 

programs and concluded that 4 new programs are at 

high risk of improper payments; 

Statistically, or other approved method, sampled 13 of 

15 programs determined to be high risk. The results 

of these tests are shown in Appendix B of this report; 

and 

Planned corrective actions and set targets to both 

reduce and recover improper payments. USDA 

submitted these plans to OMB for approval. 

Status 

IMPROVED CREDIT 

PROGRAM 

MANAGEMENT Progre

ss 

Improved Credit Program Management is a new initiative 

under the President’s Management Agenda. Beginning in 

FY 2006, this initiative required USDA to: 

Develop risk factors for predicting the cost of loan 

programs; 

Require that guaranteed lending partners have 

effective loan-portfolio management and loss 

recovery rates; 

Verify that lending partners have established quality 

collateral valuation processes; 

Calculate the cost of originating, servicing and 

liquidating loans; and 

Comply with all relevant provisions of the Debt 

Collection Improvement Act of 1996. 

USDA’s loan portfolio is approximately $100 billion in 

outstanding public debt. It represents nearly one-third of 

all debt in the Federal Government. USDA often is the 

lender of last resort, making many loans to borrowers who 

are at a higher risk for default. 

USDA is committed to achieving the goals of its credit 

programs while effectively managing its portfolio’s 

performance. While USDA’s initial scorecard rating was 

“Red” overall and “Red” in progress, the Department also 

is developing plans to meet the initiative’s goals. USDA 

hopes to receive OMB approval soon. Thus, the 

Department was upgraded to “Yellow” in progress in the 

fourth quarter. 

USDA’s plans include: 

Setting goals related to reaching target borrowers and 

reducing deviation from risk standards; 

Setting goals to reduce the total cost of servicing and 

liquidating loans, and improve the debt-recovery rate; 

Establishing customer satisfaction ratings that meet or 

exceed industry standards; 

Defining its target borrower segments clearly, 

regularly assessing whether its borrowers meet that 

definition and whether such borrowers comprise an 

acceptable risk that can be managed effectively; 

Establishing or verifying that partner lenders have 

established sound lending policies and procedures 

implemented in effective transaction-approval 

processes, loan portfolio management and loss 

recovery; 

Establishing or verifying that partner lenders have 

created collateral valuation processes with clear 

policies and procedures ensuring independence in 

appraisals and valuations, and adequate monitoring of 

appraisers’ quality and certification; 

Maintaining a reasonable level of risk and 

productivity of taxpayer cash used in lending 

programs through effective management information 

reporting. This reporting includes indicators of loan 
MANAGEMENT’S DISCUSSION AND ANALYSIS 

USDA

28 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

volume, exceptions to underwriting standards, 

concentrations of credit risk, delinquency and default 

rates, rating changes, problem loans, and charge offs, 

and using such information to improve program 

results; 

Establishing mutually agreeable goals that can be 

justified by comparisons to relevant programs to 

control the total cost of originating, servicing and 

liquidating loans and improve the rate of debt 

recovery; and 

USDA complying with all relevant provisions of the 

Debt Collection Improvement Act of 1996. 

Actions taken by USDA in FY 2006 include detailed 

plans to achieve the requirements for improving credit 

program management, which were developed and 

submitted to OMB, June 15, 2006. 

Status 

FAITH-BASED AND 

COMMUNITY INITIATIVE Progre

ss 

This initiative supports the essential work of faith-based 

and community organizations serving those in need. 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 these 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’s 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; 

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. 

USDA has scored green for status and green for progress 

on the September 30, 2006, scorecard. 

Actions taken by USDA in FY 2006 to achieve these 

results include: 

Conducting almost 4,600 outreach and technical 

assistance activities throughout the country to help 

engage faith-based and community organizations as 

partners; 

Developing a wide range of Web-based information 

and resources promoting partnership opportunities 

and information on applying for programs; 

Establishing systems to ensure monitoring and 

compliance of the Equal Treatment Rule and related 

regulations for Federally and State-administered 

programs; 

Removing key barriers to access for faith-based and 

community organizations; and 

Expanding efforts and improving data-collection 

quality at the Federal and State levels to measure 

progress on ensuring results for Americans in need. 

Financial Statement Highlights 

BUDGETARY RESOURCES AND OUTLAYS

USDA receives most of its funding from appropriations 

authorized by Congress and administered by the U.S. 

Department of the Treasury. Total resources consist of the 

balance at the beginning of the year, appropriations 

received during the year, spending authority from 

offsetting collections and other budgetary resources. 
MANAGEMENT’S DISCUSSION AND ANALYSIS 

USDA

F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 29 

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 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 nonexchange revenue or transfers in the Statement of 

Changes in Net Position. 

2006 2005 % 

Change

Appropriations 109,856 88,940 24% 

Obligations Incurred 145,458 140,835 3% 

Net Outlays 99,674 89,799 11% 

Data in millions 

Appropriations increased by $20.9 billion during FY 

2006. Commodity Credit Corporation (CCC) received 

$12.7 billion in funds for its prior year realized losses.The 

Food and Nutrition Service (FNS) reflected an increase of 

$6.4 billion, which was attributed primarily to greater 

participation in the Food Stamp Program and for higher 

food costs. 

Obligations and Outlays 

Obligations Incurred increased in FY 2006 by $4.6 

billion. $2.8 billion is attributable to the dissolution of 

Rural Telephone Bank and 100-percent redemption of 

Class B and C stock. FNS’ obligations for the Food 

Stamp and Child Nutrition Programs accounted for an 

additional $2.6 billion. 

Net Outlay increases in FY 2006 amounted to $9.9 

billion. These directly relate to the Program Obligations 

as described above. In addition, $1.3 billion of 

disbursement increases in the Electric and Telephone 

direct financing fund due to the new “Underwriters” 

program, and $1.6 billion incurred in FY 2006 by NRCS 

due to the increase in the management for the 

Environmental Quality Incentive Program (EQIP). 

BALANCE SHEET AND NET COST OF OPERATIONS

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

CONDENSED BALANCE SHEET DATA 

As of September 30, 2006 and September 30, 2005 

(in millions) 

FY 2006 FY 2005 

% 

CHANGE 

Fund Balance with Treasury $42,191 $42,327 0% 

Accounts Receivable, Net 8,881 10,154 -13% 

Loans Receivable & Related Foreclosed Property 77,791 75,176 3% 

General Property, Plant, and Equipment, Net 4,905 4,885 0% 

Other 461 442 -18% 

Total Assets 134,229 132,984 1% 

Debt 83,447 83,516 0% 

Loan Guarantee Liability 1,296 1,214 7% 

Other 39,210 46,276 -20% 

Total Liabilities 123,953 131,006 -5% 

Unexpended Appropriations 26,385 21,490 23% 

Cumulative Results of Operations (16,109) (19,512) -17% 

Total Net Position 10,276 1,978 420% 
MANAGEMENT’S DISCUSSION AND ANALYSIS 

USDA

30 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Total Liabilities and Net Position $134,229 $132,984 1% 

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. 

Accounts Receivable 

In FY 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. In FY 2006, $.9 billion was 

collected from assessments levied upon manufacturers 

and importers of tobacco products and importers of 

foreign tobacco. 

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 83 percent of the total 

USDA loan programs. Commodity Loans and Credit 

Programs administered by Commodity Credit Corporation 

represent 9 percent 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 percent 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 46 percent of the 

net PP&E, consist primarily of forest road surface 

improvements. Building Improvements and Other 

Structures represent an additional 23 percent. Other 

categories of PP&E include equipment and software. 

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 

Debt of $83 billion represents amounts owed to Treasury 

from CCC and RD. For CCC, the represents financing to 

support Direct and Counter Cyclical programs, Crop 

Disaster and Loan Deficiency programs. For RD, the debt 

represents Single and Multi Family Housing Loans and 

other Loan Programs.

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. 

Other 

Of the $7 billion decrease in other liabilities, $3.9 billion 

represents the return of monies to Treasury. These are for 

excess funds generated by RD in the pre-Credit Reform, 

Rural Housing Insurance and Electric and Telephone 

Funds. For CCC, the payments to Treasury related to 

collection of loans made to Russia. 

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 
MANAGEMENT’S DISCUSSION AND ANALYSIS 

USDA

F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 31 

Operations. The increase in Net Position by 

approximately $8.3 billion can be attributed primarily to 

the receipt of appropriations in the current year for CCC’s 

realized loss in the prior year. 

NET COST OF OPERATIONS

CONDENSED STATEMENT OF NET COST 

FY 2006 FY 2005 

% 

CHANG

E 

Enhance International 

Competitiveness and 

Sustainability of Rural and 

Farm Economies: $24,862 $26,773 -7% 

Support Increased 

Economic Opportunities 

and Improved Quality of 

Life in Rural America: 3,068 1,014 203% 

Enhance Protection and 

Safety of the Nation’s 

Agriculture and Food 

Supply: 2,980 2,441 22% 

Improve the Nation’s 

Nutrition and Health: 53,028 50,987 4% 

Protect and Enhance the 

Nation’s Natural Resource 

Base and Environment: 11,488 9,798 17% 

Net Cost of Operations $95,426 $91,013 5% 

USDA Net Cost of Operations totaled $95 billion and $91 

billion for FY 2006 and FY 2005, respectively. FNS and 

RD represent the largest portion of the cost increases. For 

FNS, the goal to improve the Nation’s nutrition and health 

amounted to an increase of $2 billion due to increased 

participation and food costs. For RD, the Single Family 

Housing reestimates and liquidating loan allowance 

changes in 2006 contributed to approximately $2 billion 

in increased costs associated with the goal to support 

increased economic opportunities and improved quality of 

life in rural America. 

MANAGEMENT’S DISCUSSION AND ANALYSIS 

USDA

F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 33 

Systems, Controls and Legal Compliance 

Management Assurances 

STATEMENT OF ASSURANCE

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

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

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

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

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

material weaknesses. The details of the exceptions are provided in the FMFIA section of this report. 

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

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

September 30, 2006, and 2) financial reporting as of June 30, 2006, which includes safeguarding of 

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

Office of Management and Budget Circular A-123, “Management’s Responsibility for Internal 

Control.” Based on the results of these evaluations, USDA identified four material weaknesses in its 

internal control over financial reporting. 

Other than the exceptions noted in the FMFIA section, financial management systems conform 

substantially with the objectives of FMFIA and the internal controls were operating effectively and no 

other material weaknesses were found in the design or operation of the internal control over 1) the 

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

September 30, 2006, and 2) financial reporting as of June 30, 2006. However, Departmental 

management identified potential violations of the Anti-Deficiency Act. These potential violations relate 

to restrictions on the use of funds to combat forest fires and transportation costs for donated food 

commodities. The latter transaction also potentially violated the Commodity Credit Corporation Charter 

Act. 

Mike Johanns 

Secretary of Agriculture 

November 15, 2006
MANAGEMENT’S DISCUSSION AND ANALYSIS 

USDA

34 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Federal Managers’ Financial Integrity Act 

Report on Management Control 

BACKGROUND

The Federal Managers’ Financial Integrity Act of 1982 

(FMFIA) requires ongoing evaluations of internal control 

and financial management systems culminating in an 

annual statement of assurance by the agency head that: 

Obligations and costs comply with applicable laws 

and regulations; 

Federal assets are safeguarded against fraud, waste 

and mismanagement; 

Transactions are accounted for and properly recorded; 

and 

Financial management systems conform to standards, 

principles and other requirements to ensure that 

Federal managers have timely, relevant and consistent 

financial information for decision-making purposes. 

Furthermore, FMFIA provides the authority for the Office 

of Management and Budget (OMB), in consultation with 

the Government Accountability Office (GAO), to 

establish and revise periodically the guidance to be used 

by Federal agencies in executing the law. 

In addition to FMFIA, the Federal Information Security 

Management Act (FISMA) requires agencies to report any 

significant deficiency in information security policy, 

procedure or practice identified (in agency reporting): 

As a material weakness in reporting under FMFIA; 

and 

If relating to financial management systems, as an 

instance of a lack of substantial compliance under the 

Federal Financial Management Improvement Act (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. 

On December 21, 2004, OMB revised Circular A-123, 

“Management’s Responsibility for Internal Control.” 

Circular A-123 provides guidance to Federal managers on 

improving the accountability and effectiveness of Federal 

programs and operations by establishing, assessing, 

correcting and reporting on internal control. It also 

provides updated internal control standards by GAO and 

new specific requirements for conducting management’s 

assessment of the effectiveness of internal control over 

financial reporting (A-123, Appendix A). 

In November 2005, USDA adopted the governance 

structure recommended by OMB in the revised circular. 

The Department also established a Senior Management 

Control Council (SMCC) and Senior Assessment Team 

(SAT) to ensure the highest levels of management 

commitment to compliance with the objectives of internal 

control. The SMCC is chaired by the Deputy Secretary 

and co-chaired by the Chief Financial Officer. 

Undersecretary and staff agency leaders comprise the 

committee. The SMCC monitors the Department-wide 

assessment activities and progress in correcting USDA’s 

material weaknesses. It also ensures that appropriate 

follow-up is executed. Ultimately, the SMCC 

recommends to the Secretary of Agriculture the level of 

assurance to be provided in the annual assurance 

statement. SAT derives its authority from the SMCC and 

oversees the assessment process for internal control of the 

financial reporting. A Department-wide Assessment 

Implementation Team also was established to plan and 

execute the process for assessing the effectiveness of the 

Department’s internal control over financial reporting. 

USDA operates a robust internal control program to 

ensure compliance with the requirements of FMFIA and 

other laws, OMB Circulars A–123, “Management’s 

Responsibility for Internal Control,” and A–127, 

“Financial Management Systems.” All USDA managers 

are responsible for ensuring that their programs operate 

efficiently and effectively, and comply with relevant laws. 

They also must ensure that financial management systems 

conform to applicable laws, standards, principles and 

related requirements. In conjunction with OIG and 
MANAGEMENT’S DISCUSSION AND ANALYSIS 

USDA

F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 35 

GAO, USDA management works aggressively to 

determine the root causes of its material weaknesses to 

correct them promptly and efficiently. The term 

“material weakness” describes both material weaknesses 

and financial system non-conformances, collectively. 

USDA remains committed to reducing and eliminating the 

risks associated with its deficiencies and operating its 

programs efficiently and effectively in compliance with 

FMFIA. 

FY 2006 Results 

The “Secretary’s Statement of Assurance” provides 

qualified assurance that USDA’s systems of internal 

control comply with FMFIA’s objectives. During FY 

2006, USDA completed a single-year implementation of 

OMB Circular A-123, Management’s Responsibility for 

Internal Control, Appendix A. Management’s assessment 

of internal controls over financial reporting, as of June 30, 

2006, identified four material weaknesses, three existing 

and one new material weakness. 

Corrective action plans have been prepared for each 

deficiency. Progress toward correcting them will be 

monitored monthly, as required. A description of each 

weakness as of June 30, 2006, is described below. 

USDA Information Technology (IT)—Management 

identified internal control deficiencies in the design 

and operating effectiveness of controls in the 

following four general computer control areas which 

aggregate to an overall IT Material Weakness: 

Logical Access Controls, Physical Access Controls, 

Software Change Controls and Disaster Recovery. 

Agency internal control weaknesses were aggregated 

and contribute to the USDA material weakness as 

identified below. 

 Logical Access Control—Weaknesses include 

user accounts without approved access request 

forms, lack of certification of access to critical 

files and databases, weak password parameters, 

lack of audit logs, lack of audit log review and 

terminated users whose access to IT systems has 

not been removed;

 Physical Access Control—Weaknesses include 

lack of access approval documentation to data 

centers, and financially significant systems and 

software operating outside of controlled data 

centers; 

 Software Change Control—Weaknesses include 

changes made to software without testing, 

unauthorized users with the ability to update 

production data and incomplete change control 

documentation; and 

 Disaster Recovery—Weaknesses pertain to the 

lack of timely recovery capability and controls in 

the event of a disaster, such as established 

agreements for backup recovery sites.

USDA County Office Operations—The Commodity 

Credit Corporation (CCC) issues payments and loans 

to farmers through the Farm Services Agency’s 2,400 

county offices. Given the large number of offices and 

the limited resources available to staff them, 

management acknowledged that segregation of duties 

and access issues exist because a single employee can 

record, approve and issue payments, and create and 

maintain producer information, and approve and issue 

commodity loans and receive loan repayments. 

Financial Accounting and Reporting—CCC and FS 

management reported a lack of effective preventive 

and detective controls around the completeness, 

accuracy and validity of accrual estimate calculations. 

While the FS was successful in downgrading accruals 

from a standalone material weakness, the reportable 

condition when aggregated at the Department level 

remains a material weakness. 

Additionally, the CCC financial statement audit 

revealed deficiencies in the compilation of the 

Statement of Financing. 

Funds Control Management—Internal controls 

supporting the accuracy, completeness and validity of 

obligations were not operating effectively at 
MANAGEMENT’S DISCUSSION AND ANALYSIS 

USDA

36 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Commodity Credit Corporation (CCC) and Forest 

Service (FS) through June 30, 2006. Additionally, the 

audit found that the FS year-end process was not 

operating effectively. 

The consolidated financial statement audit also 

disclosed that certain component agencies were not 

effectively reviewing all unliquidated obligations and 

taking appropriate actions as of September 30, 2006. 

Historical Data on Material Weaknesses 

In FY 2005, USDA identified three material weaknesses. 

In FY 2006, one new material weakness and additional 

areas of concern for the IT material weakness were added 

as a result of the assessment of internal control over 

financial reporting. 

Exhibit 5: Material Weaknesses Increased Slightly 

Fiscal 

Year 

Beginning 

Weaknesses 

Corrected/ 

Downgraded 

Weaknesses 

New 

Weaknesses 

Remaining 

Weaknesses 

2003 19 12 1 8 

2004 8 7 2 3 

2005 3 1 1 3 

2006 3 0 1 4 

SUMMARY OF MATERIAL WEAKNESSES

Exhibit 6: Summary of Outstanding Material Weaknesses and Estimated Completion Dates 

Material 

Weakness 

1. USDA Information Technology Overall 

Estimated 

Completion Date

FY 2008 

Description—Weaknesses have been identified in changes made to software without testing, unauthorized users updating production data, 

incomplete change-control documentation, lack of timely recovery capabilities in the event of a disaster, lack of certification of access to critical files 

and databases, weak password parameters, lack of audit logs and reviews, users without appropriate access forms, terminated users not being 

removed from IT systems, and mission-critical and software operated outside of controlled data centers or in data centers without adequate physical 

and environmental protection.

Responsible Agency(ies)—Multiple agencies.

Initiative 1.1—Software Change Control 

Critical Corrective Action Milestones: 

• Evaluate options and conduct market research based on 

requirements analysis to determine configuration management 

software; 

• Update policies, procedures and directives over systems design life 

cycle development, testing approval and implementation; 

• Implement procedures, processes and tools and train all staff; 

• Implement Virtual Local Area Network to install separate 

environments; 

• Test implementation of processes and procedures regularly by 

selecting changes moved to production for appropriate 

documentation; 

• Ensure new users, who require the ability to move code to 

production in accordance with configuration management 

procedures, complete an access-request form and obtain 

appropriate security officer approval prior to obtaining access; 

• Perform quarterly reviews of access permissions to production 

servers, security logs, critical folders, file creation, file modification 

for the separate environments to ensure controls are operating 

effectively; 

• Develop and execute a project to clean up Access Control Facility 

(ACF2) access rules; 

• Review all systems for the presence of outdated software and 

update or delete any identified; 

• Review all systems for missing critical patches and/or updates; and 

• Review any improperly configured services, servers or systems 

and configure them in accordance with best practices and Federal 

criteria. 

Initiative 1.2—Disaster Recovery 

Critical Corrective Action Milestones: 

• Purchase and install servers in alternate Web farm locations; 

• Ensure that contigency and disaster recovery plans are in 

• Review failover test results, update disaster recovery plans and 

implement required changes for all USDA financially significant 
MANAGEMENT’S DISCUSSION AND ANALYSIS 

USDA

F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 37 

Material 

Weakness 

1. USDA Information Technology Overall 

Estimated 

Completion Date

FY 2008 

compliance with NIST Special Publication 800-34. 

• Develop comprehensive test plans for testing critical applications; 

applications; 

• Implement contract for recovery services on critical WebFarm 

applications; and 

• Conduct annual disaster recovery failover tests for all USDA 

financially significant applications; 

• Develop continuity of operations plan, regional service-level 

agreements, contracts for back-up sites and business impact 

analyses for critical data centers. 

Initiative 1.3—Logical Access Controls 

Critical Corrective Action Milestones: 

• Develop procedures and provide training on approving and 

granting access to financially significant applications and general 

support systems; 

• Conduct quarterly reviews of access requests to ensure 

compliance with procedures; 

• Develop procedures and provide training to ensure that the 

quarterly verification process is performed by the appropriate 

official for user recertification of access to financially significant 

applications and general support systems; 

• Identify user role types and definitions, and map the current users 

to roles by job assignments; 

• Increase application password parameters to greater than six 

characters and enforce lockout after a limited number of failed login 

attempts for financially significant applications; 

• Develop processes and procedures for distributing audit log report 

covering security violations, database administrator activity logs, 

network administrator activity logs and access to sensitive datasets 

and resources; 

• Develop process to monitor the review of reports using tracking 

tools; 

• Generate reports and notification to recipients of security reports 

and produce monthly status reports showing reports created and 

received (information security chief approves and signs the status); 

• Perform independent verification to determine that audit logs are 

being reviewed by management and responses monitored by 

information security; 

• Prepare cost summary and justification to fund additional servers, 

central processing units and storage to support audit log software; 

• Implement database audit logging and initiate supervisory review 

of database administrator activity; 

• Implement an automated process that runs nightly to identify and 

disable user accounts on general support systems with more than 

120 days of inactivity; 

• Develop an employee-transfer policy addressing handling of 

property, purchase cards and access to information systems; 

• Establish a process to identify financially significant applications 

and general support systems to review against human resource 

report of active employees and conduct periodic reviews; 

• Develop process to validate the completion of reviews and 

independently verify if separated or transferred employees still 

possess information system access; 

• Ensure that all third-party connections to USDA networks are 

identified and conform to security standards by obtaining 

Interconnection Security Agreements, performing security scans 

prior to network connection and implementing detective controls to 

identify unapproved devices; and 

• Revise USDA network firewall rules to restrict access to only 

protocols and ports specifically required for USDA-agency mission 

delivery. 

Initiative 1.4—Physical Access Controls 

Critical Corrective Action Milestones: 

• Review data center physical access policies and procedures, and 

revise where necessary; 

• Update computer room facilities or migrate to alternative approved 

data centers; 

• Test all environmental controls regularly, at least annually; 

• Perform recertification of all users with physical access to data 

center(s) on an ongoing basis at least annually; 

• Obtain physical access request forms for all new users or users for 

whom an initial form was never completed; 

• Test for completion of new access request forms and successful 

completion of data center access recertification; 

• Conduct site surveys to determine county office physical access 

baseline; 

• Develop uniform access policies for county offices; and 

• Consolidate county office data centers. 
MANAGEMENT’S DISCUSSION AND ANALYSIS 

USDA

38 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Material 

Weakness 

2. USDA County Offices Operations Overall 

Estimated 

Completion 

Date

FY 2009 

Description—Segregation of duties and compliance with manual controls in FSA county offices has become difficult to maintain. Controls and

procedures developed to function with previous staffing are no longer effectively maintaining internal control over financial reporting.

Responsible Agency(ies)—FSA/CCC

Initiative 2.1—Management of Producer Banking Information Changes 

Critical Corrective Action Milestones: 

• Perform monthly spot checks of changes made to producer 

banking information; 

• Use automated monitoring to identify potentially suspicious change 

activity; 

• Process bank account changes centrally using Form 1199A and 

maintain adequate segregation of duties; and 

• Automate notification to producers of banking information changes. 

Initiative 2.2—Centralize Checkwriting 

Critical Corrective Action Milestones: 

• Conduct monthly spot checks of State and County Office 

Automation Project (SCOAP) disbursements for compliance policy 

and procedure; 

• Verify check stock inventory monthly; 

• Centralize the payment process through the National Processing 

Service and remove the paper-based certification from SCOAP; 

• Implement an automated monitoring tool to ensure proper roles are 

maintained; and 

• Remove paper checks, conduct check inventory, destroy checks 

and notify financial-processing institutions. 

Initiative 2.3—Internal Control over Collections 

Critical Corrective Action Milestones: 

• Formalize remittance acceptance controls; 

• Test these controls quarterly; and 

• Eliminate cash collections. 

Initiative 2.4—Training and Improved 

Accountability 

Critical Corrective Action Milestones: 

• Train field personnel on the nature and importance of controls and 

potential risks of non-compliance; and 

• Provide for testing of individual accountability and relate results to 

the annual performance process. 

Material 

Weakne

ss 

3. Financial Accounting and Reporting Overall 

Estimated 

Completion 

Date

FY 2007 

Description—Improvement needed in financial accounting and reporting policies, practices and procedures. 

Responsible Agency(ies)— CCC and FS

Initiative 3.1—Accruals 

Critical Corrective Action Milestones: 

• Develop a decision-tree to define the appropriate accounting 

treatment for different types of accruals; 

• Refine the accrual methodology to consider seasonality; 

• Include additional variables into the accrual statistical model to 

better substantiate the correlation of unliquidation obligations and 

payment data; 

• Review and enhance policies and procedures specific to each 

producer payment program to specifically describe the mechanics 

of the accrual calculation and key program expense drivers to be 

used to perform the final program accrual analytical review; and 

• Reassess the frequency of review for approved accrual entries.
MANAGEMENT’S DISCUSSION AND ANALYSIS 

USDA

F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 39 

Initiative 3.2— CCC Financial Statements 

Critical Corrective Action Milestones: 

• Assess and revise the overall process used to compile and review 

the financial statements and notes; 

• Document the Statement of Financing compilation process; and 

• Implement quality review procedures to comply with OMB Circular 

A-136, Financial Reporting Requirements. 

Material 

Weakness 

4. Funds Control Management Overall 

Estimated 

Completion 

Date

FY 2007 

Description—Improvements needed in funds control mechanisms. 

Responsible Agency(ies)—Department-wide 

Initiative 4.1—Unliquidated Obligations 

Critical Corrective Action Milestones: 

• Document CCC obligation business events and develop solutions 

for providing pre-authorization of funds; 

• Prepare system requirements documentation; 

• Complete systems modernization business case; 

• Develop the to-be process design; 

• Prepare a request for proposal for replacement of non-compliant 

processing systems; 

• Select and implement software package; 

• Establish a Department-wide approach to ensure the effectiveness 

of control procedures related to unliquidated obligations; and 

• Implement revised policy for certification of outstanding obligations. 

Federal Financial Management 

Improvement Act Report on Financial 

Management Systems 

BACKGROUND

The Federal Financial Management Improvement Act 

(FFMIA) is designed to improve financial and program 

managers’ accountability, provide better information for 

decision-making and improve the efficiency and 

effectiveness of Federal programs. FFMIA requires that 

financial management systems provide reliable, consistent 

disclosure of financial data in accordance with generally 

accepted accounting principles and standards. These 

systems must also comply substantially with: (1) Federal 

financial management system requirements; (2) applicable 

Federal accounting standards; and (3) the Standard 

General Ledger at the transaction level. Additionally, the 

Federal Information Security Management Act (FISMA) 

requires that there be no significant weaknesses in 

information security policies, procedures or practices to 

be substantially compliant with FFMIA (referred to as 

Section 4 in the accompanying table). 

FY 2006 RESULTS

During FY 2006, 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. A new Executive 

Information Technology Steering Committee has been 

formed to develop an integrated strategy for monitoring 

and correcting information technology weaknesses in 

USDA’s financial systems. This committee is comprised 

of senior representatives from the Office of the Chief 

Information Officer and the Office of the Chief Financial 

Officer. 

In assessing on FFMIA conformance, USDA considered 

all the information available. This information included 

the auditor’s opinions on component agencies’ financial 

statements, the work of independent contractors and 
MANAGEMENT’S DISCUSSION AND ANALYSIS 

USDA

40 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

progress made in addressing the material weaknesses 

identified in the FY 2005 Performance and Accountability 

Report — Report on Management Controls section. 

While USDA’s FY 2006 and FY 2005 Consolidated 

Financial Statements received an unqualified audit 

opinion from the Office of 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. As a 

result of the assessment of internal control over financial 

reporting and the financial statement audit, additional 

weaknesses were identified in information technology 

management, financial accounting and reporting, and 

funds control. These material weaknesses also constitute 

non-compliances with FFMIA. Planned corrective 

actions to address these material weaknesses/system noncompliances are included in the preceding FMFIA Report 

on Management Control. The Department made some 

progress in addressing its information technology 

weakness. However, additional effort is required to 

comply substantially with the Act’s requirements. USDA 

will continue monitoring progress on plans to improve its 

financial systems to comply fully with FFMIA and 

FISMA requirements. Significant accomplishments in 

FY 2006 are listed in the following exhibit. 

Exhibit 7: Initiatives Completed 

Initiatives Completed to Achieve FFMIA Compliance 

Agency Initiatives Completed 

Completion 

Date 

Section 1—Federal Financial Management System Requirements 

CCC Software change/configuration management 06/30/2006 

Contingency planning 06/30/2006 

APHIS Cyber Security – Scanning and Patching 5/19/2006 

NRCS Application controls – ProTracts 3/31/2006 

Section 2—Applicable Federal Accounting Standards 

FS SFFAS 2, Unliquidated Obligation errors; problems with preparing note disclosures; 

not assessing impact of remaining abnormal balances 

6/30/2006 

SFFAS No. 5 – Accounting for Liabilities of the Federal Government (Incorrect 

accruals) 

6/30/2006 

SFFAS 7, Errors with recording timber and non-timber revenue 7/30/2006 

Section 3—Standard General Ledger at the Transaction Level 

FS Compliance with the United States Standard General Ledger 6/30/2006 

Section 4—Information Security Policies, Procedures or Practices1

1

Completed corrective actions for this initiative aply to both Section 1 and Section 4 (information security policiies, procedures or practices) 

noncompliances and therefore and not repeated in Section 4. 

Exhibit 8: Initiatives To Be Completed

Outstanding Initiatives to Achieve FFMIA Compliance 

Initiative 

Section of 

Non-compliance Agency 

Target 

Completion Date 

Software Change Control Section 1 and Section 4 Multiple 9/30/2008 

Disaster Recovery Section 1 and Section 4 Multiple 9/30/2008 

Logical Access Controls Section 1 and Section 4 Multiple 9/30/2008 

Physical Access Controls Section 1 and Section 4 Multiple 9/30/2008 

Financial Accounting and Reporting Section 2 CCC and FS 9/30/2009*

Funds Control Management Section 3 Multiple 9/30/2009*
MANAGEMENT’S DISCUSSION AND ANALYSIS 

USDA

F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 41 

Outstanding Initiatives to Achieve FFMIA Compliance 

Initiative 

Section of 

Non-compliance Agency 

Target 

Completion Date 

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. 

*Mitigating controls will be placed into operation in the short-term for FSA until the Modernize and Innovate the Delivery of Agricultural 

Systems (MIDAS) initiative becomes fully operational. 
MANAGEMENT’S DISCUSSION AND ANALYSIS 

USDA

42 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Inspector General Act Amendments of 

1988 Management’s Report on Audit 

Follow-Up 

BACKGROUND

During the fiscal year, the Office of Inspector General 

(OIG) audits USDA’s programs, systems and operations. 

OIG then recommends improvements to management 

based on its findings. USDA management may or may not 

agree with the audit’s findings 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 then is submitted to OIG for 

its concurrence. If both OIG and management agree that 

the proposed corrective action will correct the weakness, 

management decision is achieved for that 

recommendation. Once management decision is reached 

for each recommendation in the audit, it 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 2006 Results 

USDA agencies closed 53 audits in FY 2006. The 

Department’s current inventory of audits that have 

reached management decision and require final action to 

close totals 168 which includes 47 new audits in FY 2006. 

One of these audits is in appeal status. As shown in the 

accompanying exhibit, the Department continues its 

decline in its inventory of open audits in FY 2006. This is 

a 26-percent decrease over the past 5 years. 

Exhibit 9: Decrease in Total Open Audit Inventory 

Note: The FY 2005 ending balance was revised from 164 to 174 to include 9 audits 

that reached management decision in September 2005. One additional audit was 

issued in FY 2005, but was not transmitted to OCFO until FY 2006. These 

adjustments are also reflected in the beginning balances for audits with disallowed 

costs and funds to be put to better use shown in Exhibit 11 and Exhibit 13. 

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 of the 

accompanying bullets. 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. 
MANAGEMENT’S DISCUSSION AND ANALYSIS 

USDA

F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 43 

Exhibit 10: 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 

actions, changes in planned actions, actual or revised 

completion dates and explanations for any revised dates. 

As USDA implements the Office of Management and 

Budget’s revised Circular A-123, “Management’s 

Responsibility for Internal Control,” greater emphasis is 

placed on documenting, monitoring, correcting and 

reporting on internal controls. The Department is 

implementing an online Web-based Audit Tracking 

Module (ATM) that will help USDA meet key program 

objectives that will: 1) improve the audit integration 

process; 2) streamline the audit tracking process; 3) 

improve data integrity within the online system; 4) 

provide the ability to track multiple types of audits and 

findings; and 5) provide online real-time management 

reporting. The ATM system includes several scheduler 

tools that will track automatically due dates for corrective 

action items and send reminders to USDA Agency Audit 

Liaison Officials (AALO) of impending estimated 

completion dates for open items. Additionally, AALOs 

will be able to request closure of audit recommendations 

and submit corrective action plans on-line. 

Beginning and Ending Inventory for Audits 

with Disallowed Costs (DC) and Funds to Be 

Put to Better Use (FTBU)1

Of the 53 audits that achieved final action during the 

fiscal year, 19 contained disallowed costs (DC). The 

number of DC audits remaining in the inventory at the 

end of the fiscal year is 59 with a monetary value of 

$90,723,102. 

For audits with disallowed costs that achieved final action 

in FY 2005, OIG and management agreed to collect 

$6,223,103. Adjustments were made totaling $2,069,952 

(33 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 $4,153,151. 
MANAGEMENT’S DISCUSSION AND ANALYSIS 

USDA

44 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Exhibit 11: Inventory of Audits with Disallowed Costs1

Audits with Disallowed 

Costs 

# of 

Audits 

Amount ($) 

Beginning of the Period 68 68,693,567 

Plus: New Management Decisions 10 28,252,638 

Total Audits Pending Collection of 

Disallowed Costs 

78 96,946,205 

Adjustments (2,069,952)

Revised Subtotal 94,876,253 

Less: Final Actions (Recoveries)* 19 (4,153,151) 

Audits with DC Requiring Final Action 

at the End of the Period 

59 90,723,102 

*Recoveries do not include $48,270 of interest collected. 

Exhibit 12: Distribution of Adjustments to Disallowed Costs 

Category Amount ($) 

Changes in Management Decision 72,529 

Legal Decisions 1,529,991 

Write-Offs 382,577 

Agency Documentation 56,503 

Agency Discovery -352 

OIG Agreed Amount System Error 11,500 

Appeals 17,204 

Total 2,069,952 

Final action occurred on 12 audits that involved FTBU 

amounts. USDA projects more efficient use for 99.8 

percent of the amount identified based on the corrective 

actions implemented. The number of FTBU audits 

remaining in the inventory to date is 22 with a monetary 

value of $223,178,271. 

Exhibit 13: 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 30 954,103,210 

Plus: New Management 

Decisions 

4 163,191,103 

 

1 Exhibit 11 and Exhibit 13 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 11 and Exhibit 13 will not equal the total resolved audit inventory 

balance in Exhibit 9. 

Audits with Funds to be 

Put to Better Use 

# of 

Audits Amount ($) 

Total Audits Pending 34 1,117,294,313 

Less: Final Actions 12 894,116,042 

Audits with FTBU Requiring 

Final Action at the End of the 

Period 

22 223,178,271 

Disposition of Funds to Be Put to 

Better Use: 

FTBU Implemented 892,774,600 

FTBU Not Implemented 1,341,442 

Total FTBU Amounts for Final 

Action Audits 894,116,042 

Audits Open One or More Years Past the 

Management Decision Date 

The number of audits open one or more years without 

final action increased slightly from 101 to 123 audits. 

USDA attributes much of the increase to the additional 

time required to finalize publication of guidance, e.g., IT 

related issues, and system development and 

enhancements. However, with increased monitoring of 

agency corrective action plans, USDA expects that these 

audits will decrease during the current fiscal year. 

Exhibit 14: Increase in Audits Open One or More Years Past 

Management Decision Date 

One audit is proceeding as scheduled, 86 are behind 

schedule and agencies have completed corrective actions 

on 36 audits that are pending collection of associated 

disallowed costs. While an additional 13 audits were 

scheduled for completion by September 30, 2006, final 

action documentation will not be evaluated this reporting 

period. 
MANAGEMENT’S DISCUSSION AND ANALYSIS 

USDA

F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 45 

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 the General Counsel or OIG advice; 

Conclusion of external action; and 

Administrative action. 

Exhibit 15: 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 1 0 0 86 7,981,969 44,210,397 36 54,259,969 18,531,314 

Management’s Report on Audit Follow-Up 

Exhibit 16: Audits Open One Year or More Past the Management Decision Date and Behind Schedule 

Monetary Amount 

Audits 

Date 

Issued 

Revised 

Completion 

Date Audit Title DC FTBU 

(29) Pending issuance of policy/guidance 

02007-1-AT 3/13/03 TBD ARS Florida Agricultural and Mechanical University – 

Specific Cooperative Agreements for Establishment of a 

Science Center 

$421,764 - 

03099-3-HQ 08/18/04 09/30/06 FSA Controls Over Contracting for the Disposal of Surplus 

Tobacco 

- - 

05600-1-TE 09/28/89 9/30/06 RMA Crop Year 1988 Insurance Contracts with Claims - - 

04801-4-CH 02/12/99 TBD RHS Evaluation of Rural Rental Housing Tenant Income 

Verification Process 

- - 

08016-1-SF 09/30/03 6/30/07 FS Follow-Up Review of FS Security Over Aircraft & 

Aircraft Facilities 

- - 

08401-3-FM 1/26/04 9/30/07 FS Audit of Fiscal Year 2003 Financial Statements - - 

08601-1-HY 3/31/05 3/31/07 FS Implementation of the Government Performance and 

Results Act 

- - 

08601-2-TE 9/27/04 12/31/06 FS Survey of Timber Theft Controls - - 

08601-30-SF 03/31/03 03/31/07 FS Review of FS Security Over 

Explosives/Munitions/Magazines Located Within National 

Forest System 

- - 

08601-38-SF 9/23/04 6/30/07 FS Review of Firefighting Safety Program - - 

08601-40-SF 7/6/05 9/30/07 FS Emergency Equipment Rental Agreements Audit - - 

08801-2-TE 09/24/98 12/31/06 FS Assistance Agreements with Nonprofit Organizations $140,497 $1,173,925 

10099-1-TE 02/01/02 09/30/06 NRCS Security Over IT Resources - - 
MANAGEMENT’S DISCUSSION AND ANALYSIS 

USDA

46 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Monetary Amount 

Audits 

Date 

Issued 

Revised 

Completion 

Date Audit Title DC FTBU 

10099-10-KC 09/30/03 12/30/06 NRCS Homeland Security Protection of Federal Assets - - 

23099-2-FM 05/22/02 6/30/07 DA Security of Information Technology Resources at 

USDA Departmental Administration 

- - 

24099-3-HY 6/21/00 TBD FSIS Imported Meat and Poultry Inspection Process - - 

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

Phase II 

- - 

24601-4-HY 5/18/05 TBD FSIS Oversight of the 2004 Quaker Maid Meats Recall - - 

27601-3-CH 03/22/96 03/31/07 FNS Food Stamp Program—Disqualified Recipient System - - 

27601-27-CH 04/30/02 06/30/07 FNS Food Service Management Companies - - 

34099-2-AT 09/14/01 03/37/07 RBS Business and Industry Loan Program, Omnivest 

Resources, Inc. 

$4,052,351 - 

34601-1-HY 07/22/98 03/31/07 RBS Business and Industry Loan Program—Morgantown, 

West Virginia 

- - 

34601-3-CH 03/11/03 12/31/06 RBS Processing of Loan Guarantees to Members of the 

Western Sugar Cooperative 

- - 

34601-7-SF 12/04/02 03/31/07 RBS B&I Liquidation of Loans to the Pacific Northwest 

Sugar Company in Washington State 

- $14,000,000 

50099-17-KC 2/17/05 12/31/06 CSREES Biosecurity Grant Funding Controls over 

Biosecurity Grants Funds Usage 

- $4,318 

50601-9-AT 3/24/04 TBD HS Controls Over Chemical and Radioactive Materials at 

U.S. Department of Agriculture Facilities 

- - 

50601-9-KC 08/18/04 TBD APHIS (FSIS) Phase I Review of BSE Surveillance - - 

50601-10-AT 3/8/04 TBD HS Follow-up Report on the Security of Biological agents at 

USDA Laboratories 

- - 

89099-1-HQ 10/21/02 10/31/06 OPPM Audit of Compliance with the National Energy 

Conservation Policy Act of 1978, Energy Act of 1992 and 

Executive Order Number 13123 

- - 

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

04801-3-KC 03/31/99 07/31/07 RHS Bosley Management, Inc. – Sheridan, Wyoming $146,690 $85,516 

34004-5-HY 02/18/00 TBD RBS Audit of Procurement Operations, Virginia State 

Office, Richmond, Virginia 

- - 

(27) Pending receipt and/or processing of final action documentation 

01001-2-HY 7/14/05 9/30/06 AMS National Organic Program - - 

03099-32-KC 12/22/99 10/31/06 FSA Controls Over Administrative Payment Operations - - 

04016-01-CH 9/30/04 12/31/06 RHS Rural Rental Housing Project Management - - 

05401-11-FM 1/9/03 12/31/06 RMA FY 2002 FCIC Financial Statements - - 

08003-5-SF 12/15/00 3/31/07 FS Land Acquisitions and Urban Lot Management Program - $10,329,300 

08401-4-FM 11/10/04 12/31/06 FS Audit of Fiscal Year 2004 Financial Statements - - 

10099-4-TE 12/22/04 12/30/06 NRCS Survey of Controls Over Centers and Institutes - - 

10501-1-SF 11/2/1999 12/30/06 NRCS Review of Application controls Over the Water and 

Climate Information System 

- - 

12099-1-AT 1/23/04 12/29/06 OCE Management and Security of IT Resources - - 

13001-3-TE 8/16/04 12/31/06 CSREES Implementation of Agricultural Research, 

Extension, and Education Reform Act of 1998 

$3 $482,400 

13501-1-HY 7/8/05 10/31/06 CSREES Application controls review of the Cooperative 

Research Education and Extension Management System 

- - 

33001-5-HY 07/21/00 9/30/06 APHIS Wildlife Services Controls Over Hazardous 

Materials Inventory 

- - 

33099-4-CH 03-03-04 9/30/06 APHIS Management and Security of Information 

Technology Resources 

- - 

33501-1-CH 03/31/05 9/30/06 APHIS Review of Application Controls for the Import - - 
MANAGEMENT’S DISCUSSION AND ANALYSIS 

USDA

F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 47 

Monetary Amount 

Audits 

Date 

Issued 

Revised 

Completion 

Date Audit Title DC FTBU 

Tracking System 

33601-1-AT 09/14/04 9/30/06 APHIS Security Over Owned and Leased Aircraft - - 

34601-15-TE 09/30/03 3/31/07 RBS National Report on the Business and Industry Loan 

Program 

50099-13-AT 03/29/02 12/31/06 Multi-Agency Audit Oversight and Security of Biological 

Agents at Laboratories Operated by USDA 

- - 

50099-14-AT 9/29/03 12/31/06 HS Homeland Security Controls Over Biological, Chemical 

and Radioactive Materials at Institutions Funded by USDA 

- - 

50099-27-FM 03/30/01 9/30/06 OCIO Security Over USDA Information Technology 

Resources Needs Improvement 

- - 

50401-39-FM 2/26/01 10/31/06 OCFO USDA Consolidated Financial Statements FY 2000 - - 

50801-2-HQ 2/27/97 3/31/07 OCRE Evaluation Report for the Secretary on Civil Rights 

Issues, Phase I 

- - 

50801-6-AT 3/31/99 9/30/06 FAS Private Voluntary Organization Grant Fund 

Accountability 

- - 

50801-12-AT 9/9/02 12/31/06 DA Management of Hazardous Materials Management 

Funds 

- $1,813,809 

60016-01-HY 9/8/05 3/31/07 OCRE Follow up on the Recommendations made to the 

Office of Civil Rights for Program and Employment 

- - 

60801-1-HQ 9/30/98 3/31/07 OCRE Evaluation of the Office of Civil Rights Efforts to 

Reduce Complaints Backlog 

- - 

60801-3-HQ 3/10/00 3/31/07 OCRE Evaluation Report for the Secretary on civil rights 

Issues (Phase 7) 

- - 

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

(11) Pending systems development, implementation, or enhancement

03099-27-TE 5/24/01 10/01/06 FSA Payment Limitations – Majority Stockholders of 

Corporations 

- - 

06401-17-FM 11/5/04 06/30/07 CCC Financial Statements for FY 2004 - - 

08001-1-HQ 06/28/00 12/31/06 FS Implementation of the Government Performance and 

Results Act 

- - 

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 

- - 

11401-20-FM 10/25/04 10/31/06 OCFO FY 04 Review of NFC General Controls - - 

24099-1-FM 08/11/03 9/30/06 FSIS Security Over Information Technology Resources at 

FSIS 

- - 

33601-1-HY 2/14/05 TBD APHIS (FSIS) Oversight of Beef Products from Canada - - 

33601-4-CH 03/31/03 TBD APHIS Controls Over Permits to Import Biohazardous 

Materials 

- - 

50401-53-FM 11/15/04 12/30/06 OCFO USDA Consolidated Financial statements FY 2004 

and FY 2003 

- - 

50501-1-FM 10/6/04 TBD OCIO Fiscal Year 2004 Federal Information Security - - 

(2) Pending results of internal monitoring or program review

05099-8-KC 03/31/00 TBD RMA Standard Reinsurance Agreement Reporting 

Requirements 

- - 

06401-16-FM 11/7/03 09/30/06 CCC Financial Statements for FY 2003 - - 

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

04601-5-KC 08/08/02 TBD RHS Rural Rental Housing Program Insurance Expenses, 

Phase III 

$418,321 $15,500,000 

04801-6-KC 12/18/00 TBD RHS Rural Rental Housing Program Insurance Expenses, $1,029,999 $9,000 
MANAGEMENT’S DISCUSSION AND ANALYSIS 

USDA

48 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Monetary Amount 

Audits 

Date 

Issued 

Revised 

Completion 

Date Audit Title DC FTBU 

Phase I 

33004-1-AT 03/07/00 TBD APHIS Plant Protection and Quarantine Activities in Florida - - 

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

23801-1-HQ 08/20/98 TBD OO Review of Office of Operations Contract with B&G 

Maintenance, Inc. 

- $249,866 

34601-14-TE 09/27/02 TBD RBS Business and Industry Direct Loan Program – 

Arkansas 

- - 

(4) External Action Required 

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

24601-1-CH 06/21/00 TBD FSIS Laboratory Testing of Meat and Poultry Products - - 

27010-3-KC 3/22/00 12/31/06 FNS Child and Adult Care Food Program Wildwood Inc. $199,759 - 

39099-1-AT 1/12/04 TBD OBPA FY 2003 Information Technology Security Review - - 

(6) Pending Administrative Action

05099-18-KC 6/1/04 12/31/06 RMA Management and Security of Information Technology 

Resources 

- - 

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

Agreement 

- - 

05601-7-AT 2/10/05 12/31/06 RMA Cotton Crop Insurance Premium Rates - - 

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

13099-2-TE 8/6/02 TBD CSREES Review of Research Grants to the National 

Center for Resource Innovation 

$919,287 - 

50601-5-AT 9/30/98 12/31/06 CSREES Managing Facilities Construction Grants $653,298 $542,677 

Total Number Audits (86) Total $7,981,969 $44,210,397 

Conclusion 

It is hoped that 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 2006 goals. 
ANNUAL PERFORMANCE REPORT 

2/15/2007 1:34 PM

USDA

F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 49 

USDA

F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 47 

II. 

Annual Performance Report 

he United States Department of Agriculture’s 

(USDA) mission is to provide leadership on food, 

agriculture, natural resources and related issues based 

on sound public policy, the best available science and 

efficient management. The Department executed this 

mission in FY 2006 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 emerging 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 targeted nutrition assistance programs; 

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 longterm goals and strategies (www.ocfo.usda.gov); 

An annual budget summary and performance plan 

that outlines strategies and targets for achieving 

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

A performance and accountability report that 

illustrates to the American people and Congress how 

well the Department did in reaching its goals. 

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 physical and 

social sciences, and the provision of that knowledge to 

agriculture, forestry, consumers and rural America are 

fundamental to the Department’s success. Accordingly, 

selected accomplishments in research are presented 

throughout this report. Data collection methodology is 

standardized and transparent and is vetted by scientists, 

policymakers, and undersecretaries. Methodology is 

available to the public through program administrators. 

As part of the President’s requirements to assess the 

effectiveness of USDA programs, each program is 

measured using the Program Assessment Rating Tool 

(PART) review. 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 

T 
ANNUAL PERFORMANCE REPORT 

USDA

48 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

conclusions from the completion of internal and other 

external assessments conducted during Fiscal Year (FY) 

2006 related to the measures, are also included. Only 

Federal employees participated in the preparation of the 

performance information contained in the report. 

When he created the USDA, it was President Abraham 

Lincoln’s hope “that by the best cultivation in the physical 

world, beneath and around us, and the intellectual and 

moral world within us, we shall secure an individual, 

social and political prosperity and happiness, whose 

course shall be onward and upward, and which, while the 

earth endures, will not pass away.” The following 

chapters of the USDA Performance and Accountability

Report show how the Department committed itself to 

keeping President Lincoln’s dream alive during FY 2006. 

Strategic Goal 1: Enhance 

International Competitiveness of 

American Agriculture 

A prosperous food and agricultural sector contributes to 

the Nation’s economic vitality and standard of living. The 

sector’s success depends on the ability to expand into new 

markets, raise capital, protect itself against financial risk 

and adjust to changing markets. Increasing the efficiency 

of the agricultural sector and developing new uses for 

agricultural products are critical to the Nation’s economic 

health. 

Expanding global markets for agricultural products is 

critical for the long-term economic health and prosperity 

of the domestic food and agricultural sector. America’s 

natural resources, technologies and infrastructure enable 

agricultural production beyond domestic needs. 

Expanding 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, monitoring and enforcement of trade 

agreements. Working with producers and commodity 

trade associations, USDA administers an array of market 

development and export promotion programs designed to 

build long-term markets abroad. The Department helps 

expand trade opportunities through technical assistance 

and training programs. These tools support agricultural 

development and growth in developing countries. They 

also help these countries participate in, and benefit from, 

international trade. USDA works to facilitate trade by 

adopting science-based regulatory systems and standards. 

OBJECTIVE 1.1: EXPAND AND MAINTAIN 

INTERNATIONAL EXPORT OPPORTUNITIES

Overview 

U.S. agricultural exports rose on broad-based gains for 

many products to a record $68.7 billion in FY 2006, up 

$6.2 billion from the previous year. This included a $1.8-

billion increase in horticultural exports, mostly due to 

strong foreign demand and higher prices for many 

products. Gains for tree nuts and fresh fruit especially 

were strong. Corn exports rose $1.5 billion mostly on 

increased volume supported by a large U.S. crop and 

reduced foreign competition. Livestock product exports 

rose $1.2 billion supported by gains for beef, pork and 

animal hides. Cotton exports jumped $800 million on 

record sales to China and higher prices. 

The Department works with the World Trade 

Organization (WTO) to establish export opportunities for 

U.S. agricultural producers. The WTO is charged with 

administering trade rules among its 149 member countries 

and customs areas. While the goal of reaching agreement 

on the outline of a new multilateral trade agreement by 

this past summer was not reached and efforts were 
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suspended in July 2006, USDA continues working with 

Office of the U.S. Trade Representative (USTR) and its 

trading partners to reach that goal. The Trade 

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

Government. 

In 2006, free trade agreements with Nicaragua, El 

Salvador, Honduras, Guatemala and Bahrain took effect. 

The Dominican Republic will follow, and Costa Rica’s 

new government is expected to ratify the Central 

American Free Trade Agreement (CAFTA) soon. CAFTA 

is a comprehensive trade agreement among Costa Rica, 

the Dominican Republic, El Salvador, Guatemala, 

Honduras, Nicaragua and the U.S. Agreements have also 

been reached with Peru and Colombia. These agreements 

require congressional approval. 

USDA also continues work on other free-trade 

agreements, notably with Korea and Malaysia, which are 

expected to create new opportunities for U.S. agricultural 

exports. The Department looks to conclude these 

agreements prior to the 2007 expiration of the Trade 

Promotion Authority (TPA). 

USDA also continues to monitor the impact of the North 

American Free Trade Agreement (NAFTA), a 

comprehensive trade-liberalization agreement between the 

U.S., Canada and Mexico. U.S. agricultural exports to its 

NAFTA partners continue to set records. Canada remains 

the largest market with U.S. sales at a record $11.6 billion 

in FY 2006. Canada is a major market for U.S. fresh and 

processed fruits and vegetables, snack foods, juices, wine 

and many other consumer-ready products. At a record 

$10.4 billion in FY 2006, Mexico remains the second 

largest market for U.S. agricultural exports having 

overtaken Japan in 2005. Mexico has enjoyed strong 

economic growth, with increased demand for foreign 

goods. While Mexico is a large buyer of coarse grains, 

soybeans, cotton and wheat, higher-value consumer foods 

are increasingly important. Strong Mexican demand is 

behind rising sales of U.S. pork, beef, poultry, fresh and 

processed fruits, and snack foods. 

U.S. agricultural exports to Japan were $8.2 billion, 

making it the third-largest market. About 60 percent of 

sales to Japan consist of bulk and intermediate 

commodities, mainly coarse grains, soybeans, wheat and 

animal feeds. The rest of the sales are consumer-ready 

foods, mainly pork, fresh and processed fruits and 

vegetables, and tree nuts. Japan recently announced that it 

will resume beef trade, which had reached an annual level 

of $1.3 billion before the market was closed due to a 

finding of bovine spongiform encephalopathy, a chronic 

degenerative disease affecting the central nervous system 

of cattle. 

The EU remains the fourth-largest market for U.S. 

agricultural products. It realized sales of $7.1 billion in 

FY 2006, up slightly from the previous year. The EU is a 

major market for soybeans, tobacco and animal feeds. It is 

also an important market for selected consumer foods and 

beverages, most notably tree nuts and wine. Opportunities 

remain limited in most other categories due to production 

subsidies which keep domestic supplies high, trade 

barriers that limit market access, and highly-competitive 

processed food industries. 

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

market, reached a record $6.7 billion in FY 2006. Exports 

to China have risen rapidly in the past few years, mostly 

due to record soybean and cotton sales. China is also the 

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

part U.S. consumer food sales remain modest, China has 

become an important poultry meat market and sales are 

rising for fresh fruit, tree nuts and many other consumer 

foods. China’s trade barriers are being reduced through its 

WTO membership, producing dividends which will 

continue for the next several years. 

In 2006, the EU was the fifth-largest market for U.S. 

agricultural products with sales of $6.6 billion, down from 

$6.9 billion in 2005. The EU is a major market for 

soybeans, tobacco and tree nuts — especially almonds. 

Wine sales are also noteworthy; wine is among the top 

five U.S. agricultural exports to the EU. Opportunities 

remain limited in most other categories. Production 
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50 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

subsidies in the EU keep domestic supplies high, and 

trade barriers limit market access. Expansion 

opportunities for U.S. agricultural exports to Europe 

remain limited. 

Key Outcome 

Increased Access to Global Markets for U.S. 

Agricultural Producers and Exporters 

USDA works closely with the USTR and other 

government agencies to pursue new trade agreements. 

These groups also work to enforce the provisions of 

existing agreements, providing U.S. exporters and 

consumers with the full economic benefit of trade 

agreements and rules. USDA also works to maintain 

effective government-to-government relationships that 

support open trade. Open trade will lead to increased 

export opportunities for U.S. farmers and agribusinesses. 

The Department’s industry partners promote trade and 

outreach activities to educate producers, processors and 

exporters on emerging market opportunities as a result of 

trade agreements. To capitalize on trade opportunities, 

USDA offers market intelligence, supply and demand 

forecasts, and sales-development assistance to enhance 

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

marketplace. 

Selected Results in Research, Extension and 

Statistics 

Controlling Flies in Exported Hay—The opportunity 

to export hay to Japan has been enhanced by its 

acceptance of phosphine fumigation as a quarantine 

treatment for polyethylene wrapped bales of Timothy hay. 

USDA scientists developed this treatment to control 

Hessian flies in hay. The treatment capped three years of 

collaborative research with the National Hay Association. 

It will help support a $70 million hay export market with 

Japan. Additionally, certification of the quarantine 

treatment by the Japan Ministry of Agriculture, Forestry, 

and Fisheries supports a $360 million market to Pacific 

Rim countries. 

Improved Wheat Variety for Competitive Noodle 

Market—South Dakota State University, with USDA 

funding, has developed a healthier wheat flour of hard 

white winter wheat. Its creation assures U.S. competition 

in the growing noodle markets domestically and in 

southeast Asia, and in the flatbread markets of the Middle 

East and North Africa. This variety, “Wendy,” is known 

for high protein content, does not require sugar to be 

added to the dough, and is low in an enzyme that causes 

noodle discoloration. 

Consumption and marketing patterns are changing rapidly 

in China, the world’s largest consumer of many U.S. 

agricultural commodities. These changes are generating 

uncertainty for food marketers. A USDA-funded 

conference, “Assessing the Chinese Market for U.S. 

Agricultural Products,” featured Chinese economists who 

provided current information and outlooks on agricultural 

trends. WERA-101 efforts to facilitate cooperation 

between scholars researching China’s agriculture also 

have enhanced management information available to U.S. 

producers and processors greatly. (WERA-101 refers to 

conferences organized to assess important trends in 

China’s agricultural economy.) 

Facilitating Sales to Foreign Markets—Global 

Marketing Support Services (GMSS) has provided access 

to exporting resources and opportunities to companies 

interested in expanding international sales. Partially 

supported with USDA research and extension formula 

funding to the University of Arkansas-Fayetteville, GMSS 

activities have created 120 new jobs, $3.4 million in labor 

income and $5.5 million in value added to the Arkansas 

economy. 

India’s Emerging Global Presence—USDA 

research shows how commodity trade patterns are 

changing with India’s rising income. It also shows that 

decreasing protectionism can further trade and improve 

welfare. For example, the apple report indicates that 

investment and open market competition that reduce high 

internal marketing costs and margins offer scope for 
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significant gains in Indian apple consumption and 

imports. 

USDA World Trade Negotiations— USDA research 

on trade policy provided analytical support to help inform 

and strengthen U.S. negotiating positions on agriculture. 

The analysis focused on the implications of U.S., 

European and other proposals for reforming global trade. 

USDA developed quantitative estimates of the impacts of 

market access and export subsidy liberalization under 

each of the main proposals and those on U.S. trade and 

farm income. Recent work examined the impacts of dairy 

policy reform on global dairy markets. The resulting 

report suggests that foreign dairy policy reform would 

result in lower global supplies of milk and dairy products, 

higher world dairy prices and higher value of dairy trade. 

Challenges for the Future 

USDA can increase export opportunities for the U.S. 

through a WTO agreement providing new rules for 

agricultural trade while working to complete other 

bilateral free trade agreements. New WTO rules would 

eliminate export subsidies, decrease trade-distorting 

domestic support and reduce market-access barriers 

around the world. Agriculture is a central theme for this 

round of WTO negotiations and a sensitive issue for most 

developing countries. In these countries, the food and 

agriculture sector is the dominant economic driver. Free 

trade agreements with Malaysia and Korea will lead to 

access to critical markets in Asia. If TPA is extended, 

USDA will be able to engage in even more marketopening activities. TPA is designed to enable U.S. 

negotiators to lead the way in completing major new trade 

agreements that advance the global interests of domestic 

agriculture. USDA will also continue to monitor the 

implementation of existing agreements to preserve 

existing trade and expand markets. 

Analysis of Results 

USDA did not reach its performance goal of $900 million 

because Costa Rica and the Dominican Republic did not 

ratify and implement CAFTA, and because of delays in 

finalization of the Peru and Colombia Free Trade 

Agreements. There were no large, unexpected threats 

addressed under Department monitoring and enforcement 

activities except for those related to sanitary and 

phytosanitary (SPS) barriers, which are accounted for 

separately under Objective 1.3. SPS refers to measures 

imposed by governments to protect human, animal and 

plant health from foreign pests, diseases and 

contaminants. The number of trade maintenance issues 

and their potential impact on U.S. exports depends 

primarily on foreign governmental action. Both the 

problems and the solutions are highly unpredictable. 

Solutions can range from a quick agreement with officials 

at the port of entry to a long negotiation process followed 

by a lengthy regulatory or legislative process. The cost of 

an action can range from a few thousand to billions of 

dollars. 

USDA’s selection of this performance measure 

demonstrates the critical role that the negotiation and 

enforcement of trade agreements play in expanding and 

maintaining export opportunities. As the U.S. continues to 

negotiate new bilateral, regional and multilateral trade 

agreements, the challenge will be to monitor and enforce 

compliance. Monitoring will ensure that U.S. agriculture 

receives full benefits from negotiated reductions in tariff 

barriers. 

The exact value of new markets opened through trade 

agreements is difficult to determine using traditional 

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

estimate consumer demand. Market development takes 

time and centers on consumer and wholesaler education to 

create a desire to purchase U.S. products, rather than 

those of competitors. Therefore, it is difficult for USDA 

to estimate the impact of monitoring and enforcement 

efforts. Instead, the Department tracks only instances in 

which there is a clearly defined and imminent threat, 

which is then acted upon. 

The figures in the accompanying exhibit reflect the 

uncertainty of trade negotiations and disruptions. Next 

steps include completion of the Doha Round of 

agriculture negotiations, various bilateral and regional 
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52 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

free trade agreements, and continued monitoring and 

enforcement of existing agreements that affect U.S. 

agriculture. (The Doha Round refers to multilateral 

negotiations to liberalize trade.) 

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52 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Exhibit 17: Increase U.S. Export Opportunities 

Fiscal Year 2006 

Annual Performance Goals and Indicators Target Actual Result 

1.1.1 Dollar value of agricultural trade preserved through trade 

agreement negotiation, monitoring, and enforcement (non-SPS) 

($ Mil) 

$900 $14 Unmet 

Exhibit 18: Trends in Expanding and Retaining Market Access

Fiscal Year 2006 

Trends 2002 2003 2004 2005 2006 

1.1.1 Dollar value of agricultural trade preserved 

through trade agreement negotiation, 

monitoring, and enforcement 

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

$1,327 $2,713 $3,950 $800 $14 

FYs 2002 - 2004 data is based on SPS and non-SPS related trade barriers. FY 2005 and 2006 data is based on non-SPS trade barriers. 

OBJECTIVE 1.2: SUPPORT INTERNATIONAL 

ECONOMIC DEVELOPMENT AND TRADE 

CAPACITY BUILDING

Overview 

The ultimate goal for supporting developing countries is 

to help them become economically stable and capable of 

supporting their populations. USDA participates in this 

effort by providing food assistance and trade and 

development programs. The Department supports these 

programs along with other Federal agencies, such as the 

U.S. Agency for International Development. USDA 

technical assistance and training play a vital role in 

helping developing countries meet their WTO obligations, 

strengthen policy and regulatory frameworks, and avoid 

or eliminate unjustified trade barriers. Assistance in trade 

capacity building also supports market-infrastructure 

development. This development assistance includes 

market information, agricultural grades and standards, and 

the cold-chain technology by which perishables are kept 

cold until they reach consumers. The assistance also helps 

increase capacity to purchase U.S. exports. In 

combination with food assistance that covers gaps in 

supplies and keeps the population healthy, USDA deploys 

its unique resources and expertise in agricultural 

development activities. These activities help advance 

market-based policies and institutions, develop 

sustainable agricultural systems, and strengthen research 

and education in developing countries. Assistance focuses 

on improving agricultural productivity and markets as the 

engines for economic growth. The Department also helps 

developing countries increase trade and integrate the 

agricultural sector into the global economy through 

regulatory reform. Other priorities include reducing 

hunger and malnutrition with sustainable, productivityenhancing technologies and supporting agricultural 

reconstruction in post-conflict or disaster areas. 

Primary targets for USDA food assistance in developing 

countries are school children and their mothers. The 

McGovern-Dole International Food for Education and 

Child Nutrition Program provides for the donation of 
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U.S. agricultural commodities and associated financial 

and technical assistance for pre-school and school-based 

feeding programs in developing countries. McGovernDole also authorizes the support of maternal, infant and 

child nutrition programs. Its purpose is to support a 

healthy young population necessary for a stable society 

and a capable workforce. A healthy and literate workforce 

attracts jobs, supports a sustainable economy and helps 

establish a secure food supply through domestic 

production and imports. 

Americans want a world in which all countries are stable. 

The 2002 National Security Strategy of the United States 

recognizes that the root of a foreign threat is the lack of 

economic development, which often results in political 

instability. The National Security Strategy is prepared 

periodically by the President for Congress and outlines 

the major national security concerns of the U.S., and how 

the administration plans to deal with them. For most 

developing countries, a productive and sustainable 

agricultural sector bolsters economic well-being. Thus, 

agricultural development is crucial to the National 

Security Strategy. In developing and transitioning 

economies, USDA focuses on: 

Eliminating trade and investment barriers to stimulate 

economic growth; 

Science and technology advancement to raise 

agricultural productivity in a sustainable environment 

to boost food availability and improve nutrition; 

Institution building to strengthen sustainable 

agriculture, market infrastructure and the 

development of market-information systems; 

Working with international standard-setting bodies to 

adopt science-based rules and policies; and 

Food assistance to support social stability and 

enhance economic development. 

Recent examples of the above include progress toward 

adopting agricultural biotechnology in the Western 

Hemisphere and Southeast Asia. USDA efforts resulted in 

agreement by member countries of the Inter-American 

Institute for Cooperation on Agriculture, which agreed to 

develop a program on biotechnology and biosafety. 

Additionally, USDA, the U.S. Department of State and 

the 10 members of the Association of South East Asian 

Nations participated in a roundtable discussion on 

agricultural biotechnology. The group developed 

recommendations for continued agricultural 

biotechnology exchange with the U.S. The 

recommendations will be forwarded to the association’s 

subcommittee on biotechnology. 

Selected Results in Research, Extension and 

Statistics 

USDA provided technical assistance and training to 

improve agricultural statistics programs in 10 countries. 

Short-term assignments supported work in Armenia, 

Brazil, China, Costa Rica, El Salvador, Georgia, Mexico, 

Mongolia, Russia and Ukraine. The Department also 

coordinated and/or conducted briefings and/or training 

programs in the U.S. for 158 visitors representing 17 

countries. These assistance and training activities promote 

better data quality and improved access to data from other 

countries. Thus, U.S. analysts can understand the world 

supply and demand situation better. Improved analysis 

supports trade and more efficient marketing of U.S. 

agricultural products. 

Challenges for the Future 

Hunger and malnutrition still impact much of the world. 

USDA works closely with the United Nations’ World 
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54 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Food Program and private voluntary relief and 

development organizations. The program offers food 

assistance to natural-disaster victims, the displaced and 

the world’s hungry and poor. 

Key Outcome 

Improved Ability in Developing Countries to 

Sustain Economic Growth and Benefit from 

International Trade 

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

assistance, helps strengthen developing countries’ 

agricultural institutions and regulatory systems, 

encourages compliance with international norms, and 

fosters the adoption of U.S. approaches to agricultural 

policy and regulatory procedures. TCB also supports the 

President’s national security strategy by assisting nations 

in developing economic stability through free trade and 

open markets. 

USDA’s top trade policy priority — a successful 

conclusion to the Doha Round — recognizes the 

importance of trade to developing countries. Tradecapacity building gives developing countries an incentive 

to participate in the Doha process. By helping countries 

joining WTO understand and meet their new 

commitments, TCB builds markets for the future by 

fostering economic growth. 

The United States is concluding a growing number of free 

trade agreements with developing countries. In addition to 

promoting market access, such agreements encourage 

economic growth and closer political ties with countries 

important to U.S. national security. Because of these 

linkages, technical assistance is an integral part of the 

negotiating package. 

TCB is critical in addressing the many technical barriers 

that impede access for U.S. agricultural products in global 

markets. By helping countries develop transparent, 

science-based regulations and increasing understanding of 

the U.S. regulatory system, TCB can expand access for 

U.S. agricultural products. Likewise, this assistance 

enables recipient countries to access other world markets. 

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

than half of total worldwide assistance to combat 

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

across several Federal departments. USDA works with 

USAID, private voluntary relief and development 

organizations, American universities, Federal agencies 

and the United Nations’ World Food Program to provide 

targeted food aid and assistance where it is needed most. 

Economic development activities aimed at marketcapacity building for both domestic and international 

trade are supported through the provision of food 

assistance. 

These activities combined with USDA technical 

assistance and training foster stable societies, economic 

growth and market-infrastructure development. 

Consequently, recipient countries are able to boost 

domestic production and, in turn, reduce their dependence 

on food aid. The activities aid recipient countries in 

building sound economic policies that support sustainable 

development and participation in global agricultural trade. 

Analysis of Results 

The performance goal was exceeded. McGovern-Dole 

promotes school enrollment and attendance, contributing 

to an educated workforce and economic growth and 

development. The program’s primary goal of increasing 

school attendance can be measured with confidence. In 

FY 2005, McGovern-Dole used $91 million to provide 

118,000 tons of food to 3.4 million children in 15 

developing countries in Africa, Asia, Latin America and 

Eastern Europe. These efforts resulted in more children 

entering schools, improved student performance, and 

greater parental and community involvement in education. 

In FY 2006, McGovern-Dole used $99 million, which 

supported the feeding of 3.3 million women, infants and 

children. The target of 2.4 million was based on the 

effects of estimated increases in commodity and fuel 

prices. Price fluctuations, combined with changes in 

distribution, resulted in the goal being exceeded.
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Exhibit 19: Support Foreign Food Assistance 

Fiscal Year 2006 

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) 

2.4 3.3 Exceeded 

Exhibit 20: Trends in Supporting Foreign Food Assistance 

Fiscal Year 2006 

Trends 2002 2003 2004 2005 2006 

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) 

N/A 2.5 2.0 3.4 3.3 

Exhibit 21: Support Improvement in Foreign Countries’ Trade Policies

Fiscal Year 2006 

Annual Performance Goals and Indicators Target Actual Result 

1.2.2 Number of recipient countries that make substantive 

improvements in national trade policy and regulatory 

frameworks that increase market access 

6 6 Met

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

The performance goal was met in six countries. USDA 

technical assistance to the Ministry of Agriculture in 

Montenegro resulted in establishment of a Montenegrin 

market information Web site. The site provides farmers 

access to better information and improved capacity for 

agribusiness and economic development. In Serbia, 

USDA biotechnology capacity-building activities led to a 

new draft law on agricultural biotechnology. The law 

expands on the existing one and simplifies import of 

biotechnology products. In Romania, with the official 

launch of the Good Manufacturing Practices manual, 

Romalimenta (the Romanian Food Industry Federation) 

and USDA are helping the food industry increase its 

capacity to produce and regulate safe food. 

Additionally, a USDA technical review of food shelf-life 

standards in Egypt resulted in a commitment by the 

Egyptian government to amend regulations and notify 

WTO for comment prior to final enforcement. Mexico, 

after nearly losing meat export equivalence status in late 

2003, made significant improvements in its meatinspection system; USDA sponsors Mexican meat 

inspectors at Department training courses in the U.S. 

Following a USDA diagnosis of avian influenza (AI) in 

2006, Afghanistan launched an immediate control effort. 

Since then, no new AI cases have been reported. This was 

due in part to an ongoing USDA program to develop an 

effective monitoring system in the country via workshops 

and training programs conducted by Department 

epidemiologists. Such a monitoring system helps alleviate 

fears that could stifle trade in poultry products. 

All private voluntary organizations that offer food aid 

through McGovern-Dole conduct extensive operational 

and results surveys; USDA evaluates the results to 

determine the programs’ effectiveness. Additionally, 

semi-annual reports share results and challenges. Through 

the use of the surveys and reports, USDA identifies 

strategies that address challenges and barriers. 
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56 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

OBJECTIVE 1.3: IMPROVED SANITARY AND 

PHYTOSANITARY (SPS) SYSTEM TO 

FACILITATE AGRICULTURAL TRADE

Overview

Sanitary and Phytosanitary (SPS) refers to measures 

imposed by governments to protect human, animal and 

plant health from pests, diseases and contaminants. These 

measures often hinder trade, intentionally or 

unintentionally, reasonably or unreasonably. USDA 

agencies work with other Federal agencies to address and 

mitigate SPS measures imposed by foreign governments. 

Key Outcome 

An Improved Global SPS System for 

Facilitating Agricultural Trade 

The negative impact of some SPS measures is growing 

due to increasing trade in food and agricultural products. 

This is apparent in the growth of trade in consumer-ready 

products such as meats, fruits, vegetables and processed 

foods. The problem is compounded by the emergence of 

threats like bovine spongiform encephalopathy (BSE is a 

chronic degenerative disease affecting the central nervous 

system of cattle), poor regulatory infrastructure in many 

developing countries, and political pressures that cause 

foreign governments to implement stricter-than-needed 

SPS measures. 

In response, USDA will work closely with other Federal 

agencies to strengthen regulatory coordination, address 

SPS measures and other technical barriers to trade, and 

encourage trading partners to use sound science in 

regulatory decision making. The Department will lead 

Federal efforts to monitor adherence to the SPS 

Agreement of the WTO and will help lead enforcement of 

the agreement. USDA will also continue to work through 

international organizations to develop stronger sciencebased standards to facilitate trade. Additionally, the 

Department will conduct regulatory capacity-building 

activities with selected trading partners. These activities 

will help protect the life and health of humans, animals 

and plants around the world; they will also facilitate trade 

through efficient regulation. 

USDA has several tools to help monitor international 

regulatory activities. For example, WTO members submit 

more than 800 annual notifications of intent to alter or 

create import requirements related to food safety or plant 

and animal health. USDA maintains the official U.S. 

Government Enquiry Point and Notification Authority to 

track and respond to these notifications. The Department 

reacts aggressively to restrictive measures. USDA 

maintains a monitoring system that allows it to address 

problems quickly. 

While some of the issues are difficult to resolve, USDA 

can pursue long-term solutions. BSE is a good example. In 

FY 2006, USDA reopened or expanded restricted beef 

markets in Japan, Mexico, CAFTA countries, Peru, 

Malaysia, Taiwan and Singapore. This came two years 

after the first domestic BSE case and subsequent market 

closures. To do this, USDA worked to develop the 

scientific information to support its case to revise 

international standards. The Department also strives to 

hold countries accountable for complying with their trade 

agreements. This will continue to be a top priority for 

USDA as it seeks to reopen markets for U.S. beef. 
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Selected Results in Research, Extension and 

Statistics 

New Strategies Keep Fresh-cut Produce Free of 

Pathogens—New intervention strategies for fresh-cut 

produce dramatically reduce the risk of pathogen 

contamination, thereby promoting domestic sales and 

trade. USDA scientists identified a safe and effective new 

sanitizer that achieved a 99.999 percent reduction of E. 

coli 0157:H7, Listeria, and Salmonella on produce. The 

researchers optimized sanitation treatment procedures to 

ensure good quality of shredded carrot and fresh-cut 

lettuce while maintaining the sanitizer’s effectiveness. 

These findings are especially useful to the fresh produce 

industry. They provide practical information in selecting a 

suitable sanitizer to maintain microbial safety and quality 

of fruits and vegetables. 

New Treatment Promotes Export of Lettuce—A 

new ultra-low oxygen treatment that disinfests insects on 

lettuce will expand the commodity’s export opportunities. 

Ultra-low oxygen treatments were developed for control 

of western flower thrips and lettuce aphid on iceberg 

lettuce with minimal or no negative effects on the 

vegetable’s quality. This research, conducted by a USDA 

scientist, addresses phytosanitary barriers facing U.S. 

lettuce in overseas markets. The ultra-low oxygen 

treatment potentially can become a safe, effective 

alternative to traditional methyl bromide fumigation for 

control of western flower thrips and lettuce aphid on 

exported lettuce. It also should increase export of U.S. 

lettuce to overseas markets. 

Reducing a Phytosanitary Trade Barrier for 

Apples—The purported presence of the southern strain 

of Plum Curculio (PC) in fruit-producing counties (with a 

second generation in the fruit at harvest) has caused the 

imposition of trade barriers to Virginia apples. PC is a 

pest of temperate fruits. USDA-funded research at 

Virginia Polytechnic Institute and State University is 

supporting cellular sequencing to determine the 

distribution of the northern and southern strains of PC in 

Virginia. The studies have found a bacterial symbiont in 

both strains that may cause the reproductive isolation 

between the two. This discovery could enable the 

elimination of an important phytosanitary issue that has 

caused a trade barrier in several European countries and 

several western states. Thus, the market for Virginia 

apples increases considerably. 

Challenges for the Future 

Given the increasing global flow of food and agricultural 

products, the ability of foreign countries to develop and 

implement sound science-based regulatory systems is 

vital to the long-term safety of U.S. agriculture and our 

food supply. U.S. agriculture benefits greatly from the 

development of regulatory frameworks in other countries. 

These frameworks can address technical trade barriers and 

SPS measures in a transparent and scientifically based 

manner. Besides monitoring and enforcing its rights under 

the WTO SPS agreement, USDA is working to support 

the development and adoption of science-based 

international standards and SPS regulatory systems. These 

efforts are critical to the Department’s ability to bring 

developing countries into the global trading system so that 

they support further liberalization through multilateral 

trade negotiations. 

USDA works closely with the U.S. Trade Representative 

and other Government agencies to pursue and enforce 

trade agreements. These agreements include technical 

regulations and measures designed to enhance food safety 

and protect plant and animal health. USDA staff in more 
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than 90 countries helps open, retain and expand 

international markets for U.S. food and agricultural 

products. This staff includes veterinarians, economists, 

marketing experts, plant pathologists, and others. While 

this group represents USDA overseas as its key supplier 

of market intelligence, it also helps solve minor trade 

threats before they become substantial disruptions. Staff 

members do this by being able to speak knowledgeably 

with foreign decision makers. They also help support 

U.S.-based technical experts who develop science-based 

protocols and health certification procedures for exporting 

food and agricultural products. 

Analysis of Results 

USDA met its performance goal. This was accomplished 

by trade opportunities preserved through monitoring and 

compliance enforcement, overseas advocacy and 

negotiations of technical protocols. The two most 

important successes were the European Union’s indefinite 

postponement of new requirements on wood-packaging 

material that exceeds the agreed-upon international 

standard and the reopening of the Japan market for U.S. 

beef. 

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

primarily on foreign action, sometimes in response to 

such events in the U.S. as a livestock disease outbreak. 

Both the problems and the solutions are unpredictable. 

Solutions can range from a quick agreement with officials 

at the port of entry to a long negotiation process followed 

by a lengthy regulatory or legislative process in the 

country in question. The impact of an action can range 

from a few thousand dollars to billions of dollars. While 

USDA can establish priorities in advance for known 

constraints, additional events will occur that will require 

realigning priorities. 

USDA’s selection of this performance measure 

demonstrates the growing importance of addressing SPS 

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

Government continues to negotiate new bilateral, regional 

and multilateral trade agreements, the challenge will be to 

monitor and enforce compliance with both trade and 

technical commitments. This monitoring will ensure that 

U.S. agriculture receives full benefits from negotiated 

reductions in non-tariff barriers. 

Exhibit 22: Increase U.S. Export Opportunities 

Fiscal Year 2006 

Annual Performance Goals and Indicators Target Actual Result 

1.3.1 Increase the dollar value of trade expanded through 

negotiation or preserved through USDA staff intervention and 

trade agreement monitoring activities (Sanitary and 

Phytosanitary) ($ Bil) 

$2.2 $2.6 Exceeded 

Exhibit 23: Trends in Expanding and Retaining Market Access 

Fiscal Year 20061

Trends 2002 2003 2004 2005 2006 

1.3.1 Increase the dollar value of trade expanded 

through negotiation or preserved through 

USDA staff intervention and trade 

agreement monitoring activities (Sanitary 

and Phytosanitary) ($ Mil) Baseline: 1999 = 

$2,567 

$1.327 $2,713 $3,950 $2,000 $2,600 

1 FYs 2002 - 2004 data is based on SPS and non-SPS related trade barriers. FY 2005 and 2006 data is based on SPS trade barriers.
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The figures reflect the uncertainty of trade disruptions. 

Just weeks after Japan resumed imports of beef in 

December 2005, it re-imposed the ban after finding beef 

that violated the recently agreed-upon technical protocol. 

After U.S. negotiations and inspection of processing 

facilities, the Japanese market reopened in June 2006. 

Strategic Goal 2: Enhance the 

Competitiveness and Sustainability of 

Rural and Farm Economies 

Rural America is home to 60 million people, but only 

2 million are directly engaged in production agriculture. 

Most rural income comes from forestry, mining, 

recreation, manufacturing, support services, and 

renewable energy. Thus, rural America is of critical 

importance to the Nation’s prosperity and technological 

advancement. It is in the Nation’s best interest to support 

rural America, and USDA enhances the competitiveness 

and sustainability of rural and farm economies by, among 

other things, expanding domestic market opportunities, 

increasing the efficiency of domestic agricultural 

production and marketing systems, and providing risk 

management and financial tools to farmers and ranchers. 

OBJECTIVE 2.1: EXPAND DOMESTIC 

MARKET OPPORTUNITIES

Key Outcome 

• Increased use of biobased products throughout 

the agricultural sector 

Overview 

Section 9002 of the Farm Security and Rural Investment 

Act of 2002 (FSRIA) authorized the Federal Biobased 

Products Preferred Procurement Program (FB4P). The 

funding level for FY 2006 is $1.0 million in mandated 

Commodity Credit Corporation funds and $1.5 million in 

appropriated funding. The Office of Energy Policy and 

New Uses (OEPNU) is implementing it through 

successive rulemakings. (OEPNU) assists the Secretary of 

Agriculture in developing and coordinating Departmental 

energy policy, programs and strategies. FB4P authorizes 

the preferred procurement of biobased products that fall 

under items (generic groupings of products) designated by 

rulemaking. Creating a demand for biobased products 

supports the farm and rural sectors by expanding and 

stabilizing the demand for agricultural commodities. To 

designate by rulemaking, USDA must provide 

information on environmental and health effects of the 

product and life-cycle costs. The Department also can set 

a minimum biobased content for the item. USDA must 

identify products and manufacturers. It also must gain 

their voluntary support in providing test information on 

those products to enable the Department to begin item 

designation. A voluntary labeling program also is 

available. Manufacturers of qualifying products can use it 

to carry the USDA Certified Biobased Product label and 

logo. 

Congress created the FB4P to: 

Spur demand growth for new biobased products; 

Increase domestic demand for agricultural 

commodities; 

Encourage development of processing and 

manufacturing in rural communities; 

Capture environmental benefits; and 

Enhance the Nation’s energy security. 
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The final rule establishing the guidelines under which the 

program operates was published January 11, 2005. The 

first of a series of rules to designate items (generic 

groupings of biobased products) for preferred 

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60 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

procurement was published as a proposed rule in the 

Federal Register, July 5, 2005. The final rule was 

published, March 16, 2006. Six items (mobile equipment 

hydraulic fluids, biobased roof coatings, water-tank 

coatings, diesel fuel additives, penetrating lubricants; and 

bedding, bed linens and towels) were designated in this 

rule. Manufacturers of products falling under those items 

have posted product and contact information on an FB4P 

electronic catalog for qualifying products under 

designated items. 

The two proposed rules were published in the Aug. 17, 

2006, Federal Register. The rules designated 20 items as 

generic groupings of biobased products. The new items 

included: Adhesive and mastic removers; Insulating foam 

for wall construction; Hand cleaners and sanitizers; 

Composite panels; Fluid-filled transformers; 

Biodegradable containers; Fertilizers; Metalworking 

fluids; Sorbents; Graffiti and grease removers; Two-cycle 

engine oils; Lip care products; Biodegradable films; 

Stationary equipment hydraulic fluids; Biodegradable 

cutlery; Glass cleaners; Greases; Dust suppressants; 

Carpets; and Carpet and upholstery cleaners. 

Technical information to support each proposed rule is 

available at the Federal Biobased Products Preferred 

Procurement Program Web site at 

www.biobased.oce.usda.gov. 

The two proposed rules announced are part of a series of 

rules that will be issued designating biobased items. 

USDA has identified about 170 items for which it is 

collecting test data needed for the additional designations 

of items. These designations will extend preferred 

procurement status to include all qualifying biobased 

products. 

Previously, USDA had issued final guidelines for the 

biobased procurement program. It also developed a model 

procurement program of training and education to help 

Federal procurement officials and users of biobased 

products identify and purchase qualifying biobased 

products. Information on the guidelines and the model 

program are available at http://www.usda.gov/biobased. 

The benefits of this program are broad. Some accrue 

directly to the private sector through the program’s 

operation. Others may accrue indirectly via the public 

sector. FB4P defines qualified biobased products as: 

Those consistent with definition in statute; 

Products for which the biobased content is known; 

Information is on the environmental and health effects 

of product use are available; 

Product performance, as tested against industry 

recognized standards, is known; and 

Designation is based on providing reliable and 

relevant information to Federal agency. 

For Federal agencies, FB4P encourages the purchase of 

more environmentally sustainable products. It also helps 

agencies identify those products, increases the availability 

and diversity of biobased products, and helps agencies 

reduce environmental footprint. 

For manufacturers and vendors, FB4P creates a preferred 

market for biobased products, provides large-scale 

demonstration of biobased products performance in use, 

spurs development of new biobased products and 

develops alternatives to fossil-energy-based products. 

Collectively, the benefits from FB4P creates an 

information database that both the private and public 

sectors can use to evaluate designated items to make an 

informed purchasing/procurement decision. This 

information also helps reduce the dependence of 
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petroleum-based products and improve the environment. 

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 implement the program fully. Once 

implemented, the aforementioned benefits will be 

realized. 

Challenges for the Future 

USDA is looking for ways to develop an infrastructure to 

support the efficient and economically viable 

development of biobased products. Other challenges 

include: 

Informing rural America about the benefits of 

biodiesel fuel use and helping farmers transition to a 

new style of operating; 

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 managing the 

carbon cycle more effectively; 

The development and evaluation of measures that 

identify and assess the benefits of 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 to test and evaluate 

the biobased content, environmental attributes and 

life-cycle costs required for the Department to 

designate generic groupings of products for preferred 

procurement within the program; and 

The willingness of manufacturers and vendors of 

biobased products designated by rulemaking for 

preferred procurement within the program to 

cooperate with USDA in publicizing their availability. 

This can be done by vendors voluntarily posting product 

and contact information on the program Web site at 

www.biobased.oce.usda.gov. This will allow Federal 

agencies to find biobased products for procurement. 

In response to these challenges, USDA is creating 

regulations and operating procedures for the Bioenergy 

Program and the FB4P. The Department also is 

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 also will allow 

manufacturers and vendors to identify and evaluate 

biobased products available in the marketplace for their 

use. The USDA Office of Procurement and Property 

Management will announce the model procurement 

program once 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. 

Selected Results in Research, Extension and 

Statistics 

Biobased Lubricants—Improved germplasm will 

expand production and marketing opportunities for 

biobased lubricants. Commercialization of Lesquerella – 

whose seeds contain oil rich in hydroxy fatty acids, an 

important raw material for making resins, waxes, nylons, 

plastics, lubricating greases, and cosmetics – is impeded 

by a lack of superior germplasm for crop production. 

USDA scientists released a new variety of Lesquerella 

with higher oil content than any other variety. The new 

line provides public and private researchers additional 

sources of genetic diversity for future breeding and an 

alternative domestic source of hydroxy fatty acids for 

lubricants currently made from imported castor oil. 

Analysis of Results 

Rules are being issued designating biobased items. 

FB4P is expected to significantly increase the use of 

biobased products within the Federal Government. This 

increased usage, in turn, will encourage the production of 

biobased products for that market. The program calls for 

Federal agencies to give preference to designated 
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biobased products in Government purchases within one 

year of publication of the final designation rule. 

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64 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Exhibit 24: Increase the Use of Biobased Products 

Fiscal Year 2006 

Annual Performance Goals and Indicators Target Actual Result 

2.1.1 Number of items designated as biobased for Federal 

procurement. 

Publish 6 items 

in Final Rule 

Published 6 

items in Final 

Rule 

Met 

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

OBJECTIVE 2.2: INCREASE THE EFFICIENCY 

OF DOMESTIC AGRICULTURAL PRODUCTION 

AND MARKETING SYSTEMS

Key Outcome 

Agricultural Producers Who Compete Effectively 

in the Economic Market 

Overview 

USDA improved market competitiveness and increased 

the efficiency of agricultural marketing systems. The 

Department provided greatly enhanced access to 

marketing information for producers and marketers of 

farm products, and those in related industries, by initiating 

the Market News portal. The portal provides electronic 

access and custom report capability on current market 

data for fruits and vegetables, livestock and grain. 

Additional commodities will be added to the portal as 

resources allow. Market News is the only nationwide 

mechanism for gathering and publishing price data on 

specific agricultural commodities. This timely, accurate 

and unbiased market information covers local, regional, 

national and international markets. The information is 

designed to help traders of U.S. agricultural products 

decide where and when to sell, and at what price. USDA 

also distributes Market News, which reports current data 

on supply, movement, contractual agreements, inventories 

and prices for many agricultural commodities. It does this 

by collecting, analyzing and disseminating market 

information for numerous agricultural commodities. 

Electronic access and e-mail subscriptions for all 

commodities are available at http://marketnews.usda.gov/. 

Federal and cooperating State reporters obtain market 

information, which USDA analyzes, compiles and 

disseminates immediately to all interested parties. 

Market News provides agricultural producers access to the 

necessary information for determining contract values, 

dispute resolution and reporting under trade agreements. 

Market News reports are used in judicial proceedings and 

when the International Trade Commission is considering 

dumping allegations with respect to agricultural 

commodities and products entering the country. U.S. 

Customs and Border Protection use USDA price data to 

assess the value of imports. Agricultural commodity and 

product contracts are routinely linked to prices reported 

by Market News. The Market News portal provides a 

Web-based search engine that allows users to find market 

information and tailor reports by commodity, variety, 

shipping point and destination market. 

USDA worked closely with the rapidly expanding organic 

agriculture industry to refine the definitions and 

requirements for organic production and labeling. 

USDA’s National Organic Program conducted an organic 

dairy symposium and public comment and rulemaking 

activities relating to access to pasture, the use of 

synthetics, import equivalency, aquaculture and pet food. 

This program originated from the Organic Foods 

Production Act of 1990. It is designed to establish 

national standards governing the marketing of agricultural 

products as organically produced, to assure consumers 

that organically produced products meet a consistent 

standard, and to facilitate commerce in fresh and 

processed food that is produced organically. Before the 

program’s creation, individual states established their own 

organic production and labeling requirements. The 

nationwide program provides a more efficient and 

competitive system 
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for the marketing of organic agricultural products within 

the U.S. and for exports. 

Additionally, USDA launched a new Farmers Market 

Promotion Program, updated the Farmers Market 

Resource Guide, established a Farmers Market 

Consortium, created a new Web site on Farmers Market 

resources and participated in the Farmers Market 

Coalition. More information on all of these is available at 

http://www.ams.usda.gov/farmersmarkets/. The program’s 

marketing experts provide technical advice and assistance 

to States and municipalities interested in creating or 

upgrading wholesale market facilities, auction and 

collection markets and retail farmers markets. They also 

conduct feasibility studies in cooperation with the private 

sector, not-for-profit organizations and other Government 

agencies to evaluate and suggest efficient ways to handle 

and market agricultural commodities. USDA researches 

marketplace changes to assist States, localities, market 

managers/operators and growers in making strategic 

decisions for future business development. 

The program facilitates distribution of U.S. agricultural 

products, identifies marketing opportunities, provides 

analysis to help take advantage of those opportunities and 

develops and evaluates solutions. Marketing solutions 

include improving farmers markets and other direct-toconsumer marketing activities, researching and 

developing marketing channels, providing information 

and education, encouraging adoption of improved postharvest technology, and designing market facilities. The 

program benefits agricultural producers by providing 

solutions to marketing problems so that they can remain 

financially viable. Consumers benefit from increased 

availability and alternative, cost-efficient sources. 

Selected Results in Research, Extension and 

Statistics 

USDA is taking advantage of the latest broadcast 

technology by becoming one of the first federal agencies 

to offer podcasts. The same audio stories that are 

distributed to farm broadcasters and posted on the USDA 

Web site now are available via podcast. Podcasting is a 

method of publishing and syndicating audio broadcasts 

through the Internet. It allows users to download audio 

files to be played on computers or portable music players. 

USDA conducts the Agricultural Resources Management 

Survey (ARMS) annually. ARMS data travels through 

numerous Federal statistical agencies. The Department 

estimates the largest cash receipts among the States. 

Meanwhile, the Bureau of Economic Analysis (BEA) 

produces county estimates using ARMS data in 

combination with the U.S. Census of Agriculture data. 

BEA data are used as a basis for distributing billions of 

Federal dollars back to the States and counties. 

USDA continues to work closely with the World 

Agricultural Outlook Board (WAOB) to provide shortand long-term projections of U.S. and world agricultural 

production, consumption, and trade. WAOB serves as 

USDA’s focal point for economic intelligence and the 

commodity outlook for U.S. and world agriculture. For 

the FY 2007 President’s Budget, USDA used stochastic 

budgeting based on a Department project. USDA 

incorporated stochastic price and production information 

into its 10-year budget baseline projections. (Stochastic 

budgeting helps analysts create a probability distribution 

of possible funding needs.) The Commodity Credit 

Corporation outlay projections for countercyclical 

payments, marketing loan benefits and milk income loss 

contract payments were based on stochastic information 

generated by a USDA Food and Agricultural Policy 

Simulator (FAPSIM) model on feed grains (corn, barley, 

sorghum, oats, wheat, rice, upland cotton, soybeans and 

dairy). FAPSIM is an annual econometric simulation 

model. 

The Structure and Finance of U.S. Farms: 2005 Family 

Farm Report, published in 2006, provides research 

examining the status of family farms. Most U.S. farms—

98 percent in 2003—are family owned. They are 

organized as proprietorships, partnerships or family 

corporations. Even the largest farms tend to be family 

farms. While very large family farms account for a small 

share of farms, they represent a large—and growing—
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share of farm sales. While small family farms account for 

most farms, they produce a modest share of farm output. 

Median income for farm households is 10 percent greater 

than that for all U.S. households. Small-farm households 

also receive substantial off-farm income. 

Farm-level data have been collected for use in assessing 

the relationship between approaches to management and 

farm financial success. This work examined the 

management structure of farms to determine who controls 

farm assets. Management units that make decisions for 

farms were described, extending information about how 

farms control and guide their businesses. Results suggest 

that the size and nature of the management team along 

with the complexity of the farm system have important 

implications for the operation’s success. 

Ten years after the first generation of genetically modified 

(GM) varieties became commercially available, USDA 

reviewed the adoption of domestic GM crops. It examines 

the three major stakeholders of agricultural biotechnology 

and finds that (1) the pace of research-and-development 

activity by GM-seed producers (the seed firms and 

technology providers) has been rapid, (2) farmers have 

adopted some GM varieties widely and quickly and 

benefited from such adoption, and (3) the level of 

consumer concerns about foods that contain GM 

ingredients varies by country, with European consumers 

being most concerned. 

One of the most successful management strategies for 

improving yield in corn is the use of increased plant 

populations. To realize this yield advantage, growers must 

find ways to offset decreases in stalk diameter and root 

mass. North Carolina State University conducted USDAfunded research that indicated that the use of starter 

fertilizer treatments featuring nitrogen and phosphorus led 

to significant improvements in stalk diameter and root 

mass. These improvements resulted in yield increases of 

22 bushels per acre. The number of growers using high 

population corn systems increased dramatically in 2005 

(the latest year for which data is available) in North 

Carolina counties where corn is an important crop. Sixty 

percent of the corn growers are using higher populations, 

resulting in an economic gain of $1,200,000 in 2005. 

With USDA funding, Oregon Extension livestock 

specialists taught producers to feed their animals more 

scientifically by using: (1) ration formulation software; 

(2) a library of Oregon feeds and forages, developed for 

use with the formulation software; and (3) other resources 

such as the new “Winter Feeding Workbook.” 

Participating producers report saving an average of $21 

per head by using these technologies. 

New heat-tolerant germplasm with excellent fiber quality 

will provide opportunities to expand U.S. cotton 

production. USDA partnered with a manufacturing firm to 

release three improved lines of upland cotton to the public 

for use in breeding new varieties. For the first time, these 

lines combine some of the excellent fiber quality of 

Acala-type cottons with the heat tolerance of Delta-type 

cottons. They can be used as resources for breeders trying 

to improve the fiber quality of mid-south and southeast 

cottons. Those attempting to improve heat tolerance of 

Acala cottons for the western U.S. also can use these 

materials. 

The ability to produce fresh strawberries for fall and 

winter will expand production and marketing 

opportunities. Though there is market demand for fresh 

strawberries in the fall and winter, most current 

strawberry production methods produce fruit only in the 

spring. USDA scientists have developed a new 

transplant-propagation technique. This technique causes 

strawberry plants to flower within four weeks after field 

establishment. It also can be used to grow strawberries 

that develop in both the fall and the spring. This 

propagation technique stretches the picking season to late 

fall when the price is greatest. It also lessens the risk of 

weather-related crop loss. 

Analysis of Results 

USDA published the 2006 Agricultural Statistics Board 

(ASB) calendar early in FY 2006. The calendar lists 

release dates and specified times for USDA’s national 
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agricultural statistics reports. These reports cover more 

than 120 crops and 45 livestock items. All of the 487 

agricultural statistics reports scheduled by ASB were 

released on-time to achieve the 100-percent performance 

target in FY 2006. Also, there were no errors published in 

FY 2006. USDA issues an official errata notice if the 

errors in the report were determined to be “market 

sensitive.” Reports with cosmetic and non-data errors or 

“non-market sensitive errors” are also tracked, 

documented and corrected. Revisions to preliminary data 

series, forecasts or estimates are part of USDA’s standard 

operating procedures and are not considered errors. ASB 

prepares and issues official national and State forecasts 

and estimates relating to crop production, stocks of 

agricultural commodities, livestock products, dairy 

products, poultry products, agricultural prices, agricultural 

wage rates, chemical usage, and other related subjects. 

USDA strives to release its ASB reports on time 100 

percent of the time each year. It is imperative to deliver 

high-quality, objective, relevant, timely and accurate 

statistics to producers and other data users. Such statistics 

allow users to make sound decisions. Official agricultural 

statistics promote a level playing field in production 

agriculture with impartial information available to all at a 

publicized time. These data, provided throughout the year, 

are important to the commodity and agricultural markets, 

and help provide a fair and equitable environment. The 

data are also used by public officials to make informed 

decisions. USDA policymakers and Congress use this 

information to enable a strong, sustainable U.S. farm 

economy. 

Exhibit 25: Agricultural Statistics Reports Released On-Time 

Fiscal Year 2006 

Annual Performance Goals and Indicators Target Actual Result 

2.2.1 Agricultural Statistics Board reports are released on time 100 

percent of the time. 

Agricultural 

Statistics Board 

reports are 

released on 

time 100 

percent of the 

time 

Agricultural 

Statistics 

Board reports 

were released 

on time 100 

percent of the 

time 

Met 

Exhibit 26: Trends in Agricultural Statistics Reports Released On-Time 

Fiscal Year 2006 

Trends 2002 2003 2004 2005 2006 

2.2.1 Agricultural Statistics Board reports are 

released on time 100 percent of the time. 

99.8% 100.0% 99.2% 99.8% 100.0% 
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66 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

OBJECTIVE 2.3: PROVIDE RISK 

MANAGEMENT AND FINANCIAL TOOLS TO 

FARMERS AND RANCHERS

USDA helps the Nation’s farmers and producers mitigate 

the risks involved in agricultural production. The 

Department continually works to improve its programs to 

better serve the needs of producers better, and reach out to 

new farmers and underserved populations. An 

economically prosperous agricultural sector contributes to 

the Nation’s economic vitality and standard of living. 

Consumers benefit from efficiently produced and 

marketed agricultural products that minimize their food 

costs and maximize their choices. The success of U.S. 

agriculture depends on the ability to expand into new 

markets, obtain adequate capital, protect against financial 

risk and adjust to changing conditions. This success also 

depends on the economic well-being of producers. 

Producers must be able to increase production, either 

through increased farm acreage or other methods, 

maintain their farms and equipment, and utilize tools to 

mitigate the risks associated with various aspects of 

production. 

Key Outcome 

Economically Sound Agricultural 

Production Sector 

There is much diversity in the farm sector due to 

differences in resources, climate, individual preferences 

and even lifestyles. The needs, concerns and opportunities 

of larger, commercially oriented farms differ from those 

of smaller, intermediate farms, regardless of location. 

Thus, USDA has a variety of farm-related programs 

designed to enhance the economic opportunities for all 

agricultural producers, while providing options for 

individual producers. The Department helps meet the 

credit needs of farmers and ranchers through its farm loan 

programs. It also provides income stability to keep 

producers economically viable through such economic 

safety-net programs as crop insurance, direct and countercyclical payments, marketing-assistance loans and other 

commodity support programs. 

Providing access to capital is one of USDA’s primary 

objectives. USDA makes direct and guaranteed farm 

ownership and operating loans to farmers and ranchers 

temporarily unable to obtain commercial credit from a 

bank, Farm Credit System institution or other lender at 

reasonable rates and terms. These loans can be used to 

purchase land, livestock, equipment, feed, seed and 

supplies, construct buildings or make farm improvements. 

USDA loans are particularly important to beginning, 

minority and women farmers, groups that have been 

underserved by the commercial lending industry. 

Additionally, their limited cash flow may prevent them 

from qualifying for a commercial loan. USDA also helps 

established farmers who have suffered financial setbacks 

from natural disasters or whose resources are too limited 

to maintain profitable farming operations. 

The Department provides outreach and technical 

assistance to beginning, minority and women farmers and 

ranchers to help them establish and maintain profitable 

farming operations. USDA works with other Federal, 

State and local agencies, non-governmental organizations, 

land-grant universities and other educational 

organizations. These groups identify and assist minority 

farmers and women producers, and help remove program 

barriers to participation. Additionally, USDA works to 

ensure adequate funding for direct operating loans for 

minority, small, beginning, limited resource and other 

farmers. 

USDA is positioning itself for the future to serve the 

needs of America’s farmers and ranchers, food-aid 

recipients, and the general public best. Although 

agriculture and rural America have changed substantially, 

the Department’s field-office structure dates to the 1930s. 

USDA must change the way it conducts business to place 

limited resources where they will be needed most. To 

accomplish this, it is streamlining and modernizing its 

business processes, and working to improve program 

delivery and increase operational efficiency. USDA is 
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working to make more programs and services available 

electronically. This step is designed to offer customers 

more access to programs and information. 

USDA also is redesigning the way it interfaces with 

farmers and producers in its traditional “safety-net” 

programs. The Department is expanding online options 

while maintaining more traditional approaches. Offering 

programs in a Web environment will reduce the number 

of hours needed to verify and disburse program benefits 

greatly. Additionally, a Web environment also is more 

cost effective and increases customer satisfaction. 

USDA continues to streamline procedural handbooks, 

information collections and regulations for the direct-loan 

program. This process allows the Department to focus on 

providing technical assistance, services, monitoring and 

oversight. These are essential tasks in supporting highrisk beginning and socially disadvantaged minority or 

women borrowers. A similar effort completed for the 

guaranteed loan program streamlined all business 

processes. This effort dramatically reduced the reporting 

burden for applicants and USDA. It also led to more 

efficient loan processing. Comparable results are 

anticipated for the direct loan program once the 

streamlining effort is complete. 

The Department has responded with a number of 

initiatives designed to improve services for customers and 

save time and money for its programs. Some of USDA’s 

Web-based tools improve internal processes and permit 

information sharing among agencies. Other improvements 

allow customers to complete electronic transactions 

themselves, improving customer satisfaction. Currently, 

USDA is developing the Farm Loan Program Information 

Delivery System (FLPIDS). This Web-based system will 

house all farm-loan programs and provide multiple 

improvements to operational efficiency. For example, 

producer data will only have to be entered once. Then, 

they will be available for any application needed for that 

producer. Additionally, FLPIDS will contain such 

enhanced decision-making tools as a workflow system 

that will provide improved workload data for managers. 

In FY 2001, USDA implemented the Service Center 

Information Management System. The system transfers 

producers’ names and addresses from a local database to a 

national Web-based system accessible to all service center 

employees. This application is the foundation on which 

USDA’s enterprise initiatives are built. Data are available 

centrally to automate business rules fully for payment 

limitations, eligibility and other functions that require 

nationwide data access. The Department is using cuttingedge technology for a number of initiatives. These 

initiatives are designed to decrease the amount of 

administrative processing time significantly for many 

programs, enhance program delivery and allow customers 

to complete and submit information and forms 

electronically. Producers no longer have to travel to their 

local USDA Service Center to complete these tasks, but 

can view and print submitted contract options at any time. 

While producers still have the option to apply for the 

program in person at their local USDA Service Center, 

offering sign-up options through the Internet will help the 

Department serve more producers. 

Financial risk partially derives from the time lag between 

when producers need assistance or capital and when they 

actually receive the funds or credit. USDA is working to 

reduce the amount of time required to process its direct 

and guaranteed loan programs to get funds to producers in 

a timelier manner. Reducing loan-processing time ensures 

that financial resources are funneled more quickly where 

needed. This effort allows recovery from setbacks and 

improves operational efficiency. The Department also 

plans to increase the percentage of transactions completed 

electronically. Electronic transactions greatly reduce the 

number of hours needed to verify and disburse program 

benefits. Several USDA programs already are Webenabled. This feature allows producers to file applications 

and paperwork electronically, eliminating trips to USDA 

offices and expediting the administrative process. Getting 

funds to producers more quickly and efficiently will 

improve customer service and satisfaction. Thus, the 

Department will be able to meet the needs of operators, 
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68 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

farmers and the consumers who depend upon the results 

of the Nation’s agricultural sector better. 

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 1998, the program insured 

181.8 million acres. Since that time, insured acreage has 

grown steadily, and is currently at 245.8 million acres. 

Since FY 2000, insured acreage in the program has 

increased 39.4 million acres or 19.1 percent. Federal crop 

insurance is available to producers solely through private 

insurance companies that market and provide full service 

on policies upon which they share the risk with USDA. 

Principally, the Standard Reinsurance Agreement (SRA) 

defines the amount of risk they share. The SRA calls for 

insurance providers to deliver risk management insurance 

products to eligible entities under certain terms and 

conditions. Providers oversee 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. It also provides 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 the SRA. These changes are 

estimated to generate average annual Government savings 

of $37 million. They also promote policy sales in lessprofitable areas and reduce program fraud, waste and 

abuse. The number of participating companies is up 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 $49.9 billion in FY 

2006. As recently as FY 1998, the value of risk protection 

provided agricultural producers was less than $28 billion. 

USDA launched two new Pasture, Rangeland and Forage 

pilot insurance programs at the Texas A&M Beef Cattle 

Short Course Annual Cattlemen’s College. 

Approximately 1,500 livestock producers attended the 

exhibition. USDA co-hosted a workshop for ranchers to 

explain the new pilot programs. Producers also could 

visit the USDA booth for personal demonstrations of the 

new products. The exhibition attracted substantial media 

attendance and coverage. Reporters interviewed ranchers 

and Department personnel regarding the new products. 

Various cattle organizations attended the exhibition and 

obtained information to distribute to their membership. 

USDA also announced new agricultural risk management 

partnership agreements totaling $25.05 million. The 

agreements provide funds for projects to develop new risk 

management tools for farmers and ranchers. They also 

provide outreach and education opportunities to limitedresource and other traditionally underserved farmers and 

ranchers. About $6.97 million was allocated to 64 

partnerships with community-based, educational and notfor-profit organizations. The funds are used to educate 

women, limited-resource and other traditionally 

underserved farmers and ranchers to manage and mitigate 

agricultural risks. About $4.40 million was used to fund 

cooperative agreements to deliver crop insurance 

education to producers in 15 historically underserved 

States. Specialty crop, livestock, nursery and horticulture 

producers will benefit from $5.24 million in education 

partnership agreements for 40 commodity partnership 

programs. 

When natural disasters strike, the Department reacts 

quickly to help affected producers recover. USDA 

partners with commercial lenders to guarantee ownership 

and operating loans. It also makes direct loans to 

producers and provides capital in times of emergency. 

Additionally, the Department provides income stability. 

This assistance includes direct and counter-cyclical 

payments, marketing-assistance loans and other 
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F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 69 

commodity support programs. USDA supports research to 

identify new uses and more efficient technology for 

producing and marketing agricultural products. 

Challenges for the Future 

Local and national economies impact USDA’s ability to 

meet the credit needs of producers and the delivery of 

services. Training, human-capital planning and 

organizational efficiency are priorities as the Department 

works to provide greater awareness of its programs and 

inform its customers of participation requirements. USDA 

farm loan programs are reviewed regularly. These reviews 

ensure that customers are receiving services efficiently 

and effectively, and that service staff are trained to assist 

farmers during economic crises and natural disasters. 

While a USDA strategic goal is to convert more of its 

programs to Web-based transactions, many producers are 

neither ready nor able to use new technologies. In many 

areas of the U.S. high-speed Internet access is 

unavailable. The Department recognizes the need to 

provide education and support to customers converting to 

electronic transactions. At the same time, USDA must 

continue to provide traditional, face-to-face program 

delivery for its customers. Thus, for the foreseeable 

future, service center staff must face the challenge of 

operating in a dual environment of old and new processes 

and procedures. 

USDA will continue to increase the availability of 

eGovernment initiatives to allow producers to have 

around-the-clock access to farm programs. While USDA 

offers many programs that can be accessed through the 

Internet, its ability to offer services electronically depends 

upon continual updating and improvement of its 

technological and physical infrastructure. Without 

constant maintenance and upgrading, USDA’s ability to 

offer more services online will be constrained. Improving 

equipment and technology and training staff in its use will 

be essential for the Department to achieve its goal of more 

Web-based transactions for customers. 

USDA is evaluating contracts for the development of new 

and innovative risk management solutions for insuring 

pasture, rangeland, forage and hay. The contracts include 

developing a new plan that uses such tools as a satellitebased vegetative index, and another based on a 

Temperature Constrained Normalized Difference 

Vegetation Index (NDVI) approach. NDVI uses data 

derived from satellite-based remote sensing imagery. This 

system describes the seasonal growth dynamics of 

vegetation for target areas. One such tool is a Seasonal 

Growth Constrained Rainfall Index. This index 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. FCIC will 

determine which of these approaches meets the criteria for 

effective risk management coverage and will then 

approve, modify or reject each approach for pilot testing 

in specific areas. 

Analysis of Results 

In FY 2006, USDA met or exceeded each of its 

performance targets for providing risk management and 

financial tools to farmers and ranchers. 

USDA introduced two new pasture, rangeland and forage 

products that will be available for FY 2007. The Rainfall 

Index Insurance and the Vegetation Index Insurance 

Programs will allow livestock producers to purchase 

insurance protection for losses of forage produced for 

grazing or harvested for hay. USDA will test the former 

program in 220 counties in Colorado, Idaho, North 

Dakota, Pennsylvania, South Carolina and Texas. This 

program is based on rainfall indices used to measure 

expected production losses. The Department will test the 

latter program in 110 counties in Colorado, Oklahoma, 

Oregon, Pennsylvania, South Carolina and South Dakota. 

This program is based on satellite imagery that determines 

the productivity of the acreage as a means to measure 

expected production losses. Together, these pilot 

programs will be available to provide coverage on 
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70 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

approximately 160 million of the 640 million acres of 

grazing land and hay land in the U.S. 

USDA also reviewed program participation in States 

previously determined to be underserved by the Federal 

Crop Insurance Program. This review confirmed the 

significant progress made in increasing participation in 

many of the underserved States. In FY 1998 for example, 

crop insurance covered only 30 percent of the planted 

acreage of major crops in the underserved States. By FY 

2005, the last year for which figures are available, 

participation had increased to 54 percent. Likewise, 

participation at buy-up levels of coverage increased from 

41 percent to 77 percent during this period. This review 

further confirmed that every crop of economic 

significance already has widespread insurance 

availability, except for pasture, rangeland and forage. The 

review also confirmed that, with a few exceptions, 

programs already exist for the major crops in the States 

ostensibly underserved by program. It is apparent that 

addressing participation concerns in underserved States 

largely requires a focus on USDA’s existing product 

portfolio. This is particularly true for extensive education 

and marketing, and improvements to existing products. 

The Department is looking to secure outside expertise to 

help identify improvements needed in existing products 

for underserved States. It also is continuing work on other 

efforts that may offer a cost-effective approach to 

delivering risk management products to various smallvalue and specialty crops. 

USDA set a target to have 33 percent of its programs 

Web-enabled in FY 2006. It met this target. For programs 

to be considered as such, producers and ranchers must 

have access to the relevant program software from their 

home or office. USDA met this goal with three programs 

(Loan Deficiency Payment, Direct and Countercyclical 

Payment Program, and Tobacco Successor-In-Interest 

Contracts). Another program, the Milk Income Loss 

Payments Program, while Web-enabled at all USDA 

county offices, remains unavailable to individual 

producers. 

USDA is attempting to reduce administrative costs and 

increase customer satisfaction as it moves from an 

antiquated “legacy” platform to a Web-based system for 

administering programs and disbursing payments. 

Customers have the option of applying for Loan 

Deficiency Payments (LDPs) online or going to a service 

center. Currently, USDA makes payment on approved 

electronic LDP applications within 48 hours. The 

previous manual process could take up to eight weeks for 

payment. Less than 1 percent of LDPs currently are 

delivered through a Web-based environment. USDA will 

increase the percentage to 100 percent by FY 2007. By 

using the Web-based system, USDA will realize 

substantial administrative savings. Additionally, when 

fully implemented, customers will no longer be required 

to visit USDA Service Centers to complete transactions. 

This should increase customer satisfaction and reduce the 

average processing time for delivering program benefits. 

USDA exceeded the annual goal for the percentage of 

beginning farmers, women, and racial and ethnic 

minorities financed by the Department. In FY 2006, 46 

percent of farm operating and ownership loan dollars 

went to these groups, surpassing the 40-percent target and 

matching the record result achieved in FY 2005. The FY 

2006 results continue the long-term trend of providing 

increased assistance to these farmers and ranchers. 

The Department exceeded the processing time 

performance goals for both Direct and Guaranteed Loan 

programs. In the Direct Loan Program, the average 

processing time in FY 2006 was 31 days, exceeding the 

35-day target. The average processing time for 

Guaranteed Loans decreased from the FY 2005 level of 

14.5 days to 12.63 days in FY 2006. Processing times for 

both loan programs have decreased significantly in the 

past several years, with direct loans decreasing by 10 days 

since 2002. Guaranteed loan processing decreased by 

more than five days per loan since 2001. By emphasizing 

the need to reduce processing time within each field 

office, USDA now processes and administers loans to 

customers more efficiently. Thus, farmers can receive the 
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F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 71 

financing they need in less time, and help sustain their 

livelihood or income levels. 

Selected Results in Research, Extension and 

Statistics 

USDA recently studied the role of farm subsidy programs 

on rural economic well-being. Farm subsidy programs 

were introduced in the 1930s largely due to concern for 

chronically low and highly variable incomes of U.S. farm 

households. Today, commodity-based support programs 

remain prominent, though the income and wealth of the 

average farm household now exceeds that of their nonfarm counterparts by a large margin. Farm income 

continues to be highly variable. Despite this, the small set 

of farm households most at risk for income variability — 

because farm income represents more than one-third of 

household income — are those operating large farms. 

They have substantial net worth, which cushions 

uncertain farm income. 

USDA examined the disposition of farm subsidies. Crop 

production is shifting to much larger farms. Since 

Government commodity payments reflect production 

volumes for program commodities, payments also are 

shifting to larger farms. In turn, the operators of very 

large farms have substantially higher household incomes 

than other farm households. Thus, Government 

commodity payments also are shifting to much higherincome households. Since the changes in farm structure 

appear to be ongoing, commodity payments likely, under 

current policies, will continue to shift to higher income 

households. 

Exhibit 27: Providing Tools to Help Farmers and Ranchers Stay Economically Viable 

Fiscal Year 2006 

Annual Performance Goals and Indicators Target Actual Result 

2.3.1 Increase the value of risk protection provided to agriculture 

producers through FCIC-sponsored insurance ($ Bil) 

$40.2 $49.9 Exceeded 

2.3.2 Increase percentage of program benefits delivered through a Web 

environment. 

33.0% 33.0% Met 

2.3.3 Increase percentage of beginning farmers, racial and ethnic 

minorities, and women farmers financed 

40.0% 45.9% Exceeded 

2.3.4 Reduce average processing time for direct loans 35 days 31 days Exceeded 

2.3.5 Reduce average processing time for guaranteed loans 14.25 days 12.63 days Exceeded 

Exhibit 28: Trends in Providing Tools To Keep Farmers and Ranchers Economically Viable 

Fiscal Year 2006 

Trends 2002 2003 2004 2005 2006 

2.3.1 Increase the value of risk protection provided to 

agriculture producers through FCIC-sponsored 

insurance. ($ Bil) Baseline: 1999 = $30.9 

$37.3 $40.6 $46.7 $44.2 $49.9 

2.3.2 Increase percentage of program benefits delivered 

through a Web environment. 

NA NA NA NA 33%

2.3.3 Increase percentage of beginning farmers, racial 

and ethnic minorities, and women farmers financed 

31% 33% 34% 40% 46% 

2.3.4 Reduce average processing time for direct loans 

(days) 

NA 41 43 37 31 

2.3.5 Reduce average processing time for guaranteed 

loans (days) 

18 15 15 14 12.63 
ANNUAL PERFORMANCE REPORT 

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72 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Strategic Goal 3: Support Increased 

Economic Opportunities and 

Improved Quality of Life In Rural 

America 

OBJECTIVE 3.1: EXPAND ECONOMIC 

OPPORTUNITIES BY USING USDA FINANCIAL 

RESOURCES TO LEVERAGE PRIVATE 

SECTOR RESOURCES AND CREATE 

OPPORTUNITIES FOR GROWTH

Overview 

USDA’s programs support low-interest financing of rural 

businesses to leverage limited private sector financial 

resources. USDA funds promote opportunities for 

economic growth as measured by jobs created and saved. 

One of USDA’s core missions is ensuring that rural 

residents enjoy economic opportunities equivalent to 

those of other Americans. Credit limitations and other 

market imperfections sometimes restrain the ability of 

rural economies to create the jobs and incomes that would 

allow rural families to thrive and rural youth to remain in 

their communities. USDA programs serve as capital 

enhancement tools for rural America by providing access 

to capital for investment in businesses and economic 

infrastructure. Through capital enhancement and by 

implementing energy-related provisions of the 2002 Farm 

Bill, the Department will facilitate the expansion of 

economic opportunities in rural areas. 

The development of the Internet-based economy provides 

unique opportunities for rural America. Broadband 

infrastructure greatly helps mitigate the limitations on 

business development in rural areas caused by 

geographical distance and a limited customer base. USDA 

is providing capital to finance access to broadband service 

for rural communities. This access is critical to enable 

rural businesses to participate in the developing global 

economy. 

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

Program provides up to an 80-percent guarantee to 

commercial lenders. The program allows lenders to raise 

the amount of a loan. A 2-year, $10.9 million B&I 

guaranteed loan allowed a Florida wood products 

manufacturer to modernize and increase safety standards 

while expanding product line and sale of lumber byproducts. This saved or created 176 jobs. 

In Nevada, a $17.5 million B&I loan financed the 

construction of a 25-bed acute primary care medical 

center. An emergency room, operating theaters, diagnostic 

and imaging departments, full laboratory, physical 

therapy department, and heliport to accommodate patient 

air transport will make up the 73,681-square-foot facility. 

When complete, more than 140 people will staff the 

medical center. 

In Wisconsin a $6.8 million B&I loan to a farmer-owned 

cooperative (515 farmers in 17 States) enabled the organic 

producer-distributor to expand its business and to 

establish a “green” headquarters building that 

incorporates the latest environmentally sound 

technologies. 

A $17 million construction loan to an Iowa cold storage 

facility created 24 jobs. The new automated warehouse 

allows the business to keep national customers from 

abandoning the area. 

Banking regulations limiting the concentration of credit 

prevented a bank from providing financing for expansion 
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F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 73 

to an employee-owned engineering firm. A B&I loan 

guarantee of $4.4 million allowed this firm to consolidate 

headquarters facilities in Helena, Montana. Thus, the firm 

increased its ability to serve new and expanding client 

requirements. The 260 employee-owners served as the 

direct beneficiaries. 

In Minnesota, a $13 million B&I guarantee created 57 

jobs in a machine and metal fabrication business that 

would have closed otherwise. 

USDA revolving loan programs (IRP, RBEG, RDLG) 

make small grants to local not-for-profits to re-lend to 

start-ups, typically sole proprietorships or family 

partnerships. The recipients usually have insufficient 

credit histories to qualify for commercial loans. The 

intermediary organization provides business education 

and marketing support, along with loans. Under these 

programs an intermediary can make small loans and 

usually provide consulting services as well. Typically, 

these are working capital loans to entrepreneurs trying to 

provide new services or goods. For instance, in a ninecounty area of southern Kentucky, start-up funds were 

used to purchase equipment for an outpatient home 

infusion therapy center. This facility will employ 24 

people and provide needed medical service. 

Key Outcome 

Enhanced Capital Formation for Rural 

Communities 

Not only are rural businesses supported, but the 

employment opportunities in rural areas are improved. 

Whether a grant of $20,000 is used to improve a small 

town’s lighting, or provides targeted training to entice an 

employer, all rural residents benefit from these 

investments. When a loan or grant is made to businesses 

for expansion, modernization or start-up, the local job 

market mix is increased and the local tax base improved. 

As a result of the economic stimulation, jobs are created 

and the economy improves enhancing the quality life for 

most citizens. 

Challenges for the Future 

Rural economies face challenges different from those of 

urban and suburban areas. These challenges include: 

Historical dependence on natural resources, mostly 

commodities, subject to cyclical trends and changing 

regulatory standards and oversight; 

Low profit margins on commodity sales and 

competition from foreign commodities; 

Large-scale changes in technology and the resulting 

efficiency gains in these industries along with the 

perceived limited skills available; and 

Inaccessibility and low-density populations. 

Additionally, rural areas typically have underdeveloped 

public services that make it difficult to attract or retain 

businesses. They lack public funding for amenities that 

are offered in urban areas, such as dedicated business 

parks or expanded transportation links. Education, health 

care and entertainment typically are perceived to be 

marginally acceptable in rural areas. Every rural area has 

unique concerns. 

USDA State and area staff work with regional and State 

entities, using Department dollars and other public and 

private funds. Some areas need more jobs, while others 
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74 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

are being defined by new industries or commodities. 

USDA is sensitive to these needs. 

USDA’s grant programs provide funds to under-resourced 

rural communities to improve their local infrastructure or 

expertise to be more attractive to new businesses and 

maintain appeal to local residents. For instance, Main 

Street improvements are usually funded by special local 

business tax assessments, but in marginally viable areas 

an assessment would not be affordable. Frequently 

companies looking for a new location need special skill 

sets and USDA grants can fund small, targeted job 

training programs. 

All rural residents benefit when the local economy 

prospers. More and better jobs, and more services, such as 

health care facilities, improve the quality of life and 

encourage young people to settle and stay. Additionally, 

even small economic gains can increase public 

infrastructure through improved schools or expanded 

amenities like greater entertainment options. 

Selected Results in Research, Extension and 

Statistics 

The economy of rural Appalachian communities 

historically is tied to the coal and steel industries. The 

recent decline in these industries and concerns for 

environmental quality has stressed rural community 

economic development. USDA funded a company to 

develop a value-added product from residual mine waste. 

Since funding was initiated in 2000, this company has 

processed and refined approximately 500 tons of mine 

waste to extract iron oxide for use in the pigment industry. 

This project reduced local environmental pollution and 

improved economic opportunities in rural Pennsylvania. 

A total of 30,000 agricultural operations from across the 

Nation participated in the voluntary testing of the 2007 

Census of Agriculture’s questionnaire in preparation for 

the data collection and processing the census data in FY 

2008. The 2007 Census of Agriculture is expected to be 

mailed to all agricultural operations in December 2007. 

Specific changes planned for the 2007 Census of 

Agriculture include expanded data on organic agriculture, 

new data on agriculture practices, improved coverage of 

small and minority operators, and electronic reporting 

capability for all respondents. Data from the 2007 Census 

of Agriculture will be released in February 2009. 

Considering the high cost of doing business, New Jersey 

farmers cannot grow the same commodities as farmers in 

the Midwest competitively. Proximity to the largest 

consumer market in the Nation suggests that New Jersey 

farmers should produce high-value prepared foods. A 

company supported by USDA competitive grants to 

Rutgers University provides research, education and 

business-development services to New Jersey’s 

agricultural and food industries. The company became the 

country’s first service-based, food agricultural industry 

incubator model. It already has become a template for 

similar programs throughout the U.S. 

Analysis of Results 

The number of jobs created or saved is linked directly to 

the amount of total available USDA business program 

funding, amounts obligated and disbursed to awardees, 

and local economic conditions. Annual job targets are 

based on historical program operations, subsidy rates and 

annual appropriations. The target job numbers assume a 

level funding horizon and timely allocations of funds, 

without regard to the potential impact of major natural 

disasters. In FY 2006, the aftermath of Hurricane Katrina 
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F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 75 

and other natural disasters in rural America hampered job 

growth potential. Despite this issue, USDA programs met 

the target for the fiscal year. 

USDA exceeded its goal despite a decline in the number 

of loans and job numbers in one major program. A change 

in program operations and the impact of Hurricane 

Katrina delayed fund allocations to the States. This delay, 

in turn, suppressed demand from applicants. Yet FY 2006 

funds created or saved 73,072 jobs, expanding economic 

opportunities for more than 500 rural communities. 

Subsidy rates were low in FY 2001. The low rates caused 

relatively high program fund levels for some major 

USDA business programs. At that time, the baseline for 

jobs created or saved was set at 105,222. Annual budget 

authorities, subsidy rates and program levels have varied 

since resulting in general decline in annual job numbers. 

FY 2006 results were in line with expectations given the 

level of budget authority, subsidy rate and available 

program funds. 

USDA business programs correlate the expansion of 

economic opportunity with job growth as measured by 

jobs created and saved directly related to funded 

programs. Through the years job information has been 

gathered in different ways. The business and industry 

program and some grant programs estimate jobs based on 

business plan projections. Job counts are verified when 

each loan or grant is closed. The major revolving loan 

fund uses a life-cycle formula. State offices put huge 

efforts into substantially improving their ability to collect, 

record and report job information on all programs quickly 

and consistently. 

According to the U.S. Department of Labor, in addition to 

direct jobs created or saved, the overall economic benefit 

to the rural community is estimated to be $2.50 for every 

dollar in guaranteed loans closed. These investments have 

long-lasting positive impacts in rural communities. These 

impacts include bringing more dollars to downtown areas, 

increasing variety of goods and services available, and 

offering start-up working capital. 

In reality, USDA funds have long-lasting direct and 

indirect impacts on local rural economies that are hard to 

measure. Thus, the Department is making a bold attempt 

to estimate the overall economic impact of budget dollars 

on rural areas. 

USDA has developed a pilot information system, the 

Socio-Economic Benefit Assessment System (SEBAS), to 

enhance its ability to measure actual net program–

investment effectiveness. SEBAS uses detailed 

information about Department loan or grant investments 

in conjunction with other available Federal data resources. 

This process enables estimates of the direct and indirect 

impacts of program assistance on local and regional 

economic performance. It also affects the quality of life in 

rural areas. SEBAS is being tested with several USDA 

programs in FY 2007. Future results will measure 

program effectiveness in many ways and serve as a 

management tool to help improve program efficiency and 

performance with limited resources.

Exhibit 29: Strengthen Rural Businesses 

Fiscal Year 2006 

Annual Performance Goals and Indicators Target Actual Result 

3.1.1 Jobs Created or Saved 72,370 73,072 Exceeded 

Exhibit 30: Trends in Creating or Saving Jobs 

Fiscal Year 2006 

Trends 2002 2003 2004 2005 2006 
ANNUAL PERFORMANCE REPORT 

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76 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

3.1.1 Jobs Created or Saved 76,301 87,619 81,030 73,617 73,072 
ANNUAL PERFORMANCE REPORT 

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F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 77 

OBJECTIVE 3.2: IMPROVE THE QUALITY OF 

LIFE THROUGH USDA FINANCING OF 

QUALITY HOUSING, MODERN UTILITIES, AND 

NEEDED COMMUNITY FACILITIES

Overview 

USDA successfully improved the quality of life in rural 

America during FY 2006. The Department financed 

quality homes for 42,700 homebuyers, new/improved 

water and waste disposal facilities for 1,500,000 

subscribers, new or upgraded electric service for 

8,183,649 consumers, broadband telecommunications in 

458 counties for 297,027 subscribers and improved 

community facilities for 12 million rural residents. 

The availability of adequate housing is critical to a 

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

families have access to decent and safe housing is a major 

concern in every area, whether urban or rural. USDA 

provides financing for low- and moderate-income rural 

families who cannot obtain credit from other sources to 

help them own homes. Owning a home provides stability 

for families and gives them the opportunity to strengthen 

their financial condition through the accrual of equity. 

The President has expressed his desire to increase 

homeownership, particularly among minorities. He has 

established a major initiative to increase minority 

homeownership nationwide. USDA is implementing an 

action plan aggressively to support the President’s goal. 

If new businesses are to operate in a rural community, that 

community must possess the amenities these firms require 

and employees desire. These amenities include access to 

such basic needs as clean water, adequate housing, 

reliable electricity and telecommunications, and such 

essential needs as quality education, health care, day care, 

public safety services and cultural activities. If a 

community cannot meet the public’s essential needs, 

young people will neither stay in nor migrate to rural 

areas. USDA is an important source of credit and 

technical assistance for developing the economic 

infrastructure of rural America. These resources are 

essential if rural residents and communities are to 

improve their quality of life through increased economic 

opportunity. 

Providing reliable, affordable electricity is essential to the 

economic well-being and quality of life for all of the 

Nation’s rural residents. The electric programs provide 

capital to upgrade, expand, maintain and replace 

America’s vast rural electric infrastructure. They also 

provide leadership, guidance and other benefits. 

Key Outcome 

Improved Rural Quality of Life Through 

Homeownership, New and/or Improved Water 

and/or Waste Disposal Facilities, New and/or 

Improved Electric Facilities and/or New or 

Improved Telecommunications Facilities 

In FY 2006, USDA provided funds to construct, renovate 

or improve 1,000 essential community facilities. Rural 

Americans had new or improved services available from 

133 health care facilities, 520 public safety facilities, 106 

educational facilities, 10 energy-related facilities, 211 

public buildings and improvements and a number of other 

essential community facilities. In this period, 12 million 

rural residents had new or improved services available to 

them through these facilities. 

Water and sewer facilities impact the economic 

infrastructure of communities. By investing in water and 

sewer facilities, communities can: 

Save or create jobs; 

Leverage funds with the private sector and local and 

state agencies; 

Attract Federal funds from other agencies; and 

Enlarge the property tax base. 

During FY 2006, USDA leveraged $918,306,538 from 

other sources with $1.5 billion of Department funds. 

Investments in water and sewer facilities are critical in 

encouraging economic growth. For example, the 
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78 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

wastewater treatment system in Rupert, Idaho, 

approached its design capacity and became unable to treat 

its waste and odor problems. Of concern was the 

continued viability of its industrial customers which 

provide employment and represents the footing of the 

local economy. Rupert and the Idaho Department of 

Environmental Quality joined forces. The city council, 

working with the 1,946 residential customers, 250 

commercial owners and 2 large food processors, decided 

to upgrade the 28-year old plant. Rupert attracted 

Government funds and invested its own funds for a total 

of $13,230,000. The plant will be capable of treating 2.3 

million gallons per day, providing for a 20-year growth 

pattern. The design enables plant expansion as needed. It 

increases the plant capacity 18 percent within the existing 

footprint of the present site. Through extraordinary 

cooperation, the major industry and commercial 

customers have laid the foundation for long-term growth 

and prosperity. 

The Mountain City, Tennessee, sewer system suffered 

numerous overflows and shutdowns for years. These 

overflows created problems for the inmates and staff of 

the North East Correctional Center (NECX). NECX is 

Mountain City’s largest employer. The town obtained 

USDA funding and combined it with financing from the 

Tennessee Department of Corrections. Upgrading the 

sewer line will spur growth at the Johnson County 

industrial park and allow NECX to expand, spurring 

economic growth. 

Disaster Relief Assistance, Hurricanes 

Katrina and Rita 

On September 29, 2006, the electric programs approved 

the following requests to defer certain debt service 

payments on outstanding Rural Utilities Service notes 

under Section 12 of the Rural Electrification Act. Singing 

River Electric Cooperative, Inc., of Lucedale, Mississippi, 

will defer principal in the amount of $5.7 million on 

twelve loans. The deferment is for 3 years; and the final 

maturity of each note will be extended 3 years and 

Jefferson Davis Electric Cooperative, Inc., of Jennings, 

Louisiana, will defer principal and interest in the amount 

of $4.9 million on two loans. The deferment is for five 

years and the final maturity of each note will be extended 

five years. These deferments and extension of maturity 

dates will provide financial assistance to these two 

cooperatives whose systems were significantly damaged 

by Hurricane Katrina. 

USDA electric programs are responsible for the 

engineering aspects of its borrowers. These aspects 

include standards, specifications, and other requirements 

with respect to the design, construction, and technical 

operation and maintenance of power-plant, distribution, 

and transmission systems and facilities, including load 

management, energy conservation and communications. 

Engineering practices, policies, standards and guidelines 

relating to electric borrowers systems are developed; 

analyses are conducted and guidance is provided on 

matters relating to fuels for electric generating stations 

and develops related policies and procedures for the 

electric programs. Criteria, procedures and analyses are 

developed for the improvement of the operating 

performance of electric borrowers and for the forecasting 

of borrowers’ power requirements. These standards and 

specifications enabled cooperatives that were not affected 

by Hurricane Katrina to assist those that were by sending 

supplies, equipment and crews. Electricity to cooperative 

rural residents was re-established quicker than it could 

have been if the crews and personnel were unfamiliar with 

the design of the system and lacked the proper 

replacement equipment. 

The Town of Nickelsville, Virginia took advantage of 

USDA telecommunications funding to implement a Fiber 

Optic Network. Town officials are hoping the new service 

will lead to new business prospects and economic 

development in their community. The project will enable 

the provision of broadband services, including affordable 

high-speed Internet access, digital television and 

telephone services, to households and businesses in the 

Town of Nickelsville and the surrounding areas. In 

addition, a new public Internet access site connected to 

the fiber optic network has been established at the 

Nickelsville Community Center. 
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The new Nickelsville center provides free public access 

computers with fast broadband connections to local 

residents during specific hours of operation. According to 

press accounts, the importance of the new fiber network 

far outweighs its benefits to local residents. The 

availability of fast broadband helps to level the economic 

development playing field by allowing rural communities 

like Scott County to offer the same services as those in 

larger areas. The introduction of the fiber optic network is 

expected to draw small companies to rural areas like 

Nickelsville. 

Challenges for the Future 

Challenges to this objective continue to be the increased 

cost of housing and other building costs. Rising building 

costs result in fewer homes, community facilities and 

water and waste systems. A challenge USDA faces 

regarding water and wastewater is assisting 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. Solutions are expensive, resulting in the need for 

additional grant funds to develop projects. 

USDA single-family housing programs assist low- and 

moderate-income rural residents in becoming 

homeowners. These programs are designed to strengthen 

families and communities, enhance wealth creation and 

contribute to a more broadly based ownership society. 

USDA housing program assistance reaches large numbers 

of rural Americans with services critical to a better quality 

of life. The program provides direct and guaranteed loans 

to help rural households achieve homeownership. More 

than 22,838 low-income rural Americans achieved the 

dream of homeownership though these programs in FY 

2006 which have made a special effort to increase the 

number of minority homeowners. To stretch resources, 

the programs’ loans and loan guarantees are supplemented 

with resources from private-sector banks, not-for-profit 

agencies and State housing finance agencies. 

The capital made available through the electric programs 

ensures that low-cost, reliable electric power is available 

to rural consumers, businesses, schools, health facilities 

and other consumers. The consumer density in rural areas 

is a fraction of that in urban areas. This difference 

necessitates access to lower cost capital to provide a 

comparable level of service. The electric program 

finances the construction of electric generation, 

transmission and distribution facilities serving 39 million 

rural residents in 2,500 of the country’s 3,100 counties. 

While rural electric cooperatives deliver about 12 percent 

of the total kilowatt hours sold in the country, they serve 

75 percent of the landmass. Cooperatives service 6.5 

consumers per mile of distribution line compared to 33.5 

for investor-owned utilities and 43.7 for municipal-owned 

systems. They also generate $12,000 per mile of 

distribution compared to $58,981 for investor-owned 

utilities. 

Water programs are a leading source of credit for water 

and waste projects in rural America. They provide lowinterest and guaranteed loans, grants and technical 

assistance to rural communities to develop essential water 

and waste infrastructure. With dependable infrastructure, 

communities can sustain economic development or 

improve the quality of life for their residents. Rural 

Americans may enjoy the same high standards of living 

and full participation in the global economy as their urban 

or suburban counterparts. Thus, the goal of water 

programs is to make funds available to small communities 

most in need of drinkable water and ensure that facilities 

used to deliver drinking water are safe and affordable. 

In FY 2006, the programs invested over $1.6 billion in 

direct and guaranteed loans and grants to help rural 

communities develop 1,207 water and waste disposal 

facilities. These facilities provided new or improved water 

and waste disposal services to 1,637,554 subscribers. 

Selected Results in Research, Extension and 

Statistics 

The Nurturing Homes Initiative, a collaborative effort 

between the Mississippi State University supported by 
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80 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

USDA funds and the Mississippi Department of Human 

Service’s Office for Children and Youth, provides 

educational programming and technical assistance to 

family home providers for the estimated 57 percent of 

Mississippi’s young children in unlicensed child-care 

settings. The program provides time-efficient and 

economically feasible training. Significant improvements 

occurred in the quality of childcare provided by all of the 

participants. Post-assessment scores revealed that 82 

percent of the providers scored above the national median 

score of the Family Day Care Rating Scale. The scale is 

designed to assess family child-care programs conducted 

in a provider’s home. 

Low- to-moderate income families face many challenges 

when trying to build assets. USDA, the North Carolina 

A&T University Cooperative Extension, North Carolina 

Housing and local lending institutions joined forces to 

help families in Randolph and Davidson Counties achieve 

homeownership. This partnership resulted in the 

availability of no- and low-interest loans, and in financial 

education classes to help resolve financial issues that 

could prevent them from qualifying for a loan. Twenty-six 

participants attended the first financial education 

workshops. Thirteen successfully obtained an interest-free 

loan of $50,000 to purchase homes from USDA for a total 

of $650,000. 

USDA research on non-metro population change focused 

on the future impact of the baby boom on rural migration, 

the relationship between Hispanic in-migration and 

economic restructuring, and the growing number of 

African-American retirees choosing to live in non-metro 

areas. Demographic trends also reflect a relentless 

geographic expansion of U.S. metro areas, a steady rise in 

the number of long-distance commuters and rapid 

population growth in adjacent, non-metro counties. In 

contrast, more than 1,000 counties experienced overall 

population loss since 2000, most of which are sparsely 

populated and isolated from metro regions. With natural 

increase in non-metro areas now at historically low levels, 

migration will dominate future rural demographic trends. 

Thus, the fortunes of rural America in this new century 

are linked even more to events beyond its boundaries and 

with the social, economic, technological and political 

forces that shape those events. USDA research will 

continue to focus on the changing economic and social 

conditions of rural residents as they move through largescale, demographic transitions. 

Analysis of Results 

The targets were selected based on the Department’s 

expectations for loan obligations. The expectations were 

based on the anticipated price of housing and the probable 

continuation of the low-interest-rate environment 

prevalent in 2004 and 2005. 

While the Section 502 guaranteed loan program has 

obligated more funding than last year, the actual number 

of new homeowners is less than anticipated. The reason 

for this is that escalating home prices and rising interest 

rates have made housing less affordable for low- and 

moderate-income borrowers. Higher home prices 

and higher interest rates make it more difficult for lowand moderate-income borrowers to qualify for a loan. 

Those that do qualify need larger loans to purchase their 

homes, hence, more funding was obligated than last year 

despite a lower number of new homeowners. 

The difficulties from higher interest rates and home prices 

shifted some of the demand to the direct program because 

of the payment assistance feature and slightly longer loan 

terms, making the direct program the only affordable 

option for many households. The Section 502 direct 

program fully utilized its appropriated funds plus some 

additional funding obtained to assist with the recovery 

efforts from the 2005 hurricane disasters. Thus, the direct 

program was able to provide more assistance than 

originally anticipated. 

The water program far exceeded this year’s goal because 

of various factors both internal and external to the agency. 

Demand was much stronger than expected. The loan-togrant ratio also increased over last year which allowed 

more loans to be made. Another reason the goal was 

exceeded was because of USDA state offices funding 

more projects. The offices had their full allocations in 
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F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 81 

place and semi-annual pooling redistributed funding 

among the States earlier than previous years. 

Additionally, supplemental appropriation of $45 million 

for hurricane-affected areas in the Gulf resulted in 

additional subscribers being served. 

The community facilities program exceeded its goal to 

provide needed community facilities to rural Americans 

because of the division’s emphasis on public safety and 

health care facilities. USDA staff has provided outreach at 

national, State and regional conferences, emphasizing its 

ability to provide facilities at reasonable rates and terms 

for rural Americans. 

The electric programs exceeded their performance goal 

target for fiscal year 2006 by 6,583,649 consumers. The 

2006 underestimation was due to a change in the 

interpretation of consumers receiving new or upgraded 

electric service. Other than in the year 2002, the electric 

programs have not put into its results the number of 

generation and transmission borrowers’ consumers 

receiving new or upgraded electric service. The 

estimation for 2006 was made excluding an estimation of 

generation and transmission borrowers’ consumers 

receiving new or upgraded electric service. After making 

the estimation, the electric programs re-evaluated their 

methods of calculation of consumers. A method was 

developed which enabled the generation and transmission 

borrowers’ consumers to be included in the calculation 

and eliminate double-counting consumers. Therefore, the 

estimation did not include generation and transmission 

borrowers’ consumers while the results included the 

generation and transmission borrowers’ consumers. Even 

if the electric programs had not changed their calculation 

of consumers, the target goal of 1,600,000 would still 

have been met. 

The telecommunications program exceeded its goal of 

customers served by new or improved 

telecommunications facilities by 28,563. The telephone 

loan lending authority was fully utilized. Although the 

Broadband Loan Program obligations target was unmet, 

the Broadband Program exceeded its target for customers 

served by new or improved telecommunications facilities 

by more than 100 percent. 

USDA continues to fund the deployment of advanced 

telecommunications facilities in rural America. This 

continued investment results in many financial and 

technical benefits for the borrowers. One result is the 

availability of new or improved service for the borrowers’ 

customers, the residents and businesses that they serve. In 

some cases, the financing provided by USDA reduces the 

operating and capital costs of the borrower, without a 

direct increase in the number of subscribers. Thus, the 

number of customers served by new or improved 

telecommunications facilities has fluctuated over the last 

few years, but a substantial number of customers continue 

to receive the benefit of these investments in 

infrastructure made possible by USDA’s rural 

development programs. 

Exhibit 31: Improving Rural Quality of Life Through Homeownership Opportunities 

Fiscal Year 2006 

Annual Performance Goals and Indicators Target Actual Result 

3.2.1 Homeownership opportunities provided 43,500 40,517 Unmet 

Exhibit 32: Trends in Rural Home Ownership 

Fiscal Year 2006 

Trends 2002 2003 2004 2005 2006 

3.2.1 Homeownership opportunities provided 43,036 44,130 48,894 43,224 40,517 
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82 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Exhibit 33: Improving Rural Quality of Life Through Water and Waste Disposal Facilities 

Fiscal Year 2006 

Annual Performance Goals and Indicators Target Actual Result 

3.2.2 Number of program borrowers’ subscribers (or customers) 

receiving new and/or improved water and/or waste disposal 

service. 

570,000 1,500,000 Exceeded 

Exhibit 34: Trends in Water and Waste Disposal Service 

Fiscal Year 2006 

Trends 2002 2003 2004 2005 2006 

3.2.2 Number of program borrowers’ subscribers 

(or customers) receiving new and/or 

improved water and/or waste disposal 

service. 

796,768 593,582 965,780 1,325,000 1,500,000 

Exhibit 35: Improving Rural Quality of Life Through Community Facilities 

Fiscal Year 2006 

Annual Performance Goals and Indicators Target Actual Result 

3.2.3 Customers served by new or improved community facilities 

(Mil) 

12 15.2 Exceeded 

Exhibit 36: Trends in Community Facilities 

Fiscal Year 2006 

Trends 2002 2003 2004 2005 2006 

3.2.3 Customers served by new or improved 

community facilities (Mil) 

7.2 7.2 12 12.9 15.2 

Exhibit 37: Improving Rural Quality of Life Through Electric Facilities 

Fiscal Year 2006 

Annual Performance Goals and Indicators Target Actual Result 

3.2.4 Customers served by new or improved electric facilities 1,600,000 8,183,649 Exceeded 

Exhibit 38: Trends in Electric Facilities 

Fiscal Year 2006 

Trends 2002 2003 2004 2005 2006 

3.2.4 Customers served by new or improved 

electric facilities 

11,524,931 3,745,559 4,325,985 2,360,477 8,183,649 
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F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 83 

Exhibit 39: Improving Rural Quality of Life Through Telecommunications Facilities 

Fiscal Year 2006 

Annual Performance Goals and Indicators Target Actual Result 

3.2.5 Customers served by new or improved telecommunications 

facilities 

268,464 297,027 Exceeded 

Exhibit 40: Trends in Telecommunications Facilities 

Fiscal Year 2006 

Trends 2002 2003 2004 2005 2006 

3.2.5 Customers served by new or improved 

telecommunications facilities 

N/A 382,229 373,813 232,249 297,027 

Strategic Goal 4: 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. The Department 

accomplishes this task by protecting the food supply 

against pests and diseases, minimizing production losses, 

maintaining market viability and containing 

environmental damage. USDA also ensures that the 

commercial supply of meat, poultry and egg products 

moving in interstate commerce or exported to other 

countries is safe, wholesome, labeled and packaged 

correctly. Additionally, the Department ensures that meat, 

poultry and egg products imported from other countries 

are produced by a system equivalent to USDA’s. 

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

products requires a strong infrastructure. Thus, USDA has 

stationed public-health servants throughout the country 

and in laboratories, plants and import houses. USDA will 

take an enhanced risk-based approach to inspection. 

Through these efforts, the Department will reallocate its 

resources to focus more closely on food safety systems 

and preventing public health problems before they occur. 

This initiative advances a coordinated national and 

international food safety, risk management system from 

farm to table. A significant contribution to the risk-based 

approached to inspection is the development of a public 

health infrastructure. This infrastructure will include: 

improvements to public health data analysis and 

information exchange; advanced surveillance and 

detection systems; a well-trained workforce; swift, secure 

and multi-directional communications; and disaster 

preparedness and response capability. 
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OBJECTIVE 4.1: REDUCE THE INCIDENCE OF 

FOODBORNE ILLNESSES RELATED TO MEAT,

POULTRY, AND EGG PRODUCTS IN THE U.S. 

Overview 

Protecting the Nation’s food supply from potential 

hazards is a formidable task. To accomplish this goal, 

USDA requires sound science to make the appropriate 

decisions and policy development. Currently, a 

heightened public apprehension that terrorists could target 

the Nation’s food supply exists. Additionally, there is the 

potential for new and emerging microbial hazards. Thus, 

the Department must assess and update its food safety 

systems continually. 

During the past year, USDA has continued to eliminate 

foodborne illness through testing, risk assessments, 

partnerships with its stakeholders and policy decisions 

based on sound science. 

USDA conducted approximately 1,350 food safety 

assessments in FY 2006. A food safety assessment is a 

comprehensive evaluation of an establishment’s foodsafety system, including its sanitation controls, its 

compliance with microbiological performance criteria, the 

adequacy of slaughterhouse and processing plant Hazard 

Analysis and Critical Control Point systems, the operation 

of its prerequisite programs and its response to foodsafety control deviations. Enforcement, investigation and 

analysis officers conduct food safety assessments, usually 

in response to a specific cause like a positive sample. 

USDA provides safe handling and preparation 

information to manufacturers of meat, poultry and 

processed egg products, and to consumers. This promotes 

product safety and reduces the opportunity for crosscontamination between products. For retail and foodservice operations, USDA works collaboratively with the 

U.S. Food and Drug Administration and State programs 

through the Conference of Food Protection. This 

partnership among regulators, industry, academia, 

professional organizations and consumers works to 

identify problems, formulate recommendations and 

develop and implement practices that ensure food safety. 

These efforts ensure that the Food Code contains accurate, 

science-based guidance. The Food Code is the model for 

the establishment of State and local food regulations 

regarding food safety and sanitation. 

The Department also supports public health by developing 

consumer information and education programs. These 

programs are structured around a set of food safety 

messages for the general public, are based on science, use 

social marketing principles and are delivered through a 

network of partnerships. 

Challenges for the Future 

USDA is continually challenged to prevent product 

contamination, and to educate the public on safe food 

handling. 

One of the most significant challenges faced by USDA is 

that the safety of meat, poultry and egg products can 

become endangered after Department inspection and prior 
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to consumption. Consequently, USDA is assessing how to 

limit or prevent accidental or intentional contamination. 

USDA studied Listeria monocytogenes in ready-to-eat 

meat and poultry products and is developing a 

comparative risk assessment. This comparative risk 

assessment will assist USDA in targeting its efforts to 

public health variables that are shown to be more effective 

at mitigating risk. 

USDA will continue to assess which retail practices 

present greater risk for introducing E. coli O157:H7 into 

raw ground beef and then target such operations for 

testing. The Department believes that its regulatory 

verification testing program can ensure that industry and 

retail take steps to control food safety hazards. USDA 

increases targeted testing at high-risk operations. 

As the statistics in Salmonella show, control of this 

pathogen continues to be a challenge for USDA. 

Therefore, USDA has announced the Salmonella initiative 

and the scheduling of food safety assessments to target 

broiler production in 2006 and 2007. While this group of 

pathogens is commonly associated with poultry and eggs, 

it is found in multiple products such as produce, dairy 

products and red meats. 

Additional challenges faced by USDA include the 

continued targeting of at-risk groups, namely the very 

young, pregnant women, older adults, people with chronic 

diseases, those with weakened immune systems and 

underserved populations. 

Selected Results in Research, Extension and 

Statistics 

USDA estimates the societal costs of foodborne illnesses 

from pathogens. Department researchers updated the cost 

of foodborne illness from Escherichia coli O157 (O157 

STEC). They used the U.S. Centers for Disease Control 

and Prevention (CDC) estimate of annual cases and newly 

available data from the Foodborne Diseases Active 

Surveillance Network (FoodNet) of CDC’s Emerging 

Infections Program. USDA estimates that the annual cost 

of illness from O157 STEC was $406 million in 2003, 

including $370 million for premature deaths, $31 million 

for medical care, and $5 million in lost productivity. The 

Department recently added the O157 STEC estimates to 

the Foodborne Illness Calculator to its Web site. 

USDA research on traceability in food supply showed that 

there are many private-sector, third-party certifiers 

worldwide. The Department and the University of 

Pennsylvania conducted a workshop bringing together 

insurance industry representatives, third-party certifiers 

and standards owners, lawyers and Government foodsafety experts and certifiers. The workshop examined the 

relation between USDA programs and third-party food 

safety certification, especially questions of liability. The 

Department learned that, while certifiers have avoided 

legal liability, they appear to be contributing to stricter 

food safety production decisions throughout the supply 

chain. The workshop marked a first step in assessing the 

importance of certification. 

As consumers increasingly rely on others to prepare food, 

the importance of a knowledgeable and skilled workforce 

for all food outlets is critical in preventing foodborne 

illness. The Safety Awareness in the Food Environment 

(SAFE) program provides food workers with practical 

information about food safety and sanitation. In 2005, the 

University of New Hampshire Cooperative Extension, 

supported in part by USDA funds, conducted 32 SAFE 

programs, reaching 512 food workers. Sixty-nine percent 

of the participants scored 92 percent or greater on the 

post-workshop knowledge questionnaire. Of seven 

follow-up phone surveys, 86 percent of food managers in 

establishments sponsoring a SAFE program reported food 

safety practice changes in their employees. 

Clostridium perfringens is a common bacterium 

associated with foodborne illness in the U.S. This 

bacterium produces a toxin termed enterotoxin. The 

chromosome responsible for enterotoxin production, CPE, 

has been strongly correlated to Type A food poisoning. 

Research funded through the National Research Initiative 

Food Safety Program determined that the bacterium 

containing the CPE gene survived refrigeration (4 ̊C) and 
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86 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

freezing (-20 ̊C) temperatures better, especially in meat 

products. Thus, the C. perfringens bacterium containing 

the CPE gene would be more difficult to kill by 

conventional methods and more likely to cause sickness. 

While the CPE gene’s role in mediating cold and heat 

sensitivity remains unclear, this information provides 

scientists a new avenue for improving food safety. 

A portable assay for E. coli O157:H7 will provide food 

safety regulators with additional tools. Most illness from 

E. coli O157:H7 has been associated with eating 

undercooked, contaminated ground beef. There is an 

urgent need for sensitive, specific, and rapid detection of 

these bacteria. USDA scientists developed a new assay 

based on a commercially available, portable fiber optic 

biosensor. This assay is specific for E. coli O157:H7 and 

can detect very low levels of the bacteria in ground beef 

within five hours. Higher levels of contamination can be 

detected in even less time. The biosensor and battery pack 

can be carried in a briefcase. Its compactness allows 

assays to be performed at the farm, processing plant, 

distribution center or retail store. This portable assay 

provides the food industry and regulatory agencies a new 

screening tool to detect foodborne pathogens and food 

security threats. 

A new risk assessment model will help food safety 

regulators better address the issue of Listeria in ready-toeat foods. Predicting it is a high priority for USDA, 

DHHS and FDA. Department scientists produced models 

that enable risk assessors and food safety managers to 

predict the Listeria activity in delicatessen salads at 

different storage temperatures and product formulations, 

and in commercially prepared cheeses. The models assist 

Federal regulatory agencies in developing risk assessment 

information for consumers and food companies in 

designing salad formulations that present lower health 

risks to consumers. The research also has helped food 

companies meet new Federal regulations. 

Methods to detect bacteria will help food safety regulators 

to ensure the safety of seafood better. USDA scientists 

and collaborators developed a new, rapid, inexpensive, 

enzyme-based assay to detect pathogenic Vibrio bacteria 

in seawater and shellfish. The assay may be used in 

identifying peak periods when Vibrio bacteria are at their 

highest levels in east, west and gulf coast oysters and 

growing waters. This would allow regulatory agencies to 

control shellfish harvesting based on Vibrio bacteria 

levels rather than using the current fecal coliform levels as 

indicators of pollution. Since the assay is inexpensive and 

does not require major equipment, it also could screen 

water quality in aquaculture facilities to forewarn the 

producer or processor of potential problems. Thus, 

regulators could take remedial actions. 

Key Outcome 

Basing Policies on Science 

USDA issued two instructions related to Listeria 

monocytogenes that clarified procedures used by 

consumer safety inspectors to conduct daily, routine 

inspections. The instructions also provided new 

procedures for enforcement, analysis, and investigation 

officers to follow. This was designed to determine the 

effectiveness of controls for Listeria monocytogenes. In 

March 2006 USDA began the routine testing of foodcontact surfaces and the environment in addition to testing 

product. Testing surfaces provides a better indication of 

sanitary controls than product testing alone. Listeria 

monocytogenes is an environmental contaminant known 

to become permanently resident in establishments. 

Regarding E. coli O157:H7, USDA is conducting a 

baseline study for trimmings used to make raw ground 

beef. Scientists serving on the National Advisory 

Committee on Microbiological Criteria for Foods 

(NACMCF) reviewed the study. 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 Request for Guidance on 

Baseline Study Design and Evaluations for Raw Ground 

Beef Components.” The results of this study are expected 
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F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 87 

to inform USDA risk managers and risk assessors about 

this pathogen’s prevalence in trim used to produce raw 

ground beef. 

The Department also took steps to collect production 

volume information at inspected beef facilities. This 

information, along with the results of the baseline study, 

will be used to develop a risk-based verification testing 

program. 

Analysis of Results 

The overall percentage of positive Listeria 

monocytogenes regulatory samples for FY 2006 was less 

than the targeted performance measure. USDA uses the 

results from the ALLRTE program (i.e., a random 

sampling of all ready-to-eat meat and poultry products) to 

reflect progress relative to Listeria control. USDA is 

pleased with the results of this program, particularly 

because within the sample population, products were 

included that are at high-risk for causing illness and for 

supporting the growth of Listeria monocytogenes. In a 

separate sampling program targeted at these high risk 

products, the overall percentage of positive samples 

remains lower than that of the ALLRTE sampling 

program. 

Since an initial substantial decline in the percentage of 

E. coli O157:H7-positive raw ground beef samples, 

beginning in FY 2002, USDA has been able to maintain 

the percentage positive samples at or below the targeted 

performance measure. In FY 2006, the overall percentage 

of positive samples showed a further decline from the 

FY 2005 level. The Department will continue to monitor 

data related to human infections associated with the 

consumption of beef products. If there is a rise in human 

illness associated with this pathogen and the consumption 

of beef, or a rise above 0.20 percent in the regulatory 

testing program, USDA will take immediate steps. 

USDA now collects industry data on RTE products as part 

of the October 2003 Listeria rulemaking. The Department 

used this data to revise its Listeria testing in RTE 

products. In FY 2006, USDA used this data as one means 

to identify higher risk operations and products. The 

Department targets its regulatory verification testing 

program towards operations that produce higher risk 

products. USDA now tests food contact surfaces and the 

environment routinely, in addition to product. 

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, which 

was released Spring 2006, noted significant declines from 

a 1996-1998 baseline in E. coli O157:H7-related illnesses 

(29 percent). CDC attributes the decline, in part, 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 

monocytogenes regulatory samples from the previous 

year, and a 70-percent decline compared with years prior 

to the implementation of HACCP. The report also noted 

that illness associated with Listeria monocytogenes

declined 32 percent from the baseline years of 1996-1998. 

Exhibit 41: Pathogen Reduction (Food Inspection) 

Fiscal Year 2006 

Annual Performance Goals and Indicators Target Actual Result 

4.1.1 Prevalence of Listeria monocytogenes in ready-to-eat meat 

and poultry products 

0.70% 0.60% Exceeded 

4.1.2 Prevalence of E. coli O157:H7 in ground beef 0.20% 0.16% Exceeded 

Exhibit 42: Trends in Pathogen Reduction (Food Inspection) 

Fiscal Year 2006 

Trends 2002 2003 2004 2005 2006 
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88 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

4.1.1 Prevalence of Listeria monocytogenes in 

ready-to-eat meat and poultry products 

1.03% 

Baseline 

0.0% 0.89% 0.70% 0.60% 

4.1.2 Prevalence of E. coli O157:H7 in ground beef 0.77% 

Baseline 

0.37% 0.19% 0.20% 0.16% 
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F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 89 

In 2005, the incidence of illnesses associated with Listeria 

monocytogenes was higher than its lowest point in 2002. 

It should be noted that the overall increase in illnesses 

reported by CDC reflected all foods, not just meat and 

poultry products. USDA, in 2003, issued its interim final 

rule on Listeria monocytogenes that specifically addressed 

control for this pathogen in ready-to-eat meat and poultry 

products. Since then, the percentage of positive Listeria 

monocytogenes regulatory samples has been declining in 

these areas. 

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 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 Meat and Poultry Hotline; and 

 “Ask Karen,” which complements the hotline and 

allows USDA to expand its outreach programs, 

promote food safety and defense, and protect the 

public health. 

Each component of the integrated marketing program is 

developed based on risk research, science drawn from 

epidemiological studies concerning foods and behaviors 

that contribute to food safety risks, and social marketing 

principles derived from theory, market and consumer 

research. 

Significant work continued with the USDA Mass Media 

Campaign. The campaign objective is to create a program 

that includes an umbrella brand and campaign logo, an 

educational strategy for targeted audiences and a media 

buy plan. The campaign aims to gain acceptance of 

changing behaviors involving safe food handling. 

Through this campaign, USDA will reach educators, 

health officials, media, caregivers and consumers, 

including children and at-risk and underserved 

populations. 

USDA also launched the “Be Food Safe” education 

campaign. The launch took place at the Food Safety 

Education Conference, “Reaching At-Risk Audiences and 

Today’s Other Food Safety Challenges.” The conference 

focused on education programs and strategies for those 

most at risk. It also updated educators on the latest in 

food-safety education and showcased new national 

education projects. 

During the conference, USDA unveiled a brochure series 

targeted to specific audiences most at-risk for foodborne 

illness. The brochures covered food safety for transplant 

recipients, people with HIV/AIDS, diabetics, cancer 

patients and older adults. 

Food safety publications for both industry and consumers 

have been translated into many 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. 

Additionally, a hotline offers Spanish-speaking foodsafety specialists and Spanish-language Web sites and 

printed materials. 
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90 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

In other outreach efforts to the Hispanic community, 

USDA developed a brochure and poster informing that 

community’s consumers about food safety and protecting 

their families from potential dangers. The Department 

also created a public-service announcement and launched 

an outreach program partnering with Hispanic 

organizations and supermarkets. USDA continues to work 

with the Partnership for Food Safety Education on their 

Hispanic outreach initiative. USDA also targets other 

underserved populations that include African-Americans, 

Asian-Americans, Native American Indians and Alaskan 

Natives, and the visually-impaired. 

The Department continues its multi-year effort to provide 

technical assistance and compliance guidance concerning 

major rules, policies and directives to small and very 

small meat, poultry and egg processing establishments. 

These outreach sessions bring industry and inspection 

program personnel together to promote a uniform 

understanding of food safety regulations. Information 

about the outreach sessions may be found at: 

www.fsis.usda.gov/Science/Small_Very_Small_Plant_Outreach

/index.asp. 

Analysis of Results 

A key outcome in reaching this goal is a significant 

increase in raising public health awareness. By 

developing consumer education programs and 

disseminating consumer information with food safety 

messages about the safe handling, preparation and storage 

of meat, poultry and egg products through various 

channels of communication, USDA is providing the tools 

and empowering consumers with the knowledge to 

prevent and reduce the risk of foodborne illness. 

Exhibit 43: Public Health Awareness 

Fiscal Year 2006 

Annual Performance Goals and Indicators Target Actual Result 

4.1.3 Number of consumers reached with food safety messages 

(millions of viewings) 

94 94* Met 

*end-of-year projection as of 9/19/06 

Exhibit 44: Trends in Public Health Awareness 

Fiscal Year 2006 

Trends 2002 2003 2004 2005 2006 

4.1.3 Number of consumers reached with food 

safety messages (millions of viewings) 

90 

Baseline 

92 123 120 94*

*end-of-year projections as of 9/19/06 
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D RAFT F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 91 

OBJECTIVE 4.2: REDUCE THE NUMBER AND 

SEVERITY OF AGRICULTURAL PEST AND 

DISEASE OUTBREAKS

Key Outcome 

Improve Animal and Plant Diagnostic 

Laboratory Capabilities 

Overview 

The National Animal Diagnostic Network and Plant 

Diagnostic Network Centers ensure timely disease 

detection. They also enhance the process of producing and 

maintaining a timely, comprehensive 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 diseasedetection preparation. The networks will continue to study 

new diseases regularly to protect the Nation from 

accidental or deliberate introduction of diseases. 

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 (and insect) detection criteria have been 

developed for soybean rust, sudden oak death, Ralstonia 

stem rot, plum pox virus, pink hibiscus mealybug and

potato wart. Soybean rust is a fungal disease that attacks 

the foliage of a soybean plant, causing its leaves to drop 

prematurely. Sudden oak death is a plant disease that 

attacks many types of plants and trees common to the 

Pacific Northwest. Plum pox virus browns the flesh and 

deforms stone fruit, making it unmarketable. Pink 

hibiscus mealybug is a serious insect threat to agricultural, 

ornamental and horticultural plants in tropical and subtropical areas. Potato wart creates ugly, warty outgrowths 

on potato plants. 

Animal disease-detection criteria have been developed for 

the following eight high-consequence diseases. Foot-andMouth 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 and Low Pathogen Avian Influenza are viruses 

that can cause varying amounts of clinical illness in 

poultry. In 2006, the National Animal Health Laboratory 

Network (NAHLN) worked with National Research 

Initiative funded wild bird sampling and other wildlife 

surveillance efforts to provide additional cooperative 

detection capabilities for various strains of Low Pathogen 

Avian Influenza and High Pathogen Avian Influenza. 

Bovine Spongiform Encephalopathy is a chronic 

degenerative disease that affects the central nervous 

system of cattle. Scrapie is a fatal, degenerative disease 

affecting the central nervous system of sheep and goats. 

Chronic Wasting Disease attacks the central nervous 

system of deer and elk. NAHLN is part of a national 

strategy to coordinate the Nation’s Federal, State and 

university laboratory resources. 

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. 

Future challenges to improving laboratory capabilities 

include making non-Federal funding available. This 

funding could be used to expand laboratory links in each 

State, increase the number of screened diseases and their 

detection criteria, and ensure that more strategically 

located laboratories are prepared to deal with 

geographically relevant disease threats. 
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92 D RAFT F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Exhibit 45: Ensure the Capabilities of Plant and Diagnostic Laboratories are Improved 

Fiscal Year 2006 

Annual Performance Goals and Indicators Target Actual Result 

4.2.1 Improve the capabilities of animal and plant diagnostic laboratories: Met 

 Specific plant diseases labs are prepared to detect 6 6 

 Specific animal diseases labs are prepared to detect 8 8 

Exhibit 46: Trends Improving the Capabilities of Diagnostic Laboratories 

Fiscal Year Actual 

Trends 2003 2004 2006 

4.2.1 Improve the capabilities of animal and plant 

diagnostic laboratories: 

 Specific Plant diseases labs are prepared 

to detect 

2 3 6 

 Specific animal diseases labs are 

prepared to detect 

N/A 6 8 

N/A = Not Available 

Selected Results in Research, Extension and 

Statistics 

A new Chemical Distribution Rate publication, released 

December 2005, contains data for agricultural chemical 

usage for percent of acres treated, number of treatments, 

rate per application and rates per crop year. Data for the 

2005 field and fruit crops were incorporated into the 

Agricultural Chemical Usage Field Crops Summary, May 

2006, and Agricultural Chemical Usage Fruit Crops 

Summary, July 2006. These publications provided users 

distribution-rate information on an accelerated schedule. 

Insects and diseases reduce peanut yields and increase 

production costs for farmers and may be difficult and 

expensive to control with conventional methods. The 

University of Georgia, with partial support by USDA 

funding, have identified six plant introductions from 

Bolivia in the USDA Peanut Germplasm Collection and 

additional land race cultivars from Bolivia. These 

products have shown good to excellent levels of pest 

resistance and better yield than accessions used to create 

the cultivars currently being grown. Peanut-breeding 

programs have used these new sources of resistance to 

add diversity to peanut gene pools. They also have 

increased pest-resistance levels substantially in elite 

candidate peanut breeding lines. This finding will increase 

profitability for producers, make the food supply safer 

through reduced pesticide inputs and reduce the 

environmental impacts of pest-control activities. 

Currently, soybean cyst nematode is the most damaging 

pest to U.S. soybean production. It causes $1 billion 

annual crop losses. Genetic resistance is the only viable 

means to combat the SCN pathogen. With USDA 

funding, the Tennessee Agricultural Experiment Station 

developed and released a new soybean germplasm line 

(JTN-5303) with resistance to multiple SCN races. JTN5303 currently is being accessed by public and 

commercial breeders to incorporate SCN resistance 

throughout major soybean production regions. This line is 

resistant to every major SCN race in Tennessee, resulting 

in improved, sustainable crop production. An estimated 

$9 million in crop loss in Tennessee alone can be 

eliminated through SCN resistance. 

New vaccines are being developed to protect against 

multiple strains of avian coccidiosis. Coccidiosis is a 

common intestinal protozoan infection of poultry that 

seriously impairs the growth and feed utilization of 

infected birds. It is caused by seven distinct species of 
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intracellular parasites. While anti-coccidial drugs are the 

primary control method, drug-resistant coccidia strains

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F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 95 

are emerging worldwide. Additionally, while vaccines 

provide an important alternative to anti-coccidial drug 

therapy, existing vaccines, which are comprised of one or 

more live coccidian species, do not provide crossprotection against all seven species. USDA scientists have 

discovered a protein named SZ1 that is present in three 

species. The full-length gene from Toxoplasma gondii 

was characterized and expressed in a bacterial system. 

Then, the protein was used to make antibodies to T. 

gondii SZ1. These antibodies are being evaluated to 

determine whether this protein provides cross-protective 

immunity across Eimeria strains. 

USDA overseas laboratories helped identify a biologicalcontrol agent to mitigate the impact of the olive fruit fly. 

Invasive weeds and insect pests of foreign origin cause 

more than $100 billion annually in economic losses and 

ecological problems in the U.S. Olive fruit fly first was 

reported in California in 1998 and now is established in 

olive-growing regions in the central part of the state. The 

fly is capable of infesting 100 percent of the fruit on a 

tree, rendering the harvest unmarketable. In 2004, a 

project was initiated at the European Biological Control 

Laboratory (France). Olive fly parasitoids (small wasps) 

were identified and sent to the University of CaliforniaBerkeley and California Department of Food and 

Agriculture cooperators, who first released the bio-control 

agent in 2005. When established, the parasitoids are 

expected to suppress an insect pest that threatens the 

growing ($60-100 million) U.S. olive industry. 

Mass production of biological control agents offers new 

hope for controlling the glassy-winged sharpshooter 

(GWSS) and Pierce’s Disease. USDA scientists 

determined that an increasing proportion of GWSS adults 

become positive for Xylella fastidiosa (the cause of 

Pierce’s Disease) as the insect ages, with correlate 

increases in concentration of the bacterium. Thus, older 

leafhoppers serve as a greater threat. Pierce’s Disease

plagues grapes, agronomic and horticultural crops, and 

landscape, ornamental and shade trees. To reduce insect 

numbers, USDA scientists collected and evaluated four 

species of GWSS egg parasitoids (an insect that 

parasitizes another insect). These natural enemies were 

shipped to the California Department of Food and 

Agriculture for mass rearing and release. One species, 

Gonatocerus triguttatus, now is established and spreading 

beyond the release locations. 

Key Outcome 

A Secure Agricultural Production System 

and Healthy Food Supply 

Overview 

To provide a secure agricultural production system and 

healthy food supply to U.S. consumers, USDA’s goal is to 

reduce the number and severity of agricultural pest and 

disease outbreaks. This work includes: 

Safeguarding animal and plant resources against the 

introduction of foreign agricultural pests and diseases, 

while meeting international trade obligations; 

Detecting and quickly responding to new invasive 

pests and diseases and emerging agricultural health 

situations; 

Managing existing agricultural pests and diseases and 

wildlife damage effectively; and 

Developing and applying scientific methods that 

benefit agricultural producers and consumers, protect 

the health of animal and plant resources, and sustain 

agricultural ecosystems. 

USDA’s efforts in FY 2006 prevented the introduction of 

foreign animal disease that spread beyond the original 

area of introduction. Such a spread could cause severe 

economic or environmental damage, or threaten animal 

health. Specific programs described below were 

conducted successfully to protect poultry, cattle, swine 

and other species. 

Despite USDA’s efforts, three emerging plant pest 

programs had pests or diseases that spread beyond the 

quarantined areas in place at the beginning of FY 2006. 

These were the programs for Emerald Ash Borer (EAB), 

Sudden Oak Death (SOD or Phytophtora ramorum), and 
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Citrus Canker. EAB is an exotic beetle that nibbles on the 

inner bark of ash trees, disrupting the tree’s ability to transport 

water and nutrients. SOD is a disease that is killing oaks and 

other plant species in the western U.S. Citrus canker is a 

highly contagious bacterial disease of citrus crops. The 

programs to eradicate the Asian Long Horned Beetle and 

manage the Glassy-winged Sharpshooter prevented 

outbreaks of target pests/diseases outside their quarantine 

areas. In collaboration with Federal and State regulatory 

agencies and scientists, USDA developed a Citrus Health 

Response Plan (CHRP). CHRP is a comprehensive 

framework for responding to citrus health concerns. 

Beginning in FY 2007, USDA will address CHRP’s 

performance aspects. 

USDA’s programs designed to reduce the number and 

severity of pest and disease outbreaks in plants and 

animals contribute to the good life Americans enjoy. Due 

in part to the protection afforded by these programs to the 

health of plants and animals, U.S. consumers receive an 

abundance of food and fiber. They also remain relatively 

free of diseases that may be transmitted to them from 

animals (zoonotic diseases) that affect people in many 

countries. Protecting the Nation’s plant and animal 

resources provides many Americans with employment in 

the agricultural sector and a livelihood serving farmers 

with needed tools, supplies, technical knowledge and 

money. USDA’s efforts help to ensure that such allied 

industries as the food-processing and pharmaceutical 

industries, and grocery distributors receive the raw 

materials they need to produce their products and 

services. Its efforts also help to maintain public and 

private landholders’ investments in a productive capacity, 

providing economic stability to American society. By 

protecting U.S. plant and animal resources from pest and 

disease outbreaks, USDA ensures U.S. agricultural 

resources can move freely in international trade. Because 

of these programs, Americans can enjoy parks, preserves 

and recreational areas in their healthy natural state. 

Americans landscape their property with healthy nursery 

stock and plant pure seed. The North American ecosystem 

depends in part on USDA’s efforts to reduce the number 

and severity of pest and disease outbreaks. The global 

ecosystem depends upon international efforts to minimize 

the movement of harmful species. USDA participates in 

these efforts as a world leader, benefiting the public in 

many countries. 

Challenges for the Future 

Important challenges face USDA in its efforts to reduce 

the number of pest and disease outbreaks. One is to 

prevent harmful exotic species from entering the country. 

If they do enter, the bigger challenge is detecting them 

early enough to reduce their spread and eradicate them 

before they do significant damage. To help exclude and 

detect, USDA creates and continually updates endemic 

pest and disease information, and monitors and conducts 

surveys in cooperation with States and industry. Survey 

data are essential for initiating and directing programs. 

They also result in better pest and disease management. In 

the future, USDA will increase and expand monitoring 

and surveillance activities. This process will include 

identifying potential pathways for animal disease 

transmission and increasing the number and intensity of 

plant pest surveys throughout the U.S. In addition to early 

detection, the spread of communicable animal pests and 

diseases can be prevented by regulatory enforcement 

activities. 

Once an exotic pest or disease is reported, USDA must 

respond immediately by investigating and taking 

emergency action if necessary. To meet this challenge, the 

Department develops pathway studies and thoroughly 

investigates the progression of outbreaks to determine the 

origin of plant and animal pests and diseases. Substantial 

costs are incurred as the result of outbreaks and 

introduction of economically significant plant and animal 

pests and diseases. USDA seeks to reduce these costs 

through enhanced, science-based, early detection and 

rapid response efforts. 

In an emergency, the challenge is to mobilize a sizeable 

effort to eradicate or eliminate the disease or pest 

problem. USDA is continuing to enhance emergencycoordination efforts and emergency-response capabilities. 
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USDA will procure and strategically store materials 

required to respond to the most threatening foreign animal 

diseases. This will allow the government to provide rapid 

intervention in the case of an outbreak. USDA agencies 

are participating on a government-wide team created in 

FY 2006. The team develops and implements an Avian 

Influenza Response plan. USDA also will develop 

emergency management capacity to respond to 

emergencies involving plant pests and diseases better. 

A final challenge is to minimize the economic impact of 

harmful diseases and pests where eradication is not 

feasible or will take many years to achieve. To 

accomplish this task, USDA monitors endemic diseases 

and pests through surveys. The surveys are designed to 

detect the location of pests and diseases. The Department 

also conducts inspections aimed at preventing their spread 

into non-infested parts of the country. Additionally, 

USDA works to prevent the spread of such zoonotic 

diseases as rabies and protects American agriculture from 

detrimental predators through identification, 

demonstration and application of the most appropriate 

methods of control. 

USDA has several groups of programs that focus on 

reducing the number and severity of pest and disease 

outbreaks, including Pest and Disease Exclusion 

Programs, Plant and Animal Health Monitoring Programs, 

Pest and Disease Management Programs, and Scientific 

and Technical Services Programs. 

USDA’s Pest and Disease Exclusion Programs prevent 

the introduction of foreign plant and animal pests and 

diseases. The Department monitors plant and animal 

health throughout the world and uses the information to 

establish effective import policies. USDA works with 

other countries to control or eradicate agricultural pests 

and diseases abroad. It develops quarantine regulations to 

prevent them from being imported into the U.S. USDA 

works with the U.S. Department of Homeland Security to 

ensure compliance with those regulations at domestic 

ports of entry and protect American borders. USDA’s 

exclusion programs foster a trade environment that allows 

for a common understanding of international animal and 

plant health standards. The programs in this grouping 

include Agricultural Quarantine Inspection, Cattle Ticks, 

Foreign Animal Disease/Foot and Mouth Disease, Fruit 

Fly Exclusion and Detection, Screwworm, Tropical Bont 

Tick, and Import Export (Domestic). 

USDA’s Plant and Animal Health Monitoring Programs 

quickly detect and diagnose new pests and diseases. 

USDA conducts surveys in cooperation with the States to 

detect the pests and diseases, store the information and 

analyze it. The Department partners with States and 

industry stakeholders to determine if there is a need to 

establish new pest or disease-eradication programs, and 

develop response capabilities for outbreaks. The programs 

in the Plant and Animal Health Monitoring grouping 

include Animal Health Monitoring and Surveillance, 

Animal and Plant Health Regulatory Enforcement, Pest 

Detection, Bio-surveillance, Emergency Management 

Systems, Highly Pathogenic Avian Influenza, Pest 

Detection, Select Agents, and Wildlife Disease 

Monitoring and Surveillance. 

USDA’s Pest and Disease Management Programs are 

cooperative efforts with States to detect, prevent and 

eradicate pests and diseases harmful to agriculture. USDA 

monitors and regulates interstate shipments of plants, 

livestock and related materials to prevent the spread of 

pests and disease and the distribution of impure, unsafe 

and ineffective materials and products. USDA also 

protects agriculture from detrimental animal predators 

through identification, demonstration and application of 

the most appropriate methods of control. The programs in 

this grouping include: Aquaculture; Bio-control; Boll 

Weevil; Brucellosis; Chronic Wasting Disease; Cotton 

Pests; Contingency; Emerging Plant Pests; Golden 

Nematode; Grasshopper; Gypsy Moth; Imported Fire Ant; 

Johne’s Disease; Low Pathogenic Avian Influenza; 

Noxious Weeds; Pink Bollworm; Plum Pox; 

Pseudorabies; Scrapie; Tuberculosis; Wildlife Services 

Operations; and Witchweed. 

USDA’s Scientific and Technical Services Programs 

provide new tools and technologies to protect the health 
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98 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

of American animal and plant resources. These programs 

provide diagnostic services, products and training for 

surveillance, prevention and control and eradication 

programs. They facilitate, monitor and regulate the 

development of biotechnology-derived products. They 

ensure the purity, potency, safety and effectiveness of 

veterinary biological products. They develop methods to 

control animals and pests detrimental to agriculture, 

wildlife, and public safety. The programs in this grouping 

include Biosecurity, Biotechnology Regulatory Services, 

Environmental Compliance, Plant Methods, Veterinary 

Biologics, Veterinary Diagnostics, and Wildlife Services 

Methods. 

USDA’s programs that endeavor to reduce the number 

and severity of pest and disease outbreaks contribute to a 

secure agricultural production system and healthy food 

supply. These programs benefit the public by providing 

abundant food and fiber, good personal health, freedom 

from zoonotic and nutritional diseases, jobs in the 

agricultural and related sectors, industries that receive 

agricultural products and convert and sell them, freely 

moving agricultural products in the international market 

place, protection of their herds, flocks, pets, crops, 

landholdings, parks and natural areas from invasive 

species, and an opportunity to enjoy a safe, beautiful and 

sustainable ecosystem. 

As indicators of success in reducing the number and 

severity of pest and disease outbreaks, USDA has selected 

two key performance measures of broad scope. 

The Animal Health Monitoring and Surveillance (AHMS) 

program uses performance measure 4.2.2, seen in the 

accompanying exhibit, to track its progress. This 

program’s goals are to conduct monitoring and 

surveillance activities to rapidly detect incursions of 

foreign and emerging diseases, evaluate and enhance 

surveillance for current disease control and eradication 

programs, monitor domestic and foreign disease trends 

and threats, and provide timely and accurate animal health 

information. 

Some of its components are the National Animal Health 

Surveillance System (NAHSS), the National Animal 

Identification System (NAIS), the National Animal Health 

Laboratory Network, and the National Animal Health 

Monitoring System. 

The Emerging Plant Pest (EPP) program has performance 

measure 4.2.3, seen in the accompanying exhibit. This 

program’s goal is to maintain the ability to respond 

quickly to any emerging plant pest problem. During FY 

2006, the program focused on Citrus Canker, Glassywinged Sharpshooter, Emerald Ash Borer, Asian 

Longhorned Beetle, and Sudden Oak Death

(Phytophthora ramorum.) A performance target was set at 

2 of 5 programs to ensure safeguarding of U.S. plant 

resources. 

Analysis of Results 

During FY 2006, USDA met the target related to animal 

disease outbreaks because of the successful effort of 

AHMS program components. This continued a record of 

five years of success, broken only by the outbreak of 

Exotic Newcastle Disease (see the accompanying exhibit). 

By meeting these goals, USDA provided for a continually 

secure agricultural production system and health food 

supply to consumers, minimized production losses and 

maintained market viability for U.S. livestock. 

NAHSS strives to meet the requirements of the Animal 

Health Safeguarding Review and Homeland Security 

Presidential Directive 9 (HSPD-9). HSPD-9 establishes a 

national policy to defend the agriculture and food system 

against terrorist attacks, major disasters, and other 

emergencies. During FY 2006, USDA joined with other 

federal agencies to mount a significant effort to prepare 

for a potential outbreak of highly pathogenic avian 

influenza. It concluded an enhanced bovine spongiform 

encephalopathy (BSE) surveillance program and moved to 

an ongoing BSE surveillance program. Swine

pseudorabies and brucellosis surveillance activities did 

not disclose any infected animals in commercial 

production swine herds, and significant progress was 

made in implementing the classical swine fever plan. 
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D RAFT F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 99 

Exhibit 47: Strengthen the Effectiveness of Pest and Disease Surveillance and Detection Systems 

Fiscal Year 2006 

Annual Performance Goals and Indicators Target Actual Result 

4.2.2 Number of significant introductions of foreign animal diseases and pests 

that spread beyond the original area of introduction and cause severe 

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

0 0 Met 

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

not been contained within the quarantine area 

2 of 5 

programs 

3 of 5 

programs 

Unmet 

Exhibit 48: Trends in Strengthening the Effectiveness of Pest and Disease Surveillance and Detection Systems 

Fiscal Year 2006 

Trends 2002 2003 2004 2005 2006 

4.2.2 Number of significant introductions of foreign 

animal diseases and pests that spread 

beyond the original area of introduction and 

cause severe economic or environmental 

damage, or damage to the health of animals 

0 0 1 0 0

4.2.3 Number of emerging plant pest (EPP) 

programs where an outbreak has not been 

contained within the quarantine area 

N/A 4 3 2 3 of 5 

programs

During FY 2006, the National Animal Health Laboratory 

Network continued to increase the capacity of its 

laboratories to provide a secure communication, reporting 

and alert system. It also standardized rapid diagnostic 

techniques and added modern equipment and experienced 

personnel trained in the detection of emergent, foreign 

and bioterrorist agents. A new structure was proposed for 

the National Veterinary Accreditation Program that would 

establish two categories of accreditation; require that 

accreditation status be renewed triennially and require that 

participants receive continuing education to be eligible to 

renew accreditation credentials. Establishing the threeyear renewal would ensure up-to-date contact information 

for the Nation’s accredited veterinarian population so they 

could be mobilized in the event of an animal health 

emergency. NAIS is expected to be a fully operational 

system in early 2007. Two of the three components, the 

premises registration and animal identification number 

management systems, became operational and the 

integration of private and State animal tracking databases 

was established. Once implemented, NAIS will permit 

USDA to trace diseased animals back to their place of 

origin, and trace forward the animals the diseased ones 

are likely to have infected. 

USDA failed to meet its target related to the number of 

emerging plant pest programs. Two emerging plant pest 

programs were successful in containing pests within the 

quarantine areas in place at the beginning of FY 2006. 

These were the programs for Asian Long Horned Beetle 

and Glassy-Winged Sharpshooter. Three of five emerging 

plant pest programs had outbreaks that were not contained 

within their quarantine areas. These were Citrus Canker, 

Sudden Oak Death (SOD or Phytophthora ramorum), and 

Emerald Ash Borer (EAB). 

Expanded spread of citrus canker beyond existing 

quarantined areas associated with the unprecedented 

hurricanes of 2004 prompted USDA and Florida to 

increase their eradication efforts. Unfortunately, 

Hurricane Wilma, which struck in 2005, offset these 

actions. Subsequently, a Department study concluded that 

citrus canker had spread dramatically in Florida. It also 
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100 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

found that additional spread and new detections would 

continue. This extensive spread prompted the Secretary of 

Agriculture to declare that the program in Florida would 

shift from eradication to management as of January 10, 

2006. After consulting the State and citrus industry 

representatives, USDA proposed developing the Citrus 

Health Response Plan as an alternative to eradication. 

Since then, the Department has been assembling State and 

Federal regulators, and scientists in consultation to 

identify practices to safeguard the U.S. citrus industry and 

its trading partners from various citrus diseases. It has 

improved early pest detection by establishing minimum 

standards for all aspects of citrus production, harvesting 

and packing. 

The U.S. Forest Service and the State of Oregon are 

working together to eradicate Phytophthora ramorum, the 

causal agent of SOD. A limited outbreak of the disease 

had struck Current County, Oregon. Overall, the program 

has reduced the distribution of P. ramorum significantly. 

While an additional area involving 11 square miles has 

been reported, the overall distribution of the disease has 

been reduced in Oregon. USDA regulations are directed 

toward preventing long-distance spread through sciencebased restrictions on articles that serve as pathways for P. 

ramorum spread. Thus far, these regulations have 

prevented the establishment of SOD outside the 

quarantined areas on the West Coast. USDA also is 

responsible for establishing and implementing the 

quarantines on counties when P. ramorum is detected in 

nurseries or the environment. 

EAB was detected outside existing quarantine areas in 

2006. USDA continues to develop technologies to 

improve pest detection, response and recovery. While 

regulations for quarantined areas are designed to prevent 

long-distance spread of EAB, implementation requires 

industries to be regulated and the general public to 

comply with prohibited movement of firewood, nursery 

stock and listed ash wood products. As survey methods 

improve and public outreach continues, detection of EAB 

populations that had gone undetected previously will 

occur until the true distribution has been defined. 

Additional EAB funding is needed and was requested as 

part of the President’s FY 2007 budget proposal. 

Strategic Goal 5: Improve the Nation’s 

Nutrition and Health 

USDA made strides in promoting access to a nutritious 

diet and healthy eating behaviors for everyone in the U.S. 

Through its leadership of the Federal nutrition-assistance 

programs, the Department made a healthier diet available 

for millions of children and low-income families. The 

Center for Nutrition Policy and Promotion used 

interactive tools to motivate Americans to make positive 

dietary behavioral changes. These interactive tools were 

designed to help consumers establish and maintain 

healthy diets and lifestyles, consistent with the Dietary 

Guidelines for Americans and the President’s HealthierUS 

initiative. Key accomplishments included: 

Promoting access to the Food Stamp 

Program (FSP). Food stamps help low-income 

families and individuals purchase nutritious, low-cost 

food. FSP is the Nation’s largest nutrition assistance 

program serving 26.6 million people monthly in FY 

2006. The program enables eligible participants to 

improve their diets by increasing their foodpurchasing power via benefits redeemable at retail 

grocery stores and farmers markets across the Nation. 

Continuing to ensure that the MyPyramid 

food guidance system serves the American 

public as an individualized approach to 

nutritional well-being and active living. The 

high number of e-hits to MyPyramid.gov – more than 

2 billion in FY 2006 – continued to show users’ 

interest in personalizing their diet. To date, there are 

more than 1.5 million registrations to the MyPyramid 

Tracker, the dietary and physical activity assessment 

tool. The new MyPyramid for Kids and MiPirámide

materials were made available in FY 2006. And an 

on-line customer satisfaction survey shows that 88 

percent of consumers said that the information and 

interactive tools at MyPyramid.gov prompted them to 

take action to improve their health. 
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Continuing to ensure that Food Stamp 

benefits are accurately issued. The National 

Food Stamp Program payment accuracy rate for FY 

2005, the latest year for which data is available, was 

94.16 percent, an all-time high and a 34-percent 

improvement from just 5 years ago. This 

improvement is a result of strong partnerships with 

State administering agencies, and program 

simplifications and policy options provided in the 

2002 Farm Bill. 

In FY 2006, USDA continued to improve 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, a sedentary lifestyle and the ready 

availability and choices of fat- and sugar-laden highcalorie foods. Consumers are looking for foods that taste 

good, offer nutrition and other health benefits, and are 

convenient to prepare and consume: science-based dietary 

guidance and promotion can help them integrate these 

choices into a diet that promotes their long-term health. In 

FY 2006, 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 and physical 

activity choices. 

USDA’s success in promoting public health through good 

nutrition and the effectiveness of its nutrition assistance 

education programs relies heavily on research. The 

research provides critical knowledge of what we need to 

eat to stay healthy and how that knowledge can be 

conveyed to the public in a manner that leads to true 

changes in our diets. Research also supports the 

development of new healthy and tasty food products, 

providing another avenue for helping consumers eat well. 

OBJECTIVE 5.1: IMPROVE ACCESS TO 

NUTRITIOUS FOOD

Overview 

USDA’s nutrition assistance programs represent the 

Federal Government’s core effort to reduce hunger and 

improve nutrition across the U.S. These programs aided 

one in five people in the U.S. during FY 2006. 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, physically active population is 

healthier, more productive and better able to fulfill its full 

potential. 

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 individuals and families eligible 

to participate in these programs do not. USDA focuses on 

increasing the rate of participation among people eligible 

for Food Stamps and expanding access to the School 

Breakfast Program (SBP), which is not as widely 

available as the National School Lunch Program. 

In 2006, the Department continued to work with States to 

implement FSP provisions from the Farm Bill of 2002 

that provides States with options to simplify the 

administration of the program. The Department also 

continued efforts to monitor and track outreach efforts to 

targeted populations to participate in the program. USDA 

continued a 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. 

While SBP provides cash assistance to States to operate 

breakfast programs in schools and residential child care 

institutions, many children who could benefit from 

breakfast at school do not use the program. On an average 
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school day, while more than 50 million children had 

access to school lunch and about 30 million children 

chose to eat a program lunch, but only about 9.8 million 

children received a school breakfast. USDA promoted 

SBP by raising awareness of the program’s availability 

with State and civic leaders, and supporting and 

celebrating National School Breakfast Week. 

The Department also continued to serve those eligible for 

the Special Supplemental Nutrition Program for Women, 

Infants and Children Program (WIC) who wish to 

participate within authorized funding levels – about 8.1 

million pregnant women, new mothers and their young 

children in an average month in FY 2006. WIC helps to 

safeguard the health of low-income women, infants and 

children up to age 5 who are at nutritional risk. The 

program provides nutritious foods to supplement diets, 

information on healthy eating and referrals to health care. 

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, Education and 

Statistics 

By allocating their food budgets in accordance with 

USDA’s Thrifty Food Plan (TFP), low-income U.S. 

households can meet recommended dietary guidelines. 

TFP is a national standard for a low-cost nutritious athome diet. A USDA study seeks to determine whether 

selected types of low-income households allocate their 

food budgets in accordance with the TFP. The study finds 

that low-income households as a whole spend about 86 

percent of the TFP costs for food at home. While these 

households spend approximately the TFP amount on 

cereals and bakery goods (102 percent), they spend only 

53 percent of the TFP costs on fruits and vegetables. 

Simulations for specific types of low-income households 

indicate that female-headed households with children and 

married couples with children are least likely to equal the 

TFP expenditures. 

Recently, concerns about the nutritional adequacy of the 

diets of certain population subgroups have arisen. USDA 

research provides a comprehensive analysis of the nutrient 

adequacy of segments of the population at risk of 

inadequate nutrient intake, excessive intake or dietary 

imbalances. The analysis is based on the Continuing 

Survey of Food Intakes by Individuals conducted in 1994-

96 and 1998. The segments included adolescent females, 

older adults, children and adults at risk of overweight, 

individuals living in food-insufficient households, lowincome individuals and those targeted by and participating 

in food and nutrition assistance programs. The report adds 

to a growing literature that uses current, improved 

knowledge of nutrient requirements and recommended 

nutrient assessment methods to analyze nutrient intakes. 

The report indicates: 

Inadequate intake of key micronutrients, especially 

magnesium, calcium, folate and vitamin E; 

Energy intakes less than recommended energy 

requirements for adults; and 

Consumption of too much food energy from fat and 

not enough from carbohydrates; and inadequate 

intakes of fiber. 

Additionally, diet adequacy deteriorates as individuals get 

older. Children—especially infants and young children—

have diets that are more nutritionally adequate than those 

of adolescents and adults. 

Because food stamps are designed to serve as a first-line 

defense against hunger, it would be ironic if food stamps 

were connected to America’s obesity problem. Though 

such a connection appeared to exist in the late 1980s and 

early 1990s, it does not appear to hold today. USDA 

research finds a weakening relationship between food 

stamp receipt and weight status using the latest national 

data. This reversal is most noticeable among women, the 

group for which differences between participants and nonparticipants received the most attention and for whom 

previous research has found the most consistent 

associations between food stamps and weight. For 

women, multi-year data show the opposite of what we 
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would expect to find if food stamps were behind increased 

obesity. For men, it appears that food stamp participants 

are catching up weight-wise with non-participants. 

In work funded in part by USDA, the University of 

California, Riverside has developed technology that 

doubles the protein and oil content of corn grain. This is 

accomplished by means of a genetic modification 

resulting in single normal-sized kernel that contained two 

embryos. Because the embryo contains the majority of 

protein and oil of the kernel, the corn grain produced 

contained less starch, but more protein and oil, resulting 

in “low-carb” corn. 

Apple consumption in the U.S. lags behind that in other 

countries, despite its known health benefits. Apples are a 

popular snack, but due to variability, bruising, and 

softening they do not always provide a consistent product. 

A breeding program at Cornell University partially 

supported by CSREES funding has resulted in new apples 

with non-browning flesh, higher vitamin C, excellent 

flavors, and superior crunch and juiciness. 

Iron deficiency is the most common nutrient deficiency in 

the United States and is alleviated by iron fortification of 

food items. Different forms of iron can be used in 

fortification, but scientists didn’t know which form is 

most beneficial. Researchers at the USDA ARS Grand 

Forks Human Nutrition Research Center received funding 

through the CSREES National Research Initiative 

Competitive Grants Program to resolve this question. The 

researchers compared an elemental iron powder to ferrous 

sulfate (FeSO4), a well-absorbed form of iron that can 

cause discoloration and decreased shelf life in fortified 

grain products. The investigators determined elemental 

iron powder was not absorbed into the body as easily as 

FeSO4 and absorption of the iron powder was less likely 

to be enhanced by ascorbic acid. This research provides a 

more comprehensive picture of how iron can be used most 

effectively in fortified food products. 

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 depends partly 

on adequate legislative authority for policies and program 

initiatives. These initiatives would promote effective 

access to nutrition assistance and funding to support 

program participation for all eligible people who seek 

service. The quality of program delivery by third 

parties—hundreds of thousands of State and local 

Government workers and their cooperators—is critical to 

Department efforts to reduce hunger and improve 

nutrition. Economic changes can affect both the number 

of people eligible and the ability of cooperators to provide 

services. 

Key Outcome 

Reduce hunger and improve nutrition 
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104 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

The Department is committed to providing access to 

nutritious food through the major nutrition assistance 

programs for all eligible people who wish to participate. 

Participation has increased in FSP and SBP, and was 

maintained in WIC. 

Analysis of Results

In general, nutrition assistance program participation 

reached levels as projected. As program participation is 

voluntary, participation projections are estimates based on 

economic and other factors that impact the likely behavior 

of eligible populations. An analysis of the most recent 

information available follows. 

The Food Stamp Program served approximately 26.6 

million participants monthly, a 3-percent increase from 

FY 2005 and the fourth year in a row of participation 

increases. USDA executed a range of efforts to support 

and encourage food stamp participation, including: 

Promoted the use of State policy options that promote 

outreach and improve access to the program; 

Continued to implement FSP public information 

campaign. In March 2006, 3 new paid advertisements 

in English began airing in 49 media markets and on 2 

Statewide radio networks across the Nation. Twelve 

of the markets also aired two new ads in Spanish. Ads 

aired during March, April, July and August; 

Continued work with the Social Security 

Administration to implement Combined Application 

Projects (CAP) demonstrations, which streamline the 

eligibility determination process and assist in 

improving FSP participation among the elderly. 

Thirteen States have been approved to operate CAP 

projects, two are reviewing plans and six are planning 

to submit plans in the next few months; 

Awarded 15 grants to small community and faithbased organizations to conduct localized outreach 

activities; 

Awarded five participation grants totaling $5 million 

to increase access to the FSP. The participation grants 

focus on efforts to simplify both the application 

process and eligibility systems and complement the 

outreach grants; and 

Worked successfully with States to plan and 

implement 1,600 outreach activities with faith-based 

and community-based organizations and public 

agencies. 

USDA also conducts studies to measure the number of 

people eligible for the program to determine the rate at 

which eligible people are participating. The most recent 

data indicates that about 23 million of the 38 million 

individuals who were eligible for food stamp benefits in 

an average month of 2004 participated, a participation rate 

of 60 percent. The program provided 71 percent of the 

total benefits that all eligible individuals could receive, 

one indicator that people who are eligible for higher 

benefits are more likely to participate than others. The 

overall participation rate increased by nearly five 

percentage points between 2003 and 2004, the third 

annual increase in participation rates after falling for 

seven years. 

National School Lunch Program (NSLP) participation 

levels reached 30.1 million in FY 2006, up 1.7 percent 

from FY 2005 and continuing the trend of increases in 

recent years. NSLP provides nutritious meals to millions 

of children at school; more than 95,000 schools operated 

the program in FY 2006. 

School Breakfast Program (SBP) participation levels 

reached 9.8 million in FY 2006, up 5 percent from a year 
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F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 105 

ago and continuing a trend of increases during the last 

several years. SBP makes healthy, nutritious meals 

available to millions of children at the start of each school 

day. More than 49,000 schools operated the program in 

FY 2006. USDA continued to support and encourage SBP 

participation by: 

Promoting SBP through such activities as School 

Breakfast Week, which involves schools across 

America in highlighting the program through events, 

posters and student activities in the importance of a 

good breakfast—either at home or served through the 

program—in being ready for school: 

Working with various organizations and partners to 

help develop strategies for program expansion; 

Developing school breakfast outreach materials for 

schools and parents; and 

Continuing to advance the implementation of the 

Child Nutrition/WIC Reauthorization Act of 2004.

In addition to the increase in the number of participating 

children, trend data indicate that the proportion of all 

children enrolled in schools 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. 

In FY 2006, 8.1 million participants received WIC 

benefits. USDA continued to work with OMB, Congress 

and its State cooperators to ensure that funding was 

available to support participation for all those eligible 

who wish to participate. 

USDA recently implemented a new methodology to 

estimate the number of people eligible to participate in 

WIC. The most recent data available show that 57.1 

percent of eligible women, infants and children 

participated in the program in 2003, a slight decrease 

from 2002 but consistent with the rate since 2000. 

Exhibit 49: Improve Access to Nutritious Food 

Fiscal Year 2006 

Annual Performance Goals and Indicators Target Actual Result 

5.1.1 Eligible populations participating in the major Federal nutrition 

assistance programs 

 

 Food Stamp Program Avg. Monthly Participation (millions of 

people) 26.9 mil 26.61

 National School Lunch Program Avg. Daily Participation (millions 

of people) 30.2 30.12

 School Breakfast Program Avg. Daily Participation (millions of 

people) 9.8 mil 9.8 

 Special Supplemental Nutrition Program for Women, Infants and 

Children (WIC) Monthly Participation (millions of people) 8.2 mil 8.13

Met 

1

 Data assessment metrics to meet the target allow for an actual number in the range 24.9 to 28.9 million. 2

 Data assessment metrics to meet the target allow for an actual number in the range 28.7 to 31.7 million. 3

 Data assessment metrics to meet the target allow for an actual number in the range 8.0 to 8.4 million. 

Exhibit 50: Trends in Improving Access to Nutritious Food 

Fiscal Year 2006 

Trends 2002 2003 2004 2005 2006 

5.1.1 

 Food Stamp Program Avg. Monthly 

Participation (mil) 

19.1 21.3 23.9 25.7 26.6 

 National School Lunch Program Avg. Daily 

Participation 28.0 28.4 29.0 29.6 30.1 

 School Breakfast Program Avg. Daily 

Participation (mil) 8.1 8.4 8.9 9.3 9.8 
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106 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Fiscal Year 2006 

Trends 2002 2003 2004 2005 2006 

 WIC Program Monthly Participation (mil) 7.5 7.6 7.9 8.0 8.1 
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F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 107 

OBJECTIVE 5.2: PROMOTE HEALTHIER 

EATING HABITS AND LIFESTYLES

Overview 

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, a large gap remains between recommended dietary 

patterns and what people in the U.S. actually eat. The 

Department uses Federal nutrition policy and nutrition 

education, both for the general public and for those served 

by the nutrition assistance programs, to provide 

scientifically based information about healthful diets and 

lifestyles. The Department uses, for example, the Dietary 

Guidelines for Americans and MyPyramid to help 

Americans make wise choices related to food and 

physical activity. The Guidelines provide advice about 

food choices that promote health and prevent disease, and 

MyPyramid provides the educational tools to help 

Americans take the necessary “Steps to a Healthier You.” 

Overweight and obesity are among the leading causes 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, as well as type II diabetes, the 

most common form of the disease. Thus, USDA’s efforts 

focus on updating nutrition policy, providing information 

and promoting behavioral changes that can reduce 

overweight, obesity and other diet-related health 

conditions. These actions hold the potential to improve 

the lives of millions of Americans and reduce the social 

costs of these conditions. 

Science has established strong links between diet and 

health. Researchers attribute about 300,000 premature 

deaths annually to poor diets. The total costs attributed to 

overweight and obesity are estimated to be nearly $120 

billion annually. Even small improvements in the average 

diet would yield large health and economic benefits to 

individuals and society as a whole. 

To this end, the Department will continue promoting 

healthier eating and lifestyle behaviors as a vital publichealth issue. The Dietary Guidelines for Americans is the 

cornerstone of Federal nutrition guidance. Using the 2005 

Dietary Guidelines and MyPyramid, the educational tool 

of the Guidelines, USDA will continue its leadership role 

of providing advice on patterns Americans can follow to 

improve overall health through proper nutrition and 

physical activity. 

In the same vein, the nutrition assistance programs 

managed by USDA touch the lives of one in five 

Americans – an enormous opportunity to promote 

healthier behaviors. In 2006, the Department maintained 

its focus on providing benefits to children and lowincome people that contribute to a healthful diet, with 

skills and motivation to encourage healthy eating and 

increased physical activity. For example, in the Food 

Stamp Program, USDA established, with the help of 

stakeholders, a set of guiding principles that provide the 

foundation for nutrition education for FSP applicants, 

recipients and those eligible for the Food Stamp Program. 

In FY 2006, the Principles were incorporated into 

guidance for developing State Food Stamp nutrition 

education plans starting with Fiscal Year 2007. 

Challenges for the Future 

USDA’s goal of reducing obesity levels begins with 

understanding what constitutes a healthy diet and the 

appropriate balance 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 

better food choices requires understanding their current 

choices and the relationships between these choices and 

their attitudes, knowledge and awareness of diet/health 

links. Accomplishing this understanding requires data that 

link behavior and consumption decisions for individuals 

of various backgrounds, regions, ages and genders. While 

data exist on a national scale, 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 formidable task in light of 

the limited resources available for nutrition promotion. 
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108 D RAFT F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

USDA will continue to explore ways to devote significant 

long-term resources to develop consumer-friendly and 

cost-effective nutrition education materials, and to make 

use of partnerships and “information multipliers” to 

maximize the reach and impact of these materials. 

Promotional materials will be used both within Federal 

nutrition-assistance programs and with the general public. 

More broadly, attaining performance outcomes in this 

area depends partly on the emphasis that the Nation places 

on healthier eating, including products and practices in the 

food marketplace. Additionally, physical activity and 

other lifestyle issues significantly affect weight and 

health. 

Key Outcome 

Promote More Healthful Eating and Physical 

Activity across the Nation 

USDA promotes healthful eating through its 

comprehensive nutrition assistance research and education 

programs. Efforts are targeted to nutrition assistance 

program participants and the general public. For each 

target audience, the challenge is to find effective ways to 

translate research into working knowledge to understand 

what people eat, and to find effective strategies to reach 

target populations with promotional information and 

messages. 

USDA tracks its annual performance in promoting 

healthful eating and physical activity by monitoring its 

annual distribution of nutrition education materials. Over 

the longer term, USDA assesses the effect of these efforts 

with the Healthy Eating Index (HEI), a summary measure 

of diet quality developed by USDA’s Center for Nutrition 

Policy and Promotion. The Department sets targets for 

improvement in the HEI both for the U.S. population as a 

whole and among people with incomes at or below 130 

percent of poverty. 

Analysis of Results 

To meet the needs of the general population, USDA 

continued its leadership role in the promotion of nutrition 

guidance through educational tools that are designed to 

motivate Americans to “Step Up to a Healthier You.” 

Indices of this leadership role include: 

Usage level of nutrition guidance tools was 

substantial for FY 2006. Nearly 2.2 billion pieces of 

information were distributed via MyPyramid.gov and 

printed materials. Visitors to MyPyramid.gov used 

MyPyramid interactive tools, MyPyramid for Kids 

and MiPirámide. MyPyramid for Kids is a 

specialized version of MyPyramid designed to 

promote dietary changes to children 6- to 11-years 

old, and MiPirámide, a Spanish-language version of 

MyPyramid. To date, there are 1.56 million registered 

users of MyPyramid Tracker1

, the assessment tool for 

dietary and physical activity status; 

Results from a satisfaction survey2 of MyPyramid.gov 

have been positive. Over 6 months, responses by site 

visitors continued to confirm the usefulness of 

MyPyramid.gov; 

Overall, the site received a satisfaction score that 

ranged from 69 to 83. The score was based on site 

content, functionality, look and feel, navigation, 

search, and site performance; 

Most survey respondents to the site continued to be 

general consumers, students, and educators and 

teachers: 71 to 77 percent; 

Most survey respondents believed the level and depth 

of the information at MyPyramid.gov met their needs: 

64 to 78 percent; 

Most survey respondents said that the information at 

MyPyramid.gov prompted them to take action 

regarding their health: 69 to 75 percent; and 

Of those who were prompted to take action, most said 

they changed their diet or their family’s diet, reduced 

unhealthful eating habits, started monitoring their 

intake, developed a personalized plan, or established a 

goal for physical activity: 73 to 85 percent. 

 Data on the number of registrations to MyPyramid Tracker are 

cumulative from April 19, 2005; therefore, that information is reported 

separately. 

2

These data are compiled from two surveys conducted between 

February 2 and May 3, 2006, and two surveys conducted between 

June 13 and September 25, 2006. The total number of respondents 

was 2,242.
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F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 109 

Exhibit 51: Promoting Healthier Eating Habits and Lifestyles 

Fiscal Year 2006 

Annual Performance Goals and Indicators Target Actual Result 

5.2.1 Application and usage level of nutrition guidance tools pieces* 

of nutrition guidance distributed 

1.5 billion 2.18 billion Exceeded 

*Represents number of e-hits to MyPyramid.gov links and number of print materials distributed 

Exhibit 52: Trends to Promote Healthier Eating Habits and Lifestyles 

Fiscal Year 2006 

Trends 2002 2003 2004 2005 2006 

5.2.1 Application and usage level of nutrition 

guidance tools N/A* N/A* N/A* 1.0 billion 2.2 billion 

*Data was not available when the Annual Performance Plan was published. 

Evidence from a range of 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 

nationwide 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 

Selected Results in Research, Extension and 

Statistics 

Americans consume a growing proportion of their calories 

at restaurants and fast food places, although these foods 

tend to be more calorie-dense and nutritionally poorer 

than foods prepared at home, on average. However, little 

is known about how the desire for a healthy diet and diethealth knowledge affect consumer behavior in the fastgrowing away-from-home market. Some have even 

questioned whether consumers want healthful foods or 

apply their knowledge of health and nutrition, when 

making choices about where to eat out and how often to 

do so. This study examines the impact of the desires for 

health, entertainment and convenience, along with the 

consumer’s knowledge of health and nutrition, on a 

consumer’s frequency of eating out and the type of 

restaurants he or she chooses to patronize. 

USDA continued development of a comprehensive 

consumer food consumption database comprised of the 

Food Consumption (per capita) Data System, food intake 

data gathered from the National Health and Nutrition 

Examination Survey (NHANES) and from proprietary 

datasets. USDA also finalized the development of the 

Flexible Consumer Behavior Survey (FCBS) in 2006, 

which will be fielded as a supplement to the NHANES in 

2007-2008. USDA acquired three additional food 

consumption datasets: the 2003-4 NET (National Eating 

Trends) and CREST (Consumer Reports on Eating Share 

Trends) data from the NPD group and the AC Nielsen 

Homescan consumer panel data on packaged and random 

weight food purchases. 

Researchers studied a number of popular diets and found 

that they have no special effect on metabolism. Four 

popular diets were tested for effectiveness and adherence 

in 160 overweight and obese subjects for weight loss over 

one year by USDA scientists. The diets were 

characterized as very low carbohydrate, high protein, very 

low fat, or balanced low calorie. Weight loss was mainly 
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110 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

dependent on dietary compliance and the amount of 

calorie restriction rather than the type of diet. There was 

no distinct benefit of high protein or from limiting 

carbohydrates or fats. 

Researchers have discovered a genetic marker for obesity 

that is consistent across populations. ARS scientists have, 

for the first time, shown that common mutations of a gene 

called “perilipin” modulate body weight in humans and 

more so in women. This genetic predisposition to obesity 

has been demonstrated in white Americans randomly 

selected from the general population as well as in Indians 

and Malays residing in Singapore. Identifying people with 

a predisposition to obesity will help in the tailoring of 

appropriate strategies for obesity prevention. 

Research indicates that fruit and vegetable consumption 

lowers risk for metabolic syndrome in young adults. 

USDA scientists found that low fruit and vegetable 

consumption and high sweetened beverage intake are 

independently associated with the prevalence of metabolic 

syndrome in young adults who participated in the 

Bogalusa Heart Study. Metabolic syndrome, which is 

characterized by abdominal obesity and the inability to 

use insulin efficiently, is believed to be a forerunner of 

coronary heart disease and type II diabetes. 

Smart Bodies is an interactive campaign designed to help 

prevent childhood obesity that is a joint venture supported 

partially by USDA funding to Louisiana State University 

and partially by the Blue Cross and Blue Shield of 

Louisiana Foundation. The program has been 

implemented in nearly 100 schools and has reached an 

estimated 12,000 youngsters. Preliminary results indicate 

the program is having a positive influence on the children. 

“One school said they have started ordering more fruits 

and vegetables for the cafeteria because they started 

running out after the program was implemented.” 

OBJECTIVE 5.3: IMPROVE FOOD PROGRAM 

MANAGEMENT AND CUSTOMER SERVICE

Overview 

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. 

USDA continued to improve management practices by 

reducing program errors and enhancing customer service. 

The delivery of food-stamp benefits remains a priority of 

the Department, as it continues to work with its State 

agency partners in maintaining a high level of integrity in 

administering nutrition assistance programs. USDA’s 

continued focus in 2006 on improving nutrition-assistance 

program management and customer service reflects its 

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. Deficiencies in customer service 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. 

Selected Results in Research, Extension and 

Statistics 

Evidence is strong that, beginning in 1995, an increase in 

reported certification-related costs per Food Stamp 

Program (FSP) household contributed to reduced error 

rates. Recent research studied trends in FSP 

administrative costs and errors from 1989 to 2001, 

describing the trends and composition of FSP 

administrative costs. The results imply that, in the period 
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F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 111 

after the Personal Responsibility and Work Opportunity 

Reconciliation Act of 1996, States on average had to 

spend more effort on certification-related activities than in 

previous years to achieve a given level of accuracy. 

Research results predict that, if a State’s FSP certification 

budget is fixed and the number of FSP households 

increase, the effort per FSP household will fall and error 

rates will rise, if all other things are equal. 

Over half of all infant formula sold in the United States is 

purchased through the Special Supplemental Nutrition 

Program for Women, Infants, and Children (WIC). 

Typically, State WIC agencies obtain substantial 

discounts in the form of rebates from infant formula 

manufacturers for each can of formula purchased through 

the program. However, concern has been raised that the 

cost to the States of providing infant formula to WIC 

participants is increasing, a result that if sustained, could 

have far-reaching negative implications for the WIC 

program. This study found that the cost of providing 

infant formula to WIC participants has increased in recent 

years. This increase in costs coincides with the 

introduction of higher priced DHA- and ARAsupplemented infant formulas. Conditions may change 

after the market adjusts to these new formulas. 

The South Carolina Food Stamp and Well-being Studies 

examine patterns of Food Stamp Program use and other 

types of in-kind assistance among current and former 

welfare recipients in South Carolina and the role that noncash assistance plays in maintaining families’ well-being 

as they transition off of welfare. People who receive 

public assistance confront a number of “clocks” that may 

affect program participation. Examples of clocks include 

time limits on receiving benefits and recurring deadlines 

for reconfirming eligibility. This report examines the role 

of program clocks, economic conditions, and other 

circumstances on participation in South Carolina’s cash 

and food assistance programs. The study shows that South 

Carolina’s 2-year time limit in receiving TANF benefits 

in any 10-year period hastens exits from and reduces 

returns to the program and that the State’s policy of 

quarterly recertifications hastened exits from the FSP. In 

addition, annual redeterminations may contribute to 

TANF exits. Finding employment speeds exits from the 

FSP and cash assistance and delays returns to the 

programs. Cash assistance participation may lead to 

longer spells of receiving food stamps. 

Another report—South Carolina Food Stamp and WellBeing Study: Transitions in Food Stamp Participation and 

Employment Among Adult-Only Households—focused 

on adult-only households. Several recent changes in the 

Food Stamp Program have been directed at households 

without children. Some of the changes, such as new work 

requirements and time limits for able-bodied adults 

without dependents (ABAWDs), are intended to 

encourage economic self-sufficiency and to reduce 

program dependence. Other changes are intended to raise 

low program participation rates among vulnerable groups. 

The study shows that households subject to ABAWD 

policies had shorter spells of food stamp participation, 

longer spells of food stamp nonparticipation, and higher 

rates of employment than did households not subject to 

the policies. In addition, adult-only households were 

much more likely to leave the FSP at recertification time 

than at other times. Finding employment hastened exits 

from the Food Stamp Program and delayed returns. 

Challenges for the Future 

Some improper payment risks are inherent to the 

legislatively mandated program structure. The nutrition 

assistance structure is intended to serve people in special 

circumstances and settings. USDA must shape its 

management approach in light of the need to make 

services convenient and accessible to participants. 

Additionally, State and local Governments bear direct 

responsibility for delivering the programs. Thus, the 

Department must work with State and local personnel to 

address improper payment problems through 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 and prevents 

or minimizes error, waste and abuse. 
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112 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

To meet the challenge of continued improvements in FSP 

payment accuracy, USDA continues to dedicate resources 

to this area. Significant challenges will impact future 

success. State budgets have been and will continue to be 

extremely tight. This could hurt State performance in 

payment accuracy. USDA will continue to provide 

technical assistance and support to maintain payment 

accuracy in the context of this changing environment. 

Key Outcome 

Maintain a High Level of Integrity in the 

Nutrition Assistance Programs 

While 2006 data are unavailable, payment accuracy 

reached a record high in 2005, reflecting strong efforts in 

this area that have resulted in significant error reductions 

during the past several years. Even small changes in the 

food stamp error rate can save millions of dollars. 

Analysis of Results 

The FY 2006 Food Stamp Payment Accuracy Rate will 

become available in June 2007 and will be reported in the 

FY 2007 Performance and Accountability Report. 

The FY 2005 Food Stamp Payment Accuracy Rate posted 

a new high of 94.16 percent, the seventh consecutive year 

of improvement and a reduction in error of 34 percent 

from 5 years earlier. Of the total FY 2005 payment error 

rate of 5.84 percent, 4.53 percentage points represent the 

over issuance of benefits; the other 1.31 percentage points 

represent under issuance of benefits. Performance 

highlights include: 

Thirty-two State agencies, including Illinois, 

Pennsylvania, and Texas, achieved a payment error 

rate of less than 6 percent. California, with a payment 

error rate of 6.38 percent, continued to improve from 

its FY 2002 error rate of 14.84 percent; and 

Three State agencies in FY 2005 were assessed 

liabilities totaling an aggregate of $3.6 million for 

having excessive error rates for 2 consecutive fiscal 

years. 

USDA efforts such as the Partner Web (an intranet for 

State Food Stamp agencies) and the National Payment 

Accuracy Work Group (consisting of representatives from 

USDA headquarters and regional offices) contributed 

significantly to this success by making timely and useful 

payment accuracy-related information and tools available 

across regions and States. 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 QC data. Actions are then taken by 

regional offices to address these situations in the 

individual States. 

USDA’s close working relationship with its State partners 

over the last several years, along with program changes to 

simplify rules and reduce the potential for error, has 

resulted in consistent increases in the Food Stamp 

Payment Accuracy rate. One of the most important factors 

in maintaining improved performance in this area is the 

need for State partners to continue and renew their 

leadership commitment to excellence in payment 

accuracy. To support State improvement, USDA will 

continue efforts with the National Payment Accuracy 

Work Group to share best practice methods and strategies. 

The Department also will continue to resolve quality 

control liabilities through settlements, which require 

States to invest in specific program improvements. 

Exhibit 53: Increase Efficiency in Food Management 

Fiscal Year 2006 

Annual Performance Goals and Indicators Target Actual Result 

5.3.1 Improve Food Program Management and Customer Service 

 Increase Food Stamp Payment Accuracy Rate 93.8% N/A Deferred 
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Exhibit 54: Trends in Increased Efficiency in Food Management 

Fiscal Year 2006 

Trends 2002 2003 2004 2005 2006 

5.3.1 Increase Food Stamp Payment Accuracy 

Rate 

91.7% 93.4% 94.1% 94.2%* N/A 

*The figure published in the Annual Performance Plan was an estimate and the actual figure was released in June, 2006. 

Strategic Goal 6: Protect and Enhance 

the Nation’s Natural Resource Base 

and Environment 

OBJECTIVE 6.1: PROTECT WATERSHED 

HEALTH TO ENSURE CLEAN AND ABUNDANT 

WATER

Overview 

While agriculture produces the food and fiber necessary 

to supply the Nation’s needs, much of its processes may 

affect the quality of water resources under and around 

agricultural land. For example, tilling the soil and leaving 

it without plant cover for extended periods of time can 

accelerate soil erosion. Residues of chemical fertilizers 

and pesticides may wash off the field into streams or 

leach through the soil into groundwater. Irrigation can 

move salt and other dissolved minerals to surface water. 

Livestock operations produce large amounts of waste 

which, if not disposed properly, can threaten human 

health and contribute to excess nutrient problems in 

streams, rivers, lakes and estuaries. According to the U.S. 

Environmental Protection Agency, agriculture is 

considered to be the leading source of pollutants that enter 

rivers and lakes. When pollutants degrade water quality, 

ecosystems are degraded and costs are imposed on 

ecosystems and those who rely on water for drinking, 

recreational opportunities and economic livelihoods. 

Individuals, communities and the environment then must 

bear the consequences and the costs for degraded water 

quality. 

Water resources can be protected by reducing the amount 

of sediments, nutrients and chemicals originating from 

agricultural lands. Programs designed to reduce topsoil 

erosion, monitor nutrients and provide buffers between 

farmland and water sources can reduce the introduction of 

pollutants into rivers and lakes significantly. Buffers 

improve water quality and fish and wildlife populations 

by intercepting sediment, nitrogen and phosphorus in 

runoff before these pollutants enter lakes, ponds, wetlands 

and waterways. The buffers provide shade—thereby 

cooling streams and rivers—and provide conservation 

cover and increased wildlife habitats. 

USDA conservation experts assisted agricultural 

producers in planning and applying conservation 

practices. These practices helped reduce sediment, 

nutrient and pesticide runoff. They also helped maintain 

and improve water supplies, restore wetlands and improve 

fish and wildlife habitat. On private land, USDA assisted 

people in writing or updating conservation plans for 

almost 9.9 million acres of working cropland and 23.9 

million acres of grazing lands. The Department also 

helped implement conservation practices on nearly 20 

million acres. 

The Department also assists State, Tribal and local entities 

in improving water-resource conservation. Assistance 

provided to these entities includes advice on drought and 

flood control management, natural resource data 

collection and dissemination, and cost-share and technical 

guidelines. This assistance helps State and local 

Governments plan and implement conservation practices 

and mitigate drought and flood impacts. 
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114 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Key Outcome 

Clean and Abundant Water 

In 2006, USDA helped producers develop conservation 

plans for millions of agricultural acres. These plans 

empowered producers with information on the capability 

of their soil, condition of their rangeland and woodlands, 

and requirements for irrigation. They also served as a 

land-use management tool to support healthy plant, 

animal and human communities. USDA also provided 

producers with conservation cost-share benefits and 

incentive payments. These incentives helped offset the 

cost of installing conservation covers and riparian and 

grassland buffers and maintained sound conservation 

practices while improving the productivity of agricultural 

lands. 

Additionally, USDA provided technical assistance to 

hundreds of thousands of producers in planning and 

applying conservation to manage their soil and water 

resources better. The Department’s assistance helped 

managers of private lands maintain soil quality, protect 

water and air quality, and enhance wildlife habitats. To 

reduce the risk of nutrients entering waterways from 

animal operations, USDA worked with agricultural 

producers to apply more than 4,400 Conservation Nutrient 

Management Plans on approximately 7.4 million acres. 

These activities provide the information and effective 

tools resource managers need to be good stewards of the 

Nation’s land and water. 

USDA efforts to protect the Nation’s water supply also 

affect producers and communities. Farmers, ranchers, 

private forest owners and other landowners manage twothirds of the Nation’s land. Agricultural irrigation 

accounts for a third of the water drawn from surface water 

and groundwater. The Department helps these groups 

develop environmentally sound management practices. 

USDA also provides them with information on soil 

quality, water management and quality, plant materials, 

resource management and wildlife habitat. Additionally, 

the Department provides technical and financial 

assistance to agricultural producers to promote good 

stewardship of agricultural and environmentally sensitive 

lands. Land owners and managers who receive technical 

assistance and cost-share or incentive payments are more 

likely to plan, apply and maintain conservation systems 

that support agricultural production and environmental 

quality as compatible goals. These programs target land 

for enrollment precisely where 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 funds provided to these communities preserve and 

protect the environment, which benefits society as a 

whole. 

The environmental benefits of USDA conservation efforts 

to protect watersheds from agricultural runoff include 

healthier streams, rivers and lakes. These benefits also 

lead to improved ecosystems and wildlife habitats. 

Studies about the benefits of water-pollution reduction 

suggest that the annual benefits from improving water 

quality could total tens of billions of dollars. According to 

a 2003 USDA report on agricultural resources and 

environmental indicators, water-quality benefits from 

erosion control on cropland alone could total more than 

$4 billion annually. Improved water resources reduce 

water treatment costs and mean safer drinking water 

supplies for communities. USDA provided technical and 

financial assistance to enable producers to use irrigation 

water on 953,528 acres more efficiently. The Department 

also helped local communities complete the installation of 

149 flood-prevention or mitigation measures. 

USDA provided assistance to local groups and 

Governments to develop almost 900 watershed and areawide plans. These plans address a wide range of water 

resources concerns. To help address flooding problems, 

the Department assisted in completing 121 dam-condition 

assessments and 13 watershed-rehabilitation plans. The 
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F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 115 

assessments were made to determine the risks associated 

with aging flood-control structures. The plans also 

identified feasible strategies for mitigating identified 

risks. 

USDA provided assistance to producers to improve 

irrigation water management on over 1.1 million acres. 

The Department assisted in the rehabilitation or removal 

of 4 dams determined to be at or nearing the end of their 

50-year design life. Upgrading and removing these dams 

eliminated threats to life and property. This move also 

may have mitigated flood damages, enhanced wetlands 

and wildlife, and created recreational benefits. 

USDA provided financial assistance to individuals and 

groups to implement structures and management systems. 

This move improved water management and protected 

watersheds, including: 

$512 million for cost-shares and incentives for water 

conservation and water quality. 

$5 million for Cooperative Conservation Partnership 

Initiative (CCPI) grants to help partners identify and 

solve regional, State and local natural resources 

concerns. CCPI provides funds for watershed or 

airshed-planning projects. The funds are designed for 

projects that address terrestrial and freshwater aquatic 

wildlife habitat, invasive species, livestock nutrient 

management, minor and specialty crop management, 

and agricultural air quality. CCPI also supports rapid 

watershed assessments that will provide watershed 

assessments quickly to stakeholders and partners. 

USDA also allocated $4.1 million in conservation 

innovation grants to address water quality and other 

priority natural resource concerns in the Chesapeake 

Bay Watershed.

Programs such as the Conservation Reserve Program 

(CRP), a voluntary program available to agricultural 

producers, protect millions of acres of American topsoil 

from erosion. CRP safeguards millions of acres of land 

susceptible to erosion and other environmentally sensitive 

cropland by placing it in long-term protective cover. 

Producers enrolled in the program plant long-term, 

resource-conserving covers (such as grasses and trees) to 

improve water quality, control soil erosion and enhance 

wildlife habitat. In return, USDA provides participants 

with rental payments and cost-share assistance. Once 

enrolled, producers enter into 10-to-15-year contracts. 

Current legislation requires equal consideration for soil 

erosion, water quality and wildlife concerns. The program 

addresses these natural resource concerns, providing 

environmental and economic benefits both on and off the 

farm. The Department accomplishes this by using 

environmental benefits indices in general sign-ups and 

through continuous ones that target primarily 

improvement of water quality and wildlife. Key benefits 

of the program include reduced soil erosion, increased 

wildlife habitat and better protected surface and ground 

water supplies. Acreage enrolled in the program is planted 

with resource-conserving vegetative covers. This process 

makes the program a major contributor to increased 

wildlife populations in many parts of the country. 

CRP has accounted for nearly 40 percent of the annual 1.2 

billion tons reduction in soil erosion since 1982. In 2004, 

CRP reduced nitrogen and phosphorus applications by 

683,000 and 113,000 tons, respectively. Reduced soil 

erosion and fertilizer applications improve water quality. 

Enrollment of conservation buffers and establishing 

permanent cover through CRP reduces or eliminates 

runoff. By reducing water runoff and sedimentation, CRP 

protects groundwater and helps improve the condition of 

lakes, rivers, ponds and streams. A study by the Food and 

Agricultural Policy Research Institute estimated the 

impact of CRP enrollment on nitrogen, phosphorus and 

erosion leaving field edge and root zones and showed 

significant reductions in runoff. These reductions mean 

that fewer pollutants enter water resources. CRP also 

addresses the loss of wetlands, grassland and wildlife 

habitats that has occurred historically as lands were 

converted to agricultural uses. 

Users accessed the National Water and Climate Center 

Web site millions of times. The site, 

http://www.wcc.nrcs.usda.gov/, hosts data on snowpack, 

hydroclimatic and soil moisture, which helps agricultural 
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116 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

producers effectively use limited water supplies for 

agricultural production. The data also assist Federal, State 

and local agencies to manage water compacts and treaties, 

and mitigate drought and flood damages. Officials from 

municipalities can visit the site for information on 

operating reservoirs and supporting fish and wildlifemanagement activities associated with species protection. 

This site also provides data to the scientific community. 

USDA developed and released new Web-based tools to 

help producers manage their operations more efficiently. 

These tools, which help protect water resources and 

reduce their energy costs, include: 

Energy Estimator for Tillage — Helps farmers and 

ranchers calculate diesel-fuel use and costs associated 

with various tillage practices. Key conservation 

practices include crop-residue management, nutrient 

management, irrigation-water management, precision 

agriculture, pesticide management, intensified grazing 

systems and windbreaks/shelterbelts; 

Energy Estimator for Nitrogen Fertilizer — Estimates 

savings in nitrogen-fertilizer applications and helps 

farmers and ranchers make practical and sound 

decisions regarding nitrogen fertilizer use on their 

farm or ranch; and 

Energy Estimator for Irrigation — Helps producers 

manage their irrigation water resources more 

efficiently. The tool provides an analysis of current 

water use, the reduced water use associated with 

various treatment options and the energy costs and 

savings of these treatment options based on data 

entered by the producer. 

USDA’s Plant Materials Program released 26 plants and 

published 308 technical documents to protect watershed 

health. This plant technology is used to: 

Manage and eradicate invasive species; 

Restore and enhance wetlands, grassland and wildlife 

habitat; 

Control erosion; 

Improve grassland condition; 

Restore stream banks; and 

Mitigate damages resulting from such natural 

disasters as drought, floods and fires. 

Challenges for the Future 

External factors present challenges to accomplishing the 

conservation goals set by USDA. If market prices are 

favorable, agricultural producers may be enticed into 

leaving targeted, environmentally sensitive cropland in 

crop production rather than establishing long-term 

conservation covers or buffers. High fuel prices affect 

farmers and ranchers by increasing overhead costs. 

Landowners may be more reluctant to enroll in new 

programs, implement new conservation practices or adopt 

new technologies that could decrease their bottom line. 

Additionally, natural disasters and prolonged drought 

conditions may also reduce the effectiveness of USDA’s 

conservation programs. 

Analysis of Results 

USDA met its FY 2006 targets for helping producers 

apply comprehensive nutrient management plans 

(CNMPs), which are systems for animal-feeding 

operations designed to ensure that wastes and byproducts 

are collected, stored and disposed of in ways that 

minimize environmental damage. These actions protect 

soil and water, and enable agriculture to meet long-term 

goals for clean water. Comprehensive nutrient 

management plan targets were set for the Conservation 

Technical Assistance Program (CTA) and Environmental 

Quality Incentives Program (EQIP). CNMPs are complex 

systems that require substantial investment of time and 

money. The steady increase in the number of CNMPs 

assisted by EQIP reflects the increases in public 

investment in conservation authorized by the 2002 Farm 

Bill. The trend in CNMP work supported by CTA reflects 

assistance available from non-USDA sources and 

increasing regulatory pressures. As animal agriculture has 

become more concentrated, public concern has increased 

about the potential for damage to the environment. USDA 

has focused on helping producers comply with State and 

local regulations and minimize the potential that their 
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operations might damage water or air resources. 

In FY 2006, USDA met its performance targets and made 

significant progress towards ensuring cleaner water. The 

Department helped farmers and ranchers create new 

riparian and grass buffers in agricultural lands. These 

buffer areas intercept sediment and nutrients before they 

reach surface waters. The long-term goal for USDA 

conservation programs is to have a land-management 

system that maintains a highly productive resource base 

for future generations while meeting the needs of the 

present. As one indicator of its performance in reaching 

this goal, USDA establishes an annual target for acreage 

of agricultural lands to be enrolled in CRP as buffer 

zones. The USDA Strategic Plan for FY 2005-2010 set a 

strategy of helping producers increase the number of 

riparian and grass buffers on agricultural lands. During 

the past five years, the number of acres set aside as buffer 

areas under the CRP program has increased steadily. In 

2005, USDA exceeded its target of 1.75 million acres set 

aside as buffer zones, an increase of more than 110,000 

acres from the previous year. In FY 2006, also helped 

producers create conservation plans for their privately 

owned land. USDA set a target of 1.85 million additional 

acres set aside for buffer areas and met its targeted 

number of acres for the year. Cumulative CRP enrollment 

now stands at 36.7 million acres. These acres have 

reduced soil erosion by 454 million tons annually, 

reduced nitrogen, phosphorus and sediment leaving the 

field by more than 85 percent, and sequestered more than 

48 million metric tons of carbon. 

Exhibit 55: Healthy Watersheds, High Quality Soils and Sustainable Ecosystems 

Fiscal Year 2006 

Annual Performance Goals and Indicators Target Actual Result 

6.1.1 Number of Comprehensive Nutrients Management Plans applied Met 

 Conservation Technical Assistance ≈1,909 19001

 

 Environmental Quality Incentives Program ≈2,552 25502

 

6.1.2 Increase Conservation Reserve Program (CRP) acres of riparian 

and grass buffers 

1.85 million 

acres* 

1.86 million 

acres* 

Met 

1

 Data assessment metrics to meet the target allow for an actual number in the range 1,710 - 2,090. 

2

 Data assessment metrics to meet the target allow for an actual number in the range 2,250 – 2,750. 

* Cumulative 

Exhibit 56: Trends in Application of Comprehensive Nutrient Management Plans 

Fiscal Year Actual 

Trends 2002 2003 2004 2005 2006 

6.1.1 Number of Comprehensive Nutrient 

Management Plans applied 

 Conservation Technical Assistance 2,292 2,132 2,372 2,420 19001

 Environmental Quality Incentives 

Program 

956 948 1,055 2,032 25502

6.1.2 Increase Conservation Reserve Program 

(CRP) acres of riparian and grass buffers 

1.24 million 

acres* 

1.45 million 

acres* 

1.65 million 

acres* 

1.75 million 

acres* 

1.86 million 

acres* 

1

 Data assessment metrics to meet the target allow for an actual number in the range 1,710 - 2,090. 

2

 Data assessment metrics to meet the target allow for an actual number in the range 2,250 – 2,750. 

* Cumulative. 
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118 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Selected Results in Research, Extension and 

Statistics 

Programs require understanding why producers 

participate in the programs, what incentives encourage 

participation and how policies might be designed to 

encourage participation. Recent USDA research addresses 

the question regarding program participation. This report 

examines the business, operator, and household 

characteristics of farms that have adopted certain 

conservation-compatible practices, with and without 

financial assistance from government conservation 

programs. The analysis finds that attributes of the farm 

operator and household and characteristics of the farm 

business are associated with the likelihood that a farmer 

will adopt certain conservation-compatible practices and 

the degree to which the farmer participates in 

conservation programs. For example, operators of small 

farms and operators not primarily focused on farming are 

less likely to adopt management-intensive conservationcompatible practices and to participate in working-land 

conservation programs than operators of large enterprises 

whose primary occupation is farming. 

Voluntary conservation payment programs must specify 

who is eligible to receive payments, how much can be 

received, for what action, and the means by which 

applicants are selected. Achieving program goals in a 

cost-effective manner hinges on the choices policymakers 

and program managers make when answering these 

questions. A set of five Economic Briefs explores specific 

design options these decision makers face: balancing 

income support and environmental objectives; whether 

and how to target programs to improve cost effectiveness 

and environmental performance; whether and how to use 

bidding in determining payment levels; balancing land 

retirement with conservation on working lands; and 

whether to pay for conservation practices or to link 

payments to environmental performance. 

Low technology biofilters improve water quality by 

reducing nitrate in drain water from corn fields in the 

mid-west. Corn production in tile-drained soils leads to 

high nitrate concentrations in drainage water discharges to 

streams. USDA scientists demonstrated that a simple 

biofilter composed of wood chips buried in trenches 

adjacent to subsurface tiles can remove 60-70 percent of 

the nitrate from the tile drainage. The systems are easy to 

install and do not remove land from crop production. 

Biofilters could be systematically placed within fields and 

watersheds where contamination is highest. 

New prediction technology will help producers and action 

agencies reduce wind erosion. USDA employees, crop 

consultants, and others who advise producers have a 

critical need for software that can predict the impact of 

management practices on wind erosion. USDA scientists 

have led in the development of a new advanced wind 

erosion prediction model known as the wind erosion 

prediction system (WEPS). The software allows growers 

to select the right approach to prevent erosion. In addition 

to predicting erosion, WEPS can also predict emission of 

the tiny dust particles known as PM10 that may pose risks 

to human health and the environment. 

Researchers partially supported by USDA funds at Iowa 

State University’s Center for Agricultural and Rural 

Development have developed a method for better 

assessing the costs and benefits of a range of conservation 

practices in agriculture to mitigate water pollution. State 

policymakers need to quantify the contributions of 

agriculture to the problem and what effect different landuse decisions might have on meeting water quality 

objectives. Annual costs of conservation practices ranged 

from about $300 million to $320 million, with land setaside and conservation tillage the most costly practices. 

The environmental effects of different practices varied 

among the watersheds, with sediment decreases ranging 

from 6 percent in the Little Sioux River Watershed to 65 

percent in the Turkey River Watershed. The results 

suggest a targeted approach as the most cost-effective, 

matching a specific watershed to its most effective 

conservation practice or mix of practices. 

The results of a multi-state research project supported by 

USDA funds indicates that up to 25 percent of agricultural 
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fields in the North-Central region are non-responsive to 

nitrogen fertilizer applications. They also found that 

farmers over-fertilized fields with up to 25 to 30 pounds 

of nitrogen per acre or more. Applying unneeded or 

excessive fertilizer to fields affects the environment and 

raises farmers’ production costs. 

OBJECTIVE 6.2: ENHANCE SOIL QUALITY TO 

MAINTAIN PRODUCTIVE WORKING 

CROPLAND

Overview 

High-quality soils are the foundation of productive 

croplands, forest lands and grasslands, and a vibrant and 

productive agriculture. These soils also can filter and hold 

nutrients, which prevents unwanted materials from 

entering water resources. Soil quality is affected by 

management—it can be hurt by poor management or 

maintained and even improved by good management. 

Such conservation practices as residue management, 

cover crops, crop rotations, strip-cropping and irrigationwater management help protect and improve soil 

condition on cropland. Prescribed grazing and other 

grazing land practices are important to protecting soil 

quality on grassland and rangeland. 

USDA has set a long-term objective for improving 

cropland soil condition. The soils most vulnerable to 

damage are those in such intensive uses as annual 

cropping. In 2003, 60 percent of cropland was farmed 

under systems that maintained or increased soil condition 

and soil carbon. By 2010, the goal is to increase that 

number to 70 percent. 

USDA helps producers plan and apply conservation 

practices to enhance soil health. The Department assisted 

producers to apply conservation practices in plans 

covering 13.4 million acres of cropland. The most widely 

applied practices were residue management and 

conservation crop rotations. These practices protect soil 

quality by reducing erosion and increasing soil carbon. 

Soil organic matter improves soil structure and overall 

capacity to hold water and nutrients. 

USDA helps landowners and land users plan and adopt 

environmentally sound management practices. Land 

managers who receive the Department’s technical 

assistance are more likely to plan, apply and maintain 

conservation systems that support agriculture production 

and environmental quality as compatible goals. Thus, 

producers can be good stewards of the Nation’s resource 

base. Their good management ensures that the Nation will 

continue to have a quality soil-resource base. Such a 

resource base enables the sustained production of a safe, 

healthy and abundant food supply. 

Challenges for the Future 

Economics and weather can impact producers’ 

willingness to adopt conservation measures that improve 

soil condition on cropland. Weakness in the economy and 

rising energy costs could affect producers’ abilities to 

invest their own funds and their willingness to take any 

risk associated with changing management. Natural 

disasters and prolonged unfavorable weather conditions 

also could reduce the opportunities for producers to 

implement conservation practices. As it relates to the soil 

data collection and dissemination, budget and staffing 

constraints in partnering Federal and State agencies, and 

universities could reduce the number of acres mapped and 

the total number of soil surveys updated. 
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120 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

USDA, in cooperation with other Federal, State, Tribal 

and local agencies, and private organizations, will work to 

provide producers with information and other resources 

they need to adopt applicable conservation measures. 

USDA will face challenges associated with soil data 

collection and dissemination. The Department will seek to 

strengthen partnerships and form new ones with entities 

having common interests. It also will use technology to 

improve data-collection efficiency. 

Key Outcome 

Enhanced Soil Quality 

High-quality soils support the efficient production of 

crops for food, fiber and energy. Proper soil management 

maximizes agricultural production and improves the 

environment. Intensively used cropland soils are most 

vulnerable to degradation and damage. By helping 

producers reduce erosion, minimize compaction and 

increase soil organic matter, USDA helps producers 

enhance the quality of cropland soils. The Department 

assisted producers in making significant gains in 

protecting soil quality. These moves included: 

USDA mapped or updated 35.5 million acres of soils. It 

also made 126 surveys covering 88 million acres available 

on the Web at: http://websoilsurvey.nrcs.usda.gov/app/

WebSoilSurvey.aspx. Soil surveys offer local information 

on the capabilities and conservation treatment needs of 

soils within a given region. They provide basic 

information for conservation planning and represent the 

foundation to sound land use planning and agricultural 

production. USDA provides the scientific expertise to 

enable a uniform system of mapping and assessing soil 

resources across the Nation. 

USDA developed and made new tools available to help 

producers plan cropland conservation management that 

improves soil quality and conserves energy. The Energy 

Estimator Tools for Tillage, Nitrogen, and Irrigation are 

Web-based tools designed to increase energy awareness in 

agriculture and to help farmers and ranchers identify 

where they can reduce their energy costs. More 

information on the Energy Estimator Tools can be found 

at http://energytools.sc.egov.usda.gov/. 

USDA helped producers develop or update conservation 

plans covering 10.3 million acres of cropland recorded in 

its national conservation plan database. Additionally, 

technical consultations helped land managers with other 

decisions not recorded as a final plan in the database. To 

develop plans for good stewardship of soil resources, 

USDA conservation planners helped land managers work 

through a structured process to analyze and work with 

complex natural processes in definable and measurable 

terms. Conservation plans for individual fields and farms 

are designed in the context of the larger landscape. They 

enable the producer to meet economic and environmental 

goals. 

USDA helps producers install conservation practices and 

systems on their land that meet established technical 

standards and specifications. The majority of the 

quantitative performance measures that USDA has 

established for its conservation programs are for practices 

implemented. Implementation feeds directly into 

achieving long-term outcome goals. USDA assisted in 

applying conservation practices on 13.4 million acres of 

cropland. 

USDA provides financial assistance to encourage 

producers to adopt land treatment practices proven to 

provide significant public benefits. Financial assistance 

for practices applied primarily to address soil quality 

issues included: 

$150 million in cost-shares or incentives for adopting 

structural measures or management practices to 

reduce erosion and protect cropland; and 

$ 55 million in stewardship payments to producers 

who meet or exceed standards for maintaining soil 

quality. 

Analysis of Results 

USDA performance is within the range considered as met 

for its targets for helping producers plan conservation on 
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cropland. 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. The measure includes only 

conservation planning supported by the Conservation 

Technical Assistance (CTA) program. CTA helps 

individual managers consider their operations within the 

larger landscape to which a farm or ranch belongs. The 

program 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. 

USDA also met its program goals for reducing the 

acreage of cropland soils damaged by erosion. This 

measure includes acres on which treatment applied in the 

fiscal year reduced erosion from a damaging rate to one 

that does not exceed the “tolerable” rate for the soil. 

Targets are set only for CTA and the Environmental 

Quality Incentives Program (EQIP). CTA provides 

assistance for the most widely-used, economically 

feasible practices such as residue management. EQIP 

provides cost shares for capital-intensive practices needed 

to solve difficult problems on environmentally sensitive 

land or comply with local or State regulations. Small 

acreages also are protected through other programs. 

Because conservation plans and practices may be applied 

with assistance from more than one program, some acres 

reported for one program also may be included in those 

reported for another program. 

The progress against erosion damage is considered the 

best indicator of accomplishments that link directly to the 

long-term objective of increasing the acreage under soilenhancing management. This measure does not include all 

cropland where USDA provided needed assistance. 

Farming is dynamic because producers frequently change 

crops, equipment and management practices. Thus, they 

need help in adjusting conservation systems even on land 

well protected through the previous system. The 

Department helped producers apply conservation 

practices in plans covering 13.4 million acres of cropland. 

The most widely applied practices were residue 

management and conservation crop rotations. These 

practices protect soil quality by reducing erosion and 

increasing soil carbon. Soil organic matter improves soil 

structure and overall capacity to hold water and nutrients. 

The majority of this basic soil protection was planned and 

applied with assistance through CTA. 

Exhibit 57: Enhanced Soil Quality 

Fiscal Year 2006 

Annual Performance Goals and Indicators Target Actual Result 

6.2.1 Conservation plans for cropland written, million acres 11 10.31 Met 

6.2.2 Reduction in acreage of cropland soils damaged by erosion, 

millions of acres 

Met 

 Conservation Technical Assistance Program 3.0 3.9 

 Environmental Quality Incentives Program 1.5 1.7 

1

 Data assessment metrics to meet the target allow for an actual number in the range 9.9 – 12.1. 
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Exhibit 58: Trends in Soil Quality Protection 

Fiscal Year Actual 

Trends 2002 2003 2004 2005 2006 

6.2.1 Conservation plans for cropland written, 

millions of acres 

5.2 6.3 7.4 8.5 10.3 

6.2.2 Reduction in the acreage of cropland 

soils damaged by erosion, millions of 

acres 

 Conservation Technical Assistance 3.4 3.3 N/A* 3.9 3.9 

 Environmental Quality Incentives 

Program 

1.0 1.0 N/A* 1.5 1.7 

*Data to report performance at the program level were not captured in the NRCS’ Integrated Accountability System in FY 2004; data on 

total for all programs was captured. 

Selected Results in Research, Extension and 

Statistics 

In response to Asian Soybean Rust concerns, USDA 

included soybean chemical usage data in the Agricultural 

Chemical Usage Field Crops Summary, May 2006 

publication. Soybean data were summarized from the 

Conservation Effects Assessment Project (CEAP) data 

set. The data identified six active ingredients approved for 

soybean rust applied by producers on the 2005 crop, 

compared with four active ingredients applied to the 

previous year’s soybean crop. From the CEAP data 

source, only regional chemical usage data were 

publishable. Soybeans were not a targeted crop on the 

Agricultural Resources Management Survey (ARMS) 

which prevented the data from being publishable at the 

individual State level. 

The Agricultural Chemical Usage Field Crops Summary, 

May 2006 and Agricultural Chemical Usage Fruit Crops 

Summary, July 2006, for the first time, included data for 

sulfur used as a nutrient. 

USDA’s National Agricultural Statistics Service (NASS) 

created geospatial cropland data layers for Arkansas, 

Iowa, Illinois, Indiana, Louisiana, Missouri, Mississippi, 

Nebraska, North Dakota, and Wisconsin covering the 

2005 crop year, and the Snake River Plain in Idaho 

following the final release of NASS’ county estimates for 

these states. Through a cooperative agreement with the 

Wisconsin Dept of Health and Family Services, NASS rereleased a modified and improved Wisconsin Cropland 

Data Layer of small acreage and non-agricultural fields. 

In addition, through a cooperative agreement with 

Towson University, NASS created a cropland data layer 

for the 10-state mid-Atlantic region for the 2002 crop 

year, which was released in January 2006. NASS is also 

creating a cropland data layer for Florida for the 2004 

crop year for release in the fall of 2006. Washington State 

University, through a cooperative agreement with NASS, 

is planning to create a cropland data layer for eastern 

Washington for the 2006 crop year. The malfunction of 

Landsat 7 in May 2003 has hampered the ability to obtain 

cloud-free satellite imagery during the growing season. 

Additionally, Landsat 5 failed twice during the winter of 

2005, making NASS look for additional sources of 

imagery for crop year 2006. However, alternative imagery 

sources such as GeoEye’s ResourceSat-1 AWiFS sensor 

is being acquired by the Foreign Agricultural Service and 

NASS for analysis of the 2006 crops for acreage 

estimation. 

Research has demonstrated that no-tillage cropping 

systems are as beneficial to soils as conservation 

grassland in sandy, semiarid soils. ARS researchers 

monitored a suite of critical soil parameters in 

conservation grasslands, conventionally tilled fields and 

no-tillage fields. They found that no-tillage production 

fields maintained soil conditions better than conventional 

tillage and as favorable as those in the conservation 

grasslands, indicating that farming with proper practices 
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can be as beneficial as placing lands in conservation 

reserve. 

Research has established that the use of polyacrylamide to 

reduce soil erosion has no negative effects on soil 

ecology. Polyacrylamide (PAM) has been shown to 

substantially reduce soil erosion, but some have expressed 

concern that its widespread use might have deleterious 

effects on soil organisms. ARS scientists tested this 

concern by applying PAM at a rate of 1 ton per acre, 

much higher than the normal rate of 10 to 20 pounds per 

acre. They monitored soil properties and conducted 

microbiological analyses for six years and found almost 

no difference in soil microbial activity despite the massive 

application rates. This demonstrates that there is no basis 

for concern about the effects of PAM on soil biota. 

OBJECTIVE 6.3: PROTECT FORESTS AND 

GRASSLANDS

Overview 

USDA and the U.S. Department of the Interior (DOI) are 

using tools and authorities provided by the President’s 

Healthy Forests Initiative and the Healthy Forests 

Restoration Act of 2003 (HFRA) to expedite planning and 

implementation of projects to reduce fire hazards and 

restore forests and grasslands. HFI was launched in 2002 

to reduce administrative process delays. HFRA provides 

improved statutory processes for hazardous fuel reduction 

projects and also provides other authorities and direction 

to help reduce hazardous fuel and restore healthy forest 

and rangeland conditions on lands of all ownerships. The 

USDA-DOI projects largely consist of removing excess 

vegetation and prescribed burning (collectively, 

hazardous fuel reduction) to reduce the risk from 

wildfires. In 2006, these wildfires burned more than 1.85 

million acres. The integration and alignment of the 

hazardous fuels reduction program with other restoration 

programs and the overall increase in hazardous fuel 

treatment is expedited by HFRA authorities and USDA 

leadership. The Department will continue to protect the 

Nation’s communities and natural resources by treating 

hazardous fuel and suppressing wildland fires. 

USDA is protecting the National Forests and Grasslands 

by implementing HFI and HFRA through collaboration 

among federal, State, tribal, and local governments, and 

non-governmental organizations. The Department is 

working with communities to develop Community 

Wildfire Protection Plans (CWPP). CWPPs identify 

wildland fire hazards in areas within and surrounding 

communities and identify high-priority work for the 

Forest Service. USDA’s State and local partners are 

leading this process, with active participation and 

technical assistance from USDA. Additionally, the 

Department is working to integrate vegetation 

management programs internally to achieve restoration 

goals. This effort will increase efficiency throughout the 

Department. USDA has been an active participant in 

Cooperative Conservation, promoting full partnership in 

the conservation of environmental and natural resources 

with States, local governments, tribes and individuals. 

The Department has updated the 10-year Comprehensive 

Strategy Implementation Plan, in cooperation with DOI, 

State and local governments, and non-governmental 

partners. This plan identifies a collaborative approach for 

reducing wildland fire risks to communities and the 

environment. Goals established in the original 10-Year 

Comprehensive Strategy Implementation Plan were met 

in fiscal year 2006, just five years after the establishment 

of the National Fire Plan. 
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Other 2006 accomplishments in addressing hazardous fuel 

conditions include: 

Receiving an “Adequate” rating from Office of 

Management and Budget’s Performance Assessment 

Rating Tool for the Wildland Fire Management 

Program, an improvement over the 2002 rating of 

“Results not Demonstrated”; 

Developing new fire and fuels performance measures 

to more effectively measure the impact of treatments 

on the landscape; 

Investing over 70 percent of the dollars available for 

hazardous fuel treatments in the wildland urban 

interface near communities; 

Continuing development of LANDFIRE, an 

interagency landscape-scale fire, ecosystem, and 

vegetation-mapping project. The information 

provided in LANDFIRE will help land managers 

make informed decisions for treatments to reduce 

wildland fire risks across landscapes; 

Removing forest debris from Hurricanes Katrina and 

Rita on more than 115,000 acres of National Forests 

in Louisiana, Mississippi and Texas; 

Increasing wildland fire use (allowing natural 

ignitions to burn to meet resource objectives in areas 

designated in Fire Management Plans if they meet 

predetermined conditions) on over 172,500 acres in 

2006; and 

Developing a new Hazardous Fuel Prioritization and 

Allocation System to help USDA managers identify 

and display national priorities geographically. This 

system incorporates Geographic Information System 

data across a wide range of emphasis areas, from 

wildfire potential to threatened and endangered 

species at risk from catastrophic wildfires. 

Hazardous fuel-reduction treatments help protect life and 

property by reducing the intensity of wildland fires. 

The FY 2006 fire season was considered above average, 

with 1,842,395 acres of National Forest Systems lands 

burned. Wildfires consumed more than 9.4 million acres 

nationally across all land ownerships. There were 14 

wildfires that burned more than 100,000 acres each by the 

end of the fiscal year. Major fires include the Black 

Mountain, Sawtooth, and Rattlesnake complexes. This 

ongoing trend of costly and damaging wildfire seasons 

indicates that the USDA, along with all other landmanagement agencies, must increase efforts to reduce fire 

hazards using hazardous fuel reduction activities. 

Removal of excess vegetation decreases fire hazards 

while also improving firefighter and public safety. In 

2006, USDA treated more than 2.4 million acres to 

remove excess vegetation. Approximately 1.4 million of 

these acres were treated specifically to reduce hazardous 

fuels. On an additional 1,102,293 acres, hazardous fuel 

levels were reduced through restoration and rehabilitation 

treatments of other programs (i.e., wildlife habitat, 

watershed, timber and pest management). USDA also 

used wildland fire use to achieve management objectives 

on more than 172,579 acres when naturally ignited fires 

met management prescriptions. To improve upon this 

level of accomplishment in 2007 and reduce the risk of 

future catastrophic wildland fires, USDA must use 

available resources to work collaboratively with all 

Federal, State, tribal and local entities. 

Non-Federal lands in forest and grassland ecosystems 

make up almost one-half of the area of the continental 

U.S. Active, science-based management of vegetation 

ensures the health of the soil, water and wildlife resources 

of these ecosystems. The primary threats to the health of 

forest and grassland ecosystems are wildfire, invasive 

species, fragmentation and unmanaged outdoor recreation. 

On non-Federal land, USDA provides technical and 

financial assistance to help forest and grazing land 

managers plan and apply conservation practices that 

reduce threats to resource condition. The Department 

helps land managers apply conservation practices on over 

27 million acres of privately managed grazing lands and 

forest lands. Conservation practices applied with USDA 

assistance include prescribed grazing, integrated pest 

management, brush management, forest stand 

improvement and tree planting. These practices, alone and 
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in combination with one another, provide food, cover and 

shelter for livestock and wildlife. They also improve 

animal health and productivity, maintain water quality 

and quantity, and reduce erosion. 

Byproducts removed during hazardous fuels reduction 

and landscape restoration activities are often utilized in 

certain forest products (e.g., timber, engineered lumber, 

paper and pulp, furniture) and bio-energy and bio-based 

products (e.g., plastics, ethanol and diesel). In 2006, 

USDA treated 380,000 acres mechanically; of these, 41 

percent have included some sort of biomass utilization. 

This biomass use contributes to economic diversification 

of resource-dependent communities and reduces the 

Nation’s dependency on international oil. A strategy to 

improve our ability to support use by community 

enterprises of the byproducts of fuel reduction and forest 

restoration for bio-energy or bio-based products has been 

proposed by the woody biomass utilization team, 

including a list of action items relative to stable supply, 

research and development, and partnerships with 

communities, stakeholders and other agencies. 

As more communities develop CWPPs, there is greater 

opportunity for private citizens to engage in the 

management of public lands in a collaborative and 

productive manner. For many, the experience provides 

greater understanding of the role fire plays in ecosystem 

health, a chance to interact positively with federal land 

managers, and business opportunities. 

Healthy, vigorous plant communities on rangeland, native 

and naturalized pasture, and forest lands protect soil 

quality, prevent soil erosion and provide sustainable 

forage and cover for livestock and wildlife. Such land also 

provides fiber, improves water quality, provides diverse 

habitat for wildlife and removes carbon. Sustaining 

healthy grassland, rangeland and forest ecosystems is 

achieved by focusing on interacting relationships between 

plant and animal species within a given ecosystem, and 

their relationship to the physical features and processes of 

their environment. USDA provides data and technical and 

financial assistance to those interested in creating, 

restoring, protecting and enhancing grassland, rangeland 

and forest lands. Technical assistance and tools are 

available to prevent problems and maintain good 

conditions. 

Challenges for the Future 

Future challenges include ensuring public and firefighter 

safety while protecting public lands and assets still 

threatened by fire in forests dense with ever-increasing 

vegetation and fuel. Additional challenges are the 

continued drought conditions throughout much of the 

Nation and the expansion of communities into previously 

uninhabited wildlands. This expansion makes up what is 

known as the wildland urban interface. The historical 

trend 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. 

The 2002 coarse scale assessment of wildland fuels 

determined that approximately 56 percent of all acres 

managed by USDA have missed 2 or more expected fire 

cycles and are at elevated risk from wildland fire. The 

finer scale data available from LANDFIRE is expected to 

show an even greater departure from expected conditions 

in the Nation’s forests and woodlands. Commercial 

utilization of excess vegetation has been identified as one 

way to lower the cost of government forest fuel-reduction 
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126 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

and restoration treatments. A barrier to expanding forest 

biomass utilization is the limited market for this material 

because of reduced forest products processing capacity in 

many Western States. Much of this material is small 

diameter and non-traditional species. This factor presents 

a further barrier to utilization where forest products 

processing capacity remains. Title II of HFRA authorizes 

measures to further commercial use of biomass. A 

significant challenge for USDA and DOI is to expand the 

acreage of hazardous fuel and restoration treatments with 

available funding by increasing the commercial utilization 

of hazardous fuel. The Departments are developing a 

strategy to encourage greater biomass utilization, 

including as a domestic source of energy. 

With regard to private land, producers’ willingness and 

ability to implement the conservation measures that would 

achieve this outcome are affected by economic 

conditions, drought and invasive species. Much of 

USDA’s activities on private forestland and rangeland are 

taken in cooperation with State agencies. Thus, State-level 

budget constraints that limited the assistance available 

from State programs would hamper USDA efforts to meet 

the goal for non-Federal grazing land. 

Both forest and grasslands are subject to land 

fragmentation pressures. Private forest land is the major 

source of newly developed acres. Increasing 

fragmentation of forest and grassland landscapes will 

increase the risk of invasive species and wildfires. It also 

may threaten the overall health of forest and grassland 

ecosystems. To minimize problems, USDA will make 

more information and better planning tools available to 

local communities. This assistance will help them plan 

comprehensively for growth and resource protection. 

USDA, in cooperation with other Federal, State, Tribal 

and local agencies and private organizations, will work to 

provide producers with information and other resources 

they need to adopt applicable conservation measures. 

Protecting communities and restoring forests and 

grasslands involves the integration of several key USDA 

programs that manage vegetation. The hazardous fuel 

reduction program is a key piece of this effort, along with 

treatments to improve timber and range productivity, 

wildlife habitat, forest health, and watershed quality. 

USDA and DOI are working together to implement a 

seven-step framework for the Strategic Placement of 

Treatments (SPOTS). This approach to designing 

treatment patterns at landscape scales specifically to 

reduce fire size and severity and alter problem fire 

behavior while also benefiting other resources is a way to 

leverage funds and align multiple management objectives 

into a single plan for interventions tailored to site-specific 

needs and challenges. SPOTS approaches will support 

and increase the Department’s ability to protect 

communities and resources through active management of 

forests and rangelands. 

Key Outcome 

Sustainable Forest and Grassland Ecosystems 

Selected Results in Research, Extension and 

Statistics 

There are continuing needs for new information to aid 

managers in the protection of the Nation’s forests and 

grasslands. USDA conducted scientific research, 

developed science-based management tools, and engaged 

managers to bring new science into practice. A sampling 

of the accomplishments includes: 

Fundamental and applied research was initiated to 

improve fire behavior prediction models for wildlands 

and the wildland urban interface. This work is being 

advanced in collaboration with partners from national 

laboratories and universities in order to better 

understand combustion processes in our wildlands 

and in intermixed vegetation and structures in the 

wildland urban interface. The work will aid in fire 

risk assessment, fire suppression activities, and 

improved information that private citizens can use to 

protect their property; 

USDA research personnel supported on-going fires in 

real time. A combination of personnel on-site at 
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wildland fires and supporting scientists and 

technicians working from their home offices supplied 

state-of-the-art predictions of fire spread and 

economic impacts. Information from these efforts was 

used to brief local officials and incident management 

teams for fires in Arizona, California, Minnesota and 

Washington. 

Working with headquarters Fire and Aviation 

personnel, USDA refined estimates of seasonal 

wildland fire expenditures. Produced every two weeks 

through the fire season, these estimates comprised a 

primary information source for assessing budget 

impacts of wildland fire suppression activities; and 

The frequent occurrence of extensive, severe fires in 

recent years has elevated concern about what may 

happen in the future given the uncertainty of future 

climate and the related changes in vegetation and fire 

activity. USDA projections of future vegetation and 

fire patterns for the continental U.S. show higher 

levels of burned areas in all scenarios evaluated. 

Work continues to refine models as our understanding 

of climate change advances. 

The Oregon State University Extension Service, partially 

supported with USDA funding, delivers forest land 

management education and information to the state’s 

166,000 non-industrial private forest landowners via the 

Master Woodland Manager (MWM) Volunteer Program. 

A collaborative effort between Extension, Oregon 

Department of Forestry, and the Natural Resources 

Conservation Service, volunteers visit neighboring 

landowners to identify opportunities for improving 

woodland stewardship. According to a survey of 80 

forestland clients, 151 forest improvement projects were 

initiated as a result of MWM visits. 

Research has established that properly managed livestock 

grazing can improve biodiversity in the Great Plains. 

Livestock grazing on rangelands has come under attack 

because grazing is believed to reduce plant biodiversity, 

adversely affecting environmental quality. Because of the 

lack of scientific information on how to manage grazing 

to meet biodiversity goals, USDA scientists have 

conducted long-term studies of plant composition under 

various livestock stocking rates. In both locations, 

moderate levels of livestock grazing resulted in the same 

or higher levels of biodiversity as ungrazed areas. In 

Montana, non-native plants were found in higher numbers 

in the ungrazed areas. Therefore, excluding livestock 

grazing on northern Great Plains rangelands is not the best 

strategy for improving and maintaining biodiversity and 

ecological health. 

Research has demonstrated that no-till seeding can 

increase pasture productivity while reducing input costs. 

The economic competitiveness of American agriculture, 

particularly for limited-resource farmers, depends on 

doing more with less. In the southern Great Plains, 

feeding hay over the entire winter can cost limitedresource farmers as much as a third of farm income. 

USDA and university scientists evaluated no-till options 

for seeding cool-season forages into dormant warmseason pastures as an alternative to feeding hay or 

planting winter forages using conventional tillage. They 

found that no-till seeding of annual ryegrass increased 

annual pasture production by 19 percent and if the forage 

legume, Korean lespedeza, was added to the mix, forage 

production increased by 37 percent. The no-till pastures 

exceeded conventional tillage for overall production. The 

combination of reduced hay feeding, using legumes as a 

nitrogen source and less expensive no-till cultivation, 

reduced costs significantly. 

To help achieve the targets for non-Federal forestland and 

grazing lands, USDA provided a portfolio of products and 

services, including: 

Conservation Planning and Technical 

Consultation—USDA helped producers develop or 

update conservation plans covering 22.8 million acres 

of grazing lands recorded in its national conservation 

plan database. Technical consultations also helped 

land managers with other decisions not recorded as a 

final plan in the database. The Department provided 

advice and expertise to help landowners, Tribes, 

communities and Federal land management agencies 
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128 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

develop plans to achieve goals across landscapes that 

are a mosaic of land in many types of ownership. 

Conservation Implementation—USDA assisted 

in applying conservation practices on nearly 26.5 

million acres of non-Federal grazing lands. These 

lands included rangeland, pastureland, grazed forest 

and native pasture. Through its programs, the 

Department also assisted on 550,000 acres of private, 

non-industrial forestland. 

Financial Assistance—USDA provides financial 

assistance to encourage producers to adopt land 

treatment practices proven to provide significant 

public benefits. Financial assistance for practices 

applied primarily to protect and enhance grazing land 

and forestland included: 

 $113 million in cost-shares or incentives for 

adoption of structural measures or management 

practices. 

 $15 million in easements to protect grassland 

ecosystems and ranching operations. 

 $4 million in grants through the Grazing Lands 

Conservation Initiative (GLCI) for proposals to 

control and manage invasive species affecting 

grazing lands. GLCI, a partnership of individuals 

and organizations, maintains and improves the 

management, productivity and health of the 

Nation’s privately owned grazing land. 

Analysis of Results 

USDA fell short of its 2006 performance goals for 

protecting the health of the Nation’s forests and 

grasslands against the risk of fire. The damage caused by 

Hurricanes Katrina and Rita limited USDA ability to use 

prescribed fire as a treatment tool in affected areas. As a 

result, resources were dedicated to removing the 

hazardous material left in the wake of these devastating 

hurricanes through mechanical means. The Department 

treated more than 115,000 acres of National Forest 

System land in Mississippi and Texas, providing raw 

material for economic recovery and building materials to 

the region. While mechanical treatment is of great benefit 

to communities, the cost of conducting these treatments 

compared to the cost of treatment through prescribed fire 

severely limited accomplishment of established goals. The 

Department met or exceeded fuel reduction performance 

goals throughout the remainder of the country. 

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. USDA is increasing 

emphasis on the contribution of all vegetation 

management programs toward the restoration of fireadapted ecosystems and reducing the threat of 

catastrophic fire. Activities to restore forest health, 

wildlife habitat, watershed condition, and timber and 

range productivity in fire-adapted ecosystems contributed 

over 1.3 million acres toward these goals in FY 2006. 

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 since FY 2004 includes the 

contribution of improved Condition Class resulting from 

resource restoration activities and direct hazardous fuel 

reduction treatments. 
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USDA exceeded its target for assisting in planning the 

protection of non-Federal grazing land. Conservation 

plans are the essential tool enabling producers to meet 

their economic and environmental goals. Department 

technical assistance for planning enables resource 

managers to focus on the natural systems and ecological 

processes that maintain the natural resource base. This 

comprehensive approach considers all of the aspects of a 

site and sees the site as a part of a larger landscape. This 

approach is essential to the sustainable, productive use of 

natural resources. These comprehensive plans are the 

framework within which more specific designs for 

individual practices can be developed. The acreage of 

grazing land plans developed each year has been 

increasing as USDA offers more assistance for it. 

Rangeland managers in many States have requested 

advice and assistance in protecting land against drought 

and mitigating damages caused by drought. 

Comprehensive planning assistance is available primarily 

through CTA. 

USDA also met its target for assisting in the application 

of conservation practices on non-Federal grazing land. In 

2000, an estimated 288 million acres of non-Federal 

grazing land were in minimal or degrading vegetative 

condition. USDA’s long-term goal is to reduce that by 

100 million acres by 2010. The measure of acres of 

grazing land treated is an indicator of progress toward the 

goal of improved condition. The acreage treated annually 

is a surrogate used to indicate progress toward the longterm goal of improved condition. A surrogate annual 

measure is needed because improvement in condition 

resulting from program action generally occurs slowly 

over time. The moisture available to support plant growth 

is limited in rangeland ecosystems. The measure includes 

all land on which producers applied a conservation 

practice in the fiscal year with USDA technical or 

financial assistance. The conservation applied includes a 

wide range of practices tailored to the resource conditions 

and producer’s operation and goals on the specific site. 

The conservation practices applied help protect the 

resource base against on-site damage and prevent that to 

off-site soil, water and air. High priority was given to 

activities to achieve the reduction of non-point source 

pollution in impaired watersheds, those of emissions to 

meet ambient air quality standards, a lower soil erosion 

from unacceptable levels and the promotion of habitat for 

at-risk species. The Environmental Quality Incentives 

Program provided financial and technical assistance in 

implementing capital-intensive measures. CTA provided 

assistance for measures that producers financed entirely 

with their own funds or with assistance from non-USDA 

sources. 

To increase the effectiveness of its ongoing efforts to help 

people protect and enhance plant and animal 

communities, USDA is working to improve the 

technology for measuring conditions. The Department 

also is projecting the results of management options on 

grazing lands. Activities include accelerating the 

development of methodologies to measure and monitor 

grazing land health, developing plants with a natural 

resistance to pests and working with partners to address 

grazing land health, including efforts to control invasive 

species. 

Exhibit 59: Hazardous Fuel Reduction 

Fiscal Year 2006 

Annual Performance Goals and Indicators Target Actual Result 

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

urban interface 

1,383,000 1,084,615 Unmet 

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

Classes 2 or 3 in Fire Regimes I, II, or III outside the wildlandurban interface 

235,000 124,183 Unmet 

6.3.3 Number of acres of other hazardous fuel treated that are outside 

the wildland-urban interface 

982,000 1,385,611 Exceeded 
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Exhibit 60: Trends in Treatment of Hazardous Fuel 

Fiscal Year Actual (thousand acres) 

Trends 2002 2003 2004 2005 2006 

6.3.1 Number of acres of hazardous fuel treated that are in 

the wildland urban interface 

764 1,114 1,712 1,649 1,241

6.3.2 Number of acres of hazardous fuel treated that are in 

condition Classes 2 or 3 in Fire Regimes I, II, or III 

outside the wildland-urban interface 

N/A 293 619 480 124 

6.3.3 Number of acres of other hazardous fuel treated that 

are outside the wildland-urban interface 

N/A N/A 274 592 1,385 

Exhibit 61: Sustainable Forests and Grasslands 

Fiscal Year 2006 

Annual Performance Goals and Indicators Target Actual Result 

6.3.4 Conservation plans written for grazing land (millions of acres) 18.0 22.8 Exceeded 

6.3.5 Grazing lands with conservation applied to protect the resource base 

and environment, Conservation Technical Assistance, millions of acres 

9.0 12.0 Exceeded 

6.3.6 Grazing lands with conservation applied to protect the resource base 

and environment, Environmental Quality Incentives Program, millions of 

acres 

10.0 13.6 Exceeded 

Exhibit 62: Trends in Protection of Non-federal Forests and Grasslands 

Fiscal Year Actual 

Trends 2002 2003 2004 2005 2006 

6.3.4 Conservation plans written for grazing lands, millions 

of acres 

8.1 11.7 15.1 19.2 22.8 

6.3.5 Grazing lands with conservation applied to protect the 

resource base and environment, Conservation 

Technical Assistance, millions of acres 

9.0 9.9 9.7 9.9 12.0 

6.3.6 Grazing lands with conservation applied to protect the 

resource base and environment, Environmental Quality 

Incentives Program, millions of acres 

7.7 8.7 8.5 10.3 13.6 

OBJECTIVE 6.4: PROTECT AND ENHANCE 

WILDLIFE HABITAT TO BENEFIT DESIRED,

AT-RISK AND DECLINING SPECIES

Overview 

Protecting the Nation’s wildlife requires protecting the 

interacting relationships between plant and animal species 

within a given ecosystem. It also requires sustaining the 

health and vigor of such a system. Protecting specific 

ecosystems and landscapes ― including wetlands, 

riparian areas, grasslands, floodplains, open water areas 

and certain types of forests ― can help support wildlife 

and aquatic species and provide economic and 

recreational benefits to people. Fragmentation and loss of 

habitat resulting from urban and suburban development, 

and intensive agricultural uses have contributed to 

declines in populations of many terrestrial and aquatic 

species. Invasive species are second only to habitat 

destruction as the cause of native species declines. 

Improving the habitat for declining and at-risk species is 

key to preventing further declines. It also ensures the 
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continued survival of those species and the overall health 

of the ecosystems to which they belong. 

USDA’s efforts to improve habitat on private lands 

include providing technical and financial assistance to 

landowners and managers. This assistance helps them 

manage working lands and waters to sustain wildlife, 

aquatic species and plant communities. USDA also 

acquires and manages easements to improve and restore 

grassland, rangeland and forest ecosystems, and wetlands 

and their associated upland buffers. These moves are 

designed to create productive, diverse and resilient 

habitat. 

USDA assisted individuals and groups to apply 

management that will maintain or improve habitat on 15.4 

million acres of non-Federal land. The land treated 

included 12.3 million acres of upland wildlife habitat 

management and 400,000 acres of wetland wildlife 

habitat management. The Department focuses on 

improving habitat for at-risk and declining species. USDA 

provided financial and technical assistance to improve and 

manage 3.6 million acres to benefit at-risk and declining 

species. USDA’s goal on non-Federal land is to assist in 9 

million acres of essential habitat to benefit at-risk and 

declining species between 2006 and 2010. USDA is 

supporting efforts to achieve the President’s goal to 

restore, create, enhance and protect 3 million acres of 

wetlands by 2010. The Department assisted in creating, 

restoring or enhancing 318,000 wetland acres on nonFederal lands. Its goal is to address 1.5 million acres by 

2010. 

Fragmentation and loss of habitat have contributed to 

declines in populations of many terrestrial and aquatic 

species. Invasive species are second only to habitat 

destruction as the cause of native species declines. These 

adverse landscape impacts negatively affect both human 

and wildlife populations. Loss of habitat means fewer 

wildlife recreational opportunities for humans, less open 

space and poorer air and water quality. The development 

that fragments wildlife habitat can result in a landscape 

with a greater susceptibility to flooding. The frequency 

and severity of drought conditions also may increase. 

Improving and protecting habitat for at-risk and declining 

species is key to preventing further declines. It also 

ensures the continued survival of those species and the 

overall health of the ecosystems to which they belong. 

Improving watershed health for wildlife species also 

improves conditions for humans. Humans will benefit 

from improved water and air quality, control of invasive 

species, reduced flood damage, more open space and an 

increased opportunity for educational and wildlife 

recreational opportunities. Additionally, keeping wildlife 

populations healthy and sustainable minimizes the need 

for regulatory action to protect threatened and endangered 

species on privately owned land. 

Challenges for the Future 

The ability of agricultural producers to restore, improve 

and protect habitat is impacted by their immediate 

economic situation, market conditions, weather and 

personal cost/benefit analyses. Weakness in the economy 

could affect producers’ abilities to invest their own funds 

and their willingness to take any risk associated with 

changing management. Many wildlife projects are 

supported by a combination of Federal, State and local 

funds. State and local budget constraints would impact 

project implementation. 

USDA, in cooperation with other Federal, State, Tribal 

and local agencies, and private organizations, will work to 
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provide producers with information and other resources to 

adopt applicable conservation measures. USDA also will 

facilitate the development and implementation of 

landscape-scale habitat protection plans that provide atrisk and declining species access to water, food, shelter 

and corridors for seasonal migration. 

Key Outcome 

Improved Wildlife Habitat Quality Supporting 

Desired Species and Species of Concern 

(At-Risk and Declining Species) 

Analysis of Results 

USDA met its target for the creation, restoration or 

enhancement of wetlands. Targets were set for two USDA 

programs; Conservation Technical Assistance (CTA) and 

the Wetlands Reserve Program (WRP). On wetlands 

where USDA provided technical assistance through CTA, 

no financial assistance was provided by Department 

programs. In some cases, financial assistance may have 

been provided through non-USDA sources. 

WRP is a voluntary conservation program that offers 

landowners the means and opportunity to protect, restore 

and enhance wetlands on their property. WRP participants 

sign an easement or agreement with USDA. Some 

wetlands protection activity is carried out under other 

USDA programs, including the CRP. 

In 2003, there were 111 million wetland acres on nonFederal lands in the continental U.S. In 2004, the 

President set a national goal to go beyond no net loss – to 

restore, create, enhance and protect 3 million acres of 

wetlands by 2010. In support, USDA established a longterm goal of 1.5 million acres created, restored or 

enhanced by 2010. Reaching the target level established 

for WRP and CTA will contribute significantly toward 

meeting the long-term goal. When 2006 results are 

combined with 2005 results and the projected 

accomplishments through 2010 (strategic plan period - 

2005-2010), these two programs will contribute 89 

percent of the total goal. 

USDA uses the acreage of wetlands created, restored or 

enhanced as an indicator of progress toward improved 

habitat for many species. Acreage is used as an indicator 

because there is no feasible, widely accepted 

methodology for documenting the quality of habitat 

developed or the suitability of the habitat for the target 

species USDA is participating in cooperative efforts to 

quantify the results of its conservation practices for 

wildlife habitat. 

Selected Results in Research, Extension and 

Statistics 

USDA opened the Agricultural Wildlife Conservation 

Center (AWCC) in Madison, Mississippi, to expand 

efforts to preserve wildlife and wildlife habitat on private 

lands. The center supports the development of wildlifehabitat technology through a competitive grants program 

available to many cooperative conservation partners, 

including fish and wildlife conservation groups, 

universities and State agencies. AWCC will ensure that 

new technology is available to farmers and ranchers 

nationwide through USDA service centers. 

USDA helps farmers, ranchers, non-industrial private 

forest landowners and other natural resource managers 

consider wildlife when they plan the use of their land. 

These plans consider wildlife needs for shelter, access to 

water, food in proper amounts, locations and times to 

sustain wildlife populations that inhabit the area during a 

portion of their life cycle. 
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USDA assists in applying conservation practices to 

enhance habitat on private lands. Department 

conservationists provide on-site assistance to producers 

and other landowners in controlling invasive species, 

adopting practices to improve grassland or forest habitat, 

and managing water levels in wetlands to control 

vegetation. Actions to sustain and enhance aquatic habitat 

include applying conservation practices that filter 

potential pollutants and moderate stream temperatures. 

USDA assisted in applying practices that benefited upland 

wildlife in plans covering 12.3 million acres. Practices to 

benefit wetland species were applied in plans covering 

400,000 acres. 

USDA provided financial assistance to individuals and 

groups to implement structures and management systems. 

These moves to improve water management and protect 

watersheds included:

$38 million for cost-shares and incentives for habitat 

protection; 

$38 million for easements to protect wetlands; 

$9.5 million for Wetlands Reserve Enhancement 

Program partnership proposals. These proposals 

address wetland creation and enhancement efforts on 

prior-year enrolled contracts, those where cooperators 

will contribute significantly to the Wetlands Reserve 

Program (WRP) delivery and technical assistance 

costs, and easement management projects; and

$1.6 million in competitive grants to develop and 

evaluate technological tools for fish and wildlife 

habitat improvements. The Agricultural Wildlife 

Conservation Center will administer the grants.

WRP is a voluntary conservation program that offers 

landowners the means and opportunity to protect, restore 

and enhance wetlands on their property. 

Exhibit 63: Improved Wildlife Habitat 

Fiscal Year 2006 

Annual Performance Goals and Indicators Target Actual Result 

Wetlands created, restored or enhanced, acres 

6.4.1 Conservation Technical Assistance 50,000 65.345 Exceeded 

6.4.2 Wetlands Reserve Program 170,000 181,979 Exceeded 

Exhibit 64: Trends in Wildlife Habitat Enhancement 

Fiscal Year Actual 

Trends 2002 2003 2004 2005 2006 

Wetlands created, restored or enhanced, acres 

6.4.1 Conservation Technical Assistance 63,463 43,525 59,293 53,498 65,345 

6.4.2 Wetlands Reserve Program 139,927 137,151 123,363 180,358 181,979 

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Program Assessment Rating Tool (PART) Evaluations 

The Program Assessment Rating Tool (PART) was developed to assess and improve program performance so that the 

Federal government can achieve better results. The PART reviews of USDA programs help identify a program’s 

strengths and weaknesses to inform funding and management decisions aimed at making the program more effective. 

The PART therefore looks at all factors that affect and reflect program performance including program purpose and 

design; performance measurement, evaluations, and strategic planning; program management; and program results. 

Because the PART includes a consistent series of analytical questions, it allows programs to show improvements over 

time, and allows comparisons between similar programs. 

The summaries below represent programs PARTed in fiscal year 2006, including programs that were reassessed because 

the programs’ previous ratings were unsatisfactory. The programs are summarized by Strategic Objective. Further detail 

on USDA’s PARTed programs can be found at http://www.whitehouse.gov/omb/budget/fy2006/part.html. 

Strategic Objective 

1.1 

Expand and Maintain International Export Opportunities 

Program Name Export Enhancement/Dairy Export Incentive Program 

Current Rating • Moderately Effective 

Lead Agency • Foreign Agricultural Service 

Major Findings/ 

Recommendations 

• Globally, the export subsidy programs have not been able to demonstrate an ability to permanently expand 

exports or build U.S. market share in targeted countries. However, the Dairy Export Incentive Program 

(DEIP) was successful in offsetting European Union export subsidies for dairy products to Mexico which 

permitted the U.S to develop and sustain a market for U.S. dairy product exports there. 

Actions Taken/Planned • These programs have not been operative for several years. However, a policy paper should be developed to 

lay out the circumstances where future reactivation of the programs would be warranted. 

Strategic Objective 

1.1 

Expand and Maintain International Export Opportunities 

Program Name Trade Adjustment Assistance 

Current Rating • Results Not Demonstrated 

Lead Agency • Foreign Agricultural Service 

Major Findings/ 

Recommendations • The assessment found that the program is costly to administer when considered in relation to the number of 

producers that have been assisted to date. 

Actions Taken/Planned • Performance baselines, based on survey results of individuals who received TAA program benefits in 2004 

and 2005, will be established. After that, ambitious performance targets will be established. 
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Strategic Objective 

2.3 

Provide Risk Management and Financial Tools to Farmers and Ranchers 

Program Name Crop Insurance 

Current Rating • Moderately Effective 

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 • Achieve proposed legislative changes to make the program more effective and efficient by covering more 

acres at a lower subsidy cost. 

• Developed other efficiency measures that incorporate the whole taxpayer cost (administrative, indemnities, 

underwriting gains, premium subsidies and company reimbursements) needed to run the program. 

Strategic Objective 

2.2 

Increase the Efficiency of Domestic Agricultural Production and Marketing Systems 

Program Name Commodity Purchase Services (Section 32) 

Current Rating • Results Not Demonstrated (Results Not Demonstrated) 

Lead Agency • Agricultural Marketing Service

Major Findings/ 

Recommendations 

• The Section 32 program has three purposes, but it lacks goals and measures in support of any of these 

underlying purposes. 

Actions Taken/Planned • Developing outcome-based annual and long-term performance measures, including baselines and targets 

that demonstrate progress towards a long-term programmatic outcome.

Strategic Objective 

2.2 

Increase the Efficiency of Domestic Agricultural Production and Marketing Systems 

Program Name Research and Promotion 

Current Rating • Results Not Demonstrated (Adequate) 

Lead Agency • Agricultural Marketing Service 

Major Findings/ 

Recommendations 

• R&P programs are directed by industry-governed boards appointed by the Secretary of Agriculture. Federal 

oversight by AMS includes reviewing and approving program plans, projects, and budgets. R&P programs 

are designed to facilitate collective action among producers to maintain and expand markets. 

Actions Taken/Planned • Clarifying long-term and annual measures to better demonstrate progress toward performance goals. 

Strategic Objective 

2.2 

Increase the Efficiency of Domestic Agricultural Production and Marketing Systems 

Program Name Market News and Marketing Services 

Current Rating • Adequate 

Lead Agency • Agricultural Marketing Service 

Major Findings/ 

Recommendations 

• The Marketing Services program (MSP) gathers, analyzes, and makes available market data for use among 

participants throughout the agricultural marketing chain. Increased information in the marketplace provides 

all market participants with resources to inform their business transactions. 

Actions Taken/Planned • Developing an automated system to collect and post Market News price data. 
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Strategic Objective 

2.2 

Increase the Efficiency of Domestic Agricultural Production and Marketing Systems 

Program Name Packers and Stockyards 

Current Rating • Results Not Demonstrated 

Lead Agency • Grain Inspection, Packers and Stockyards Administration 

Major Findings/ 

Recommendations 

• The program lacks well-defined internal processes to determine workload priorities, conduct effective 

investigations, evaluate investigative findings, and monitor industry activity to determine if regulatory reforms 

are needed. 

Actions Taken/Planned • Conducting business process re-engineering to improve internal controls. 

Strategic Objective 

2.3 

Provide Risk Management and Financial Tools to Farmers and Ranchers 

Program Name Dairy Program Income Loss 

Current Rating • Results Not Demonstrated (Adequate) 

Lead Agency • Farm Service Agency 

Major Findings/ 

Recommendations 

• Dairy production is increasing in the U.S., but declining on farms with fewer than 200 cows. Market forces 

continue to drive consolidation and increase output from larger dairies. The income payments from this 

program have a modest impact on slowing the decline in production on small to medium size dairy 

operations. 

Actions Taken/Planned • Feedback from USDA’s 2007 farm bill forums will be used to examine this farm safety net program compared 

to other government and private sector program alternatives to mitigate risk on farm operations 

Strategic Objective 

2.3 

Provide Risk Management and Financial Tools to Farmers and Ranchers 

Program Name Dairy Price Support 

Current Rating • Results Not Demonstrated (Results Not Demonstrated) 

Lead Agency • Farm Service Agency 

Major Findings/ 

Recommendations 

• The purpose of the program is outdated. In 1933, USDA first facilitated the purchase of surplus dairy 

products to ensure an adequate supply of milk. Today the program remains in place, even as the U.S. 

industry has matured as a global leader in milk production. Overall, USDA manages the program well; 

however, not at the least cost to the taxpayer. 

Actions Taken/Planned • Conduct biannual evaluations of the USDA set prices for nonfat dry milk and butter. Program managers will 

determine whether the program is operating at least cost to the taxpayer. 

Strategic Objective 

2.3 

Provide Risk Management and Financial Tools to Farmers and Ranchers 

Program Name Non-Insured Crop Disaster Assistance 

Current Rating • Moderately Effective 

Lead Agency • Farm Service Agency 

Major Findings/ 

Recommendations 

• The noninsured crop disaster assistance program is valuable for agricultural producers as one of their risk 

management tools. It is delivered through local county FSA offices, which enable the greatest grassroots 

outreach possible in the specific county locations where intended beneficiaries live and farm. Participation in 

NAP has increased steadily over the years” 

Actions Taken/Planned • Eliminating shortcomings identified in financial audits by strengthening the processes and controls in the 

program’s disbursement system. 
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Strategic Objective 

2.2 

Enhance the Competitiveness and Sustainability of Rural Farm Economics 

Program Name Economic Opportunities and Quality of Life for Rural America 

Current Rating • Effective 

Lead Agency • Cooperative State Research, Education and Extension Service 

Major Findings/ 

Recommendations 

• This program includes a significant number projects (earmarks) added to the Budget by the Congress. Within 

the limitations of total funding, the inclusion of any unrequested projects reduces funding that could be used 

for high priority national programs. 

Actions Taken/Planned • The agency should consider the use Grants.gov (a Web-based peer review system), as well as virtual panels 

to improve the efficiency of the grant review process. 

Strategic Objective 

3.1 

Expand Economic Opportunities by Using USDA Financial Resources to Leverage 

Private Sector Resources and Create Opportunities for Growth 

Program Name Value-Added Producer Grants 

Current Rating • Results Not Demonstrated (Adequate) 

Lead Agency • Rural Development 

Major Findings/ 

Recommendations 

• This program provides valuable support for emerging markets. Though there is room for improvement on 

how a project is selected for funding, in general, new market technologies are favored and the target 

audience is reached. 

Actions Taken/Planned • Increase targeting of program to emerging markets. Continue to assess the focus of the program on small 

and medium-sized producers. 

Strategic Objective 

3.2 

Improve the Quality of Life Through USDA Financing of Quality Housing, Modern 

Utilities, and Needed Community Facilities 

Program Name Broadband 

Current Rating • Results Not Demonstrated 

Lead Agency • Rural Development 

Major Findings/ 

Recommendations 

• Other findings include: the program is flawed as seen by the under utilization of two loan types; there are no 

periodic independent reviews that assess program performance; and the Rural Utilities Service is unable to 

track the full costs of operating the program. 

Actions Taken/Planned • Reviewing program operations and community/constituent/borrower needs to determine program 

improvements to increase program efficiency and demand for under utilized loan types. A new regulation is 

pending. 

Strategic Objective 

3.2 

Improve the Quality of Life Through USDA Financing of Quality Housing, Modern 

Utilities, and Needed Community Facilities 

Program Name Community Facilities 

Current Rating • Results Not Demonstrated (Moderately Effective) 

Lead Agency • Rural Development 

Major Findings/ 

Recommendations 

• The program is managed effectively. Data is collected and analyzed to ensure performance. Funds are 

tracked and spent in a timely manner using sound financial practices, and there is good collaboration with 

other Federal, state and local programs. 

Actions Taken/Planned • Obtaining tangible statistics to create and improve performance measures by utilizing a newly created 

performance related computer model developed exclusively for Rural Development programs. 
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Strategic Objective 

3.1, 3.2 

Support Increased Economic Opportunities and Improved Quality of Life in Rural 

America 

Program Name Resource Conservation and Development 

Current Rating • Results Not Demonstrated (Adequate) 

Lead Agency • Natural Resources Conservation Service 

Major Findings/ 

Recommendations 

• The Natural Resources Conservation Service (NRCS) has improved its management of RC&D. NRCS: (1) 

has coordinated a nationwide program review and has taken actions to implement its recommendations; (2) 

revised the RC&D manual to reflect increased emphasis on program performance and linkages to national 

performance goals; and (3) increased performance and reduced Federal fund expenditures. 

Actions Taken/Planned • Conducting an external, independent review that examines overall program effectiveness and makes 

recommendations for enhancing program efficiencies. 

Strategic Objective 

4.2 

Reduce the Number and Severity of Agricultural Pest and Disease Outbreaks 

Program Name On-going Pest and Disease Management Programs 

Current Rating • Effective 

Lead Agency • Animal and Plant Health Inspection Service 

Major Findings/ 

Recommendations 

• The program purpose is clear. It addresses a clearly defined problem, and works to effectively target 

resources to areas most affected by specific plant and animal infestations. 

Actions Taken/Planned • The program will continue to measure the value of damage mitigated and prevented, refining this new 

measure. 

Strategic Objective 

5.1 

Ensure Access To Nutritious Food 

Program Name Summer Food Service Program 

Current Rating • Moderately Effective 

Lead Agency • Food and Nutrition Service 

Major Findings/ 

Recommendations • The program is effectively providing nutritious meals to low income children. Program benefits are well 

targeted to low-income children, and meals provide the desired levels for most key nutrients and food energy. 

Actions Taken/Planned • Examine program meal patterns to address consistency with the 2005 Dietary Guidelines for Americans. 

Strategic Objective 

5.2 

Promote Healthier Eating Habits and Lifestyles 

Program Name Women, Infant, and Children 

Current Rating • Effective 

Lead Agency • Food and Nutrition Service 

Major Findings/ 

Recommendations • OMB HAS NOT PROVIDED RECOMMENDATIONS 

Actions Taken/Planned • OMB HAS NOT PROVIDED RECOMMENDATIONS 

Strategic Objective 

5.2 

Promote Healthier Eating Habits and Lifestyles 

Program Name National School Lunch Program 

Current Rating • Results Not Demonstrated (Moderately Effective) 

Lead Agency • Food and Nutrition Service 
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Strategic Objective 

5.2 

Promote Healthier Eating Habits and Lifestyles 

Program Name National School Lunch Program 

Major Findings/ 

Recommendations 

• The program has made progress in improving the nutritional content of meals by reducing the proportion of 

calories from fat and saturated fat. Between 1993 and 1999 the proportion of calories from fat in the lunches 

was reduced from 39% to 34%. 

Actions Taken/Planned • Conducting nationally representative study updating information on the nutrient content of meals. 

Strategic Objective 

5.2 

Promote Healthier Eating Habits and Lifestyles 

Program Name Nutrition and Health 

Current Rating • Moderately Effective 

Lead Agency • Agricultural Research Service 

Major Findings/ 

Recommendations 

• While this program does include a number projects added to the Budget by the Congress, the number is 

fewer than in other research programs. However, within the limitations of total funding, the inclusion of any 

unrequested projects reduces funding that could be used for high priority national programs. 

Actions Taken/Planned • The program will continue to monitor the actual use of research outputs (new knowledge and technologies). 

Strategic Objective 

5.3 

Improve Nutrition Assistance Program Management and Customer Service 

Program Name Child and Adult Care Food Program 

Current Rating • Results Not Demonstrated (Adequate) 

Lead Agency • Food and Nutrition Service 

Major Findings/ 

Recommendations 

• The program is well targeted to low-income children. Most participating centers and homes provide wellbalanced meals and snacks, supplying more than one-half of the Recommended Daily Allowances for 

calories and substantially more than two-thirds of key nutrients. 

Actions Taken/Planned • Developing new long-term measures to assess the nutrient content of meals; piloting a process to collect 

annual data on compliance with meal pattern requirements. 

Strategic Objective 

5.3 

Improve Nutrition Assistance Program Management and Customer Service 

Program Name Food Distribution Program On Indian Reservations 

Current Rating • Adequate 

Lead Agency • Food and Nutrition Service 

Major Findings/ 

Recommendations • FDPIR helps low-income Native Americans in areas with limited access to food stores meet their food needs. 

Actions Taken/Planned • Partnering with Indian tribal organizations to develop a method of allocating administrative funds that is more 

equitable and better supports program operations. 

Strategic Objective 

5.3 

Improve Nutrition Assistance Program Management and Customer Service 

Program Name Senior and WIC Farmers’ Market Programs 

Current Rating • Results Not Demonstrated 

Lead Agency • Food and Nutrition Service 

Major Findings/ 

Recommendations 

• The programs have no standardized means to demonstrate program results. The programs do not have 

annual performance measures that can demonstrate progress towards achieving the programs’ long term 

goals. Program evaluations are limited and provide no firm conclusions about the impact on participants’ 

consumption of fresh produce. 
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Strategic Objective 

5.3 

Improve Nutrition Assistance Program Management and Customer Service 

Program Name Senior and WIC Farmers’ Market Programs 

Actions Taken/Planned • Establishing and implementing monitoring and reporting requirements for the Senior Farmers’ Market 

Nutrition Program. 

Strategic Objective 

5.3 

Improve the Nation’s Health and Nutrition 

Program Name Nutrition and Health 

Current Rating • Effective 

Lead Agency • Cooperative State Research, Education and Extension Service 

Major Findings/ 

Recommendations 

• While this program does include a number projects added to the Budget by the Congress, the number is 

fewer than in other research programs. However, within the limitations of total funding, the inclusion of any 

unrequested projects reduces funding that could be used for high priority national programs. 

Actions Taken/Planned • The agency should consider the use Grants.gov (a Web-based peer review system), as well as virtual panels 

to improve the efficiency of the grant review process. 

Strategic Objective 

6.1 

Protect Watershed Health to Ensure Clean and Abundant Water 

Program Name Emergency Watershed 

Current Rating • Results Not Demonstrated (Adequate) 

Lead Agency • Natural Resources Conservation Service 

Major Findings/ 

Recommendations 

• The Natural Resources Conservation Service (NRCS) has improved its management of EWP. NRCS has: 

(1) revised its EWP regulation to increase program effectiveness; (2) developed State Emergency Recovery 

Plans that allow for rapid response; (3) improved its coordination with other emergency assistance agencies; 

and (4) addressed actions expressed in a number of internal and external evaluations. 

Actions Taken/Planned • Improving data management to increase program accountability and efficiency, improve financial reporting, 

and increase cost-effectiveness. 
ANNUAL PERFORMANCE REPORT 

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142 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

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

Program Name Natural Resource Base and Environment 

Current Rating • Moderately Effective 

Lead Agency • Agricultural Research Service 

Major Findings/ 

Recommendations 

• This program includes a significant number projects (earmarks) added to the Budget by the Congress. Within 

the limitations of total funding, the inclusion of any unrequested projects reduces funding that could be used 

for high priority national programs. 

Actions Taken/Planned • The program should conduct an independent external retrospective panel to review the Global Change and 

Air Quality programs during FY 2007. 

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

Program Name Emergency Conservation 

Current Rating • Results Not Demonstrated 

Lead Agency • Farm Service Agency 

Major Findings/ 

Recommendations 

• ECP lacks a mechanism to effectively prioritize its limited disaster recovery funding. The program does not 

have a system for prioritizing recovery dollars to geographic areas or individual farmers who are most in need 

of assistance. Instead, funding is generally provided on a first-come-first-served basis across relatively broad 

geographic areas. 

Actions Taken/Planned • Developing and using improved, outcome-based performance measures, including long-term, annual, and 

efficiency measures. 

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

Program Name Watershed 

Current Rating • Results Not Demonstrated 

Lead Agency • Forest Service 

Major Findings/ 

Recommendations 

• The Forest Service lacks a nationally consistent approach to prioritize watersheds and for management 

activities on national forests and for providing grants to non-Federal entities. The Forest Service is working to 

address this. 

Actions Taken/Planned • Developing and implementing a strategy to prioritize watersheds for management activities as the basis for 

program allocations. 

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

Program Name Mission Support 

Current Rating • Results Not Demonstrated 

Lead Agency • Forest Service 

Major Findings/ 

Recommendations • The components of this program do not share a common purpose, beneficiary characteristics, or target 

populations. However, the components address specific and existing problems, interests, or needs. 

Actions Taken/Planned • Examining with OMB the viability of a PART review for a combination of program activities, determining the 

components of the program, and providing an alternative option to assess the components. 
ANNUAL PERFORMANCE REPORT 

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F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 143 

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

Program Name Conservation Operations 

Current Rating • Moderately Effective 

Lead Agency • Natural Resources Conservation Service 

Major Findings/ 

Recommendations 

• Overall, Conservation Operations (CO) operates efficiently and effectively. CO has made strides in making its 

state allocation process more transparent; tracking non-field level activities, including those of contractors and 

partnering organizations; and linking performance to state budget allocations. 

Actions Taken/Planned • Improving CO program management by identifying national program priorities and conducting an independent 

review of the allocation formula. 

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

Program Name Conservation Security Program 

Current Rating • FY 2008 - Results Not Demonstrated 

Lead Agency • Natural Resources Conservation Service 

Major Findings/ 

Recommendations 

• Although CSP is the only conservation program that recognizes and rewards farmers and ranchers for 

ongoing high levels of environmental stewardship, it has not yet demonstrated that it effectively motivates 

people to achieve a higher level of conservation than they otherwise would adopt. 

Actions Taken/Planned • Conducting an external, independent review that examines overall program effectiveness. 

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

Program Name Resource Conservation and Development 

Current Rating • Results Not Demonstrated (Adequate) 

Lead Agency • Natural Resources Conservation Service 

Major Findings/ 

Recommendations 

• The Natural Resources Conservation Service (NRCS) has improved its management of RC&D. NRCS: (1) 

has coordinated a nationwide program review and has taken actions to implement its recommendations; (2) 

revised the RC&D manual to reflect increased emphasis on program performance and linkages to national 

performance goals; and (3) increased performance and reduced Federal fund expenditures. 

Actions Taken/Planned • Conducting an external, independent review that examines overall program effectiveness and makes 

recommendations for enhancing program efficiencies. 

Strategic Objective 

6.3 

Protect Forests and Grasslands 

Program Name Wildland Fire Management 

Current Rating • Results Not Demonstrated (Adequate) 

Lead Agency • Forest Service 

Major Findings/ 

Recommendations 

• Large wildfire costs are increasing as a result of many factors, but the Forest Service lacks an overall national 

management strategy for aligning incentives, improving accountability, and controlling costs by allocating 

resources on the basis of risk. Multiple Forest Service units spend funds without limits or regard to overall 

costs. 

Actions Taken/Planned • Refining program delivery by basing resource allocation on risk mitigation, emphasizing accountability for 

firefighting costs, improving management oversight, and ensuring fair sharing of costs. 
ANNUAL PERFORMANCE REPORT 

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144 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Strategic Objective 

6.3 

Protect Forests and Grasslands 

Program Name Invasive Species 

Current Rating • Results Not Demonstrated (Adequate) 

Lead Agency • Forest Service 

Major Findings/ 

Recommendations 

• The Forest Service has implemented a cohesive national strategy for invasive species management that 

encourages coordination within the agency. Additional work is needed to ensure states and other 

cooperators link their proposed activities to the Forest Service’s Strategic Plan or annual performance 

measures. 

Actions Taken/Planned • Continuing to implement the integrated invasive species strategy based on input from the Regions and other 

customers; improving outreach and delivery of research and management information. 

Strategic Objective 

6.4 

Protect and Enhance Wildlife Habitat to Benefit Desired, At-Risk and Declining 

Species 

Program Name Wildlife Habitat Incentives Program 

Current Rating • Results Not Demonstrated (Adequate) 

Lead Agency • Natural Resources Conservation Service 

Major Findings/ 

Recommendations 

• The Natural Resources Conservation Service has improved its management of WHIP. Since WHIP 

underwent a PART assessment in 2002, it has: (1) adopted recommendations issued by internal and 

external oversight teams; (2) created new allocation and performance incentive formulas; and (3) instituted 

new software to track program activities and evaluate and rank applications. 

Actions Taken/Planned • Improving WHIP management by identifying national program priorities, standardizing the application 

selection and ranking process, and conducting an independent review of the allocation formula. 
ANNUAL PERFORMANCE REPORT 

USDA

F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 145 

Program Evaluations 

Objective Title Findings and Recommendations/Actions Availability 

1.1 GAO Report, December 6, 2005; 

GAO-06-167 — 

INTERNATIONAL TRADE: USTR 

Would Benefit from Greater Use of 

Strategic Human Capital 

Management Principals 

Findings: GAO recommends that USTR develop a 

strategic human capital management system addressing the 

areas of strategic human capital leadership, planning, 

recruitment and retention, and performance management. 

There were no recommendations for USDA. 

Actions: No USDA action required. 

Report is available at 

http://www.gao.gov/cgibin/getrpt?GAO-06-167

GAO Report, April 30, 2006; GAO06-596 — WORLD TRADE 

ORGANIZATION: Limited 

Progress at Hong Kong Ministerial 

Clouds Prospects for Doha 

Agreement 

Findings: This report reviews the results of the Doha 

Round of WTO negotiations, and the possible completion of 

the negotiations in 2006. 

Actions: No USDA action required. 

Report is available at 

http://www.gao.gov/new.item

s/d06596.pdf

 GAO Report, June 26, 2006; GAO06-737 — 

OVERSEES STAFFING: 

Rightsizing Approaches Slowly 

Taking Hold but More Action 

Needed to Coordinate and Carry 

Out Efforts 

Findings: While this report focuses primarily on the 

Department of State, it does refer to FAS’ overseas presence, 

repositioning efforts, and staffing levels. It includes a table of 

FY 2007 Capital Security Cost Sharing charges. This report 

contains recommendations for the Secretary of State and the 

Office of Rightsizing. 

Actions: No USDA action required. 

Report is available at 

http://www.gao.gov/new.item

s/d06737.pdf

GAO Report, December 9, 2005; 

GAO-06-162 — 

CHINA TRADE: U.S. Exports, 

Investment, Affiliate Sales Rising, 

but Export Share Falling 

Findings: This data-driven, informational report is 

intended to provide a “by-the-numbers” overview of the U.S.-

China trade relationship. 

Actions: No USDA action required. 

Report is available at 

http://www.gao.gov/cgibin/getrpt?GAO-06-162

1.2 OIG Report, March 15, 2006; 

07016-01-At — 

Foreign Agricultural Service Private 

Voluntary Organization Grant Fund 

Accountability 

Findings: OIG had 19 recommendations for FAS to 

improve its administration and oversight of the food aid 

program. 

Actions: OIG has accepted FAS’ management decision 

on most of the recommendations, while FAS continues to 

work with OIG on the few remaining. 

Report is available at 

http://www.usda.gov/oig/web

docs/07016-01-AT.pdf

2.3 OIG-05401-14-FM, Financial 

Statements for Fiscal Years 2004 

and 2005 

Findings: The Deloitte report on FCIC/RMA’s internal 

control over financial reporting contains one reportable 

condition identified during the fiscal year 2004 audit. 

FCIC/RMA is in process of resolving the condition. 

Therefore, this report contains no recommendations. 

Recommendations/Actions: RMA has completed 

the actions recommended by OIG to address this matter. 

Report is available at 

http://www.usda.gov/oig/web

docs/05401-14-FM.pdf

OIG-05801-03-KC, Financial 

Management Controls over 

Reinsured Companies 

Findings: Both OIG and GAO concluded that RMA had 

not identified the financial deficiencies of the failed reinsured 

company primarily because RMA emphasized past 

compliance and financial data, rather than future financial 

forecasts. OIG closed this review without recommendations 

because the problematic issues identified were raised in a 

December 3, 2003, memorandum to RMA prior to its 2005 

SRA negotiations with reinsured companies, and that their 

findings overlapped those reported by GAO in their June 1, 

2004, report. 

Report is available at 

http://www.usda.gov/oig/web

docs/05801-3-KC.pdf
ANNUAL PERFORMANCE REPORT 

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146 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Objective Title Findings and Recommendations/Actions Availability 

 OIG-05601-13-Te, New Crop 

Products Submitted by Private 

Companies 

Actions: RMA completed actions necessary to address 

the issues identified in the above referenced documents.

Findings: RMA needs to establish written procedures to 

monitor and review the implementation and performance of 

section 508(h) products. 

Recommendations/Actions: RMA completed the 

actions recommended by OIG to address this matter. 

Report is available at 

http://www.usda.gov/oig/web

docs/05601-13-TE.pdf

OIG-05099-11-SF, Prevented 

Planting Payments For Cotton Due 

to Failure of the Irrigation Water 

Supply in California and Arizona 

Crop Year 2003

Findings: OIG found none of the cotton producers in their 

sample improperly sold their water service rights, and nothing 

came to their attention to indicate that the pertinent controls 

were not operating as prescribed. However, four cotton 

producers in California did not meet program eligibility 

requirements. 

Actions: RMA is reviewing the four producers to 

determine whether loss payments were improperly paid to 

these individuals. 

Report is available at 

http://www.usda.gov/oig/web

docs/05099-11-SF.pdf

3.1.1 Business Programs Assessment 

Reviews 

(BPARS) 

Findings: National Office engages Farm Credit 

Administration to provide Commissioned Bank Examiners to 

assist in evaluating performance and risk inherent in 

performance of up to 10 states each year. In FY 2006, six 

State Office operations and portfolio management were 

reviewed. 

This included assessment of local offices. 

Actions: Findings, causes and recommendations vary 

widely state to state. 

Each state office undertakes corrective actions in response to 

the BPAR. 

Banking information and 

borrower data is protected 

under Federal Bank Secrecy 

Laws, but redacted reports 

are available to the public 

through Freedom of 

Information. 

3.2.2 2003 PART of Rural Water and 

Wastewater Grants and Loans and 

2005 RePART 

Findings: The Water Programs addressed the concerns of 

the Office of Management Budget (OMB) that the program 

needed to develop better long-term goals to quantify program 

success and identify solutions to better serve rural residents. 

Actions: 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. 

The program assessment is 

available at 

http://www.whitehouse.gov/o

mb/expectmore/summary.10

000458.2005.html

 2003 PART of Rural Water and 

Wastewater Grants and Loans and 

2005 RePART 

Findings: OMB recommended that the Water Programs 

create reasonable long-term goals that measure outcomes. 

Actions: The Water Programs is in the process of 

developing indicators to assess the financial performance of 

its water and wastewater borrowers. The Water Programs 

will track borrowers’ financial ratios to gauge the financial 

viability of borrowers’ systems. The target is to establish the 

data collection format and scoring criteria for rating the 

borrower based on the ratios. The Water Programs will 

consult the Economic Research Service in identifying sources 

of performance data. 

The program assessment is 

available at 

http://www.whitehouse.gov/o

mb/expectmore/summary.10

000458.2005.html
ANNUAL PERFORMANCE REPORT 

USDA

F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 147 

Objective Title Findings and Recommendations/Actions Availability 

EPA Clean Watersheds Needs 

Survey 2000 and the EPA 1999 

Drinking Water Infrastructure 

Needs Survey 

Findings: The EPA Clean Watersheds Needs Survey 

2000 showed that small communities of under 10,000 have 

documented needs of $16 billion for wastewater systems. 

Needs for drinking water are significantly higher. The EPA 

1999 drinking water survey showed $48.1 billion in needs for 

communities of 10,000 or less and $31.2 billion in needs for 

communities of 3,300 or less. 

Investments in new, high quality environmentally safe water 

and wastewater infrastructure or in replacing aging 

infrastructure reduce reductions out-migration of young 

people and attract new businesses. 

Actions: The Water Programs2 has developed a measure 

to track annually the number of borrowers; subscribers 

(customers) receiving new or improved services from water 

systems and facilities. 

Reports available at: 

http://www.epa.gov/safewate

r/needssurvey/index.html

http://www.epa.gov/ipbpages

/archive/V7/444.htm

 2003 PART of Rural Water and 

Wastewater Grants and Loans and 

2005 RePART 

Findings: OMB recommended that the Water Programs 

develop better annual goals. 

Actions: The Water Programs developed a Loan/Grant 

Ratio to improve the loan to grant mix so that more loan 

dollars are used by systems that can afford maximum debt 

capacity. This result limits grant funds to the neediest 

systems. 

The program assessment is 

available at 

http://www.whitehouse.gov/o

mb/expectmore/summary.10

000458.2005.html

2003 PART of Rural Water and 

Wastewater Grants and Loans and 

2005 RePART 

Findings: The Office of Management Budget (OMB) 

recommended that the Water Programs develop better 

annual goals to quantify program success and identify 

solutions to better serve rural residents better. 

Actions: The Water Programs created an annual measure 

to track the percent of total project costs from commercial 

credit and other non- agency sources for projects funded from 

RUS loans and grants 

The program assessment is 

available at 

http://www.whitehouse.gov/o

mb/expectmore/summary.10

000458.2005.html

 OIG audit, “Rural Utilities Service, 

Water and Waste Program: Grant 

Eligibility, #09601-6-KC, 

September 2003 

Referrals to commercial credit 

Findings: OIG issued a report, showing that RUS was 

evaluating other credit inadequately. 

Actions: The Water Programs WEP addressed 

commercial credit by implementing an underwriting program 

that identifies an applicant that has the resources and ability 

to use commercial credit as part of its financing package. An 

annual goal to measure applicant and borrower referrals to 

other commercial credit was developed and implemented in 

2005. 

The report is available at: 

http://www.usda.gov/oig/web

docs/09601-6-KC.pdf

3.2.3 Community Facilities Program During FY 2006, the Office of Inspector General completed a 

program wide (Direct, Guaranteed, and Grant) audit (Report 

No. 04601-4-AT). This was a nationwide audit, even though 

reviews were primarily completed in North Carolina and 

Virginia. This audit identified no outstanding issues and OIG 

provide no recommendations which required a management 

decision. The Community Programs Staff reviewed files in 

five states during FY 2006 as part of a Management Control 

Review. No material weaknesses were identified as part of 

this review. Documentation and accessibility items were 

identified and the Agency is taking action to rectify the 

outstanding items. 

The report is available at 

http://www.usda.gov/oig/web

docs/04601-4-AT.pdf

 
ANNUAL PERFORMANCE REPORT 

USDA

148 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Objective Title Findings and Recommendations/Actions Availability 

3.2.4 and 

3.2.5 

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 periodically examined 

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 

4.1 and 

4.1 

OIG-24601-0006-Ch: Food Safety 

and Inspection Service’s In-Plant 

Performance System 

Findings: FSIS’ policies and procedures generally were 

adequate and the system improved supervision and inspector 

accountability. However, the review process could be 

strengthened in the areas of written guidance and 

management oversight. The final report was released to the 

public March 2006. 

Actions: FSIS generally agreed with these findings and 

continues to take action to address them. 

Report available at 

http://www.usda.gov/oig/web

docs/24601-06-CH.pdf 

Additional information may 

be requested from the 

USDA’s Food Safety and 

Inspection Service—Office of 

Program Evaluation, 

Enforcement and Review, 

Program Evaluation and 

Improvement Staff 

USDA-FSIS (202) 720-6735 

4.2 GAO-06-132 

Plum Island Animal Disease 

Center: DHS and USDA Are 

Successfully Coordinating Current 

Work, but Long-Term Plans Are 

Being Assessed, December 19, 

2005 

Findings: DHS and USDA’s coordination at Plum Island 

Animal Disease Center has been largely successful because 

of the agencies’ early efforts to work together to bring 

structure to their interactions at the island. To make more 

effective use of limited space, GAO recommended that DHS, 

in consultation with USDA, pursue opportunities to shift work 

that does not require the unique features of Plum Island to 

other institutions. 

Actions: APHIS continues to explore collaborations with 

other institutions to allow for the most effective use of the 

limited space at the Plum Island facility. In addition, access to 

disease specific experts and efficient use of expertise is a 

factor in determining projects that require use of the Plum 

Island location. 

The report is available at 

http://www.gao.gov/new.item

s/d06132.pdf 

Audit Report: Animal and Plant 

Health Inspection Service Bovine 

Spongiform Encephalopathy (BSE) 

Surveillance Program – Phase II 

and Food Safety and Inspection 

Service Controls Over BSE 

Sampling, Specified Risk Materials, 

and Advanced Meat Recovery 

Products - Phase III, Report No. 

50601-10-KC, USDA Office of 

Inspector General, January 2006 

Findings: OIG evaluated the elements of the interlocking 

safeguards in place to protect US beef from BSE, particularly 

the expanded BSE surveillance program that was put in place 

a BSE-positive cow was found in December 2003 and the 

effectiveness of the controls and processes.

Actions: APHIS and FSIS were in general agreement with 

the findings and recommendations and provided specific 

actions they had taken or planned to take as well as 

timeframes for implementing the proposed actions. Their joint 

response is included in its entirety as a separate exhibit in the 

OIG’s report. 

The OIG report is available 

on the Web at: 

http://www.usda.gov/oig/web

docs/50601-10-KC.pdf

5.1 Food Stamp Participation Rates 

2004 Findings: This report presents the latest in a series on 

participation rates based on Current Population Survey and 

national participation rates for fiscal year 2004. The findings of this 

report indicate that 60 percent of the individuals eligible for food 

stamp benefits choose to participate. As a result, it appears that 

FSP is reaching the neediest eligible individuals. Although the FSP 

served more than 60 percent of all eligible individuals, it provided 71 

percent of the benefits that all eligible individuals could receive. As 

a result, the FSP appears to be reaching the neediest eligible 

individuals. Actions: The report contained no recommendations 

for action by USDA. 

Available on the FNS Web 

site at 

http://www.fns.usda.gov/oan

e/MENU/Published/FSP/FIL

ES/Participation/FSPPart200

4.pdf
ANNUAL PERFORMANCE REPORT 

USDA

F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 149 

Objective Title Findings and Recommendations/Actions Availability 

State Food Stamp Participation 

Rates For The working Poor in 

2003 

Findings: In general, the pattern of participation rates based on 

these estimates show that overall participation among the working 

poor vary widely across States, with some over 60 percent and 

some under 40 percent. In most States, participation among the 

working poor is significantly less among all eligible. 

Actions: The report contained no recommendations for action 

by USDA. 

Available on the FNS Web 

site at 

http://www.fns.usda.gov/oan

e/MENU/Published/FSP/FIL

ES/Participation/WorkingPoo

r2003.pdf

 South Carolina Food Stamp and 

Well-Being Study Well-Being 

Outcomes Among Food Stamp 

Leavers 

Findings: The study examined from a survey of families in 

South Carolina who left the Food Stamp Program (FSP). The 

study Results show that families with rising incomes are less likely 

than families with lower incomes to experience food hardships or 

other adverse events to have a negative view about life changes. 

Actions: The report contained no recommendation for action by 

USDA. 

Available on the ERS Web 

site at 

http://www.ers.usda.gov/publ

ications/ccr22/ccr22.pdf

South Carolina Food Stamp and 

Well-Being Study Well-Being 

Outcomes Among Food Stamp 

Leavers 

Findings: The study examined from a survey of families in 

South Carolina who left the Food Stamp Program (FSP). The 

study Results show that families with rising incomes are less likely 

than families with lower incomes to experience food hardships or 

other adverse events to have a negative view about life changes. 

Actions: The report contained no recommendation for action by 

USDA. 

Available on the ERS Web 

site at 

http://www.ers.usda.gov/publ

ications/ccr22/ccr22.pdf

 WIC Participant and Program 

Characteristics 2004 Findings: This report summarizes demographic characteristics 

of WIC participants nationwide. Actions: This report did not contain 

recommendations for action by USDA. 

Available on the FNS Web 

site at 

http://www.fns.usda.gov/oan

e/MENU/Published/WIC/FIL

ES/pc2004.pdf

WIC Program Coverage: How 

Many Eligible Individuals 

Participated in the Special 

Supplemental Nutrition Program for 

Women Infants, and Children 

(WIC): 1994 to 2003? 

Findings: This report illustrates the methodology used to 

calculate the number of individuals eligible for the WIC program. In 

2003, about 57% of eligible participants. 

Actions: This report did not contain recommendations for action 

by USDA. 

Available on the FNS Web 

site at

http://www.fns.usda.gov/oan

e/MENU/Published/WIC/FIL

ES/WICEligibles.pdf

5.2 Food Stamp Nutrition Education 

Systems Review Findings: The report presents a comprehensive and systematic 

national description of food stamp nutrition education operations in 

the fiscal year 2004. It also provides a comparison of those 

operations to the standards of excellence for nutrition education 

developed as the Food Stamp Education Guiding Principles. 

Actions: This report did not contain recommendations for action 

by USDA. 

Available on the FNS Web 

site at 

http://www.fns.usda.gov/oan

e/MENU/Published/Nutrition

Education/Files/FSNESyste

msReview.pdf

Effects of Food Assistance and 

Nutrition Programs on Nutrition and 

Health 

Findings: This report provides a summary of a comprehensive 

review and synthesis of published research on the impact of 

USDA’s domestic food and nutrition assistance programs on 

participants’ nutrition and health outcomes. 

Actions: This report did not contain recommendations for action 

by USDA. 

Available on the ERS Web 

site at 

http://www.ers.usda.gov/publ

ications/fanrr19-4/fanrr19-

4.pdf

 

 WIC Food Packages: Time for a 

Change Findings: USDA contracted with the Institute of Medicine to 

evaluate the WIC food packages, and to recommend cost-neutral 

changes to improve the package to better meet the nutrition needs 

of WIC participants. 

Actions: The report recommended a range of WIC food 

package changes. USDA published a proposed rule that reflects 

these recommendations in August 2006. 

Available on the FNS Web 

site at 

http://www.fns.usda.gov/oan

e/MENU/Published/WIC/FIL

ES/Time4AChange(mainrpt).

pdf 
ANNUAL PERFORMANCE REPORT 

USDA

150 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Objective Title Findings and Recommendations/Actions Availability 

5.3 The Effect of Simplified Reporting 

on Food Stamp Payment Accuracy Findings: This analysis suggests that the simplified reporting 

policies adopted by States in 2004 could have lowered error rates 

by 1.2 to 1.5 percentage points. Therefore, if all states adopted the 

policy of simplified reporting, the payment error rate might improve 

further. 

Actions: This report does not contain recommendations for 

action by USDA. 

Available on the FNS Web 

site at 

http://www.fns.usda.gov/oan

e/MENU/Published/FSP/FIL

ES/ProgramIntegrity/Simplifi

edReporting.pdf 

6.1 OIG Report, September 5, 2006, 

OIG/10099-5-SF – Natural 

Resources Conservation Service 

Farm and Ranch Lands Protection 

Program in Alabama 

Findings: OIG recommended that NRCS terminate its FY 2004 

FRPP cooperative agreements with the land trust, and deobligate 

$1,021.438. NRCS will consult with legal counsel to consider legal 

remedies available concerning the trust’s material noncompliance 

with the appraisal requirements for the FY 2003 easement 

transactions. 

Actions: NRCS is requesting closure from OCFO and 

developing Completion Plan to address pending management 

decisions.

Report is available at 

http://www.usda.gov/oig/web

docs/10099-05-SF.pdf

6.2 and 

6.3 

GAO Report, September 27, 2006, 

GAO/06-969 – USDA Should 

Improve Its Process for Allocating 

Funds to States for the 

Environmental Quality Incentives 

Program 

Findings: GAO recommended that NRCS document its 

rationale for the factors and weights for its general financial 

assistance formula and use current and accurate data. GAO also 

recommended that NRCS continue to analyze current and newly 

developed long-term performance measures for EQIP program and 

use the information to make farther revisions to the financial 

assistance formula to ensure funds are directed to areas of highest 

priority.

Report is available at 

http://www.gao.gov/new.item

s/d06969.pdf

 Actions: NRCS has taken proactive steps to address the 

concerns of the report by contracting for an independent review of 

all NRCS conservation program allocation formulas, including 

EQIP. NRCS also continues to make significant improvements in 

implementing performance measures for tracking the 

environmental benefits produced through EQIP. 

6.3 OIG 08601-6-AT Implementation of 

the Healthy Forests Initiative 

(September 2006) 

Findings: Develop and implement specific, national 

guidance for assessing risks of wildland fires in determining 

the benefits of fuels treatment and restoration projects. 

Actions: The Forest Service will develop national guidance 

for the Regions to use in assessing the risks from wildfires. 

Findings: Establish controls to ensure that the process 

and methodology to identify and prioritize the most effective 

fuels reduction projects can be utilized at all levels. 

Actions: The FS will establish controls to assist Regions in 

identifying and prioritizing hazardous fuels projects. Elements 

may include proximity to a community, fuel type, etc. 

Findings: Establish controls to ensure funds are 

distributed according to where the highest concentrations of 

priority projects are located. 

Actions: The agency is developing a regional fuels 

allocation strategy that will link the regional funding and 

associated fuels reduction projects. 

Findings: Develop, implement more meaningful outcomeoriented performance measures for reporting metrics. 

Actions: The FS developed a core set of new performance 

measures. One measure is “Number of acres maintained and 

improved by treatment category and of those improved, the 

percent that change condition class. 

Report is available at 

http://www.usda.gov/oig/web

docs/08601-6-AT.pdf
ANNUAL PERFORMANCE REPORT 

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F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 151 

Objective Title Findings and Recommendations/Actions Availability 

6.3 

(Cont’d) Findings: Improve accomplishment reporting by including 

more detailed information, such as breaking down 

accomplishments by region, and differentiating between initial 

and maintenance treatments and multiple treatments on the 

same acres. 

Actions: The FS will update its reporting systems and 

documents to include more detailed information on 

accomplishments.

6.4 GAO Report, April 28, 2006, 

GAO/06-312 – Despite Cost 

Controls, Improved USDA 

Management Is Needed to Ensure 

Proper Payments and Reduce 

Duplication with Other Programs 

Findings: GAO recommended that NRCS review its state 

offices’ wildlife habitat assessment criteria and develop a 

process to preclude and identify duplicate payments. 

Actions: NRCS has requested states to submit a copy 

their wildlife habitat assessment criteria for all proposed CSP 

watersheds for FY 2007 for review by Deputy Administrator 

and National Biology Team. NRCS has created an automated 

system within the ProTracts contracting software to conduct a 

comparison between existing WHIP, AMA, and EQIP with 

CSOP application to reveal potential areas of overlapping 

practices to minimize duplication of payments. 

Report is available at 

http://www.gao.gov/new.item

s/d06312.pdf

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III. 

Financial Statements, Notes, Supplemental and 

Other Accompanying Information 

Message from the Chief Financial Officer 

USDA programs and activities affect every American, every day. Most of USDA’s 

impact on average citizens involves food, fiber and natural resources. To facilitate these 

programs, the Department is entrusted with a vast amount of the citizens’ resources. 

These resources are invested in grants, supplemental payments, loans and assets. We 

are keenly aware of the importance of this fiduciary responsibility and remain 

committed to the performance and accountability mandates put forward by the 

President and Congress. 

This year, USDA sustained its unqualified audit opinion on the consolidated financial 

statements. The Department’s receiving this performance benchmark is evidence of its 

focus and progress toward accountability, internal controls and data integrity. 

Through the individual leadership and collaborative efforts of USDA managers, 

employees, business partners and other stakeholders, we made significant strides in 

2006 advancing the Department’s record of excellence in financial management. Here 

are some highlights: 

The Department met the requirements for compliance with The Office of Management and Budget Circular A-123, 

Management’s Responsibility for Internal Control, Appendix A. This appendix is comparable to Sarbanes- Oxley, 

Section 404 in the private sector. The circular covers the documentation, testing and remediation of internal controls. 

Although the Department received the option of a multi-year implementation to reach compliance, we decided that 

the potential additional cost and the delay in necessary remediation necessitated compliance within one year. Our 

compliance efforts found four areas of material weaknesses. The detail of the material weaknesses and the 

Secretary’s letter of assurance can be found in the Management’s Discussion and Analysis section of this document; 

USDA continues to be a sponsoring organization of shared services in the Federal Government. The economies of 

scale provided by shared services that support more than 130 agencies provide a vast savings to USDA and the other 

agencies served. These services are located at the National Finance Center (NFC) in New Orleans, Louisiana. In 

2005, Hurricane Katrina forced NFC employees to deploy to various areas of the U.S. under their Continuity of 

Operations Plan. Not only was the plan executed successfully, but NFC added two large agencies to their systems. 

Early this year, the 1,288-employee NFC returned to New Orleans in a logistically complex move that required 

precise coordination of business operations and employees’ personal needs. To further support hurricane issues, 
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NFC selected the Federal Center in Denver, Colorado, as the primary location for information technology. The 

primary location will be managed remotely from New Orleans allowing NFC to remain one of southern Louisiana’s 

largest employers. It also will support the President’s Gulf Coast rebuilding plan; 

The Department continues to focus even more on improper payments. This issue includes incorrect payments and 

incorrect paperwork related to payments. This year, USDA’s largest program, the Food Stamp program, reported 

improper payments of 5.84 percent ($1.645 billion), a .04-percent decrease from the prior year. Additionally, the 

Wildlife Habitat Incentive, Grassland Reserve, Wetlands Reserve, Farm-Land Ranch and the Environmental Quality 

Incentive Programs demonstrated that the risk level for improper payment has been lowered substantially. However, 

FSA completed the measurement of several programs using a statistical sampling approach. FSA’s results indicated 

a substantial increase in improper payments, which are due mostly to incorrect or missing paperwork required for 

payment. A few programs are still implementing plans to fully estimate the amount of improper payments due 

to complex program design and/or layering in the payment processes. The programs and the error rates are listed in 

Appendix B of this report. The leaders of the mission areas and I take improper payments seriously; 

USDA has issued a Request for Proposal (RFP) for the modernization of its financial systems. The Department 

currently operates nine general ledger systems that either are no longer supported by their vendors or were 

developed internally. The objective of this RFP is to support a Department-wide solution that will be the foundation 

for all USDA financial operations. The new system also will be designed to support electronic document approvals, 

consolidated financial reporting incorporating the Transparency Act of 2006 and shared services with other 

Government agencies; 

USDA developed the USDA Strategic Plan for FY 2005 – 2010, which guides Department efforts to align strategic 

direction, operating budgets and performance measures to drive continued performance enhancements, and clear 

accountability throughout the organization; and 

The Department developed pandemic continuity of operations plans and agency disaster-recovery plans. 

While we continue to make progress in financial management, we cannot give unqualified assurance of compliance with 

the Federal Managers’ Financial Integrity Act, or the financial systems requirements of the Federal Financial 

Management Improvement Act. However, we will continue to focus our teams to resolve these deficiencies. USDA is 

committed to providing sound management of the resources under its stewardship, and communicating the performance 

of its programs through this report. USDA’s results are due to the hard work and innovative leadership of skilled, career 

employees. These employees take seriously their responsibility for the substantial resources entrusted to them by 

Congress, and to perform this important work for the American people. 

Charles R. Christopherson 

Chief Financial Officer 

November 15, 2006
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Report of the Office of Inspector General 
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CONSOLIDATED BALANCE SHEET 

As of September 30, 2006 and 2005 

(in millions) 

2006 2005

Assets:

Intragovernmental:

Fund Balance with Treasury (Note 3) 42,191 $ 42,327 $ 

Investments (Note 5) 81 69 

Accounts Receivable, Net (Note 6) 246 712 

Other (Note 11) - 1 

Total Intragovernmental 42,518 43,109 

Cash and Other Monetary Assets (Note 4) 224 242 

Investments (Note 5) 3 15 

Accounts Receivable, Net (Note 6) 8,635 9,442 

Loans Receivable and Related Foreclosed Property, Net (Note 7) 77,791 75,176 

Inventory and Related Property, Net (Note 8) 55 29 

General Property, Plant, and Equipment, Net (Note 9) 4,905 4,885 

Other (Note 11) 98 86 

Total Assets (Note 2) 132,984 134,229 

Stewardship PP&E (Note 10)

Liabilities:

Intragovernmental:

Accounts Payable 7 821 

Debt (Note 13) 83,447 83,515 

Other (Note 15) 14,080 18,591 

Total Intragovernmental 97,534 102,927 

Accounts Payable 4,170 4,292 

Loan Guarantee Liability (Note 7) 1,296 1,214 

Debt Held by the Public (Note 13) - 1 

Federal Employee and Veterans Benefits 808 834 

Environmental and Disposal Liabilities (Note 14) 63 28 

Other (Notes 15 & 16) 20,082 21,710 

Total Liabilities (Note 12) 131,006 123,953 

Commitments and Contingencies (Note 17)

Net Position:

Unexpended Appropriations - 21,490 

Unexpended Appropriations - earmarked funds 976 - 

Unexpended Appropriations - other funds 25,409 - 

Cumulative Results of Operations - (19,512) 

Cumulative Results of Operations - earmarked funds 518 - 

Cumulative Results of Operations - other funds (16,627) - 

Total Net Position 1,978 10,276 

Total Liabilities and Net Position $ 132,984 134,229 $ 

The accompanying notes are an integral part of these statements. 
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184 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

CONSOLIDATED STATEMENT OF NET COST 

For the Years Ended September 30, 2006 and 2005 

(in millions) 

2006 2005

Enhance International Competitiveness and 

the Sustainability of Rural and Farm Economies:

Gross Cost 31,841 $ 41,909 $ 

Less: Earned Revenue 6,979 15,136 

Net Cost 24,862 26,773 

Support Increased Economic Opportunities and 

Improved Quality of Life in Rural America:

Gross Cost 7,048 5,358 

Less: Earned Revenue 3,980 4,344 

Net Cost 3,068 1,014 

Enhance Protection and Safety of the Nation's

Agriculture and Food Supply:

Gross Cost 3,629 3,071 

Less: Earned Revenue 649 630 

Net Cost 2,980 2,441 

Improve the Nation's Nutrition and Health:

Gross Cost 53,064 51,033 

Less: Earned Revenue 36 46 

Net Cost 53,028 50,987 

Protect and Enhance the Nation's 

Natural Resource Base and Environment:

Gross Cost 12,592 10,686 

Less: Earned Revenue 1,104 888 

Net Cost 11,488 9,798 

Total Gross Costs 108,174 112,057 

Less: Total Earned Revenues 12,748 21,044 

Net Cost of Operations (Note 19) $ 91,013 95,426 $ 

The accompanying notes are an integral part of these statements. 
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F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 185 

CONSOLIDATED STATEMENT OF CHANGES IN NET POSITION 

For the Years Ended September 30, 2006 and 2005 

(in millions) 

2005

Earmarked All Other Consolidated Consolidated

Funds Funds Eliminations Total Total

Cumulative Results of Operations:

Beginning Balances 964 $ (20,476) $ - $ (19,512) $ (7,174) $ 

 Budgetary Financing Sources:

Appropriations Used 3,184 91,765 - 94,949 77,921 

Non-exchange Revenue - 2 - 2 8 

Donations and Forfeitures of Cash and Equivalents 1 - - 1 2 

Transfers In (Out) without Reimbursement 915 2,694 - 3,609 686 

Other - - - - (1) 

 Other Financing Sources (Non-Exchange):

Donations and Forfeitures of Property - - - - 31 

Transfers In (Out) without Reimbursement - (544) - (544) (1,001) 

Imputed Financing 43 3,113 (2,349) 807 833 

Other 5 - - 5 196 

Total Financing Sources 4,148 97,030 (2,349) 98,829 78,675 

Net Cost of Operations (4,594) (93,181) 2,349 (95,426) (91,013) 

Net Change (446) 3,849 - 3,403 (12,338) 

 Cummulative Results of Operations, Ending (16,627) 518 - (16,109) (19,512) 

Unexpended Appropriations:

Beginning Balances 923 20,567 - 21,490 22,158 

 Budgetary Financing Sources:

 Appropriations Received 3,308 97,832 - 101,140 80,697 

 Appropriations transferred in/out (5) 103 - 98 (507) 

 Other Adjustments (66) (1,328) - (1,394) (2,937) 

 Appropriations Used (3,184) (91,765) - (94,949) (77,921) 

Total Budgetary Financing Sources 53 4,842 - 4,895 (668) 

Unexpended Appropriations, Ending 25,409 976 - 26,385 21,490 

Net Position $ 8,782 1,494 $ - $ 10,276 $ 1,978 $ 

2006

The accompanying notes are an integral part of these statements. 
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186 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

COMBINED STATEMENT OF BUDGETARY RESOURCES 

For the Years Ended September 30, 2006 and 2005 

(in millions) 

Non-Budgetary Non-Budgetary

Credit Reform Credit Reform

Budgetary Financing Accounts Budgetary Financing Accounts

Budgetary Resources:

Unobligated balance, brought forward, October 1 (Note 24) 19,170 $ 6,828 $ 18,756 $ 6,325 $ 

Recoveries of prior year unpaid obligations 9,071 941 6,243 559 

Budget Authority -

Appropriation 109,856 - 88,940 - 

Borrowing Authority (Notes 22 & 23) 44,465 12,608 45,357 10,886 

Earned -

Collected 23,265 7,864 27,460 8,576 

Change in receivables from Federal Sources (129) (29) - (113) 

Change in unfilled customer orders -

Advances received 299 - (1,383) - 

Without advance from Federal Sources 70 11 15 2 

Expenditure transfers from trust funds 1,050 - 899 - 

Nonexpenditure transfers, net, anticipated and actual (342) - (907) - 

Permanently not available (55,745) (8,798) (39,871) (4,911) 

Total Budgetary Resources 151,030 19,425 145,509 21,324 

Status of Budgetary Resources:

Obligations Incurred (Note 21) -

Direct 87,185 15,710 82,879 14,496 

 Reimbursable 42,563 - 43,460 - 

Unobligated Balance -

 Apportioned 7,818 1,625 5,919 5,672 

Exempt from Apportionment 771 - 1,262 5 

Unobligated balance not available 12,693 2,090 11,989 1,151 

Total status of budgetary resources 151,030 19,425 145,509 21,324 

Change in Obligated Balances:

Obligated balance, net, brought forward October 1 (Note 24) 26,555 18,202 21,010 17,136 

Obligations incurred 129,748 15,710 126,339 14,496 

Gross outlays (120,756) (14,089) (114,536) (12,982) 

Recoveries of prior year unpaid (9,071) (941) (6,243) (559) 

Change in uncollected payments from Federal Sources 59 18 (15) 111 

Obligated balance, net, end of period -

Unpaid obligations (Note 28) 28,881 19,722 28,961 19,042 

Uncollected customer payments from Federal Sources (2,344) (822) (2,406) (840) 

Obligated balance, net, end of period 26,537 18,900 26,555 18,202 

Net Outlays:

Gross outlays 120,756 14,089 114,536 12,982 

Offsetting collections (24,612) (7,864) (26,976) (8,576) 

Distributed offsetting receipts (1,708) (987) (1,445) (722) 

Net Outlays 94,436 $ 5,238 $ 86,115 $ 3,684 $ 

2006 2005

The accompanying notes are an integral part of these statements. 
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CONSOLIDATED STATEMENT OF FINANCING 

For the Years Ended September 30, 2006 and 2005 

(in millions) 

2006 2005

Resources Used to Finance Activities:

Budgetary Resources Obligated -

Obligations Incurred $ 140,835 145,458 $ 

Less: Spending authority from offsetting collections and recoveries 42,413 42,258 

Obligations net of offsetting collections and recoveries 103,045 98,577 

Less: Offsetting receipts 2,167 2,695 

Net Obligations 96,410 100,350 

Other Resources -

Donations and forfeitures of property 31 - 

Transfers in(out) without reimbursement (544) (1,001) 

Imputed financing from costs absorbed by others 807 833 

Other 196 5 

Net other resources used to finance activities 268 59 

Total resources used to finance activities 96,469 100,618 

Resources Used to Finance Items not Part of the Net Cost of Operations:

Change in undelivered orders (2,192) (840) 

Resources that fund expenses recognized in prior periods (812) (432) 

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 12,067 14,921 

Other 10,968 7,811 

Resources that finance the acquisition of assets (28,444) (31,208) 

Other resources or adjustments to net obligated resources that do not affect net cost of operations (1,860) (932) 

Total resources used to finance items not part of the net cost of operations (12,078) (8,875) 

Total resources used to finance the net cost of operations 87,594 88,540 

Components of the Net Cost of Operations that will not Require or Generate

Resources in the Current Period:

Components Requiring or Generating Resources in Future Periods -

Increase in annual leave liability - 43 

Increase in environmental and disposal liability 35 - 

Upward/Downward reestimates of credit subsidy expense 650 (1,853) 

Increase in exchange revenue receivable from the public (377) (7,791) 

Other 7,456 95 

Total components of Net Cost of Operations that will require or generate

 resources in future periods (Note 29) (2,188) 446 

Components not Requiring or Generating Resources -

Depreciation and amortization 524 375 

Revaluation of assets or liabilities (525) (53) 

Other 5,608 6,118 

Total components of Net Cost of Operations that will not require or generate resources 6,440 5,607 

Total components of Net Cost of Operations that will not require or generate

 resources in the current period 3,419 6,886 

Net Cost of Operations $ 91,013 95,426 $ 

The accompanying notes are an integral part of these statements. 
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Notes to the Consolidated Financial Statements 

As of September 30, 2006 and 2005 

(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) 
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Rural Development 

Rural Development (RD) 

 Rural Telephone Bank (RTB) – a corporation 

 Alternative Agricultural Research and Commercialization Corporation (AARC) 

With the passage of the 2006 Agriculture, Rural Development, Food and Drug Administration, and Related Agencies 

Appropriation Act, Public Law No. 109-97, the legal restriction on redeeming Government-owned Class A stock was 

removed for RTB. As a result of this change, the process of liquidation and dissolution of the RTB began. During FY 

2008 RTB will be dissolved in its entirety and will no longer be a reportable entity. 

Consolidation 

The financial statements consolidate all the agencies’ results. The effects of intradepartmental activity and balances are 

eliminated, except for the Statement of Budgetary Resources that is presented on a combined basis. The financial 

statements are prepared in accordance with generally accepted accounting principles for the Federal Government. 

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 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. 
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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 occurring on or before the 

reporting date. The liability for long-term other post-employment benefits is the present value of future payments. 

Earmarked Funds 

In accordance with SFFAS 27, Identifying and Reporting Earmarked Funds, which became effective in FY 2006, the 

USDA has reported the earmarked funds for which it has program management responsibility when the following three 

criteria are met: (1) a statute committing the Federal Government to use specifically identified revenues and other 

financing sources only for designated activities, benefits or purposes; (2) explicit authority for the earmarked fund to 

retain revenues and other financing sources not used in the current period for future use to finance the designated 

activities, benefits or purposes; and (3) a requirement to account for and report on the receipt, use, and retention of the 
FINANCIAL STATEMENTS, NOTES, SUPP LEMENTAL AND OTHER ACCOMPANYING 

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F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 191 

revenues and other financing sources that distinguishes the earmarked fund from the Government’s general revenues. In 

accordance with SFFAS 27, the USDA did not restate FY 2005. In FY 2005, these funds were considered to be 

dedicated collections. 

Stewardship PP&E 

SFFAS 29, Heritage Assets and Stewardship Land, was issued in July 2005. SFFAS 29 reclassified all heritage assets 

and stewardship land information as basic except for condition information, which is classified as RSI. The 

reclassification as basic is being phased in per SFFAS 29. Heritage assets and stewardship land information that was 

previously reported in RSSI will temporarily shift to RSI until it moves to a note on the balance sheet as basic 

information. The phase-in of disclosure requirements being reported as basic information provides that SFFAS 29 will 

be fully implemented for reporting periods beginning after September 30, 2008. 

Contingencies 

Contingent liabilities are recognized when a past event or exchange transaction has occurred, a future outflow or other 

sacrifice of resources is probable, and the future outflow or sacrifice of resources is measurable. 

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. 
FINANCIAL STATEMENTS, NOTES, SUPP LEMENTAL AND OTHER ACCOMPANYING 

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192 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

NOTE 2. NON-ENTITY ASSETS

Non-entity assets include proceeds from the sale of timber payable to Treasury, employer contributions and payroll taxes 

withheld for agencies serviced by the National Finance Center, property taxes and insurance for single family housing, 

and interest, fines and penalties. 

FY 2006 FY 2005

Intragovernmental:

Fund balance with Treasury 37 $ 140 $ 

Accounts Receivable 17 1 

Subtotal Intragovernmental 54 141 

With the Public:

Cash and other monetary assets 98 91 

Accounts receivable 32 81 

Subtotal With the Public 130 172 

Total non-entity assets 184 313 

Total entity assets 134,045 132,671 

Total assets 134,229 $ 132,984 $ 

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 2006 FY 2005

Fund Balances:

 Trust Funds $ 759 551 $ 

 Revolving Funds 5,227 11,011 

 Appropriated Funds 36,061 30,009 

 Other Fund Types 352 548 

Total 42,327 42,191 

Status of Fund Balance with Treasury:

Unobligated Balance:

 Available 12,630 11,108 

 Unavailable 11,870 13,147 

Obligated Balance not yet Disbursed 26,011 26,357 

Clearing Account Balances 16 170 

Borrowing Authority not yet Converted to Fund Balance (8,091) (8,700) 

Total $ 42,327 42,191 $ 
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F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 193 

NOTE 4. CASH AND OTHER MONETARY ASSETS

In fiscal 2006 and 2005, cash includes Federal crop insurance escrow amounts of $90 million and $65 million, funds 

held in escrow for single family housing borrowers of $98 million and $90 million, and other receipts of $36 million and 

$87 million, respectively. The other receipts of $87 million in fiscal 2005 include $26 million of interest-bearing 

deposits. 

FY 2006 FY 2005

Cash 224 $ 242 $ 

NOTE 5. INVESTMENTS

FY 2006 Unamortized Market

Amortization Premium/ Investments, Value

Method Cost (Discount) Net Disclosure

Intragovernmental:

Non-marketable

Par value 76 $ - $ 76 $ - $ 

Market-based Straight Line 5 - 5 5 

Total 81 $ - $ 81 $ 5 $ 

With the Public:

AARC 3 $ - $ 3 $ 3 $ 

Total 3 $ - $ 3 $ 3 $ 

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 $ 
FINANCIAL STATEMENTS, NOTES, SUPP LEMENTAL AND OTHER ACCOMPANYING 

INFORMATION

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194 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

NOTE 6. ACCOUNTS RECEIVABLE, NET

FY 2006

Accounts 

Receivable, 

Gross

Allowance for 

Uncollectible 

Accounts

Accounts 

Receivable, 

Net

Intragovernmental 246 $ - $ 246 $ 

With the Public 8,732 97 8,635 

Total 8,978 $ 97 $ 8,881 $ 

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 $ 

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 2006 was $77,791 million compared to 

$75,176 million at the end of FY 2005. Loans exempt from the Federal Credit Reform Act of 1990 represent $1,381 

million of the total compared to $1,057 million in FY 2005. Table 1 illustrates the overall composition of the 

Department’s credit program balance sheet portfolio by mission area and credit program for FY 2006 and 2005. 

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 $4,674 
FINANCIAL STATEMENTS, NOTES, SUPP LEMENTAL AND OTHER ACCOMPANYING 

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F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 195 

million to $5,090 million during FY 2006, an increase of $416 million. Table 2 shows the reconciliation of subsidy cost 

allowance balances from FY 2005 to FY 2006. 

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 2006 was $717 million compared to negative $783 million in FY 2005. Table 3 illustrates the breakdown 

of total subsidy expense for FY 2006 and 2005 by program. 

Direct loan volume increased from $7,740 million in FY 2005 to $8,875 million in FY 2006. 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 2006 were $33,419 million in outstanding principal and $29,643 million 

in outstanding principal guaranteed, compared to $34,072 and $30,269 million, respectively at the end of FY 2005. 

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 $1,214 million to $1,296 million 

during FY 2006, an increase of $82 million. The post-1991 liability moved from $1,210 million to $1,294 million, an 

increase of $84 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 2006 was negative $64 million compared to negative $222 million in FY 2005. 

Table 8 illustrates the breakdown of total subsidy expense for FY 2006 and 2005 by program. 

Guaranteed loan volume decreased from $8,987 million in FY 2005 to $7,394 million in FY 2006. Volume distribution 

between mission area and program is shown in Table 9. 

Credit Program Discussion and Descriptions 

The Department offers direct and guaranteed loans through credit programs in the FFAS mission area through the FSA 

and the CCC, and in the RD mission area. 
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196 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

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 writedowns. 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. 

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 
FINANCIAL STATEMENTS, NOTES, SUPP LEMENTAL AND OTHER ACCOMPANYING 

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F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 197 

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 lowincome families each year. The programs also help rural communities finance, construct, enlarge or improve fire 

stations, libraries, hospitals and medical clinics, industrial parks, and other community facilities. 

The Rural Business Program goal is to promote a dynamic business environment in rural America. RD partners with the 

private sector and community-based organizations to provide financial assistance and business planning. It also provides 

technical assistance to rural businesses and cooperatives, conducts research into rural economic issues, and provides 

cooperative educational materials to the public. 

The Rural Utilities Program helps to improve the quality of life in rural America through a variety of loan programs for 

electric energy, telecommunications, and water and environmental projects. This program leverages scarce Federal funds 

with private capital for investing in rural infrastructure, technology and development of human resources. 

RD programs provide certain loan servicing options to borrowers whose accounts are distressed or delinquent. These 

options include reamortization, restructuring, loan deferral, lowering interest rate, acceptance of easements and debt 

write-downs. The choice of servicing options depends on the loan program and the individual borrower. 

Rural Development List of Programs 

Rural Housing Program Rural Business Program Rural Utilities Program 

Home Ownership Direct Loans 

Home Ownership Guaranteed Loans 

Home Improvement and Repair Direct Loans 

Home Ownership and Home Improvement and 

Repair Nonprogram Loans 

Rural Housing Site Direct Loans 

Farm Labor Housing Direct Loans 

Rural Rental and Rural Cooperative Housing Loans 

Rental Housing Guaranteed Loans 

Multi-family Housing–Nonprogram–Credit Sales 

Community Facilities Direct Loans 

Community Facilities Guaranteed Loans 

Business and Industry Direct Loans 

Business and Industry Guaranteed 

Loans 

Intermediary Relending Program 

Direct Loans 

Rural Economic Development Direct 

Loans 

Water and Environmental Direct Loans 

Water and Environmental Guaranteed 

Loans 

Electric Direct Loans 

Electric Guaranteed Loans 

Telecommunications Direct Loans 

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 2006 and 2005 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 
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198 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

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 cash flow 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 2005 and FY 2004 actual budgetary reestimates were recorded as of 

September 30, 2006 and 2005, 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 2006 reestimate process resulted in a $353 million increase in 

the post 1991 estimated cost of the direct loan portfolio and a $269 million reduction in the post 1991 estimated cost of 

the guaranteed loan portfolio. 

Table 3 discloses the direct loan subsidy expense including the $353 million increase due to reestimates. The increase 

was most affected by a $798 million increase in the housing program and $253 million reduction in the electric program. 

The housing FY 2006 upward reestimates was largely due to model and data assumption changes that were implemented 

during the current fiscal year. These changes reversed the large decrease reported during FY 2005. The reduction in the 

electric program was due to differences between the Treasury discount rate and the borrower interest rate varying from 

the original assumptions in the Federal Financing Bank electric loan cohort and Underwriters cohort. In conjunction, the 

borrower rate and payment consistency contributed to the Government cost savings and reduced subsidy expense. 

Table 8 discloses the loan guarantee subsidy expenses including the $269 million reduction due to reestimate. The 

reduction was most impacted by the $348 million reduction in the export 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. 

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 2006 and 2005 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 
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F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 199 

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 2006 

and 2005, respectively. The remainder of USDA credit programs chose to reflect downward reestimates in earned 

revenue on the Statement of Net Cost. Both methodologies are accepted alternatives that have been promulgated by 

Treasury. 

Foreclosed Property 

Property is acquired largely through foreclosure and voluntary conveyance. Acquired properties associated with loans 

are reported at their market value at the time of acquisition. The projected future cash flows associated with acquired 

properties are used in determining the related allowance (at present value). 

As of September 30, 2006 and 2005, foreclosed property consisted of 530 and 587 rural single-family housing 

dwellings, with an average holding period of 27 and 26 months, respectively. As of September 30, 2006 and 2005, FSAFarm Loan Program properties consist primarily of 78 and 100 farms, respectively. The average holding period for these 

properties in inventory for FY 2006 and 2005 was 58 and 57 months, respectively. Certain properties can be leased to 

eligible individuals. 

Non-performing Loans 

Non-performing loans are defined as receivables that are in arrears by 90 or more days, or are on rescheduling 

agreements until such time two consecutive payments have been made following the rescheduling. 

When RD, FSA and CCC calculate loan interest income, however, the recognition of revenue is deferred. Late interest is 

accrued on arrears. 

Loan Modifications 

A modification is any Government action different from the baseline assumptions that affects the subsidy cost, such as a 

change in the terms of the loan contract. The cost of a modification is the difference between the present value of the 

cash flows before and after the modification. 

In FY 2006, Rural Development modified several loan programs. The multiple-family housing direct loan program was 

modified due to the revitalization project. The revitalization project is used to rehabilitate ailing housing developments. 

In this program, Rural Development determines whether the development owner should be offered a financial 

restructuring plan and what type of incentives, if any, should be offered to the owner to rehabilitate an ailing housing 

development and to provide affordable rents for tenants who live in such projects that are revitalized. 

The electric program direct loans have been modified for two borrowers due to damage caused by the hurricanes which 

occurred during the 2005 calendar year. One borrower’s loans were modified to defer principal payments for three years 

and to extend the loan term for three years. The other modification was made to defer principal and interest for five 

years and to extend the maturity by five years. 

The guaranteed single-family housing loan programs were modified to enable eligible delinquent borrowers that were 

impacted by the hurricanes which occurred during the 2005 calendar year to receive a one-time advance from their loan 

servicer in an amount equal to not more than 12 months past due mortgage payments. Loan servicers are reimbursed by 

Rural Development and the borrower is required to repay Rural Development. 
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200 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

To determine the cost of the above modifications, the most recently approved President's budget was used for the net 

present value discount factor for the premodification cash flow, which was FY 2006. The post modification cash flows 

are discounted at the net present value discount factor for the FY 2004 Reestimates for the respective cohort. 

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. 

There was one loan modification effected in FY 2005. A Forest Conservation Agreement between the Government of 

Jamaica and the Government of the United States, signed September 21, 2004, which resulted in a reduction of debt in 

the amount of $6.5 million. No gain or loss was recognized. 

Interest Credit 

Approximately $17.9 and $18.2 billion of RHS unpaid loan principal as of September 30, 2006, and 2005 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 $1.0 and $1.1 billion higher for FY 2006 and 2005, respectively. 

Restructured Loans 

At the end of FY 2006 and 2005, the RD portfolio contained approximately 81 and 80 thousand restructured loans with 

an outstanding unpaid principal balance of $2.6 billion. At the end of FY 2006 and 2005, the farm loan portfolio 

contained approximately 23 and 25 thousand restructured loans with an outstanding unpaid principal balance of $1.3 and 

$1.4 billion, respectively. Direct credit and credit guarantee principal receivables in the food aid and export programs 

under rescheduling agreements as of September 30, 2006 and 2005, were $4.2 and $5.5 billion, respectively. 
FINANCIAL STATEMENTS, NOTES, SUPP LEMENTAL AND OTHER ACCOMPANYING 

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F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 201 

Table 1. Total Loans Receivable and Related Foreclosed Property, Net 

FY 2006 Loans Present Value of Assets

Direct Loans Receivable, Interest Foreclosed Value Related to

Gross Receivable Property Allowance Direct Loans

Obligated Pre-1992

Farm 1 $ 133 ,981 $ 13 $ $ 1 (174) $ ,953

Export - - - - - Food Aid 5 68 ,600 - 3 (2,570) ,098

Housing 101 11,666 16 6 (5,212) ,571

Electric 11 25 ,969 - 10 (1,460) ,534

Telecommunications 1 2 ,239 - 1 (79) ,162

Water and Environmental 1 16 ,568 - 1 (216) ,368

Business and Industry 1 1 - 1 (1) Economic Development 44 - - 22 (22) Pre-1992 Total 34 346 ,068 29 24 (9,734) ,709

Obligated Post-1991

Farm 4 152 ,692 4 4 (642) ,206

Export - - - - - Food Aid 2 34 ,548 - 1 (1,249) ,333

Housing 87 15,145 16 13 (2,099) ,149

Electric 22 3 ,237 - 22 (240) ,000

Telecommunications 2 5 ,718 - 77 2 ,800

Water and Environmental 7 73 ,104 - 6 (663) ,514

Business and Industry - 70 - 3 (67) Economic Development 488 2 - 328 (162) Post-1991 Total 55 356 ,002 20 50 (5,045) ,333

Total Direct Loan Program Receivables 89 702 ,070 49 75 (14,779) ,042

Defaulted Guarantee Loans

Pre-1992

Farm 8 - - 2 (6) Export 516 7 - 386 (137) Food Aid - - - - - Housing - - - - - Electric - - - - - Telecommunications - - - - - Water and Environmental - - - - - Business and Industry - - - - - Economic Development 4 - - - 4 Pre-1992 Total 528 7 - 392 (143) 

Post-1991

Farm 36 1 - 15 (22) Export 1 20 ,189 - 803 (406) Food Aid - - - - - Housing - 17 - 3 (14) Electric - - - - - Telecommunications - - - - - Water and Environmental - - - - - Business and Industry 2 162 - 155 (9) Economic Development - - - - - Post-1991 Total 1 23 ,404 - 976 (451) Total Defaulted Guarantee Loans 1 30 ,932 - 1 (594) ,368

Loans Exempt from Credit Reform Act:

Commodity Loans 1 - ,493 - 1 (132) ,361

Other Foreign Receivables 62 - - 20 (42) Total Loans Exempt 1 - ,555 - 1 (174) ,381

Total Loans Receivable and Related Foreclosed Property, Net 77 $ ,791
FINANCIAL STATEMENTS, NOTES, SUPP LEMENTAL AND OTHER ACCOMPANYING 

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202 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Table 1. Total Loans Receivable and Related Foreclosed Property, Net (cont’d) 

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 $ 151 ,336 $ 21 $ $ 2 (247) $ ,261

Export - - - - - Food Aid 5 69 ,909 - 3 (2,624) ,354

Housing 114 12,379 13 7 (5,112) ,394

Electric 12 25 ,308 - 10 (1,599) ,734

Telecommunications 1 3 ,526 - 1 (109) ,420

Water and Environmental 1 17 ,700 - 1 (248) ,469

Business and Industry - 1 - - (1) Economic Development 52 - - 27 (25) Pre-1992 Total 36 379 ,211 34 26 (9,965) ,659

Obligated Post-1991

Farm 4 141 ,562 3 4 (645) ,061

Export - - - - - Food Aid 2 37 ,794 - 1 (1,391) ,440

Housing 73 14,423 19 13 (1,114) ,401

Electric 17 2 ,857 - 17 (600) ,259

Telecommunications 2 3 ,533 - 24 2 ,560

Water and Environmental 6 65 ,639 - 5 (705) ,999

Business and Industry - 83 - 7 (76) Economic Development 452 2 - 297 (157) Post-1991 Total 49 323 ,343 22 45 (4,664) ,024

Total Direct Loan Program Receivables 85 702 ,554 56 71 (14,629) ,683

Defaulted Guarantee Loans

Pre-1992

Farm 9 - - 2 (7) Export 1 15 ,401 - 1 (122) ,294

Food Aid - - - - - Housing - - - - - Electric - - - - - Telecommunications - - - - - Water and Environmental - - - - - Business and Industry - - - - - Economic Development 3 1 - - 4 Pre-1992 Total 1 16 ,413 - 1 (129) ,300

Post-1991

Farm 26 1 - 9 (18) Export 1 24 ,605 - 938 (691) Food Aid - - - - - Housing - 13 - - 13 Electric - - - - - Telecommunications - - - - - Water and Environmental - - - - - Business and Industry 1 167 - 8 176 Economic Development - - - - - Post-1991 Total 1 26 ,811 - 1 (701) ,136

Total Defaulted Guarantee Loans 3 42 ,224 - 2 (830) ,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
FINANCIAL STATEMENTS, NOTES, SUPP LEMENTAL AND OTHER ACCOMPANYING 

INFORMATION

USDA

F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 203 

Table 2. Schedule for Reconciling Subsidy Cost Allowance Balances (Post-1991) Direct 

Loans 

FY 2006 FY 2005

Beginning balance of the subsidy cost allowance 4,674 $ 6,256 $ 

Add: Subsidy expense for direct loans disbursed during the year by component

Interest rate differential costs (119) (89) 

Default costs (net of recoveries) 120 141 

Fees and other collections (3) (7) 

Other subsidy costs 326 337 

Total subsidy expense prior to adjustments and reestimates 335 371 

Adjustments

Loan modifications 6 27 

Fees received 20 22 

Loans written off (191) (276) 

Subsidy allowance amortization (78) (527) 

Other (99) 32 

Total subsidy cost allowance before reestimates 4,736 5,836 

Add or subtract subsidy reestimates by component

Interest rate reestimate 97 108 

Technical/default reestimate 257 (1,270) 

Total reestimates (1,162) 354 

Ending balance of the subsidy cost allowance 5,090 $ 4,674 $ 
FINANCIAL STATEMENTS, NOTES, SUPPLEMENT AL AND OTHER ACCOMPANYING I

USDA

204 F Y 2006

P ERFORMANCE AND 

A CCOUNTABILITY 

R EPORT

Table 3. Direct Loan Subsidy Expense by Program and Component 

FY 2006

Interest Fees and Other Subtotal Total Rate Technical 

Differential Defaults Collections Other Subsidy Modifications Reestimates Reestimates 

Direct Loan Programs

Farm 12 $ 73 $ - $ (4) $ 81 $ - $ 5 $ (18) $ 

Export - - - - - - - - 

Food Aid 18 4 - - 22 26 - (89) Housing (178) 31 (3) 360 210 - 337 461 

Electric (45) 9 - (14) (50) 1 (214) (39) 

Telecommunications (1) 2 - (1) - - (6) (43) 

Water and Environmental 53 1 - (3) 51 - (29) (4) 

Business and Industry - - - - - - 3 (9) 

Economic Development 23 - - - 23 - - (2) 

Total Direct Loan Subsidy Expense (118) $ 120 $ (3) $ 338 $ 337 $ 27 $ 96 $ 257 $ 

.

FY 2005

Interest Fees and Other Subtotal Total Rate Technical 

Differential Defaults Collections Other Subsidy Modifications Reestimates Reestimates R

Direct Loan Programs

Farm (4) $ 97 $ - $ (18) $ 75 $ - $ (8) $ 42 $ 

$ 

Export - - - - - - - - 

 

Food Aid 21 5 - 1 27 6 - (343) 

 

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) $ 

$ 

.
FINANCIAL STATEMENTS, NOTES, SUPP LEMENTAL AND OTHER ACCOMPANYING 

INFORMATION

USDA

F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 205 

Table 4. Total Amount of Direct Loans Disbursed (Post-1991) 

FY 2006 FY 2005

Direct Loan Programs

Farm 1,041 $ 906 $ 

Export - - 

Food Aid 16 20 

Housing 1,790 1,744 

Electric 4,802 3,600 

Telecommunications 485 567 

Water and Environmental 675 855 

Business and Industry - 2 

Economic Development 66 46 

Total Direct Loans Disbursed 8,875 $ 7,740 $ 
FINANCIAL STATEMENTS, NOTES, SUPPLEMENT AL AND OTHER ACCOMPANYING I

USDA

206 F Y 2006

P ERFORMANCE AND 

A CCOUNTABILITY 

R EPORT

Table 5. Loan Guarantees Outstanding 

Pre - 1992 Post - 1991 Total Pre - 1992 Post - 1991 

FY 2006 Outstanding Principal, Outstanding Principal, Outstanding Principal, Outstanding Principal, Outstanding Principal, 

Face Value Face Value Face Value Guaranteed Guaranteed 

Loan Guarantee Programs

Farm $ 86 $ 10,069 $ 10,155 $ 76 $ 9,046 Export - 3,022 3,022 - 2,925 Food Aid - - - - - Housing 12 15,889 15,901 10 14,286 Electric 167 222 389 167 222 Telecommunications - - - - - Water and Environmental - 34 34 - 28 Business and Industry 23 3,892 3,915 17 2,863 Economic Development 3 - 3 3 - 

Total Guarantees Disbursed $ 291 $ 33,128 $ 33,419 $ 273 $ 29,370 

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 

.
FINANCIAL STATEMENTS, NOTES, SUPP LEMENTAL AND OTHER ACCOMPANYING 

INFORMATION

USDA

F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 207 

Table 6. Liability for Loan Guarantees (Present Value Method for Pre-1992 Guarantees) 

FY 2006

Liabilities for 

Losses on Pre1992 

Guarantees 

Present Value

Liabilities for Loan 

Guarantees on 

Post-1991 

Guarantees 

Present Value

Total Liabilities for 

Loan Guarantees

Loan Guarantee Programs

Farm 1 $ 121 $ 122 $ 

Export - 220 220 

Food Aid - - - 

Housing - 624 624 

Electric - - - 

Telecommunications - - - 

Water and Environmental - - - 

Business and Industry 1 329 330 

Economic Development - - - 

Total Liability for Loan Guarantees 2 $ 1,294 $ 1,296 $ 

FY 2005

Liabilities for 

Losses on Pre1992 

Guarantees 

Present Value

Liabilities for Loan 

Guarantees on 

Post-1991 

Guarantees 

Present Value

Total Liabilities for 

Loan Guarantees

Loan Guarantee Programs

Farm 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 $ 
FINANCIAL STATEMENTS, NOTES, SUPP LEMENTAL AND OTHER ACCOMPANYING 

INFORMATION

USDA

208 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Table 7. Schedule for Reconciling Loan Guarantee Liability 

FY 2006 FY 2005

Beginning balance of the loan guarantee liability 1,209 $ 1,183 $ 

Add:Subsidy expense for guaranteed loans disbursed during the year by component

Interest rate differential costs 35 35 

Default costs (net of recoveries) 290 369 

Fees and other collections (118) (106) 

Other subsidy costs - - 

Total of the above subsidy expense components 207 298 

Adjustments

Loan modifications - - 

Fees received 103 95 

Interest supplements paid (10) (6) 

Claim payments to lenders (154) (360) 

Interest accumulation on the liability balance 127 16 

Other 498 84 

Ending balance of the subsidy cost allowance before reestimates 1,562 1,728 

Add or subtract subsidy reestimates by component:

Interest rate reestimate (284) 57 

Technical/default reestimate (326) (235) 

Total of the above reestimate components (269) (519) 

Ending balance of the loan guarantee liability 1,293 $ 1,209 $ 
FINANCIAL STATEMENTS, NOTES, SUPPLEMENT AL AND OTHER ACCOMPANYING I

F Y 2006

P ERFORMANCE AND 

A CCOUNT

Table 8. Guarantee Loan Subsidy Expense by Program and Component 

FY 2006

Interest 

Interest Fees and Other Total Rate Technical 

Loan Guarantee Programs Supplement Defaults Collections Other Subtotal Modifications Reestimates Reestimates 

Farm 25 $ 58 $ (17) $ - $ 66 $ - $ 1 $ 18 $ 

Export - 78 (9) - 69 - 23 (371) 

Food Aid - - - - - - - - 

Housing 10 97 (68) - 39 - 20 31 

Electric - - - - - - - - 

Telecommunications - - - - - - - - 

Water and Environmental - - - - - - - - 

Business and Industry - 56 (25) - 31 - 13 (4) 

Economic Development - - - - - - - - 

Total Loan Guarantee Subsidy Expense $ 35 $ 289 $ (119) $ - $ 205 $ - $ 57 $ (326) 

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) $ (142

$ 

Export - 181 (16) - 165 - (287) (188

 

Food Aid - - - - - - - - 

Housing 6 93 (66) - 33 - 18 75 

Electric - - - - - - - - 

Telecommunications - - - - - - - - 

Water and Environmental - - - - - - - - 

Business and Industry - 36 (8) - 28 - 4 21 

Economic Development - - - - - - - - 

Total Loan Guarantee Subsidy Expense $ 35 $ 368 $ (107) $ - $ 296 $ - $ (284) $ (234) 
FINANCIAL STATEMENTS, NOTES, SUPP LEMENTAL AND OTHER ACCOMPANYING 

INFORMATION

USDA

210 F Y 2006 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 2,146 $ 1,928 $ 2,191 $ 1,968 $ 

Export 1,568 1,451 2,956 2,678 

Food Aid - - - - 

Housing 3,187 2,864 3,130 2,813 

Electric 3 3 2 2 

Telecommunications - - - - 

Water and Environmental 1 1 5 4 

Business and Industry 489 382 703 550 

Economic Development - - - - 

Total Guaranteed Loans Disbursed 7,394 $ 6,629 $ 8,987 $ 8,015 $ 

FY 2006 FY 2005

Table 10. Administrative Expenses 

FY 2006 FY 2005

Direct Loan Programs 535 $ 516 $ 

Guaranteed Loan Programs 253 253

Total Administrative Expenses 788 $ 769 $ 
FINANCIAL STATEMENTS, NOTES, SUPP LEMENTAL AND OTHER ACCOMPANYING 

INFORMATION

USDA

F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 211 

Table 11. Subsidy Rates for Direct Loans (percentage) 

FY 2006 Interest 

Differential Defaults

Fees and 

Other 

Collections Other Total

Direct Loan Programs

Farm Operating 1.62 8.05 - 0.28 9.95 

Indian Land Acquisition 5.87 (1.86) - - 4.01 

Emergency Disaster 5.02 6.25 - (0.33) 10.94 

Boll Weevil Eradication 0.51 (18.74) - 0.14 (18.09) 

Farm Ownership 0.63 2.49 - 2.00 5.12 

Farm Storage Facility Loan Program 0.04 6.76 (0.11) (7.31) (0.62) 

Sugar Storage Facility Loan Program 0.36 0.90 - - 1.26 

Community Facility Loans 3.59 0.24 - (0.48) 3.35 

Water and Waste Disposal Loans 7.14 0.09 - (0.32) 6.91 

Distance Learning and Telemedicine Loans - 1.63 - (0.13) 1.50 

Broadband 4% Loans (Mandatory) 5.83 2.13 - (0.01) 7.95 

Broadband 4% Loans (Discretionary) 5.83 2.13 - (0.01) 7.95 

Broadband Treasury Loans (Mandatory) - 2.22 - (0.07) 2.15 

Broadband Treasury Loans (Discretionary) - 2.22 - (0.07) 2.15 

Electric Hardship Loans 0.69 0.02 - 0.21 0.92 

Municipal Electric Loans 4.68 0.02 - 0.35 5.05 

FFB Electric Loans (0.49) 0.02 - (0.01) (0.48) 

Treasury Electric Loans - 0.02 - (0.01) 0.01 

Telecommunication Hardship Loans (1.84) 0.02 - 0.02 (1.80) 

FFB Telecommunications Loans (1.03) 0.02 - (0.56) (1.57) 

Treasury Telecommunication Loans - 0.03 - 0.02 0.05 

Rural Telephone Bank Loans - - - - - 

Single-Family Housing Credit Sales 1.16 (19.35) - 3.66 (14.53) 

Multi-Family Housing Credit Sales 0.12 (19.82) - 65.10 45.40 

Section 502 Single-Family Housing 2.32 (16.77) - 25.84 11.39 

Section 504 Housing Repair 27.00 2.45 - (0.20) 29.25 

Section 515 Multi-Family Housing (17.86) 0.04 (0.05) 63.75 45.88 

Section 523 Self-Help Site Development 1.03 - - - 1.03 

Section 524 Site Development (4.30) 0.79 - - (3.51) 

Section 514 Farm Labor Housing 44.91 0.03 - (0.35) 44.59 

Intermediary Relending Program 43.84 - - (0.82) 43.02 

Rural Economic Development Loans 21.40 0.07 - 1.50 22.97 

Electric Underwriting (2.09) 0.83 - - (1.26) 

MFH Preservation 46.76 - - - 46.76 

P. L. 480 Direct Credits 44.39 11.01 - - 55.40 
FINANCIAL STATEMENTS, NOTES, SUPP LEMENTAL AND OTHER ACCOMPANYING 

INFORMATION

USDA

212 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

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 2.46 17.55 - (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 26.95 2.38 - (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 

Electric Underwriting - - - - - 

MFH Preservation - - - - - 

P. L. 480 Direct Credits 45.85 10.13 - - 55.98 

Table 12. Subsidy Rates for Loan Guarantees (percentage) 

FY 2006 Interest

Fees and

Other

Differential Defaults Collections Other Total

Guaranteed Loan Programs

CCC Export Loan Guarantee Program - 9.50 (0.57) - 8.93 

Farm Operating—Unsubsidized - 3.93 (0.90) - 3.03 

Farm Operating—Subsidized 9.24 3.26 - - 12.50 

Farm Ownership—Unsubsidized - 1.38 (0.90) - 0.48 

Business and Industry Loans - 8.20 (3.41) - 4.79 

Guaranteed Business & Industry NadBank Loans - 13.76 (3.28) (0.01) 10.47 

Community Facility Loans - 1.21 (0.85) - 0.36 

Water and Waste Disposal Loans - - (0.90) - (0.90) 

Electric Guaranteed Loans - 0.90 - - 0.90 

Local Television Loans (Discretionary) - - - - - 

Local Television Loans (Mandatory) - - - - - 

Guaranteed Broadband Loans (Discretionary) - 3.82 - - 3.82 

Guaranteed Broadband Loans (Mandatory) - 3.82 - - 3.82 

Section 502 Single-Family Housing Purchase - 3.16 (2.00) - 1.16 

Section 502 Single-Family Housing Refinance - 0.79 (0.50) - 0.29 

538 Multi-Family Housing-Subsidized 12.28 0.57 (7.44) 0.01 5.42 

Renewable Energy - 8.20 (1.75) - 6.45 

Rural Business Investment Program - - - - - 
FINANCIAL STATEMENTS, NOTES, SUPP LEMENTAL AND OTHER ACCOMPANYING 

INFORMATION

USDA

F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 213 

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 - (0.07) 13.31 

Farm Ownership—Unsubsidized - 1.43 (0.90) - 0.53 

Business and Industry Loans - 6.51 (1.47) (0.01) 5.03 

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 - - - - - 

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, 2006 and 2005 were $106 million and $79 million, respectively. 

In fiscal year 2005, tobacco loan forfeitures amounted to $985 million including accrued interest. Estimated future 

commodity donations are expected to be $37 million. 
FINANCIAL STATEMENTS, NOTES, SUPP LEMENTAL AND OTHER ACCOMPANYING 

INFORMATION

USDA

214 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Inventories 1 $ - $ 

Commodities: Volume 

(in millions) Amount

Volume 

(in millions) Amount

Corn (In Bushels):

On hand at the beginning of the year 2 1 12 22 

Acquired during the year 289 561 99 204 

Disposed of during the year

Sales (288) (558) (97) (198)

Donations (1) (3) (13) (25)

Other - - - (1)

On hand at the end of the year 2 1 1 2 

Wheat (In Bushels):

On hand at the beginning of the year 171 47 81 291 

Acquired during the year 56 240 68 287 

Disposed of during the year

Sales (28) (134) (71) (295)

Donations (32) (118) (31) (112)

Other - - - - 

On hand at the end of the year 159 43 47 171 

Nonfat Dry Milk (In Pounds):

On hand at the beginning of the year 94 104 661 594 

Acquired during the year 62 50 34 26 

Disposed of during the year

Sales (27) (25) (186) (164)

Donations (82) (76) (276) (259)

Other (8) (3) (129) (103)

On hand at the end of the year 40 49 104 94 

Sugar (In Pounds):

On hand at the beginning of the year - - 32 8 

Acquired during the year - - 48 10 

Disposed of during the year

Sales - - (80) (18)

Donations - - - - 

Other - - - - 

On hand at the end of the year - - - - 

Tobacco (In Pounds):

On hand at the beginning of the year - - 2 2 

Acquired during the year - - 280 986 

Disposed of during the year

Sales - - (200) (696)

Donations - - (82) (292)

Other - - - - 

On hand at the end of the year - - - - 

Other:

On hand at the beginning of the year 33 37 

Acquired during the year 5,140 5,675 

Disposed of during the year

Sales (5,085) (5,507)

Donations (68) (164)

Other - - 

On hand at the end of the year 37 24 

Allowance for losses (171) (275)

Total Commodities 54 29 

Total Inventory and Related Property, Net 55 $ 29 $ 

FY 2006 FY 2005
FINANCIAL STATEMENTS, NOTES, SUPP LEMENTAL AND OTHER ACCOMPANYING 

INFORMATION

USDA

F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 215 

NOTE 9. GENERAL PROPERTY, PLANT, AND EQUIPMENT, NET

FY 2006 Useful Net

Life Accumulated Book

Category (Years) Cost Depreciation Value

Land and Land Rights 75 $ - $ 75 $ 

Improvements to Land 10 - 50 4,986 2,711 2,275 

Construction-in-Progress 828 - 828 

Buildings, Improvements and Renovations 15 - 30 1,815 1,099 716 

Other Structures and Facilities 15 - 50 1,604 1,194 410 

Equipment 5 - 20 1,711 1,375 336 

Assets Under Capital Lease 3 - 20 44 16 28 

Leasehold Improvements 10 50 34 16 

Internal-Use Software 5 - 8 442 263 179 

Internal-Use Software in Development 38 - 38 

Other General Property, Plant and Equipment 5 - 15 4 - 4 

Total $ 6,692 11,597 $ 4,905 $ 

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 $ 

NOTE 10. STEWARDSHIP PP&E

Stewardship PP&E consist of assets whose physical properties resemble those of General PP&E that are traditionally 

capitalized in the financial statements. Due to the nature of these assets however, valuation would be difficult and 

matching costs with specific periods would not be meaningful. Stewardship PP&E include heritage assets and 

stewardship land. 

Heritage assets are unique and are generally expected to be preserved indefinitely. Heritage assets may be unique 

because they have historical or natural significance, are of cultural, educational or artistic importance, or have significant 

architectural characteristics. The assets are reported in terms of physical units rather than cost, fair value, or other 

monetary values. No amounts are shown on the balance sheet for heritage assets, except for multi-use heritage assets in 

which the predominant use of the asset is in general government operations. The costs of acquisition, betterment, or 

reconstruction of multi-use heritage assets is capitalized as general PP&E and depreciated, with required supplementary 

information providing the physical quantity information for the multi-use heritage assets. The costs of acquiring, 

constructing, improving, reconstructing, or renovating heritage assets, other than multi-use is considered an expense in 
FINANCIAL STATEMENTS, NOTES, SUPP LEMENTAL AND OTHER ACCOMPANYING 

INFORMATION

USDA

216 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

the period incurred when determining the net cost of operations. Heritage assets are held by the FS, NRCS, and ARS, 

consisting mainly of buildings and structures. 

Stewardship land is land and land rights not acquired for or in connection with items of general PP&E. Land is defined 

as the solid surface of the earth, excluding natural resources. Stewardship land is valued for its environmental resources, 

recreational and scenic value, cultural and paleontological resources, vast open spaces, and resource commodities and 

revenue provided to the Federal government, states, and counties. These assets are reported in terms of physical units 

rather than cost, fair value, or other monetary values. No asset amount is shown on the balance sheet for stewardship 

land. The acquisition cost of stewardship land is considered an expense in the period acquired when determining the net 

cost of operations. The FS manages public land, the majority of which is classified as stewardship land. The NRCS 

manages several conservation easement programs. 

NOTE 11. OTHER ASSETS

In fiscal 2006 and 2005, other assets include investments in trust for loan asset sales of $37 million and $36 million, 

respectively. 

FY 2006 FY 2005

Intragovernmental:

Advances to Others - $ 1 $ 

Subtotal Intragovernmental - 1 

With the Public:

Advances to Others 60 48 

Prepayments 1 1 

Other Assets 37 37 

Subtotal With the Public 98 86 

Total Other Assets 98 $ 87 $ 

NOTE 12. LIABILITIES NOT COVERED BY BUDGETARY RESOURCES

In fiscal 2006 and 2005, other intragovernmental liabilities not covered by budgetary resources include accruals for 

Federal Employee Compensation Act (FECA) of $159 million and $155 million, respectively, and contract disputes 

claims payable to Treasury’s Judgment Fund of $13 million and $10 million, respectively. 

In fiscal 2006 and 2005, other liabilities with the public not covered by budgetary resources include, accruals for rental 

payments under the Conservation Reserve Program (CRP) of $1,779 million and $1,695 million, unfunded leave of $589 

million and $546 million, Payments to States $398 million and $378 million, future funded indemnity cost of $296 and 

$479 million, and, contingent liabilities of $15 million and $19 million, respectively. In fiscal 2006 and 2005, CCC 

reported a liability in the amount of $6,137 and $7,100 million under the Tobacco Transition Payment Program (TTPP), 

respectively. 
FINANCIAL STATEMENTS, NOTES, SUPP LEMENTAL AND OTHER ACCOMPANYING 

INFORMATION

USDA

F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 217 

FY 2006 FY 2005

Intragovernmental:

Other 173 $ 166 $ 

Subtotal Intragovernmental 173 166 

With the Public:

Federal employee and veterans' benefits 808 834 

Environmental and disposal liabilities 63 28 

Benefits due and payable - - 

Other 9,216 10,553 

Subtotal With the Public 10,087 11,415 

Total liabilities not covered by budgetary resources 10,260 11,581 

Total liabilities covered by budgetary resources 113,693 119,425 

Total liabilities 123,953 $ 131,006 $ 

NOTE 13. DEBT

FY 2006 Beginning 

Balance Net Borrowing

Ending 

Balance

Intragovernmental

Debt to the Treasury 60,708 $ (2,521) $ 58,187 $ 

Debt to the Federal Financing Bank 22,807 2,453 25,260 

Total Intragovernmental 83,515 (68) 83,447 

Agency Debt:

Held by the Public 1 (1) - 

Total Debt 83,516 $ (69) $ 83,447 $ 

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 $ 14,462 69,054 $ 83,516 $ 
FINANCIAL STATEMENTS, NOTES, SUPP LEMENTAL AND OTHER ACCOMPANYING 

INFORMATION

USDA

218 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

NOTE 14. ENVIRONMENTAL AND DISPOSAL LIABILITIES

The Department is subject to the Comprehensive Environmental Response, Compensation, and Liability Act, the Clean 

Water Act, and the Resource Conservation and Recovery Act for cleanup of hazardous waste. The FS and CCC estimate 

the liability for total cleanup costs for sites known to contain hazardous waste to be $53 million and $10 million in fiscal 

2006, $18 million for FS and $10 million for CCC in fiscal 2005, based on actual cleanup costs at similar sites. These 

estimates will change as new sites are discovered, remedy standards change and new technology is introduced. This 

liability is not covered by budgetary resources. 

NOTE 15. OTHER LIABILITIES

As of September 30, 2006 and 2005, other intragovernmental liabilities include credit reform reestimates of $202 million 

and $410 million, respectively. In fiscal 2005, the General Sales Manager (GSM) Program, was $23 million. 

In fiscal 2006, other liabilities with the public include estimated losses on crop insurance claims of $2,328 million, 

estimated underwriting gains on crop insurance of $652 million, crop insurance premium subsidy deficiency reserve of 

$431 million, payments to states of $398 million, credit reform programs of $47 million, undistributed credits for 

insured loans of $16 million, peanut/tobacco programs of $10 million, and estimated program delivery cost to reinsurer 

of $3 million. 

In fiscal 2005, other liabilities with the public include estimated losses on crop insurance claims of $1,924 million, stock 

payable to RTB borrowers of $1,390 million, estimated underwriting gains on crop insurance of $740 million, crop 

insurance premium subsidy deficiency reserve of $371 million, RTB dividend payable to treasury of $50 million, and 

peanut/tobacco programs of $33 million. 
FINANCIAL STATEMENTS, NOTES, SUPP LEMENTAL AND OTHER ACCOMPANYING 

INFORMATION

USDA

F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 219 

FY 2006 Non-Current Current Total

Intragovernmental:

Other Accrued Liabilities 49 $ 549 $ 598 $ 

Employer Contributions and Payroll Taxes 1 44 45 

Unfunded FECA Liability - 159 159 

Advances from Others - 8 8 

Liability for Deposit Funds, Clearing Accounts - (136) (136) 

Liability for Subsidy Related to Undisbursed Loans - 9 9 

Resources Payable to Treasury - 13,158 13,158 

Custodial Liability - 37 37 

Other Liabilities - 202 202 

Subtotal Intragovernmental 50 14,030 14,080 

With the Public:

Contract Holdbacks - - - 

Other Accrued Liabilities 23 14,869 14,892 

Accrued Funded Payroll and Leave 2 43 45 

Unfunded Leave 8 581 589 

Other Unfunded Employment Related Liability - - - 

Advances from Others - 58 58 

Deferred Credits - 311 311 

Liability for Deposit Funds, Clearing Accounts - 231 231 

Contingent Liabilities 5 10 15 

Capital Lease Liability 26 2 28 

Custodial Liability - 27 27 

Other Liabilities 19 3,867 3,886 

Subtotal With the Public 83 19,999 20,082 

Total Other Liabilities 133 $ 34,029 $ 34,162 $ 

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 $ 
FINANCIAL STATEMENTS, NOTES, SUPP LEMENTAL AND OTHER ACCOMPANYING 

INFORMATION

USDA

220 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

NOTE 16. LEASES

USDA activities based in the Washington D.C. area are located in General Services Administration (GSA) leased 

facilities, and USDA owned buildings. The USDA Headquarter complex (Whitten Building, South Building and Cotton 

Annex) is a government owned facility, which is part of the GSA Federal Buildings Inventory. As the result of a 1998 

Agreement between GSA and USDA, a moratorium was placed on the rental billings for the Headquarters complex 

beginning in FY 1999. 

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 

$53 million. This agreement is still in effect and as a result, USDA activities located in the Headquarter complex are not 

billed for rental costs. 

FY 2006

Capital Leases:

Summary of Assets Under Capital Leases

Land and Building 41 $ 

Machinery and Equipment 3 

Accumulated Amortization 16

Future Payments Due:

Land & Buildings Machinery & 

Equipment Other Totals

Fiscal Year

2007 7 - - 7 

2008 7 - - 7 

2009 7 - - 7 

2010 7 - - 7 

2011 7 - - 7 

After 5 Years 52 - - 52 

Total Future Lease Payments 87 - - 87 

Less: Imputed Interest 54 - - 54 

Less: Executory Costs 5 - - 5 

Less: Lease Renewal Options - - - - 

Net Capital Lease Liability 28 - - $ 28 

Lease liabilities covered by budgetary resources 28 

Operating Leases:

Future Payments Due:

Fiscal Year Land & Buildings Machinery & 

Equipment Other Totals

2007 80 - 5 85 

2008 - 75 4 79 

2009 - 68 4 72 

2010 - 61 4 65 

2011 54 - 3 57 

After 5 Years 368 - 42 410 

Total Future Lease Payments 706 $ - $ 62 $ 768 $ 
FINANCIAL STATEMENTS, NOTES, SUPP LEMENTAL AND OTHER ACCOMPANYING 

INFORMATION

USDA

F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 221 

FY 2005

Capital Leases:

Summary of Assets Under Capital Leases

Land and Building 38 $ 

Machinery and Equipment 2 

Accumulated Amortization 17

Future Payments Due:

Land & Buildings Machinery & 

Equipment Other 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 Other 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 $ 

NOTE 17. COMMITMENTS AND CONTINGENCIES

The Department is subject to various claims and contingencies related to lawsuits as well as commitments under 

contractual and other commercial obligations. 

For cases in which payment has been deemed probable and for which the amount of potential liability has been 

estimated, $15 million and $47 million has been accrued in the financial statements as of September 30, 2006 and 2005, 

respectively. 

No amounts have been accrued in the financial statements for claims where the amount is uncertain or where the 

probability of judgment against USDA is remote. The Department’s potential liability for claims where a judgment 

against the Department is reasonably possible ranges from $2,890 million to $2,900 million as of September 30, 2006, 

compared to $114 million to $134 million as of September 30, 2005. This estimate increased in fiscal 2006 because of 

pending class litigation. 
FINANCIAL STATEMENTS, NOTES, SUPP LEMENTAL AND OTHER ACCOMPANYING 

INFORMATION

USDA

222 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

In fiscal 2006 and 2005, CRP annual rental payments are estimated to be $2,000 million. Commitments to extend loan 

guarantees are estimated to be $2,300 million and $2,000 million in fiscal 2006 and 2005, respectively. 

NOTE 18. EARMARKED FUNDS

Earmarked funds are financed by specifically identified revenues, often supplemented by other financing sources, which 

remain available over time. These specifically identified revenues and other financing sources are required by statute to 

be used for designated activities, benefits or purposes and must be accounted for separately from the Government’s 

general revenues. The implementation of SFFAS 27 in FY 2006 supersedes the dedicated collections provisions in 

SFFAS 7 for earmarked funds. These funds were reported as dedicated collections in FY 2005. 

Financial information for all significant earmarked funds follows the descriptions of each fund’s purpose shown below. 

Risk Management Agency 

Federal Crop Insurance Corporation Fund (FCIC) 

Resources for the FCIC Fund includes funds collected from the public for insurance premiums and other insurance 

related fees that are used with appropriations from Congress and unobligated balances from previous years to fund the 

Federal Crop Insurance Program. Funds are available under 7 U.S.C. 1501-1519. 

Agricultural Marketing Service 

Funds for Strengthening Markets, Income, and Supply 

This fund is used to purchase commodities for schools and elderly feeding programs, to provide goods and other 

necessities in emergencies and disasters, and to purchase agricultural commodities to stabilize markets. The fund is 

permanently financed by statutory transfer of an amount equal to 30 percent of customs receipts collected during each 

calendar year is automatically appropriated for expanding outlets for perishable, non-price supported commodities. An 

amount equal to 30 percent of receipts collected on fishery products is transferred to the Food and Nutrition Service and 

is used to purchase commodities under section 6 of the National School Lunch Act and other authorities specified in the 

child nutrition appropriation. Funds are available under section 32 of the Act of August 24, 1935, as amended (7 U.S.C. 

612c). 

Expenses and Refunds, Inspection and Grading of Farm Products 

The commodity grading programs provide grading, examination, and certification services for a wide variety of fresh 

and processed food commodities using federally approved grade standards and purchase specifications. This fund is 

financed by the collection of fees charged to producers of various food commodities who request, on a voluntary basis, 

inspection and grading of agricultural food commodities. This program is authorized by the Agricultural Marketing Act 

of 1946 (7 U.S.C. 1621-1627). 

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 
FINANCIAL STATEMENTS, NOTES, SUPP LEMENTAL AND OTHER ACCOMPANYING 

INFORMATION

USDA

F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 223 

the costs of administering the Perishable Agricultural Commodities and Produce Agency Act (7 U.S.C. 491-497, 499a499s). 

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, not-for-profit 

organizations, and local hunting and fishing clubs. The governing authorities are the Act of June 30, 1914 (16 U.S.C. 

498), and the Knutson-Vandenberg Act. 

Land Acquisition 

Each fiscal year this fund receives a transfer of recreation user fees from the Department of the Interior’s Land and 

Water Conservation Fund, to be used for the acquisition of land or waters, or interest therein, including administrative 

expenses, to carry out the provisions of the Land and Water Conservation Fund Act of 1965, as amended (16 U.S.C. 

460l-4-11), pertaining to the preservation of watersheds. The Land Acquisition program is authorized by the Interior 

and Related Agencies Appropriations Act of December 30, 1982 (96 Stat. 1983, Public Law 97-394). 

Payments to States, National Forest Fund 

The Payments to States, National Forest Fund receives receipts from the National Forest Fund. These monies are 

generated from the sale of goods and services at the national forests. Annually, 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. 
FINANCIAL STATEMENTS, NOTES, SUPP LEMENTAL AND OTHER ACCOMPANYING 

INFORMATION

USDA

224 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

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 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 Highway Trust Fund 

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 
FINANCIAL STATEMENTS, NOTES, SUPP LEMENTAL AND OTHER ACCOMPANYING 

INFORMATION

USDA

F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 225 

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. 

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. 
FINANCIAL STATEMENTS, NOTES, SUPP LEMENTAL AND OTHER ACCOMPANYING 

INFORMATION

USDA

226 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

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. 

Acquisition of Lands to Complete Land Exchanges 

As authorized by 7 statutes , this program is funded annually by congressional appropriation action, with forest revenues 

generated by the occupancy of public land or from the sale of natural resources other than minerals. All funds 

appropriated that remain unobligated at the end of the fiscal year are returned to the receipts of the affected national 

forests. 

Use these funds to purchase land and for related expenditures such as title search, escrow, recording, and personnel costs 

when the purchase is considered necessary to minimize soil erosion and flood damage. This appropriation is available 

for land acquisition within the exterior boundaries of the national forests. 

Southern Nevada Public Lands Management 

Department of Interior’s Treasury symbol 14X5232 “Southern Nevada Public Lands Management, Bureau of Land 

Management” (BLM) was established by the Department of Interior as authorized by 112 Stat. 2345. The Act 

authorizes BLM to sell parcels of public land and retain the sale proceeds for various work projects related to improving 

and managing the public lands in Southern Nevada. Forest Service has participated in these work projects for several 

years, using many reimbursable agreements each year to conduct business with the other Federal agencies involved. FY 

2005 was the first year that DOI/BLM is providing this financing with a transfer fund. 

Operation and Maintenance of Forest Service Quarters 

As authorized by 5 U.S.C. 5911, this appropriation is funded from quarters rental income from Forest Service owned 

and operated employee housing. The funds are available without further appropriation for maintenance of the residences 

including any Government-owned property, appliances, and utility systems integral to the facility and common to the 

residential community.. The fund does not cover betterments, additions, or replacement construction and new 

construction. This appropriation should not be used for complete or partial replacement of structures when lost by fire, 

flood, wind, earthquake, other disaster, or acts of God. 
FINANCIAL STATEMENTS, NOTES, SUPP LEMENTAL AND OTHER ACCOMPANYING 

INFORMATION

USDA

F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 227 

Cooperative State Research, Education and Extension Service 

Native American Institutions Endowment Fund 

The Native American Institutions Endowment Fund is authorized by Public Law 103-382 (7 U.S.C. 301 note). This 

program provides for an endowment for the 1994 land-grant institutions (31 Tribally controlled colleges) to strengthen 

the infrastructure of these institutions and develop Indian expertise for the food and agricultural sciences and businesses 

and their own communities. At the termination of each fiscal year, the Secretary shall withdraw the income from the 

endowment fund for the fiscal year, and after making adjustments for the cost of administering the fund, distribute the 

adjusted income on a formula basis to the 1994 land-grant institutions. 

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 (nonfood-nonfeed) 

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. 
FINANCIAL STATEMENTS, NOTES, SUPPLEMENT AL AND OTHER ACCOMPANYING I

USDA

228 F Y 2006

P ERFORMANCE AND 

A CCOUNTABILITY 

R EPORT

Earmarked Funds

RMA AMS AMS AMS APHIS APHIS FS FS FS 

Balance Sheet As of September 30, 2006

Federal Crop 

Insurance 

Corporation Fund

Funds for 

Strengthening 

Markets, Income, 

and Supply

Expenses and 

Refunds, 

Inspection and 

Grading of Farm 

Products

Perishable 

Agricultural 

Commodities Act

Agricultural 

Quarantine 

Inspection User 

Fee Account

Miscellaneous 

Contributed 

Funds Cooperative Work Land Acquisition

Payments 

States, Nat

Forests F

ASSETS 12X4085 12X5209 12X8015 12X5070 12X5161 12X8226 12X8028 12X5004 12X520Fund Balance with Treasury 1,431 $ 202 $ 58 $ 19 $ 122 $ 14 $ 412 $ 40 $ 

$ 

Investments - - - - - - - - 

 

Other Assets 1,714 483 19 - 10 1 22 50 

 

Total Assets 3,145 685 77 19 132 15 434 90 

 

Other Liabilities 3,927 3 61 - 9 - 57 1 

 

Total Liabilities 3,927 3 61 - 9 - 57 1 

 

Unexpended Appropriations 510 302 - - 130 - - - 

 

Cumulative Results of Operations (1,292) 380 16 19 (7) 15 377 89 

 

Total Liabilities and Net Position 3,145 685 77 19 132 15 434 90 

 

Statement of Net Cost For the PeriodEnded September 30, 2006Gross program costs 4,584 1,087 171 10 162 16 173 83 

 

Less Earned Revenues 1,100 1 132 7 424 7 116 1 

 

Net Cost of Operations 3,484 1,086 39 3 (262) 9 57 82 

 

Statement of Changes in Net PositionFor the period Ended September 30, 2006Net Position Beginning of Period (529) 591 25 22 102 23 594 134 

 

Non-Exchange Revenue 3,230 1,177 (3) - (240) - (159) 37 

 

Other Financing Sources - - 31 - - - - - 

 

Net Cost of Operations (3,484) (1,086) (39) (3) 262 (9) (57) (82) 

 

Change in net Position (254) 91 (11) (3) 22 (9) (216) (45) 

 

Net Position End of Period (783) $ 682 $ 14 $ 19 $ 124 $ 14 $ 378 $ 89 $ 

$ 
FINANCIAL STATEMENTS, NOTES, SUPPLEMENT AL AND OTHER ACCOMPANYING I

F Y 2006

P ERFORMANCE AND 

A CCOUNT

Earmarked Funds

FS FS FS FS FS FS FS FS FS 

Balance Sheet As of September 30, 2006

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 Highway 

Trust Fund

Recreation Fee 

Demonstration 

Program

Roads and Trails 

for States, 

National Forest 

Fund

National Forest 

Fund Receipts

Reforesta

Trust Fu

ASSETS 125072&12X5072 12X5202 12X5206 12X5367 1269X8083 12X5268 12X5203 125008 12X804Fund Balance with Treasury 13 $ 64 $ 55 $ 85 $ 11 $ 132 $ 30 $ 3 $ 

$ 

Investments - - - - - - - - 

 

Other Assets - 2 1 2 16 7 18 7 

 

Total Assets 13 66 56 87 27 139 48 10 

 

Other Liabilities - - - 3 1 4 3 - 

 

Total Liabilities - - - 3 1 4 3 - 

 

Unexpended Appropriations - - - - - - - - 

 

Cumulative Results of Operations 13 66 56 84 26 135 45 10 

 

Total Liabilities and Net Position 13 66 56 87 27 139 48 10 

 

Statement of Net Cost For the PeriodEnded September 30, 2006Gross program costs - 1 13 47 12 50 12 - 

 

Less Earned Revenues 12 7 12 - - 54 15 6 

 

Net Cost of Operations (12) (6) 1 47 12 (4) (3) (6) 

 

Statement of Changes in Net PositionFor the period Ended September 30, 2006Net Position Beginning of Period 1 70 58 74 61 131 42 2 

 

Non-Exchange Revenue - (10) - 57 (22) - - 1 

 

Other Financing Sources - - - - - - - - 

 

Net Cost of Operations 12 6 (1) (47) (12) 4 3 6 

 

Change in net Position 12 (4) (1) 10 (34) 4 3 7 

 

Net Position End of Period 13 $ 66 $ 57 $ 84 $ 27 $ 135 $ 45 $ 9 $ 

$ 
FINANCIAL STATEMENTS, NOTES, SUPPLEMENT AL AND OTHER ACCOMPANYING I

USDA

230 F Y 2006

P ERFORMANCE AND 

A CCOUNTABILITY 

R EPORT

Earmarked Funds

FS FS FS FS CSREES ARS AARC

Balance Sheet As of September 30, 2006

Timber Sales 

Pipeline 

Restoration Fund

Acquisition of 

Lands to 

Complete Land 

Exchanges

Southern Nevada 

Public Land 

Management

Operation and 

Maintenance of 

Quarters

Native American 

Institutions 

Endowment Fund

Miscellaneous 

Contributed 

Funds

Alternative 

Agricultural 

Research and 

Commercialization 

Revolving Fund Other 

ASSETS 12X5264 12X5216 1214X5232 12X5219 12X5205 12X8214 12X4144Fund Balance with Treasury 10 $ 35 $ 34 $ 10 $ 8 $ 19 $ 1 $ 

$ 

Investments - - - - 76 - 3 

 

Other Assets 2 11 - - - 1 - 

 

Total Assets 12 46 34 10 84 20 4 

 

Other Liabilities 1 1 2 2 - 1 - 

 

Total Liabilities 1 1 2 2 - 1 - 

 

Unexpended Appropriations - - - - 24 - (1) 

 

Cumulative Results of Operations 11 45 32 8 60 19 5 

 

Total Liabilities and Net Position 12 46 34 10 84 20 4 

 

Statement of Net Cost For the PeriodEnded September 30, 2006Gross program costs 6 3 13 7 2 17 12 

 

Less Earned Revenues 4 25 - 8 3 17 1 

 

Net Cost of Operations 2 (22) 13 (1) (1) - 11 

 

Statement of Changes in Net PositionFor the period Ended September 30, 2006Net Position Beginning of Period 14 13 - 7 70 19 15 

 

Non-Exchange Revenue - 10 45 - 13 - - 

 

Other Financing Sources - - - - - - - 

 

Net Cost of Operations (2) 22 (13) 1 1 - (11) 

 

Change in net Position (2) 32 32 1 14 - (11) 

 

Net Position End of Period 12 $ 45 $ 32 $ 8 $ 84 $ 19 $ 4 $ 

$ 
FINANCIAL STATEMENTS, NOTES, SUPPLEMENT AL AND OTHER ACCOMPANYING I

F Y 2006

P ERFORMANCE AND 

A CCOUNT

Dedicated Collections

RMA AMS AMS AMS APHIS APHIS FS FS FS 

Balance Sheet As of September 30, 2005

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, Nation

Forests Fun

ASSETS 12X4085 12X5209 12X8015 12X5070 12X5161 12X8226 12X8028 12X5004 12X5201 Fund Balance with Treasury 1,537 $ 350 $ 44 $ 20 $ 90 $ 13 $ 624 $ 67 $ 

$ 

Investments - - - - - - - - 

 

Other Assets 1,433 245 40 3 13 10 19 68 

 

Total Assets 2,970 595 84 23 103 23 643 135 

 

Other Liabilities 3,499 4 59 1 1 - 49 1 

 

Total Liabilities 3,499 4 59 1 1 - 49 1 

 

Unexpended Appropriations 465 302 6 - 130 - - (1) 

 

Cumulative Results of Operations (994) 289 19 22 (28) 23 594 135 

 

Total Liabilities and Net Position 2,970 595 84 23 103 23 643 135 

 

Statement of Net Cost For the PeriodEnded September 30, 2005Gross program costs 3,637 1,090 164 11 129 16 109 92 

 

Less Earned Revenues 1,019 - 126 7 344 24 112 20 

 

Net Cost of Operations 2,618 1,090 38 4 (215) (8) (3) 72 

 

Statement of Changes in Net PositionFor the period Ended September 30, 2005Net Position Beginning of Period (205) 933 34 27 95 16 442 145 

 

Non-Exchange Revenue 2,291 749 - - (208) - 149 61 

 

Other Financing Sources 2 - 28 - - - - - 

 

Net Cost of Operations (2,618) (1,090) (38) (4) 215 8 3 (72) 

 

Change in net Position (325) (341) (10) (4) 7 8 152 (11) 

 

Net Position End of Period (530) $ 592 $ 24 $ 23 $ 102 $ 24 $ 594 $ 134 $ 

$ 
FINANCIAL STATEMENTS, NOTES, SUPPLEMENT AL AND OTHER ACCOMPANYING I

USDA

232 F Y 2006

P ERFORMANCE AND 

A CCOUNTABILITY 

R EPORT

Dedicated Collections

FS FS FS FS FS FS FS FS 

Balance Sheet As of September 30, 2005

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

National Forest 

Fund Receipts

Refo

Tru

ASSETS 125072&12X5072 12X5202 12X5206 12X5367 1269X8083 12X5268 12X5203 125008 12Fund Balance with Treasury 13 $ 68 $ 57 $ 80 $ 24 $ 129 $ 29 $ 21 $ 

$ 

Investments - - - - - - - - 

 

Other Assets - 2 - - 38 6 16 7 

 

Total Assets 13 70 57 80 62 135 45 28 

 

Other Liabilities 12 - - 5 1 4 3 25 

 

Total Liabilities 12 - - 5 1 4 3 25 

 

Unexpended Appropriations - - - - - - (1) - 

 

Cumulative Results of Operations 1 70 57 75 61 131 43 3 

 

Total Liabilities and Net Position 13 70 57 80 62 135 45 28 

 

Statement of Net Cost For the PeriodEnded September 30, 2005Gross program costs - - 12 35 6 44 12 - 

 

Less Earned Revenues - 7 13 - - 50 16 3 

 

Net Cost of Operations - (7) (1) 35 6 (6) (4) (3) 

 

Statement of Changes in Net PositionFor the period Ended September 30, 2005Net Position Beginning of Period 81 63 56 52 52 44 38 (1) 

 

Non-Exchange Revenue (80) - - 57 16 81 - - 

 

Other Financing Sources - - - - - - - - 

 

Net Cost of Operations - 6 1 (35) (6) 6 4 3 

 

Change in net Position (80) 6 1 22 10 87 4 3 

 

Net Position End of Period 1 $ 69 $ 57 $ 74 $ 62 $ 131 $ 42 $ 2 $ 

$ 
FINANCIAL STATEMENTS, NOTES, SUPPLEMENT AL AND OTHER ACCOMPANYING I

F Y 2006

P ERFORMANCE AND 

A CCOUNT

Dedicated Collections

FS FS FS FS CSREES ARS AARC

Balance Sheet As of September 30, 2005

Timber Sales 

Pipeline 

Restoration Fund

Acquisition of 

Lands to 

Complete Land 

Exchanges

Southern Nevada 

Public Land 

Management

Operation and 

Maintenance of 

Quarters

Native American 

Institutions 

Endowment Fund

Miscellaneous 

Contributed 

Funds

Alternative 

Agricultural 

Research and 

Commercialization 

Revolving Fund 

ASSETS 12X5264 12X5216 1214X5232 12X5219 12X5205 12X8214 12X4144Fund Balance with Treasury 12 $ 4 $ - $ 9 $ 7 $ 18 $ - $ 

$ 

Investments - - - - 63 - 15 

 

Other Assets 2 9 - - - 2 - 

 

Total Assets 14 13 - 9 70 20 15 

 

Other Liabilities - - - 3 - - - 

 

Total Liabilities - - - 3 - - - 

 

Unexpended Appropriations - - - - 12 - (1) 

 

Cumulative Results of Operations 14 13 - 6 58 20 16 

 

Total Liabilities and Net Position 14 13 - 9 70 20 15 

 

Statement of Net Cost For the PeriodEnded September 30, 2005Gross program costs 5 2 - 8 2 19 - 

 

Less Earned Revenues 6 8 - 7 3 16 - 

 

Net Cost of Operations (1) (6) - 1 (1) 3 - 

 

Statement of Changes in Net PositionFor the period Ended September 30, 2005Net Position Beginning of Period 13 6 - 7 58 23 15 

 

Non-Exchange Revenue - 1 - - 12 - - 

 

Other Financing Sources - - - - - - - 

 

Net Cost of Operations 1 6 - - 1 (4) - 

 

Change in net Position 1 7 - - 13 (4) - 

 

Net Position End of Period 14 $ 13 $ - $ 7 $ 71 $ 19 $ 15 $ 

$ 
FINANCIAL STATEMENTS, NOTES, SUPPLEMENT AL AND OTHER ACCOMPANYING I

USDA

234 F Y 2006

P ERFORMANCE AND 

A CCOUNTABILITY 

R EPORT

NOTE 19.

SUBORGANIZATION 

PROGRAM 

COSTS/PROGRAM 

COSTS BY 

SEGMENT

FY 2006

Intragovernmental With the Public Intragovernmental With the Public Intragov

Enhance International Competitiveness andthe Sustainability of Rural and Farm Economies:Gross Costs 901 $ 1,266 $ 1,801 $ 21,876 $ 

$ 

Less: Earned Revenue 314 378 246 4,749 

 

Net Cost 587 888 1,555 17,127 

 

Support Increased Economic Opportunities andImproved Quality of Life in Rural America:Gross Costs - - - - 

 

Less: Earned Revenue - - - - 

 

Net Cost - - - - 

 

Enhance Protection and Safety of the Nation'sAgriculture and Food Supply:Gross Costs - - - - 

 

Less: Earned Revenue - - - - 

 

Net Cost - - - - 

 

Improve the Nation's Nutrition and Health:Gross Costs - - - - 

 

Less: Earned Revenue - - - - 

 

Net Cost - - - - 

 

Protect and Enhance the Nation's Natural ResourceBase and Environment:Gross Costs - - 284 2,082 

 

Less: Earned Revenue - - - 35 

 

Net Cost - - 284 2,047 

 

Total Gross Costs 1,266 901 2,085 23,958 

 

Less: Total Earned Revenue 378 314 246 4,784 

 

Net Cost of Operations $ 888 587 $ 1,839 $ 19,174 $ 

$ 

FSA CCC 
FINANCIAL STATEMENTS, NOTES, SUPPLEMENT AL AND OTHER ACCOMPANYING I

F Y 2006

P ERFORMANCE AND 

A CCOUNT

FY 2006

Intragovernmental With the Public Intragovernmental With the Public Intragov

Enhance International Competitiveness andthe Sustainability of Rural and Farm Economies:Gross Costs 45 $ 4,626 $ - $ - $ 

$ 

Less: Earned Revenue - 1,100 - - 

 

Net Cost 45 3,526 - - 

 

Support Increased Economic Opportunities andImproved Quality of Life in Rural America:Gross Costs - - - - 

 

Less: Earned Revenue - - - - 

 

Net Cost - - - - 

 

Enhance Protection and Safety of the Nation'sAgriculture and Food Supply:Gross Costs - - - - 

 

Less: Earned Revenue - - - - 

 

Net Cost - - - - 

 

Improve the Nation's Nutrition and Health:Gross Costs - - 785 52,666 

 

Less: Earned Revenue - - 3 18 

 

Net Cost - - 782 52,648 

 

Protect and Enhance the Nation's Natural ResourceBase and Environment:Gross Costs - - - - 

 

Less: Earned Revenue - - - - 

 

Net Cost - - - - 

 

Total Gross Costs 4,626 45 785 52,666 

 

Less: Total Earned Revenue 1,100 - 3 18 

 

Net Cost of Operations $ 3,526 45 $ 782 $ 52,648 $ 

$ 

RMA FNS 
FINANCIAL STATEMENTS, NOTES, SUPPLEMENT AL AND OTHER ACCOMPANYING I

USDA

236 F Y 2006

P ERFORMANCE AND 

A CCOUNTABILITY 

R EPORT

FY 2006

Intragovernmental With the Public Intragovernmental With the Public Intragov

Enhance International Competitiveness andthe Sustainability of Rural and Farm Economies:Gross Costs 467 $ 929 $ - $ - $ 

$ 

Less: Earned Revenue 9 190 - - 

 

Net Cost 458 739 - - 

 

Support Increased Economic Opportunities andImproved Quality of Life in Rural America:Gross Costs - - - - 

 

Less: Earned Revenue - - - - 

 

Net Cost - - - - 

 

Enhance Protection and Safety of the Nation'sAgriculture and Food Supply:Gross Costs - - 271 1,483 

 

Less: Earned Revenue - - 400 471 

 

Net Cost - - (129) 1,012 

 

Improve the Nation's Nutrition and Health:Gross Costs - - - - 

 

Less: Earned Revenue - - - - 

 

Net Cost - - - - 

 

Protect and Enhance the Nation's Natural ResourceBase and Environment:Gross Costs - - - - 

 

Less: Earned Revenue - - - - 

 

Net Cost - - - - 

 

Total Gross Costs 929 467 271 1,483 

 

Less: Total Earned Revenue 190 9 400 471 

 

Net Cost of Operations $ 739 458 $ (129) $ 1,012 $ 

$ 

AMS APHIS 
FINANCIAL STATEMENTS, NOTES, SUPPLEMENT AL AND OTHER ACCOMPANYING I

F Y 2006

P ERFORMANCE AND 

A CCOUNT

FY 2006

Intragovernmental With the Public Intragovernmental With the Public Intragov

Enhance International Competitiveness andthe Sustainability of Rural and Farm Economies:Gross Costs - $ - $ - $ - $ 

$ 

Less: Earned Revenue - - - - 

 

Net Cost - - - - 

 

Support Increased Economic Opportunities andImproved Quality of Life in Rural America:Gross Costs - - - - 

 

Less: Earned Revenue - - - - 

 

Net Cost - - - - 

 

Enhance Protection and Safety of the Nation'sAgriculture and Food Supply:Gross Costs - - - - 

 

Less: Earned Revenue - - - - 

 

Net Cost - - - - 

 

Improve the Nation's Nutrition and Health:Gross Costs - - - - 

 

Less: Earned Revenue - - - - 

 

Net Cost - - - - 

 

Protect and Enhance the Nation's Natural ResourceBase and Environment:Gross Costs 1,106 5,831 540 2,472 

 

Less: Earned Revenue 386 649 119 (15) 

 

Net Cost 720 5,182 421 2,487 

 

Total Gross Costs 5,831 1,106 540 2,472 

 

Less: Total Earned Revenue 649 386 119 (15) 

 

Net Cost of Operations $ 5,182 720 $ 421 $ 2,487 $ 

$ 

FS NRCS 
FINANCIAL STATEMENTS, NOTES, SUPPLEMENT AL AND OTHER ACCOMPANYING I

USDA

238 F Y 2006

P ERFORMANCE AND 

A CCOUNTABILITY 

R EPORT

FY 2006

Intragovernmental With the Public Intragovernmental With the Public Intragov

Enhance International Competitiveness and the Sustainability of Rural and Farm Economies:Gross Costs 11 $ 371 $ 18 $ 32 $ 

$ 

Less: Earned Revenue 9 - 1 (1) 

 

Net Cost 2 371 17 33 

 

Support Increased Economic Opportunities andImproved Quality of Life in Rural America:Gross Costs 5 160 3 5 

 

Less: Earned Revenue 4 - - - 

 

Net Cost 1 160 3 5 

 

Enhance Protection and Safety of the Nation'sAgriculture and Food Supply:Gross Costs 8 268 2 3 

 

Less: Earned Revenue 7 - - - 

 

Net Cost 1 268 2 3 

 

Improve the Nation's Nutrition and Health:Gross Costs 4 123 4 7 

 

Less: Earned Revenue 3 - - - 

 

Net Cost 1 123 4 7 

 

Protect and Enhance the Nation's Natural ResourceBase and Environment:Gross Costs 6 189 4 7 

 

Less: Earned Revenue 5 - - - 

 

Net Cost 1 189 4 7 

 

Total Gross Costs 1,111 34 31 54 

 

Less: Total Earned Revenue - 28 1 (1) 

 

Net Cost of Operations $ 1,111 6 $ 30 $ 55 $ 

$ 

CSREES ERS 
FINANCIAL STATEMENTS, NOTES, SUPPLEMENT AL AND OTHER ACCOMPANYING I

F Y 2006

P ERFORMANCE AND 

A CCOUNT

FY 2006

Intragovernmental With the Public Intragovernmental With the Public Intragov

Enhance International Competitiveness andthe Sustainability of Rural and Farm Economies:Gross Costs - $ - $ 181 $ 302 $ 

$ 

Less: Earned Revenue - - 213 6 

 

Net Cost - - (32) 296 

 

Support Increased Economic Opportunities andImproved Quality of Life in Rural America:Gross Costs 3,133 3,709 58 94 

 

Less: Earned Revenue 348 3,632 69 1 

 

Net Cost 2,785 77 (11) 93 

 

Enhance Protection and Safety of the Nation'sAgriculture and Food Supply:Gross Costs - - 86 140 

 

Less: Earned Revenue - - 103 3 

 

Net Cost - - (17) 137 

 

Improve the Nation's Nutrition and Health:Gross Costs - - 49 79 

 

Less: Earned Revenue - - 57 1 

 

Net Cost - - (8) 78 

 

Protect and Enhance the Nation's Natural ResourceBase and Environment:Gross Costs - - 112 181 

 

Less: Earned Revenue - - 135 1 

 

Net Cost - - (23) 180 

 

Total Gross Costs 3,709 3,133 486 796 

 

Less: Total Earned Revenue 3,632 348 577 12 

 

Net Cost of Operations $ 77 2,785 $ (91) $ 784 $ 

$ 

RD DO 
FINANCIAL STATEMENTS, NOTES, SUPPLEMENT AL AND OTHER ACCOMPANYING I

USDA

240 F Y 2006

P ERFORMANCE AND 

A CCOUNTABILITY 

R EPORT

FY 2006 Intradepartmental

Eliminations GRAND TOTAL

Enhance International Competitiveness andthe Sustainability of Rural and Farm Economies:Gross Costs (2,008) $ 31,841 $ Less: Earned Revenue (412) 6,979Net Cost (1,596) 24,862Support Increased Economic Opportunities andImproved Quality of Life in Rural America:Gross Costs (156) 7,048Less: Earned Revenue (78) 3,980Net Cost (78) 3,068Enhance Protection and Safety of the Nation'sAgriculture and Food Supply:Gross Costs (197) 3,629Less: Earned Revenue (497) 649Net Cost 300 2,980Improve the Nation's Nutrition and Health:Gross Costs (747) 53,064Less: Earned Revenue (53) 36Net Cost (694) 53,028Protect and Enhance the Nation's Natural ResourceBase and Environment:Gross Costs (511) 12,592Less: Earned Revenue (231) 1,104Net Cost (280) 11,488Total Gross Costs 108,174 (3,619)Less: Total Earned Revenue 12,748 (1,271)Net Cost of Operations $ 95,426 (2,348) $ 
FINANCIAL STATEMENTS, NOTES, SUPPLEMENT AL AND OTHER ACCOMPANYING I

F Y 2006

P ERFORMANCE AND 

A CCOUNT

FY 2005

Intragovernmental With the Public Intragovernmental With the Public Intragov

Enhance International Competitiveness andthe Sustainability of Rural and Farm Economies:Gross Costs 848 $ 1,129 $ 1,683 $ 32,653 $ 

$ 

Less: Earned Revenue 260 418 129 13,102 

 

Net Cost 588 711 1,554 19,551 

 

Support Increased Economic Opportunities andImproved Quality of Life in Rural America:Gross Costs - - - - 

 

Less: Earned Revenue - - - - 

 

Net Cost - - - - 

 

Enhance Protection and Safety of the Nation'sAgriculture and Food Supply:Gross Costs - - - - 

 

Less: Earned Revenue - - - - 

 

Net Cost - - - - 

 

Improve the Nation's Nutrition and Health:Gross Costs - - - - 

 

Less: Earned Revenue - - - - 

 

Net Cost - - - - 

 

Protect and Enhance the Nation's Natural ResourceBase and Environment:Gross Costs - - 187 1,970 

 

Less: Earned Revenue - - 1 1 

 

Net Cost - - 186 1,969 

 

Total Gross Costs 1,129 848 1,870 34,623 

 

Less: Total Earned Revenue 418 260 130 13,103 

 

Net Cost of Operations $ 711 588 $ 1,740 $ 21,520 $ 

$ 

FSA CCC 
FINANCIAL STATEMENTS, NOTES, SUPPLEMENT AL AND OTHER ACCOMPANYING I

USDA

242 F Y 2006

P ERFORMANCE AND 

A CCOUNTABILITY 

R EPORT

FY 2005

Intragovernmental With the Public Intragovernmental With the Public Intragov

Enhance International Competitiveness andthe Sustainability of Rural and Farm Economies:Gross Costs 40 $ 3,678 $ - $ - $ 

$ 

Less: Earned Revenue - 1,019 - - 

 

Net Cost 40 2,659 - - 

 

Support Increased Economic Opportunities andImproved Quality of Life in Rural America:Gross Costs - - - - 

 

Less: Earned Revenue - - - - 

 

Net Cost - - - - 

 

Enhance Protection and Safety of the Nation'sAgriculture and Food Supply:Gross Costs - - - - 

 

Less: Earned Revenue - - - - 

 

Net Cost - - - - 

 

Improve the Nation's Nutrition and Health:Gross Costs - - 1,093 50,513 

 

Less: Earned Revenue - - 5 24 

 

Net Cost - - 1,088 50,489 

 

Protect and Enhance the Nation's Natural ResourceBase and Environment:Gross Costs - - - - 

 

Less: Earned Revenue - - - - 

 

Net 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 
FINANCIAL STATEMENTS, NOTES, SUPPLEMENT AL AND OTHER ACCOMPANYING I

F Y 2006

P ERFORMANCE AND 

A CCOUNT

FY 2005

Intragovernmental With the Public Intragovernmental With the Public Intragove

Enhance International Competitiveness andthe Sustainability of Rural and Farm Economies:Gross Costs 82 $ 1,325 $ - $ - $ 

$ 

Less: Earned Revenue 3 189 - - 

 

Net Cost 79 1,136 - - 

 

Support Increased Economic Opportunities andImproved Quality of Life in Rural America:Gross Costs - - - - 

 

Less: Earned Revenue - - - - 

 

Net Cost - - - - 

 

Enhance Protection and Safety of the Nation'sAgriculture and Food Supply:Gross Costs - - 252 1,063 

 

Less: Earned Revenue - - 20 462 

 

Net Cost - - 232 601 

 

Improve the Nation's Nutrition and Health:Gross Costs - - - - 

 

Less: Earned Revenue - - - - 

 

Net Cost - - - - 

 

Protect and Enhance the Nation's Natural ResourceBase and Environment:Gross Costs - - - - 

 

Less: Earned Revenue - - - - 

 

Net 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 
FINANCIAL STATEMENTS, NOTES, SUPPLEMENT AL AND OTHER ACCOMPANYING I

USDA

244 F Y 2006

P ERFORMANCE AND 

A CCOUNTABILITY 

R EPORT

FY 2005

Intragovernmental With the Public Intragovernmental With the Public Intragove

Enhance International Competitiveness andthe Sustainability of Rural and Farm Economies:Gross Costs - $ - $ - $ 5 $ 

$ 

Less: Earned Revenue - - (1) - 

 

Net Cost - - 1 5 

 

Support Increased Economic Opportunities andImproved Quality of Life in Rural America:Gross Costs - - 23 108 

 

Less: Earned Revenue - - 1 3 

 

Net Cost - - 22 105 

 

Enhance Protection and Safety of the Nation'sAgriculture and Food Supply:Gross Costs - - - - 

 

Less: Earned Revenue - - - - 

 

Net Cost - - - - 

 

Improve the Nation's Nutrition and Health:Gross Costs - - - - 

 

Less: Earned Revenue - - - - 

 

Net Cost - - - - 

 

Protect and Enhance the Nation's Natural ResourceBase and Environment:Gross Costs 929 4,902 433 1,953 

 

Less: Earned Revenue 265 524 80 45 

 

Net 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 
FINANCIAL STATEMENTS, NOTES, SUPPLEMENT AL AND OTHER ACCOMPANYING I

F Y 2006

P ERFORMANCE AND 

A CCOUNT

FY 2005

Intragovernmental With the Public Intragovernmental With the Public Intragover

Enhance International Competitiveness andthe Sustainability of Rural and Farm Economies:Gross Costs 10 $ 360 $ 14 $ 26 $ 

$ 

Less: Earned Revenue 8 - 1 - 

 

Net Cost 2 360 13 26 

 

Support Increased Economic Opportunities andImproved Quality of Life in Rural America:Gross Costs 3 167 3 6 

 

Less: Earned Revenue 5 - - - 

 

Net Cost (2) 167 3 6 

 

Enhance Protection and Safety of the Nation'sAgriculture and Food Supply:Gross Costs 9 275 1 3 

 

Less: Earned Revenue 6 - - - 

 

Net Cost 3 275 1 3 

 

Improve the Nation's Nutrition and Health:Gross Costs 2 131 6 11 

 

Less: Earned Revenue 4 - - - 

 

Net Cost (2) 131 6 11 

 

Protect and Enhance the Nation's Natural ResourceBase and Environment:Gross Costs 5 201 4 8 

 

Less: Earned Revenue 4 - - - 

 

Net 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 
FINANCIAL STATEMENTS, NOTES, SUPPLEMENT AL AND OTHER ACCOMPANYING I

USDA

246 F Y 2006

P ERFORMANCE AND 

A CCOUNTABILITY 

R EPORT

FY 2005

Intragovernmental With the Public Intragovernmental With the Public Intragover

Enhance International Competitiveness andthe Sustainability of Rural and Farm Economies:Gross Costs - $ - $ 125 $ 271 $ 

$ 

Less: Earned Revenue - - 191 5 

 

Net Cost - - (66) 266 

 

Support Increased Economic Opportunities andImproved Quality of Life in Rural America:Gross Costs 3,314 1,730 49 106 

 

Less: Earned Revenue 416 3,920 74 2 

 

Net Cost 2,898 (2,190) (25) 104 

 

Enhance Protection and Safety of the Nation'sAgriculture and Food Supply:Gross Costs - - 60 132 

 

Less: Earned Revenue - - 92 2 

 

Net Cost - - (32) 130 

 

Improve the Nation's Nutrition and Health:Gross Costs - - 35 77 

 

Less: Earned Revenue - - 54 1 

 

Net Cost - - (19) 76 

 

Protect and Enhance the Nation's Natural ResourceBase and Environment:Gross Costs - - 75 168 

 

Less: Earned Revenue - - 118 3 

 

Net Cost - - (43) 165 

 

Total Gross Costs 1,730 3,314 344 754 

 

Less: Total Earned Revenue 3,920 416 529 13 

 

Net Cost of Operations $ (2,190) 2,898 $ (185) $ 741 $ 

$ 

RD DO 
FINANCIAL STATEMENTS, NOTES, SUPPLEMENT AL AND OTHER ACCOMPANYING I

F Y 2006

P ERFORMANCE AND 

A CCOUNT

FY 2005 Intradepartmental

Eliminations GRAND TOTAL

Enhance International Competitiveness andthe Sustainability of Rural and Farm Economies:Gross Costs (1,356) $ 41,909 $ 

Less: Earned Revenue (348) 15,136

Net Cost (1,008) 26,773

Support Increased Economic Opportunities andImproved Quality of Life in Rural America:Gross Costs (171) 5,358

Less: Earned Revenue (77) 4,344

Net Cost (94) 1,014

Enhance Protection and Safety of the Nation'sAgriculture and Food Supply:Gross Costs (181) 3,071

Less: Earned Revenue (100) 630

Net Cost (81) 2,441

Improve the Nation's Nutrition and Health:Gross Costs (940) 51,033

Less: Earned Revenue (48) 46

Net Cost (892) 50,987

Protect and Enhance the Nation's Natural ResourceBase and Environment:Gross Costs (430) 10,686

Less: Earned Revenue (169) 888

Net Cost (261) 9,798

Total Gross Costs 112,057 (3,078)

Less: Total Earned Revenue 21,044 (742)

Net Cost of Operations $ 91,013 (2,336) $ 
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NOTE 20. COST OF STEWARDSHIP PP&E

The acquisition cost of stewardship land in FY 2006 and FY 2005 was $291 million and $246 million, respectively. 

NOTE 21. APPORTIONMENT CATEGORIES OF OBLIGATIONS INCURRED

FY 2006

Direct Reimbursable Total

Apportionment by Fiscal Quarter 70,503 $ 1,336 $ 71,839 $ 

Apportionment for Special Activities 30,857 41,166 72,023 

Exempt from Apportionment 1,535 61 1,596 

Total Obligations Incurred 102,895 $ 42,563 $ 145,458 $ 

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 $ 

NOTE 22. AVAILABLE BORROWING AUTHORITY, END OF PERIOD

Available borrowing authority at September 30, 2006 and 2005 was $29,700 million and $29,073 million, respectively. 

NOTE 23. TERMS OF BORROWING AUTHORITY USED

The Secretary of Agriculture has the authority to make and issue notes to the Secretary of Treasury for the purpose of 

discharging obligations for RD’s insurance funds and CCC’s nonreimbursed realized losses and debt related to foreign 

assistance programs. The permanent indefinite borrowing authority includes both interest bearing and non–interest 

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 
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weighted average interest rates for the cohort, to which the borrowings are associated. Interest is earned on the daily 

balance of uninvested funds in the credit reform financing funds maintained at Treasury. The interest income is used to 

reduce interest expense on the underlying borrowings. 

USDA has authority to borrow from the Federal Financing Bank (FFB) 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 24. ADJUSTMENTS TO BEGINNING BALANCE OF BUDGETARY RESOURCES

Obligated Unobligated Obligated Unobligated

Beginning balances 44,757 $ 25,998 $ 38,146 $ 25,081 $ 

Adjustments - - - - 

Beginning balances, as adjusted 44,757 $ 25,998 $ 38,146 $ 25,081 $ 

FY 2006 FY 2005

NOTE 25. PERMANENT INDEFINITE APPROPRIATIONS

USDA has permanent indefinite appropriations available to fund 1) subsidy costs incurred under credit reform programs, 

2) certain costs of the crop insurance program, and 3) certain costs associated with FS programs. 

The permanent indefinite appropriations for credit reform are mainly available to finance any disbursements incurred 

under the liquidating accounts. These appropriations become available pursuant to standing provisions of law without 

further action by Congress after transmittal of the Budget for the year involved. They are treated as permanent the first 

year they become available, as well as in succeeding years. 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. 
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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 26. LEGAL ARRANGEMENTS AFFECTING USE OF UNOBLIGATED BALANCES

Unobligated budget authority is the difference between the obligated balance and the total unexpended balance. It 

represents that portion of the unexpended balance unencumbered by recorded obligations. Appropriations are provided 

on an annual, multi-year, and no-year basis. An appropriation expires on the last day of its period of availability and is 

no longer available for new obligations. Unobligated balances retain their fiscal-year identity in an expired account for 

an additional five fiscal years. The unobligated balance remains available to make legitimate obligation adjustments, i.e., 

to record previously unrecorded obligations and to make upward adjustments in previously underestimated obligations 

for five years. At the end of the fifth year, the authority is canceled. Thereafter, the authority is not available for any 

purpose. 

Any information about legal arrangements affecting the use of the unobligated balance of budget authority is specifically 

stated by program and fiscal year in the appropriation language or in the alternative provisions section at the end of the 

appropriations act. 

NOTE 27. DIFFERENCES BETWEEN THE STATEMENT OF BUDGETARY RESOURCES AND THE 

BUDGET OF THE UNITED STATES GOVERNMENT

The differences between the fiscal 2005 Statement of Budgetary Resources and the fiscal 2005 actual numbers presented 

in the fiscal 2007 Budget of the United States Government (Budget) are summarized below. 

The Budget excludes expired accounts that are no longer available for new obligations. 

Adjustments were made subsequent to the Budget submission as follows: 

Forest Service – A Treasury symbol that was established and utilized for Fire Transfer Payback and included in the 

President’s Budget should not have been treated as an offsetting receipt. 

CCC – Beginning balance difference resulting primarily from the accounting for cohorts in the President’s Budget and 

FACTS ll for Budgetary Resources and Obligations incurred. In addition the difference in the Outlays are as a result of a 

timing difference of a Parent-child relationship with another governmental agency. 

Unavailable collections for the Native American Institution Endowment Fund were included as budgetary resources in 

the Statement of Budgetary Resources. 
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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 2006 Statement of Budgetary Resources and the fiscal 2006 actual numbers presented 

in the fiscal 2008 Budget cannot be performed as the fiscal 2008 Budget is not yet available. The fiscal 2008 Budget is 

expected to be published in February 2007 and will be available from the Government Printing Office. 

FY 2005

Budgetary 

Resources

Obligations 

incurred

Distributed 

offsetting 

receipts Net Outlays

Combined Statement of Budgetary Resources $ 166,833 $ 140,836 $ 2,167 $ 89,799

Reconciling items:

 Expired accounts (9,479) (4,060) - - 

 Adjustment - Forest Service - - (168) 168 

 Adjustment- CCC 184 184 (47) - 

 Native American Institutions (15) (1) - - 

 Milk Market Orders Fund 49 49 (2) - 

 Other (4) 9 1 (16) 

Budget of the United States Government $ 137,017 157,568 $ 2,336 $ 89,566 $ 

NOTE 28. UNDELIVERED ORDERS AT THE END OF THE PERIOD

Budgetary resources obligated for undelivered orders as of September 30, 2006 and 2005 was $35,204 million and 

$34,698 million, respectively. 
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NOTE 29. 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. 

FY 2006 FY 2005

Current year liabilities not covered by budgetary resources, 10,260 $ 11,581 $ 

as disclosed in Note 12

Prior year liabilities not covered by budgetary resources (11,581) (3,697) 

Increase (Decrease) in liabilities not covered by budgetary resources (1,321) 7,884 

Upward/Downward Reestimates of Credit Subsidy Expense 650 (1,853) 

Increase in Exchange Revenue Receivable from the Public (377) (7,791) 

Other (428) 1,494 

Components requiring or generating resources in future periods,

as reported on the Statement of Financing 446 $ (2,188) $ 

NOTE 30. 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 Department of Interior for watershed improvement 

projects and oil and gas use authorizations; 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; the Department of Interior for state and private forestry; 

the Department of Transportation for capital improvement and maintenance; and the Department of Defense for state and 

private forestry. 
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NOTE 31. INCIDENTAL CUSTODIAL COLLECTIONS

Custodial collections represent National Forest Fund receipts from the sale of timber and other forest products, 

miscellaneous general fund receipts such as collections on accounts receivable related to canceled year appropriations, 

civil monetary penalties and interest, and commercial fines and penalties. Custodial collection activities are considered 

immaterial and incidental to the mission of the Department. 

Revenue Activity: FY 2006 FY 2005

Sources of Collections:

Miscellaneous $ 64 65 $ 

Total Cash Collections 64 65 

Accrual Adjustments (7) (11) 

Total Custodial Revenue 54 57 

Disposition of Collections:

Transferred to Others:

Treasury (8) (46) 

States and Counties (7) - 

( Increase )/Decrease in Amounts Yet to be Transferred (8) (42) 

Net Custodial Activity $ - - $ 
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Required Supplementary Stewardship Information 

STEWARDSHIP INVESTMENTS

Stewardship investments are substantial investments made by the Federal Government for the benefit of the nation but 

are not physical assets owned by the Federal Government. When incurred, they are treated as expenses in determining 

the net cost of operations. However, these items merit special treatment so that users of Federal financial reports know 

the extent of investments that are made for long-term benefit. Such investments are measured in terms of expenses 

incurred for non-federal physical property, human capital, and research and development. 

Stewardship Investments (in millions)

FY 2006 FY 2005 FY 2004 FY 2003 FY 2002

Expense Expense Expense Expense Expense

Non-Federal Physical Property:

Food and Nutrition Service

Food Stamp Program 21 $ 22 $ 36 $ 39 $ - $ 

Special Supplemental Nutrition Program 12 17 8 16 - 

Cooperative State Research, Education, and Extension Service

Extension 1890 Facilities Program 17 17 15 15 14 

Total Non-Federal Property $ 56 50 $ 59 $ 70 $ 14 $ 

Human Capital:

Cooperative State Research, Education, and Extension Service

Higher Education and Extension Programs 525 $ 507 $ 502 $ 511 $ 532 $ 

Food and Nutrition Service

Food Stamp Program 66 49 75 99 - 

Forest Service

Job Corps Program 110 161 106 118 104 

Agricultural Research Service

National Agricultural Library 22 21 21 21 20 

Risk Management Agency

Risk Management Education 10 10 7 4 - 

Total Human Capital $ 748 733 $ 711 $ 753 $ 656 $ 

Research and Development:

Agricultural Research Service

Plant Sciences - $ - $ - $ 394 $ 384 $ 

Commodity Conversion and Delivery - - - 185 182 

Animal Sciences - - - 194 102 

Soil, Water, and Air Sciences - - - 110 100 

Human Nutrition 85 84 83 78 80 

Integration of Agricultural Systems - - - 43 40 

Collaborative Research Program 7 6 5 6 11 

Product Quality/Value Added 107 105 104 - 

Livestock Production 85 84 82 - - 

Crop Production 201 197 194 - - 

Food Safety 105 103 96 - - 

Livestock Protection 90 78 64 - - 

Crop Protection 199 193 183 - - 

Environmental Stewardship 223 219 216 - - 

Homeland Security - - 21 - - 

Cooperative State Research, Education, and Extension Service

Land-grant University System 661 645 610 601 542 

Forest Service 318 295 312 233 227 

Economic Research Service 

Economic and Social Science 75 74 71 69 67 

National Agricultural Statistics Service 

Statistical 5 5 5 5 5 

Total Research and Development $ 2,088 2,161 $ 2,046 $ 1,918 $ 1,740 $ 
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Non-Federal Physical Property 

Food and Nutrition Service 

FNS’ non-Federal physical property consists of computer systems and other equipment obtained by State and local 

governments for the purpose of administering the Food Stamp Program. The total Food Stamp Program Expense for 

ADP Equipment & Systems has been reported as of the date of FNS’ financial statements. FNS’ non-Federal physical 

property also consists of computer systems and other equipment obtained by the State and local governments for the 

purpose of administering the Special Supplemental Nutrition Program for Women, Infants and Children. 

Cooperative State Research, Education and Extension Service 

The Extension 1890 facilities program supports the renovation of existing buildings and the construction of new 

facilities that permit faculty, students, and communities to benefit fully from the partnership between USDA and the 

historically African-American land-grant universities. 

Human Capital 

Cooperative State Research, Education and Extension Service 

The Higher Education programs include graduate fellowship grants, competitive challenge grants, Secondary/2-year 

Post Secondary grants, Hispanic serving institutions education grants, a multicultural scholars program, a Native 

American institutions program, a Native American institutions endowment fund, an Alaska Native Serving and Native 

Hawaiian Serving institutions program, a resident instruction grant program for insular areas, and a capacity building 

program at the 1890 institutions. These programs enable universities to broaden their curricula, increase faculty 

development and student research projects, and increase the number of new scholars recruited in the food and agriculture 

sciences. CSREES also supports extension-related work at 1862 and 1890 land-grant institutions throughout the country 

through formula and competitive programs. CSREES supported the Outreach and Assistance for Disadvantaged Farmers 

Program for the first time in fiscal 2003. The purpose is to enhance the ability of minority and small farmers and 

ranchers to operate farming or ranching enterprises independently to assure adequate income and maintain reasonable 

lifestyles. 

Food and Nutrition Service 

FNS’ human capital consists of employment and training (E&T) for the Food Stamp Program. The E&T program 

requires recipients of food stamp benefits to participate in an employment and training program as a condition to food 

stamp eligibility. 

Outcome data for the E&T program is only available through the third quarter. As of this period, FNS’ E&T program 

has placed 781,543 work registrants subject to the 3 - month Food Stamp Program participant limit and 1,203,142 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.” 

In partnership with the U.S. Department of Labor (DOL), the FS operates 19 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, 
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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 

2006, accomplishments included the following: 

8,732 participants received 4,116 placements with an average starting hourly wage of 55 cents more than the 

DOL national average. 

Approximately 1,806 female students received training in nontraditional vocations. 

634 students received high school diplomas, and 1,429 students obtained general equivalency diplomas. 

Approximately 1,223 Job Corps students and staff assisted the agency in its firefighting efforts. 

Students accomplished conservation work on NFS lands appraised at $26.4 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. 

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 
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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 2006 and 2005, 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 48,000 in 

fiscal year 2006 and 47,000 in fiscal year 2005. 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 $10 

million for fiscal year 2006 and $10 million for fiscal year 2005. The following table summarizes the RME initiatives 

since fiscal year 2002: 

 (dollars in millions) 2006 2005 2004 2003 2002 

RME Obligations $ 10 9.4 10 9 6 

Number of producers attending RME sessions 48,000 47,000 46,000 62,000 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 is in the process of revising its Strategic Plan to align it with the Department’s new Strategic Plan. ARS’ major 

program areas are being aligned as follows: 

GOAL: Enhance the Competitiveness and Sustainability of Rural and Farm Economies.

Product Quality/Value Added—Many agricultural products are marketed as low value commodities; 

harvested commodities often suffer losses due to spoilage or damage during shipping, storage, and handling. 

Biobased products represent a small fraction of the market for industrial products and their performance is often 

uncertain. Biofuels and some biobased products are not yet economically competitive with petroleum-based 

products. Healthy foods are often not convenient and/or are not widely accepted by many consumers. 

Currently, the agency has active research programs designed to address these new product/product quality issues 

and concerns. 

Livestock Production—Producers need new scientific information and technologies to increase production 

efficiency; safeguard the environment; improve animal well-being; reduce production risks and product losses; 

and understand the relationships between nutrients, reproduction, growth, and conversion to and marketability of 
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animal products. In addition, new research is needed to identify genes that are responsible for economically 

important traits; to maintain and develop improved germplasm and use genetic resources to optimize and 

safeguard genetic diversity; to understand biological mechanisms; and to promote viable, vigorous production 

systems. Currently, ARS has active research programs designed to address these livestock production issues 

and concerns. 

Crop Production—Producers need new scientific information and technologies to increase production 

efficiency; safeguard the environment; reduce production risks and product losses; and understand the 

relationships between nutrients, reproduction, growth, and conversion to and marketability of plant products. In 

addition, new research is needed to identify genes that are responsible for economically important traits; to 

maintain and develop improved germplasm and use genetic resources to optimize and safeguard genetic 

diversity; to understand biological mechanisms; and to promote viable, vigorous production systems. Currently, 

ARS has active research programs designed to address these crop production issues and concerns. 

GOAL: Enhance Protection and Safety of the Nation’s Agriculture and Food Supply. 

Food Safety—For the Nation to have affordable and safe food, the food system must be protected at each step 

from production to consumption. The production and distribution system for food in the United States has been 

a diverse, extensive, and easily accessible system. This open system is vulnerable to the introduction of 

pathogens and toxins through natural processes, global commerce, and by intentional means. The food supply 

must be protected during production, processing, and preparation from pathogens, toxins, and chemical 

contamination that cause diseases in humans. Currently, the agency has active research programs designed to 

develop new on-farm preharvest systems, practices, and products to reduce pathogen and toxin contamination of 

animal and plant derived foods; and to develop and transfer to Federal and State agencies and the private sector 

technologies that rapidly and accurately detect, identify, and differentiate the most critical and economically 

important foodborne pathogenic bacteria and viruses. 

Livestock Protection—Economic sustainability of livestock production systems in domestic and global 

markets is limited by the disease status of the animals. Many factors affect the likelihood of diseases in 

livestock. These include globalization and international commerce, presence of pathogen vectors, 

industrialization of agriculture, availability of vaccines and protection systems, movements of animals during 

production, emergence of new diseases, genetic resistance, and the availability of trained animal health 

specialists. Livestock production systems are in transition from open and extensive systems to more closely 

monitored intensive management systems which remain vulnerable to accidental and intentional exposure to 

pathogens. Many of these pathogens are zoonotic and impact public health. Currently, the agency has active 

research programs designed to protect animals from pests and infectious diseases; identify, develop, and release 

to the U.S. agricultural community genetic markers, genetic lines, breeds, or germplasm that result in food 

animals with improved pest and disease resistance traits; and to provide producers of agriculturally important 

animals, scientific information and technologies to control, monitor, and manage invasive insects and pathogens. 

Crop Production—Economic sustainability of agricultural crop production in domestic and global markets is 

limited by the disease status of crops. Many factors affect the likelihood of diseases to crops including, 

globalization and international commerce, presence of pathogen vectors, availability of protection systems, 

emergence of new diseases, genetic resistance, and the availability of trained plant health specialists. Crop 

systems have limited diversity and remain more vulnerable to intentional exposure to pathogens. Currently, the 

agency has active research programs designed to protect plants from pests (including weeds) and diseases; 
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identify, develop, and release to the U.S. agricultural community genetic markers, genetic lines, or germplasm 

that result in plants with improved pest and disease resistance traits; to provide producers of agriculturally 

important plants, scientific information and technologies to control, monitor, and manage invasive insects, 

weeds, and pathogens; and to conduct biologically-based integrated and area-wide management of key invasive 

species. 

GOAL: Improve the Nation’s Nutrition and Health. 

Human Nutrition—Improving the Nation’s health requires enhancing the quality of the American diet. The 

United States is experiencing an obesity epidemic resulting from multifaceted causes including a “more is 

better” mindset, a sedentary lifestyle, and the selection of readily available high calorie foods. Four of the top 

ten causes of death in the United States – cardiovascular disease, cancer, stroke, and diabetes – are associated 

with the quality of our diets, diets too high in calories, total fat, saturated fat, cholesterol, or too low in fiber. 

Americans want fresh foods that taste good, are convenient to prepare and consume, and yet, offer nutrition and 

health benefits. Building a strong connection between agriculture and human health is an important step to 

providing a nutritionally enhanced food supply. Promoting healthier food choices and educating Americans to 

balance caloric intake with sufficient daily physical activity are vital steps to preventing obesity and decreasing 

risk for chronic disease. 

Currently, the agency has active research programs designed to address food consumption patterns; and dietary 

intervention strategies and programs to prevent obesity and promote healthy dietary behavior. Research is being 

conducted to implement the combined "What We Eat in America" dietary survey; and to update and revise 

Dietary Reference Intake and the National Nutrient Database of nutrient content of foods. Research is also 

being conducted to provide information, technology, services, and data from the National Nutrient Database, 

and from the “What We Eat in America” survey to USDA agencies and the private sector to support revision of 

the Dietary Guidelines. 

GOAL: Protect and Enhance the Nation’s Natural Resource Base and Environment.

Environmental Stewardship— Agriculture relies on a natural resource base whose sustainability depends 

on sound, science-based production practices. The management of the Nation’s renewable natural resources 

often seems to be a continuous balancing of conflicting and competing goals and concerns. While this is often 

the case, particularly in the short-term, longer-term management strategies combined with adequate knowledge 

of the complex natural systems can yield maximum sustainable benefits from the country’s resources that can 

satisfy most competing concerns. ARS research in the broad area of environmental stewardship is designed to 

address specific issues relating to agriculture’s impact on the environment and the environment’s impact on 

agriculture. EPA estimates that only 70 percent of the rivers, 68 percent of the estuaries, and 60 percent of the 

lakes now meet legislatively mandated goals. Dust emissions from agricultural operations and ammonia 

emissions from animal feeding operations pose a threat to environmental quality and human health. 

Approximately half of the rangelands have been significantly degraded by fire, invasive weeds, environmental 

changes, and poor grazing management. Approximately 500 million acres of cropland and grazing land have 

been degraded by various causes, including erosion, loss of organic matter, compaction, salinity, and soil 

acidification. Increases in the atmospheric concentration of greenhouse gases and related increases in weather 

variability affect the physiology and ecology of plants on croplands and rangelands in often unpredictable ways. 

Currently, ARS has active research programs designed to respond to these environmental issues and concerns. 
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260 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Management Initiative: Provide Agricultural Library and Information Services to USDA and the Nation via the 

National Agricultural Library. 

The National Agricultural Library (NAL), the world’s primary agricultural library, has two legislative mandates, to serve 

the Nation as one of four national libraries of the United States, and to be USDA’s library. NAL, whose vision 

statement is “advancing access to global information for agriculture,” serves its customers by identifying, collecting, 

providing access to, and preserving agricultural information. NAL’s collections, programs, and services support USDA 

agencies as well as multiple client audiences which include scientists, researchers, practitioners, policymakers, teachers, 

and students. 

Management Initiative: Provide Adequate Federal Facilities Required to Support the Research Mission of ARS. 

ARS has over 100 laboratories, primarily located throughout the United States. ARS’ facilities program is designed to 

meet the needs of its scientists and support personnel to accomplish the agency’s mission 

Cooperative State Research, Education, and Extension Service Program 

CSREES participates in a nationwide land-grant university system of agriculture related research and program planning 

and coordination between State institutions and USDA. It assists in maintaining cooperation among the State 

institutions, and between the State institutions and their Federal research partners. CSREES administers grants and 

formula payments to State institutions to supplement State and local funding for agriculture research. 

Forest Service 

FS Research and Development (R&D) provides reliable, science-based information that is incorporated into natural 

resource decision making. Responsibilities include developing new technology and then adapting and transferring this 

technology to facilitate more effective resource management. Some major research areas include the following: 

Fire, Invasive species 

Recreation 

Research Data and Analysis 

Research Management and Use 

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 2006 accomplishments include the following: 

54 new interagency agreements and contracts 

15 interagency agreements and contracts continued 

1,691 articles published in journals 

1,817 articles published in all other publications 

7 patents granted 

1 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 
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F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 261 

disseminated through published and electronic reports and articles; special staff analyses, briefings, presentations, and 

papers; databases; and individual contacts. ERS’ objective information and analysis helps public and private decision 

makers attain the goals that promote agricultural competitiveness, food safety and security, a well-nourished population, 

environmental quality, and a sustainable rural economy. 

National Agricultural Statistics Service 

Statistical research and service is conducted to improve the statistical methods and related technologies used in 

developing U.S. agricultural statistics. The highest priority of the research agenda is to aid the NASS estimation program 

through development of better estimators at lower cost and with less respondent burden. This means greater efficiency in 

sampling and data collection coupled with higher quality data upon which to base the official estimates. In addition, new 

products for data users are being developed with the use of technologies such as remote sensing and geographic 

information systems. Continued service to users will be increasingly dependent upon methodological and technological 

efficiencies. 
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262 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Required Supplementary Information 

STEWARDSHIP PROPERTY, PLANT AND EQUIPMENT

Heritage Assets 

Forest Service 

The FS estimates that more than 340,000 heritage assets are on land that it manages. Some of these assets are listed on 

the National Register of Historic Places, and some are designated as National Historic Landmarks. Collection assets 

held at museums and universities are managed by those entities, and not the FS. 

Heritage assets designated as National Historic Landmarks are sites, buildings, or structures that possess exceptional 

value in commemorating or illustrating the history of the United States, and exceptional value or quality in illustrating 

and interpreting the heritage of the United States. The Secretary of the Interior is the official designator of National 

Historic Landmarks. 

Heritage assets listed in the National Register of Historic Places include properties, buildings, and structures that are 

significant in U.S. history, architecture, and archaeology, and in the cultural foundation of the Nation. Sites formally 

determined as eligible for the National Register by the Keeper of the National Register, or documented through 

consultation with State Historic Preservation Offices, are considered potentially eligible for the National Register. 

The 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. 

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. Most additions occur through inventory activities, where previously undocumented sites are discovered 

and added to the total. Although not technically additions—they already existed on NFS lands—they do represent an 

increased management responsibility commensurate with the spirit of “additions.” 

Major FS heritage assets by category and condition for FY 2005 are shown below: 

Category 

2004 

Final 

Sites 

Additions Withdrawals

FY 2005 

Ending 

Balance 

Condition 

Total heritage assets 318,259 24,103 1 342,361 Poor – Fair 

Eligible for the National Register 

of Historic Places 57,925 0 3,963 53,962 Poor – Fair 

Listed on the National Register 3,397 82 1 3,478 Fair 

Sites with structures listed on 

the National Register 1,874 82 0 1,956 Poor – Fair 

National Historic Landmarks 19 1 0 20 Fair – Good 
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Natural Resources Conservation Service 

NRCS currently owns one heritage asset, the Tucson Plant Materials Center (TPMC). It was listed in the National 

Register of Historic Places (NRHP) on July 2, 1997. The TPMC develops and evaluates native plants and addresses an 

array of resource issues in the areas of rangeland, mined land, urban lands, cropland riparian areas, and desert lands. It 

provides technical assistance to NRCS field offices, RC& D groups, Conservation districts, federal, state, and tribal 

agencies, and private landowners throughout the greater Southwest. 

Agricultural Research Service 

ARS has approximately 60 heritage assets at three locations under its custody and control. These locations include: (1) 

the U.S. National Arboretum, Washington, D.C.; (2) the Grazinglands Research Laboratory (GRL), El Reno, Oklahoma; 

and (3) the Fort Keogh Livestock and Range Research Laboratory, Miles City, Montana. 

Established in 1927 by an Act of Congress, the mission of the U.S. National Arboretum is to serve the public need for 

scientific research, education, and gardens that conserve and showcase plants to enhance the environment. 

GLR was established by Public Law 80-494, 62 Stat. 197 on April 21, 1948, and includes 6,737-acres of withdrawn 

public land. The mission of the GRL is to provide new technologies and management strategies which increase the 

profitability of forage and livestock production, reduce risks associated with management decisions, promote 

sustainability, and conserve the productivity of grazing land resources of the Great Plains. 

The Fort Keogh Livestock and Range Research Laboratory was established by an Act of Congress in 1924 and includes 

55,767 acres within the original area of the Fort Keogh Military Reservation just west of Miles City, Montana. The 

mission of the Fort Keogh Livestock and Range Research Laboratory is to research and develop ecologically and 

economically sustainable range animal management systems that ultimately meet consumers’ needs. The Fort Keogh 

Military Reservation, which was established by an Act of Congress in 1876, was placed on the National Register of 

Historic Places in March of 1978. 
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264 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Stewardship Land 

Description FY 2006 Balance Additions (+) Withdrawals (-) FY 2005 Balance

National Forest System Land (In acres):

National Forests 144,056,315 - (403,999) 144,460,314 

National Forests Wilderness Areas 34,816,228 - (140,850) 34,957,078 

National Forests Primitive Areas 173,762 - - 173,762 

National Wild and Scenic River Areas 931,314 681 - 930,633 

National Recreation Areas 2,912,576 94,308 - 2,818,268 

National Scenic–Research Areas 137,486 196 - 137,290 

National Game Refuges and Wildlife Preserve Areas 1,198,099 - - 1,198,099 

National Monument Areas 3,834,041 - - 3,834,041 

National Grasslands 3,837,870 - (296) 3,838,166 

Purchase Units 374,749 4,718 - 370,031 

Land Utilization Projects 1,876 - - 1,876 

Other Areas 512,497 2,640 - 509,857 

Total National Forest System Land 192,786,813 102,543 (545,145) 193,229,415 

Conservation Easements (In acres):

Natural Resources Conservation Service

Wetlands Reserve Program 1,531,185 135,486 - 1,395,699 

Grassland Reserve Program 42,902 29,190 - 13,712 

Emergency Wetlands Reserve Program 92,159 - - 92,159 

Emergency Watershed Protection Program 94,399 50 - 94,349 

Total Conservation Easements 1,760,645 164,726 - 1,595,919 

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 1,395,699 133,580 - 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 147,542 1,595,919 - 1,448,377 
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National Forest System 

The FS manages an estimated 193 million acres of public land, most of which are classified as stewardship assets. These 

stewardship assets are valued for the following reasons: 

Environmental resources; 

Recreational and scenic values; 

Cultural and paleontological resources; 

Vast open spaces; and 

Resource commodities and revenue they provide to the Federal Government, States, and counties. 

Land needed to protect critical wildlife habitat and cultural and historic values, to support the purposes of congressional 

designation, and for recreation and conservation purposes is acquired through purchase or exchange. 

National Forests 

The national forests are formally established and permanently set aside and reserved for national forest purposes. The 

following categories of NFS lands have been set aside for specific purposes in designated areas: 

National Wilderness Areas. Areas designated by Congress as part of the National Wilderness Preservation 

System. 

National Primitive Areas. Areas designated by the Chief of the Forest Service as primitive areas. They are 

administered in the same manner as wilderness areas, pending studies to determine sustainability as a 

component of the National Wilderness Preservation System. 

National Wild and Scenic River Areas. Areas designated by Congress as part of the National Wild and Scenic 

River System. 

National Recreation Areas. Areas established by Congress for the purpose of assuring and implementing the 

protection and management of public outdoor recreation opportunities. 

National Scenic Research Areas. Areas established by Congress to provide use and enjoyment of certain ocean 

headlands and to ensure protection and encourage the study of the areas for research and scientific purposes. 

National Game Refuges and Wildlife Preserve Areas. Areas designated by Presidential proclamation or 

Congress for the protection of wildlife. 

National Monument Areas. Areas including historic landmarks, historic and prehistoric structures, and other 

objects for historic or scientific interest, declared by Presidential proclamation or Congress. 

National Grasslands 

National Grasslands are designated by the Secretary of Agriculture and permanently held by the USDA under Title III of 

the Bankhead-Jones Farm Tenant Act. 

Purchase Units 

Purchase units are land designated by the Secretary of Agriculture or previously approved by the National Forest 

Reservation Commission for purposes of Weeks Law acquisition. The law authorizes the Federal Government to 

purchase lands for stream flow protection and maintain the acquired lands as national forests. 
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266 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Land Utilization Projects 

Land utilization projects are reserved and dedicated by the Secretary of Agriculture for forest and range research and 

experimentation. 

Other Areas 

There are areas administered by the FS that are not included in one of the above groups. 

Condition of NFS Lands 

The condition of NFS lands varies by purpose and location. The FS monitors the condition of NFS lands based on 

information compiled by two national inventory and monitoring programs—Forest Inventory and Analysis (FIA) and 

Forest Health Monitoring (FHM). 

The FIA program conducts annual inventories of forest status and trends. FIA has historic inventory data in all 50 States 

and is currently collecting annual inventory data in 45 States, including 38 of the 41 States containing NFS land. Active 

throughout all 50 States, FHM provides surveys and evaluations of forest health conditions and trends. 

Although most of the estimated 193 million acres of NFS forest lands continue to produce valuable benefits (i.e., clean 

air, clean water, habitat for wildlife, and products for human use), significant portions are at risk to pest outbreaks or 

catastrophic fires. About 25.03 million acres of NFS forest land are at risk to future mortality from insects and diseases, 

based on the current Insect and Disease Risk Map; and nearly 111 million acres are at risk of losing key ecosystem 

components from wildland fire based on current condition and departure from historic fire regimes. 

The LANDFIRE dataset is mapping vegetation for fire behavior and fire regime across all ownerships, including NFS 

lands, at a 30-meter pixel resolution from Landsat Satellite Imagery. The 2005 release of the LANDFIRE Rapid 

Assessment included subject matter experts’ maps of current fire regime condition class. The national LANDFIRE 

dataset, available in 2009, will document fire regime condition class of all lands based on satellite imagery and plot data, 

displaying departure from the historic fire regimes. 

Invasive species of insects, diseases, and plants continue to affect our native ecosystems by causing mortality to, or 

displacement of, native vegetation. Insect and disease prevention and suppression treatments were completed on 154,000 

acres of NFS lands in FY 2006. 

Conservation Easements 

Wetlands Reserve Program 

The Wetlands Reserve Program (WRP) is authorized under Section 1237 of the Food Security Act of 1985 (P.L. 99-

198), as amended, by the Food, Agriculture, Conservation and Trade Act of 1990 (P.O. 101-624), the Federal 

Agriculture Improvement and Reform Act of 1996 (P.L. 104-127), and the Farm Security and Rural Investment Act of 

2002 (P.L. 107-171) (“2002 Farm Bill”). The Secretary of Agriculture delegated the authority for WRP to the Chief of 

the Natural Resources Conservation Service (NRCS), who is a vice president of the Commodity Credit Corporation 

(CCC). WRP is a voluntary program offering landowners the opportunity to restore, protect, and enhance wetlands on 

agricultural land. Participants in the program may sell a conservation easement with CCC/NRCS in order to restore and 

protect wetlands. The 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. 
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To be eligible for WRP, land must be restorable and suitable for wildlife benefits. Once land is enrolled in the program, 

the landowner continues to control access to the land—and may lease the land—for hunting, fishing, and other 

undeveloped recreational activities. Easements can be either permanent or 30-year duration. Once enrolled, the land is 

monitored to ensure compliance with program requirements. At any time, a landowner may request the evaluation of 

additional activities (such as cutting hay, grazing livestock, or harvesting wood products) to determine if there are other 

compatible uses for the site. Compatible uses are allowed if it is fully consistent with the protection and enhancement of 

the wetland. The condition of the land is immaterial as long as the easement on the land meets the eligibility 

requirements of the program. 

Withdrawals from the program are rare. The Secretary of Agriculture has the authority to terminate contracts, with 

agreement from the landowner, after an assessment of the effect on public interest, and following a 90-day notification 

period of the House and Senate agriculture committees. 

Grassland Reserve Program 

The Grassland Reserve Program (GRP) is authorized by Section 1238n of Title XII, of Food Security Act of 1985, as 

amended by section 2401 of the 2002 Farm Bill. The Secretary of Agriculture delegated the authority for FRPP to the 

Chief of the Natural Resources Conservation Service (NRCS), who is a vice president of the Commodity Credit 

Corporation (CCC). GRP assists landowners in restoring and protecting grassland, including rangeland, pastureland, and 

certain other lands, while maintaining the lands suitability for grazing. The emphasis of the program is to support 

grazing operations, plant and animal biodiversity, and grassland and land containing shrubs or forbs under the greatest 

threat of conversion. 

Land is eligible if it is privately owned or tribal land and it is: 1) grassland that contains forbs or shrubs (including 

rangeland and pastureland); or 2) located in an area that has been historically dominated by grassland, forbs, or shrubs; 

and has potential to provide habitat for animal or plant populations of significant ecological value if the land is retained 

in the current use; or restored to a natural condition. Incidental lands may be included to allow for the efficient 

administration of an agreement or easement. 

NRCS develops a conservation plan with the landowners eligible for the program. The plan specifies the management 

options available on the grasslands with the goal of maintaining the viability for the grassland’s resources. Easements 

can be permanent, 30-year, or the maximum duration permitted based on State or Tribal law. NRCS continues to provide 

assistance to the landowner after the acres are enrolled. GRP easements prohibit the production of crops (other than 

hay), fruit trees, and vineyards that require breaking the soil surface and any other activity that would permanently 

disturb the surface of the land, except for appropriate land management activities included in a the grassland 

conservation plan. Withdrawals from the program are not permitted. 

Emergency Wetlands Reserve Program 

The Emergency Wetlands Reserve Program (EWRP) administered by NRCS was established as part of the emergency 

restoration package following the flooding of the Mississippi River and its tributaries in 1993. EWRP provides 

landowners an alternative to restoring agricultural production lands that previously were wetlands. The program is 

patterned after the WRP. Participants in the program sell a conservation easement to USDA in order to restore and 

protect wetlands. The landowner voluntarily limits the future use of the land, yet retains private ownership. 

To be eligible, the land must have been damaged by a natural disaster and be restorable as a wetland. Once the land is 

enrolled in the program, the landowner continues to control access to the land. Easements purchased under EWRP are 
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268 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

permanent in duration. The land is monitored to ensure that the wetland is in compliance with contract requirements, 

including compatible uses, such as recreational activities or grazing livestock. 

Easements purchased under this program meet the definition of stewardship land. NRCS records an expense for the 

acquisition cost of purchasing easements plus any additional costs such as closing, survey, and restoration costs. In 

exchange for establishing a permanent easement, the landowner receives payment based on agricultural value of the 

land, a geographic land payment cap, or the landowner offer. Easement values are assessed on pre-disaster conditions. 

The landowner may receive up to 100 percent of restoring the wetland. There are no provisions in the easement to 

terminate the purchase. 

Emergency Watershed Protection Program – Floodplain Easements 

The Emergency Watershed Protection Program (EWP) Floodplain Easements is authorized by the Federal Agriculture 

Improvement and Reform Act of 1996, Public Law 104-127, and administered by NRCS. Floodplain easements restore, 

protect, manage, maintain, and enhance the functions of wetlands, riparian areas; conserve natural values including fish 

and wildlife habitat, water quality, flood water retention, ground water recharge, and open space; and safeguard lives 

and property from floods, drought, and the products of erosion. A floodplain easement is purchased on flood prone lands 

to provide a more permanent solution to repetitive disaster assistance payments and achieve greater environmental 

benefits where the situation warrants when the affected landowner is willing to participate in the easement approach. 

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 EWP are permanent in duration. 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. 
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F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 269 

DEFERRED MAINTENANCE

FY 2006 Cost to Return to 

Acceptable Condition

Cost of Critical 

Maintenance

Cost of Non-critical 

Maintenance

Asset Class

Forest Service

Bridges 116 $ 27 $ 89 $ 

Buildings 483 106 377 

Dam 21 8 13 

Minor Constructed Features 88 - 88 

Fence 403 403 - 

Handling Facility 24 24 - 

Heritage 32 9 23 

Road 4,054 748 3,306 

Trail Bridge 10 4 6 

Wastewater 31 17 14 

Water 85 47 38 

Wildlife, Fish, TES 6 4 2 

Trails 243 19 224 

General Forest Area - - - 

Total Forest Service 5,596 $ 1,416 $ 4,180 $ 

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 

Minor Constructed 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 98 33 65 

General Forest Area 4 1 3 

Total Forest Service 5,963 $ 1,440 $ 4,523 $ 
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270 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

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. 

Critical maintenance is defined as a serious threat to public health or safety, a natural resource, or the ability to carry out

the mission of the organization. Noncritical maintenance is defined as a potential risk to the public or employee safety 

or health (e.g., compliance with codes, standards, or regulations), and potential adverse consequences to natural 

resources or mission accomplishment. 

The FS uses condition surveys to estimate deferred maintenance on all major classes of PP&E. 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. 

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. 

Condition of Assets 

In previous years, the FS reported deferred maintenance estimates for General Forest Areas (GFA) and Developed Sites 

(Minor Constructed Features) in this table. The revised Heritage Assets and Stewardship Lands standard (SFFAS 29) 

provides the FS the means to report these land units’ deferred maintenance by their respective individual asset, although 

deferred maintenance for the Minor Constructed Features located on the Developed Sites will remain in this table. 

The overall condition of major asset classes range from poor to good depending on the location, age, and type of 

property. The standards for acceptable operating condition for various classes of general PP&E, stewardship, and 

heritage assets are as follows. 

Conditions of roads and bridges within the NFS road system are measured by various standards: 

1. Federal Highway Administration regulations for the Federal Highway Safety Act; 

2. Best management practices (BMP) for the nonpoint source provisions of the Clean Water Act from EPA and States; 

3. Road management objectives developed through the NFMA forest planning process; 
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4. Forest Service Directives—FSM 7730, Operation and Maintenance (January 2003 amendment was superseded with 

August 25, 2005, revision); FSH 7709.56a, Road Preconstruction, and FSH 7709.56b, Transportation Structures 

Handbook. 

Dams are managed according to FSM 7500, Water Storage and Transmission, and FSH 7509.11, Dams Management 

Handbook, as determined by condition surveys. The overall condition of dams is below acceptable. The condition of a 

dam is acceptable when the dam meets current design standards and does not have any deficiencies that threaten the 

safety of the structure or public. For dams to be rated as in acceptable condition, the agency needs to restore the dams to 

the original functional purpose, correct unsightly conditions, or prevent more costly repairs. 

Buildings comply with the National Life Safety Code, the Forest Service Health and Safety Handbook, and the 

Occupational Safety Health Administration (OSHA) 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 include developed recreation sites, general forest areas, campgrounds, trailheads, trails, water and 

wastewater systems, 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 FSM 2330, Publicly Managed 

Recreation Opportunities, and forest- and regional-level user guides. Quality standards for developed recreation sites 

were established as Meaningful Measures for health and cleanliness, settings, safety and security, responsiveness, and 

the condition of the facility 

The condition assessment for range structures (fences and stock handling facilities) is based on (1) a determination by 

knowledgeable range specialists or other district personnel of whether the structure would perform the originally 

intended function, and (2) a determination through the use of a protocol system to assess conditions based on age. A 

longstanding range methodology is used to gather this data. 

Heritage assets include archaeological sites that require determinations of National Register of Historic Places status, 

National Historic Landmarks, and significant historic properties. Some heritage assets may have historical significance, 

but their primary function in the agency is as visitation or recreation sites and, therefore, may not fall under the 

management responsibility of the heritage program. 

Trails (and trail bridges) are managed according to Federal law and regulations (CFR 36). More specific direction is 

contained in FSM 2350, Trail, River, and Similar Recreation Opportunities, and the FSH 2309.18, Trails Management 

Handbook. 

Deferred maintenance of structures for wildlife, fish, and threatened and endangered species (TES) is determined by 

field biologists using their professional judgment. The deferred maintenance is considered critical if resource damage or 

species endangerment would likely occur if maintenance were deferred much longer. 
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272 F Y 2006

P ERFORMANCE AND 

A CCOUNTABILITY 

R EPORT

STATEMENT OF 

BUDGETARY 

RESOURCES

FY 2006 FSA CCC FAS RMA FNS FSIS AMS 

Non-Budgetary Non-Budgetary

Financing Financing

Budgetary Accounts Budgetary Accounts Budgetary Budgetary Budgetary Budgetary Budgetar

Budgetary Resources:Unobligated balance, brought forward, October 1: (Note 24) 343 $ 2,146 $ 1,299 $ 2,699 $ 175 $ 1,358 $ 7,108 $ 71 $ 37

$ 

Recoveries of prior year unpaid obligations 43 77 4,945 4 754 4 797 177 2

 

Budget Authority:

Appropriation 1,884 - 28,112 - 341 3,372 53,813 844 6,71

 

Borrowing Authority (Notes 22 & 23) - 1,746 44,465 824 - - - - 

 

Earned -

Collected 979 1,483 15,068 1,174 81 1,208 85 132 6

 

Change in receivables from Federal Sources (15) - 54 (29) 10 - - (10) (

 

Change in unfilled customer orders -

Advances received - - 259 - - - - (2) 

 

Without advance from Federal Sources (1) 1 - - - - 1 - 

 

Expenditure transfers from trust funds - - 891 - - - - - 

 

Nonexpenditure transfers, net, anticipated and actual (38) - (1,872) - 14 (5) 5,203 - (5,26

 

Permanently not available (541) (2,862) (50,153) (1,690) (3) (2) (1,032) (23) (4

 

Total Budgetary Resources 2,654 2,591 43,068 2,982 1,372 5,935 65,975 1,189 1,87

 

Status of Budgetary Resources:Obligations Incurred (Note 21):

Direct 1,801 1,810 2,970 1,355 965 4,666 53,530 999 1,56

 

Reimbursable 483 - 38,933 - 111 - 27 149 5

 

Unobligated Balance:

Apportioned 260 361 363 748 101 1,266 3,160 7 2

 

Exempt from Apportionment - - 533 - 1 - - 1 17

 

Unobligated balance not available 110 420 269 879 194 3 9,258 33 5

 

Total Status of Budgetary Resources 2,654 2,591 43,068 2,982 1,372 5,935 65,975 1,189 1,87

 

Change in Obligated Balances:Obligated balance, net, brought forward October 1 (Note 24) 168 483 8,428 (153) 77 268 3,940 82 11

 

Obligations incurred 2,284 1,810 41,903 1,355 1,076 4,666 53,557 1,148 1,62

 

Gross outlays (2,180) (1,752) (37,326) (1,325) (350) (4,653) (52,533) (968) (1,61

 

Recoveries of prior year unpaid (43) (77) (4,945) (4) (754) (4) (797) (177) (2

 

Change in uncollected payments from Federal Sources 16 (1) (53) 29 (10) - (1) 10 

 

Obligated balance, net, end of period -

Unpaid obligations (Note 28) 259 476 9,281 75 77 276 4,166 113 11

 

Uncollected customer payments from Federal Sources (14) (14) (1,275) (174) (39) - (1) (17) (

 

Obligated balance, net, end of period 245 462 8,006 (99) 38 276 4,165 96 10

 

Net Outlays:

Gross outlays 2,180 1,752 37,326 1,325 350 4,653 52,533 968 1,61

 

Offsetting collections (979) (1,483) (16,217) (1,174) (81) (1,208) (85) (130) (6

 

Distributed offsetting receipts (396) - - (987) 2 (3) (1) (12) (14

 

Net Outlays 805 $ 269 $ 21,109 $ (836) $ 271 $ 3,442 $ 52,447 $ 826 $ 1,40

$ 
FINANCIAL STATEMENTS, NOTES, SUPPLEMENT AL AND OTHER ACCOMPANYING I

F Y 2006

P ERFORMANCE AND 

A CCOUNT

FY 2006 GIPSA FS NRCS ARS CSREES ERS NASS RD 

Non-Budgetary 

Financing 

Budgetary Budgetary Budgetary Budgetary Budgetary Budgetary Budgetary Budgetary Accounts 

Budgetary Resources:Unobligated balance, brought forward, October 1: (Note 24) 8 $ 2,429 $ 468 $ 412 $ 128 $ 1 $ 5 $ 4,498 $ 1,983 $ 

Recoveries of prior year unpaid obligations 7 78 721 295 444 13 29 304 860 

Budget Authority:

Appropriation 38 5,362 1,358 1,330 1,221 76 141 3,298 - 

Borrowing Authority (Notes 22 & 23) - - - - - - - - 10,038 

Earned -

Collected 42 665 151 84 33 1 20 3,410 5,207 

Change in receivables from Federal Sources (2) (21) (48) (9) (8) (2) (2) (26) - 

Change in unfilled customer orders -

Advance received - 19 - - - - - - - 

Without advance from Federal Sources - 37 30 13 7 - 2 2 10 

Expenditure transfers from trust funds - 159 - - - - - - - 

Nonexpenditure transfers, net, anticipated and actual - 3 1,741 6 5 - - 37 - 

Permanently not available (1) (65) (28) (20) (20) (1) (2) (3,755) (4,246) 

Total Budgetary Resources 92 8,666 4,393 2,111 1,810 88 193 7,768 13,852 

Status of Budgetary Resources:Obligations Incurred (Note 21):

Direct 45 6,382 3,363 1,690 1,630 86 169 5,427 12,545 

Reimbursable 38 475 166 113 47 1 21 523 - 

Unobligated Balance:

Apportioned 1 1,052 527 278 104 - 1 244 516 

Exempt from Apportionment - - 3 15 25 - - - - 

Unobligated balance not available 8 757 334 15 4 1 2 1,574 791 

Total Status of Budgetary Resources 92 8,666 4,393 2,111 1,810 88 193 7,768 13,852 

Change in Obligated Balances:Obligated balance, net, brought forward October 1 (Note 24) 7 1,561 3,565 442 1,268 28 16 6,022 17,872 

Obligations incurred net 83 6,857 3,529 1,803 1,677 87 190 5,950 12,545 

Gross outlays (76) (6,375) (2,907) (1,408) (1,136) (74) (163) (6,041) (11,012) 

Recoveries of prior year unpaid (7) (78) (721) (295) (444) (13) (29) (304) (860) 

Change in uncollected payments from Federal Sources 2 (15) 17 (4) 1 2 (1) 24 (10) 

Obligated balance, net, end of period

Unpaid obligations (Note 28) 13 2,383 3,567 619 1,430 30 23 5,725 19,171 

Uncollected customer payments from Federal Sources (4) (433) (83) (81) (65) - (10) (73) (634) 

Obligated Balance, net, end of period 9 1,950 3,484 538 1,365 30 13 5,652 18,537 

Net Outlays:

Gross outlays 76 6,375 2,907 1,408 1,136 74 163 6,041 11,012 

Offsetting collections (42) (844) (151) (84) (33) (1) (20) (3,410) (5,207) 

Distributed offsetting receipts - (457) (19) (22) (4) 1 - (688) - 

Net Outlays 34 $ 5,074 $ 2,737 $ 1,302 $ 1,099 $ 74 $ 143 $ 1,943 $ 5,805 $ 
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USDA

274 F Y 2006

P ERFORMANCE AND 

A CCOUNTABILITY 

R EPORT

FY 2005 FSA CCC FAS RMA FNS FSIS AMS 

Non-Budgetary Non-Budgetary

Financing Financing

Budgetary Accounts Budgetary Accounts Budgetary Budgetary Budgetary Budgetary Budgetary 

Budgetary Resources:Unobligated balance, brought forward, October 1: (Note 24) 244 $ 1,868 $ 1,197 $ 2,643 $ 37 $ 2,060 $ 7,768 $ 54 $ 517 $ 

Recoveries of prior year unpaid obligations 71 69 2,837 3 761 5 391 247 10 

Budget Authority:

Appropriation 1,735 - 15,444 - 316 2,314 47,398 827 6,267 

Borrowing Authority (Notes 22 & 23) - 1,724 45,357 688 - - - - - 

Earned -

Collected 1,016 1,535 17,267 1,768 97 1,236 80 110 59 

Change in receivables from Federal Sources 15 - (158) (113) (24) - - 6 (2) 

Change in unfilled customer orders -

Advances received - - (1,387) - - - - 2 - 

Without advance from Federal Sources 3 (3) - - - - - - - 

Expenditure transfers from trust funds - - 899 - - - - - - 

Nonexpenditure transfers, net, anticipated and actual 50 - (2,838) - 13 (1) 5,168 - (5,139) Permanently not available (656) (1,368) (33,582) (735) (3) (2) (2,511) (17) (164) 

Total Budgetary Resources 2,478 3,825 45,036 4,254 1,197 5,612 58,294 1,229 1,548 

Status of Budgetary Resources:Obligations Incurred (Note 21):

Direct 1,716 1,678 2,954 1,556 925 4,255 51,158 1,053 1,114 

Reimbursable 419 - 40,782 - 97 - 28 104 56 

Unobligated Balance:

Apportioned 176 1,693 331 2,523 76 1,355 526 42 49 

Exempt from Apportionment - - 872 5 1 - - 2 343 

Unobligated balance not available 167 454 97 170 98 2 6,582 28 (14) Total Status of Budgetary Resources 2,478 3,825 45,036 4,254 1,197 5,612 58,294 1,229 1,548 

Change in Obligated Balances:Obligated balance, net, brought forward October 1 (Note 24) 198 436 5,596 (228) 74 204 3,048 101 93 

Obligations incurred net 2,135 1,678 43,736 1,556 1,022 4,255 51,186 1,157 1,170 Gross outlays (2,076) (1,565) (38,011) (1,591) (281) (4,186) (49,902) (923) (1,137) Unpaid obligations transferred - - (216) - - - - - - Recoveries of prior year unpaid (71) (69) (2,837) (3) (761) (5) (391) (247) (10) Change in uncollected payments from Federal Sources (18) 3 158 113 24 - - (6) 2 Obligated balance, net, end of period

Unpaid obligations (Note 28) 198 496 9,649 50 106 268 3,940 109 125 

Uncollected customer payments from Federal Sources (30) (13) (1,221) (203) (29) - - (27) (6) 

Obligated balance, net, end of period 168 483 8,428 (153) 77 268 3,940 82 119 

Net Outlays:

Gross outlays 2,076 1,565 38,011 1,591 281 4,186 49,902 923 1,137 

Offsetting collections (1,016) (1,535) (16,780) (1,768) (97) (1,236) (79) (112) (59) 

Distributed offsetting receipts (320) - - (722) - - - (3) (122) 

Net Outlays 740 $ 30 $ 21,231 $ (899) $ 184 $ 2,950 $ 49,823 $ 808 $ 956 $ 
FINANCIAL STATEMENTS, NOTES, SUPPLEMENT AL AND OTHER ACCOMPANYING I

F Y 2006

P ERFORMANCE AND 

A CCOUNT

FY 2005 GIPSA FS NRCS ARS CSREES ERS NASS RD 

Non-Budgetary 

Financing 

Budgetary Budgetary Budgetary Budgetary Budgetary Budgetary Budgetary Budgetary Accounts 

Budgetary Resources:Unobligated balance, brought forward, October 1: (Note 24) 7 $ 1,738 $ 313 $ 342 $ 148 $ 2 $ 5 $ 3,751 $ 1,814 $ 

Recoveries of prior year unpaid obligations 11 169 464 265 350 28 22 273 487 

Budget Authority:

Appropriation 37 5,812 1,354 1,314 1,195 75 130 2,997 - 

Borrowing Authority (Notes 22 & 23) - - - - - - - - 8,474 Earned -

Collected 36 448 1,637 67 30 1 23 4,737 5,273 

Change in receivables from Federal Sources 1 13 45 (1) (7) - 2 19 - 

Change in unfilled customer orders -

Advances received - 3 - - - - - - - 

Without advance from Federal Sources - 72 - 4 (7) - (3) - 5 

Expenditure transfers from trust funds - - - - - - - - - 

Nonexpenditure transfers, net, anticipated and actual - 53 1,813 6 5 - - 1 - 

Permanently not available (1) (67) (9) (14) (16) (2) (1) (2,812) (2,808) 

Total Budgetary Resources 91 8,241 5,617 1,983 1,698 104 178 8,966 13,245 

Status of Budgetary Resources:Obligations Incurred (Note 21):

Direct 47 5,546 5,011 1,478 1,511 101 150 3,948 11,262 

Reimbursable 37 265 138 94 58 2 23 520 - 

Unobligated Balance:

Apportioned 5 1,805 306 395 102 - 3 362 1,456 

Exempt from Apportionment - - 4 11 14 - - - - 

Unobligated balance not available 2 625 158 5 13 1 2 4,136 527 

Total Status of Budgetary Resources 91 8,241 5,617 1,983 1,698 104 178 8,966 13,245 

Change in Obligated Balances:Obligated balance, net, brought forward October 1 (Note 24) 9 1,493 1,437 477 1,192 29 15 6,527 16,928 

Obligations incurred net 84 5,811 5,149 1,572 1,569 103 173 4,468 11,262 

Gross outlays (74) (5,489) (2,728) (1,338) (1,157) (76) (152) (4,681) (9,826) 

Unpaid obligations transferred - - 216 - - - - - - 

Recoveries of prior year unpaid (11) (169) (464) (265) (350) (28) (22) (273) (487) 

Change in uncollected payments from Federal Sources (1) (85) (45) (3) 14 - 1 (19) (5) 

Obligated balance, net, end of period

Unpaid obligations (Note 28) 13 1,978 3,666 519 1,334 30 25 6,120 18,496 Uncollected customer payments from Federal Sources (6) (418) (100) (77) (66) (2) (9) (97) (624) Obligated balance, net, end of period 7 1,560 3,566 442 1,268 28 16 6,023 17,872 

Net Outlays:

Gross outlays 74 5,489 2,728 1,338 1,157 76 152 4,681 9,826 Offsetting collections (36) (451) (1,637) (67) (30) (1) (23) (4,737) (5,273) Distributed offsetting receipts - (429) - (15) (3) - - (538) - Net Outlays 38 $ 4,609 $ 1,091 $ 1,256 $ 1,124 $ 75 $ 129 $ (594) $ 4,553 $ 
FINANCIAL STATEMENTS, NOTES, SUPP LEMENTAL AND OTHER ACCOMPANYING 

INFORMATION

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276 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT
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F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 269 

IV. 

Other Accompanying Information 

Appendix A—Management Challenges 
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OTHER ACCOMPANYING INFORMATION 

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F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 283 
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286 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT
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F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 287 
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288 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT
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F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 289 
OTHER ACCOMPANYING INFORMATION 

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290 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT
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F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 291 
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294 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT
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296 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT
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OTHER ACCOMPANYING INFORMATION 

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298 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Appendix B—Improper Payment and Recovery Auditing Details 

Since 2000, agencies have reported efforts to reduce erroneous payments through the Office of Management and 

Budget’s (OMB) Circular A-11. Under the Improper Payments Information Act (IPIA), executive agencies must identify 

any of its programs that may be susceptible to significant improper payments, estimate the annual amount of improper 

payments and submit those estimates to Congress. Section 831 of the Defense Authorization Act for FY 2002 requires 

recovery auditing. In this process, agencies entering into contracts worth more than $500 million in a fiscal year must 

execute a cost effective program for identifying errors made in paying contractors and for recovering amounts 

erroneously paid to the contractors. In FY 2005, Eliminating Improper Payments became a President’s Management 

Agenda (PMA) initiative. On August 10, 2006, government-wide guidance was consolidated into OMB Circular A-123, 

Management’s Responsibility for Internal Control, Appendix C. Under this guidance, USDA has 4 programs required to 

report under Section 57 of A-11 and has identified an additional 11 at risk of significant improper payments through the 

risk assessment process. 

USDA is taking steps to implement IPIA fully and achieve a “green” rating for the Eliminating Improper Payments 

PMA initiative. During FY 2006, USDA maintained “yellow” status by: 

Completing risk assessments for all programs; 

Developing plans to measure improper payments for all high risk programs and receiving OMB approval; 

Developing corrective action plans to reduce improper payments and establishing both reduction and recovery 

targets for all high risk programs; 

Fully complying with reporting standards; 

Reporting component error rates for two Food Nutrition Service programs for the first time; and 

Reporting statistical error rates for four newly declared high risk programs. 

The Farm Service Agency (FSA) made improvements to the quality of its risk assessments and statistical sampling. 

Unfortunately, these improvements resulted in significant increases in improper payment rates for programs already 

designated as high risk, and four additional programs being declared susceptible to improper payments. The improved 

statistical sampling focused on verifying program eligibility and uncovered administrative weaknesses that prevent FSA 

from determining if payments are proper. Thus, the Commodity Credit Corporation (CCC) is reporting an increase of 

$3.5 billion in estimated potential improper payments in this report. Aggressive corrective action plans are being 

developed to improve the quality of documentation for program eligibility. 

USDA will be able to move to “green” status when error rates are available for all programs and it demonstrates that 

reduction and recovery goals are being met. Due to budget and program constraints, this process can be complicated. For 

the programs without an estimated error rate, USDA is working with OMB to develop interim methods to establish and 

track erroneous payment percentages. 

Additionally, USDA is taking steps to implement recovery auditing fully. Using an independent recovery audit 

contractor working on contingency, USDA identified $379,000-worth of potentially recoverable improper payments. 

The Department has recovered $538,000 in FY 2006 from amounts identified during FY 2005 and 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. 
OTHER ACCOMPANYING INFORMATION 

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F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 299 

I. Describe your agency’s risk assessments, performed subsequent to compiling your full 

program inventory. 

List the risk-susceptible programs identified through your risk assessments. 

OCFO issued detailed guidance for the risk assessment process including templates and extensive reviews of drafts. 

Programs with larger outlays were required to perform more detailed assessments than smaller programs. For USDA’s 

largest programs, the risk assessment process required the following: 

The amount of improper payments needed to meet the reporting standards; 

A description of the program including purpose and basic eligibility requirements; 

Definition of improper payments specific to the program; 

Program vulnerabilities linked to improper payments; 

Internal controls designed to offset the program vulnerabilities; 

Internal controls testing; 

Listing of significant reviews and audits; 

Final determination of risk level; 

Planned future enhancements (optional); and 

Description of how improper payments are recovered (optional). 

USDA has identified the following 15 programs as susceptible to improper payments. 

Selection Methodology Agency Program 

Farm Service Agency (FSA), 

Commodity Credit Corporation (CCC) 

Marketing Assistance Loan Program (MAL)

Food Stamp Program

National School Lunch & School Breakfast Programs (NSLPSBP) 

Section 57 of OMB Circular A-11 

Food Nutrition Service (FNS)

Special Supplemental Nutrition Program for Woman, Infants and 

Children

Milk Income Loss Contract Program 

Loan Deficiency Payments 

Direct and Counter-Cyclical Payments 

Conservation Reserve Program 

Disaster Programs 

Farm Service Agency (FSA) 

Commodity Credit Corporation (CCC)

Noninsured Assistance Program 

Food Nutrition Service (FNS) Child and Adult Care Food Program

Forest Service (FS) Wildland Fire Suppression Management

Rural Development (RD) Rental Assistance Program

Risk Management Agency (RMA) Federal Crop Insurance Corporation Program Fund

USDA Identified as Susceptible to 

Significant Improper Payments 

Natural Resources Conservation 

Service (NRCS)

Farm Security and Rural Investment Programs
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300 F Y 2006 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 (MAL)

Reviews of program payment activities with respect to the Improper Payment Information Act are 

conducted by FSA’s County Office Review Program (CORP) under the direction of the Operations 

Review and Analysis Staff (ORAS). 

Testing is conducted using statistically sound samples drawn from the total population of program 

payments for each program tested. A professional statistician under contract to FSA is used to design 

the sampling approach, define the sample size and identify the sample items. Sample size is chosen to 

achieve a 95-percent confidence level. 

Once the universe of the program is determined for the target fiscal year, a stratified two-stage 

sampling approach is used. Agency program delivery organizations (county offices) are selected in the 

first stage and individual payments made or contracts reviewed by those organizations are selected in 

the second stage. 

That sample list of individual contracts or payments is provided to the members of the CORP staff 

covering the respective States. CORP staff visits each of the county offices shown on the list and 

reviews the individual contracts or payments identified in the statistically sound sample. CORP 

reviewers use a list of program division provided criteria drawn from legal and program administrative 

guidance. Findings of non-adherence to the criteria related to the individual contracts or payments in 

the sample will identify potentially improper payments made. The results of that review are summarized 

and submitted to CORP national office staff to be analyzed by the statistician contractor. That 

contractor determines the rate of improper payments based on the data provided by the CORP staff 

that visited the county offices and completed the actual reviews of documents.

FNS Food Stamp Program 

(FSP)

Statistical sampling

Each month, States select a statistically random sample of cases from a universe of all households 

receiving FSP benefits for that given month. Most States draw the samples using a constant sampling 

interval. There are some which employ simple random and/or stratified sampling techniques. Required 

annual sample sizes range from 300 for State agencies with small FSP populations to more than 1,000 

for larger States. The average is approximately 950 per State. States are required to complete at least 

98 percent of selected cases deemed to be part of the desired FSP universe. Federal sub-samples are 

selected systematically by FNS from each State’s completed reviews. These sample sizes range from 

150 to 400 per State. 

Error Rate Calculation

The National payment error rate is calculated using a multi-step process: 

Each State agency conducts quality control (QC) reviews of the monthly sample of cases. The QC 

review measures the accuracy of eligibility and benefit determinations for each sampled case against 

FSP standards. State agencies are required to report to FNS the findings for each case selected for 

review. 

FNS then sub-samples completed State QC reviews and re-reviews selected individual case findings 

for accuracy. Based on this sub-sample, FNS determines each State agency’s official error rate using a 

regression formula. 

The national payment error rate then is computed by averaging the error rate of the active cases for 

each State weighted by the amount of issuance in the State.

FNS National School Lunch & 

School Breakfast 

Programs (NSLP-SBP)

The results of a large national study of improper payments in NSLP and SBP, for School Year 2005-

2006, are anticipated to be reported next year. Because of the scope and cost of this kind of 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 improper payment measurement estimate every five years. Additionally, 

as part of the current project, FNS intends to develop a methodology that uses data available from 

extant sources to estimate improper payments annually on a NSLP component. 

The sampling plan for the large national study involves the selection of a national probability sample of 

school food authorities (SFA), schools, certified students and their households, and households that 

applied for and were denied benefits. In the first stage of sampling, a stratified random sample of 80 

SFAs was selected. Stratification variables included geographic region, prevalence of schools with SBP 

and those using Provision 2/3 and a poverty indicator. In the second stage of sampling, three schools, 

on average, were selected from SFAs that do not have Provision 2/3 schools. Schools were stratified 
OTHER ACCOMPANYING INFORMATION 

USDA

F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 301 

Agency Program Sampling Process 

FNS 

(Cont’d) 

 into two groups: (1) elementary schools and (2) middle and high schools. A total of 264 schools were 

selected for the study (216 non-Provision 2/3 schools, 24 Provision 2/3 schools in their base year, and 

24 Provision 2/3 schools not in their base year). For the third stage of sampling, households were 

selected in 240 of these schools. This process was designed to yield completed interviews for 3,600 

students certified for free and reduced-price meals, and 400 denied applicant households. The sample 

of approved and denied applicant households was augmented by sampling applications from Provision 

2/3 schools in which household surveys were not conducted. The study design includes approximately 

4,500 application reviews to estimate a case-error rate due to administrative error. All schools selected 

for application reviews also would include data collection for counting and claiming errors. 

In the interim (before the nationally representative improper payments rate is available), FNS is 

reporting a component measure drawn from annual on-site reviews focused on the certification and 

verification process. One important source of certification error is (SFA errors in certifying and verifying 

applications. In 2002, on-site reviews were conducted of the application verification process at 14 

SFAs. This activity determined that 6 percent of the SFAs’ verification determinations were incorrect 

due to administrative errors. USDA worked with Congress to develop and adopt legislative changes to 

address certification accuracy. These changes included mandating direct certification, year-long 

certifications and household applications. FNS has worked with States and local education agencies to 

implement these improvements rapidly. Beginning in FY 2005, FNS has conducted an annual review of 

a statistical sample of SFA application eligibility determinations. This sample will be used to measure 

changes in administrative error rates, assess the impact of its corrective action, and target and focus 

future activities. The national benefit status error rate on applications for school year 2004-05 is 4.3 

percent (±0.95, 90 percent confidence interval based on 2,766 applications). Beginning in 2007, it is 

anticipated that this component also will become part of the formula used to develop the annual 

payment error estimate. 

FNS Special Supplemental 

Nutrition Program for 

Women, Infants and 

Children (WIC) 

FNS plans to continue periodic examinations of WIC certification and vendor error. 

• Certification Error—The next decennial national study to measure certification error in WIC 

is scheduled for 2008. This study will, for the first time, include a measurement of the amount of 

improper payments associated with certification error. Previous studies preceded IPIA and did not 

include any value determination of improper payments. 

• Vendor Error—A study of WIC vendor management recently has been completed. A national 

improper payments estimate of vendor charges, for FY 2005 activity, is reported in Section IV. For 

the next few years, FNS will generate an annual update of this improper payment measurement 

using statistical techniques. Options to accomplish this using existing administrative and other data 

are being examined. 

The “bookend” study data will be aged by data reported annually by all WIC State agencies to produce 

estimates for FY 2006 and annually until the next bookend study. State WIC agencies are required to 

investigate at least 5 percent of their authorized vendor population each year. Some States investigate 

more than the minimum. In FY 2004, approximately 10 percent of all vendors were investigated, 

although there is substantial variation across States. These data are collected into The Integrity Profile 

Report and database on a fiscal-year basis. The investigations check for vendor violations including 

overcharging and charging for foods not received by the recipient. While States primarily select vendors 

for investigation through purposive sampling from their presumed high risk vendors, some include a 

random component in their sampling. Moreover, the state-of-the-art in identifying “high risk” vendors is 

imperfect and there is a semi-random aspect to the samples. Thus, FNS can generate an improper 

payment amount by using post-stratified sampling techniques to adjust for the purposive aspects of the 

samples. The Food Stamp Program pioneered the use of post-stratified sampling methods to estimate 

food-stamp trafficking. FNS believes it can adapt the food stamp methodology for the WIC vendor 

estimates. The agency will develop and test the methodology. 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.
OTHER ACCOMPANYING INFORMATION 

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302 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Agency Program Sampling Process 

FNS Child and Adult Care Food 

Program (CACFP)

Two measures of the Family Day Care Home component of the program are planned. The methods for 

determining these measures are: 

• Sponsor Tiering Error—National study of a representative sample of sponsor files for 

3,150 family day care homes (FDCHs) in 95 distinct sponsors in 14 States. Data collectors went to 

each sampled sponsor with randomly drawn lists of 30 to 90 FDCHs. They extracted the 

necessary documents to establish eligibility for reimbursements from the sponsors’ files. The FY 

2005 results are reported in Section IV below. 

• Meal Claiming Error—Two methods of estimating the risk of claiming error will be tested for 

feasibility. Both approaches compare the number of participants observed during the monitoring 

visit to the average number of meals claimed for reimbursement for the meal or snack closest to 

the time of the visit. Each approach a) provides an estimate of the risk of claiming error among 

FDCH providers; b) involves a different set of problems (which may or may not be surmountable); 

and c) requires very different resource implications. 

FNS will pilot both approaches in conjunction with the 11 Child Care Assessment Project (CCAP) 

reviews scheduled for FY 2007. A sample size (for the pilot) of 200 FDCHs is anticipated. Data 

collection forms already have been developed for each approach to facilitate standardized collection 

and data entry.

FSA/CCC Milk Income Loss Contract 

Program (MILC) 

MILC only disbursed approximately $9 million in FY 2005. USDA suspended improper payment 

sampling because of the low level of outlays since the program expired as of September 30, 2005. The 

program was reauthorized for two years in February 2006 and signup for the new MILC ended in May 

2006. Outlays for FY 2006 were $351 million, exclusive of accruals. There will be a statistical sampling 

of the FY 2006 activity using the same approach as defined for Marketing Assistance Loan and Loan 

Deficiency Payment program activity. 

FSA/CCC Loan Deficiency Payments Reviews of program payment activities with respect to the Improper Payment Information Act are

conducted by FSA’s County Office Review Program (CORP) under the direction of the Operations 

Review and Analysis Staff (ORAS). 

Testing is conducted using statistically sound samples drawn from the total population of program 

payments for each program tested. A professional statistician under contract to FSA is used to design 

the sampling approach, define the sample size and identify the sample items. Sample size is chosen to 

achieve a 95-percent confidence level. 

Once the universe of the program is determined for the target fiscal year, a stratified two-stage 

sampling approach is used. Agency program delivery organizations (county offices) are selected in the 

first stage and individual payments made or contracts reviewed by those organizations are selected in 

the second stage. 

That sample list of individual contracts or payments is provided to the members of the CORP staff 

covering the respective States. CORP staff visits each of the county offices shown on the list and 

reviews the individual contracts or payments identified in the statistically sound sample. CORP 

reviewers use a list of program division provided criteria drawn from legal and program administrative 

guidance. Findings of non-adherence to the criteria related to the individual contracts or payments in 

the sample will identify potentially improper payments made. The results of that review are summarized 

and submitted to CORP national office staff to be analyzed by the statistician contractor. That 

contractor determines the rate of improper payments based on the data provided by the CORP staff 

that visited the county offices and completed the actual reviews of documents. 

FSA/CCC Direct and CounterCyclical Payments (DCP) Reviews of program payment activities with respect to the Improper Payment Information Act are 

conducted by FSA’s County Office Review Program (CORP) under the direction of the Operations 

Review and Analysis Staff (ORAS). 

Testing is conducted using statistically sound samples drawn from the total population of program 

payments for each program tested. A professional statistician under contract to FSA is used to design 

the sampling approach, define the sample size and identify the sample items. Sample size is chosen to 

achieve a 95-percent confidence level. 

Once the universe of the program is determined for the target fiscal year, a stratified two-stage 

sampling approach is used. Agency program delivery organizations (county offices) are selected in the 

first stage and individual payments made or contracts reviewed by those organizations are selected in 

the second stage. 

That sample list of individual contracts or payments is provided to the members of the CORP staff 

covering the respective States. CORP staff visits each of the county offices shown on the list and 

reviews the individual contracts or payments identified in the statistically sound sample. CORP 

reviewers use a list of program division provided criteria drawn from legal and program administrative 
OTHER ACCOMPANYING INFORMATION 

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F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 303 

Agency Program Sampling Process 

FSA/CCC 

(Cont’d) 

guidance. Findings of non-adherence to the criteria related to the individual contracts or payments in 

the sample will identify potentially improper payments made. The results of that review are summarized 

and submitted to CORP national office staff to be analyzed by the statistician contractor. That 

contractor determines the rate of improper payments based on the data provided by the CORP staff 

that visited the county offices and completed the actual reviews of documents. 

FSA/CCC Conservation Reserve 

Program (CRP) 

Reviews of program payment activities with respect to the Improper Payment Information Act are 

conducted by FSA’s County Office Review Program (CORP) under the direction of the Operations 

Review and Analysis Staff (ORAS). 

Testing is conducted using statistically sound samples drawn from the total population of program 

payments for each program being tested. A professional statistician under contract to FSA is used to 

design the sampling approach, define the sample size and identify the sample items. Sample size is 

chosen to achieve a 95-percent confidence level. 

Once the universe of the program is determined for the target fiscal year, a stratified two-stage 

sampling approach is used. Agency program delivery organizations (county offices) are selected in the 

first stage and individual payments made or contracts reviewed by those organizations are selected in 

the second stage. 

That sample list of individual contracts or payments is provided to the members of the CORP staff 

covering the respective States. CORP staff visits each of the county offices shown on the list and 

reviews the individual contracts or payments identified in the statistically sound sample. CORP 

reviewers use a list of program division provided criteria that is drawn from legal and program 

administrative guidance. Findings of non-adherence to the criteria related to the individual contracts or 

payments in the sample will identify potentially improper payments made. The results of that review are 

summarized and submitted to the CORP national office staff to be analyzed by the statistician 

contractor. That contractor determines the rate of improper payments based on the data provided by 

CORP staff that visited the county offices and completed the actual reviews of documents. 

FSA/CCC Disaster Programs (CDP) Reviews of program payment activities with respect to the Improper Payment Information Act are 

conducted by FSA’s (FSA) County Office Review Program (CORP) under the direction of the 

Operations Review and Analysis Staff (ORAS). 

Testing is conducted using statistically sound samples drawn from the total population of program 

payments for each program tested. A professional statistician under contract to FSA is used to design 

the sampling approach, define the sample size and identify the sample items. Sample size is chosen to 

achieve a 95-percent confidence level. 

Once the universe of the program is determined for the target fiscal year, a stratified two-stage 

sampling approach is used. Agency program delivery organizations (county offices) are selected in the 

first stage and individual payments made or contracts reviewed by those organizations are selected in 

the second stage. 

That sample list of individual contracts or payments is provided to the members of the CORP staff 

covering the respective States. CORP staff visits each of the county offices shown on the list and 

reviews the individual contracts or payments identified in the statistically sound sample. CORP 

reviewers use a list of program division provided criteria drawn from legal and program administrative 

guidance. Findings of non-adherence to the criteria related to the individual contracts or payments in 

the sample will identify potential improper payments made. The results of that review are summarized 

and submitted to CORP national office staff to be analyzed by the statistician contractor. That 

contractor determines the rate of improper payments based on the data provided by the CORP staff 

that visited the county offices and completed the actual reviews of documents. 

FSA/CCC Noninsured Assistance 

Program (NAP) 

Reviews of program payment activities with respect to the Improper Payment Information Act are 

conducted by FSA’s County Office Review Program (CORP) under the direction of the Operations 

Review and Analysis Staff (ORAS). 

Testing is conducted using statistically sound samples drawn from the total population of program 

payments for each program tested. A professional statistician under contract to FSA is used to design 

the sampling approach, define the sample size and identify the sample items. Sample size is chosen to 

achieve a 95-percent confidence level. 

Once the universe of the program is determined for the target fiscal year, a stratified two-stage 

sampling approach is used. Agency program delivery organizations (county offices) are selected in the 

first stage and individual payments made or contracts reviewed by those organizations are selected in 

the second stage. 
OTHER ACCOMPANYING INFORMATION 

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304 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Agency Program Sampling Process 

FSA/CCC 

(Cont’d) 

 That sample list of individual contracts or payments is provided to the members of the CORP staff 

covering the respective States. CORP staff visits each of the county offices shown on the list and 

reviews the individual contracts or payments identified in the statistically sound sample. CORP 

reviewers use a list of program division provided criteria drawn from legal and program administrative 

guidance. Findings of non-adherence to the criteria related to the individual contracts or payments in 

the sample will identify potential improper payments made. The results of that review are summarized 

and submitted to CORP national office staff to be analyzed by the statistician contractor. That 

contractor determines the rate of improper payments based on the data provided by the CORP staff 

that visited the county offices and completed the actual reviews of documents. 

FS Wildland Fire Suppression 

Management

Wildland Fire Management – Suppression has been deemed a high risk account and as such, the 

sample had to be a statistically based sample. For FY 2006, the fund had 13,553 payments made. 

Accordingly, a sample size of 166 was selected using a random number generator. The sample was 

selected using a 90-percent confidence level, anticipated rate of occurrence of 2.9 percent and a 

desired precision range of 5 percent.

RD Rental Assistance 

Program

The agency reviewed the sampling plan developed by the U.S. Department of Housing and Urban 

Development for its studies. It engaged an Rural Development (RD) statistician to prepare a similar 

plan for this report. This report is based on a review of tenants receiving RA during their occupancy 

beginning September 1, 2005, to May 31, 2006. This period was selected since the actual rental 

assistance payment is made one month following the occupancy date. Thus, the universe covers the 

fiscal year to date. RD plans another review in November/December 2006 that will cover the full FY 

2006 period. The sampling plan consisted of 665 rental assistance (RA) payments from a universe of 

2,330,334 or .029 percent. The methodology produced a sample with a 99-percent confidence level. 

The study required field staff to evaluate tenant files and income calculations. The agency did not test if 

RD’s deputy chief finance office paid appropriately on the borrower’s request for subsidy due to the 

minuscule error rate from the FY 2004 report and the implementation of an automation enhancement to 

improve data entry. 

The universe of rental assistance payments during the period of September 1, 2005, to May 31, 2006, 

was 2,330,334. The only parameter used to determine the eligible universe was the RA payment. No 

other data element, such as location, size of property, number of units and availability of other rental 

assistance (such as Section 8) was a consideration. The statisticians were provided a data extract from 

the Multi-Family Housing Information System (MFIS). The extract contained a list of all tenants 

receiving RA who occupied the unit as of September 1, 2006, for payment as of October 1, 2006. The 

data included month of payment, project name, project identifier (case number/project number) and 

tenant name and unit number. From the data extract, the statisticians selected the sample by a 

systematic sample technique. Once the sample was identified, an unnumbered letter dated July 11, 

2006, was issued to RD field staff that explained the process (including detailed instructions), provided 

the list of tenant payments to be reviewed and provided the data currently maintained in MFIS. These 

data were used as the baseline review of the tenant data comparison between the Agency records and 

the management agent’s tenant files. The survey instrument was revised this year and reduced from a 

two-page to a one-page questionnaire. The study asked State office staff to complete the survey for the 

selected tenant payments. There was to be no substitution of the selected payment and, if the 

management agent was unable to submit the file, the payment would be considered unauthorized 

assistance. 

RMA Federal Crop Insurance 

Corporation Program Fund

RMA drew 300 random 2004 crop year indemnities to review during 2005. It will repeat this process for 

three years to compile 900 random indemnity reviews that will be used to identify the RMA programerror rate. Limited resources make it impractical to conduct a statistically valid program review each 

year. Despite these limits, in combination with the National Operations Reviews conducted by RMA 

compliance personnel, these random reviews of paid indemnities should provide the program with 

sufficient data to establish an acceptable error rate for the purposes of the IPIA.

NRCS Farm Security and Rural 

Investment Programs

The Farm Security and Rural Investment Program was treated as six individual programs following the 

apportionment schedule: 

• Environmental Quality Incentive Program; 

• Wildlife Habitat Incentive Program; 

• Wetland Reserve Program; 

• Grassland Reserve Program; 

• Farm and Ranch Land Protection Program; and 

• Conservation Security Program (CSP). 
OTHER ACCOMPANYING INFORMATION 

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F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 305 

Agency Program Sampling Process 

NRCS 

(Cont’d) 

 As shown in section IV, the Farm Security and Rural Investment Program has reported an improper 

payment rate of less than 2.5 percent for the last 2 years. The Farm Security and Rural Investment 

Program also met its FY 2006 reduction and recovery targets. As a result of this demonstrated ability to 

reduce improper payments, we anticipate that OMB will authorize the removal of all but CSP from the 

high risk list. Starting in FY 2007, USDA anticipates that only CSP will be sampled statistically and 

reported in the PAR. 

Risk assessments were developed for each program with the Financial Management Division and the 

National Program Managers. Using last year’s risk assessments and corrective action plans, NRCS 

identified any new risks and internal controls to test. It reviewed internal and external reviews and 

audits to eliminate duplication of effort and incorporated testing of any new internal controls 

implemented as a result of the reviews and audits. Statutory and program changes as they related to 

IPIA were considered. 

Individual program samples were statistically selected from the universe of payments made to 

participants during FY 2005. Anticipated error rates were based on the actual ones determined from the 

results of last year’s sampling and anticipated impact of ProTracts. NRCS used a rigorous confidence 

level of 95 percent and precision range of 5 percent to select the number of samples. A total of 765 

samples were selected. 

Questionnaires unique for each program were developed with the program managers. Sample payment 

data were merged into the questionnaires. These questionnaires were sent to State and field offices to 

complete and return with supporting documentation. The questionnaires are a tool for re-enforcing 

program rules and a means to obtain verification of items which would not be readily available in a 

contract file. 

NRCS started the implementation of individual program review checklists. They were created by the 

Financial Management Division based on the risk assessments and internal controls selected for 

testing. As samples were returned, the agency used the review checklist to test the effectiveness of the 

selected internal controls. This ensured testing consistency by the review team. We also tested 

payment calculations, contracting policy adherence, and issues from last year’s sampling. 

III. Describe the Corrective Action Plans for reducing the estimated rate of improper 

payments. Include in this discussion what is seen as the cause of errors and the 

corresponding steps necessary to prevent future occurrences. 

If efforts are already underway, and/or have been ongoing for some length of time, it is 

appropriate to include that information in this section. 

Agency Program Corrective Actions Planned 

FSA/CCC Marketing Assistance 

Loan program (MAL) 

A large percentage of the improper payments was caused by noncompliance with administrative procedures. 

While failure to follow administrative procedures may not have caused the payment to be disbursed in error, 

it is not possible to determine whether the payment was appropriate without the documentation. For 

example, it was determined that a producer who did not certify whether it had a delinquent Federal non-tax 

debt but still received a payment was considered an improper one. In such cases, while the producer may 

have been a legitimate recipient, because he or she failed to indicate his or her status this was considered 

an improper payment. After further program review and additional corrective action, the program payment 

amount issued was determined to be accurate. The State and county offices involved in the statistical 

sample have been notified of the findings and the necessary corrective actions. 

FSA corrective action plans for reducing improper payments include: 

• Reiterating current program policies regarding program compliance through the issuances of national 

notices to State and county office personnel; 

• Developing a PowerPoint training presentation addressing the statistical sample’s findings and overall 

MAL program compliance concerns. This PowerPoint presentation will be made available to all State 

executive directors and office employees to assist when training county office employees. This training 

presentation will be the first of a series of training modules to address MAL policies and procedures; 

• Informing State executive directors of compliance issues that resulted in an improper payment and 

provide additional internal control procedures to avoid these types of errors; 
OTHER ACCOMPANYING INFORMATION 

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306 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Agency Program Corrective Actions Planned 

FSA/CCC 

(Cont’d) 

• Enhancing existing software and/or developing automated programs that verify program eligibility and 

compliance, subject to funding; 

• Reviewing existing policy and procedures handbooks to determine program compliance inefficiencies. 

FSA will strengthen or eliminate inadequate program compliance controls to simplify the MAL approval 

process without compromising program integrity; 

• Enhance individual accountability of controls by performing quarterly control testing on each employee’s 

program related payment transactions. A sample of five producer payments will be selected for each 

employee for testing each quarter. The results from these quarterly tests will be included as part of the 

employee’s annual performance plans for the county, district and State executive director. The 

employee’s individual results will be integrated into his/her annual performance rating. 

• Leveraging the Treasury Offset Program System (TOP) to verify Debt Collection Improvement Act 

(DCIA) compliance. This, in turn, may eliminate the need for a producer self-certification of the DCIA 

requirement. Current financial systems and security issues must be enhanced and addressed before 

FSA can use TOP for the purpose of verifying DCIA compliance for producers requested LDP benefits; 

and 

• Amending existing regulations to eliminate inadequate program compliance controls. A final rule 

amending regulatory language requiring lien searches and filing of financing statements on loan amount 

$25,000 or less is going through Departmental clearance and will be published in the Federal Register

upon final signature. 

FNS Food Stamp Program Causes of improper payments 

An improper payment occurs when a participating household is certified for too many or too few benefits 

compared to the level for which they are eligible. This can result from incomplete or inaccurate reporting of 

income and/or assets by participants at the time of certification. It also can occur from changes subsequent 

to certification or errors in determining eligibility or benefits by caseworkers. Eligibility worker delays in action 

or inaction taken on client reported changes also can cause of improper payments. 

An analysis of the FY 2004 completed statistical sample revealed that approximately 69 percent of all 

variances occurred before or at the most recent certification/recertification. Additionally, 56.7 percent of the 

errors were agency caused. A little more than 50 percent of the errors (50.4 percent) were income related 

and caused by client misreporting or the agency misapplying the reported income. Misreporting or 

misapplying deductions was the second largest source of errors at 31.6 percent. 

The analysis of the FY 2005 data is scheduled for release in early 2007. 

Steps that are (or will be) taken to address specific findings in the last statistical sample: 

Program regulations require State agencies to analyze data to develop corrective action plans to reduce or 

eliminate program deficiencies. A State with a high error rate must develop a QC corrective action plan to 

address deficiencies revealed through an analysis of its own QC data. A State with an excessive error rate 

will be required to invest a specified amount (depending on its error rate and size) designated specifically to 

correct and lower its error rate. The State also will face further fiscal penalties if it fails to lower its error rate 

in a future fiscal year. 

Steps that are (or will be) taken to improve the overall control environment and improper payments: 

FNS, through its regional offices, works directly with States to impart the importance of payment accuracy 

and correct payments to State leadership. The agency also helps those leaders develop effective corrective 

action strategies to reduce payment errors. Regional offices provide many forms of technical assistance to 

States, such as: 

• Analyzing data; 

• Reviewing and monitoring corrective action plans; 

• Developing strategies for error reduction and corrective action; 

• Participating on boards and in work groups; and 

• Hosting, attending and supporting payment accuracy conferences. 
OTHER ACCOMPANYING INFORMATION 

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F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 307 

Agency Program Corrective Actions Planned 

FNS 

(Cont’d) 

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 development of effective corrective action. 

FNS National School 

Lunch & School 

Breakfast Programs 

(NSLP-SBP) 

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 annually. 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. In June 2006, FNS published the results of the certification 

and verification reporting for school year 2004-05. The report indicates that approximately three quarters of 

certified students were subject to verification, with the remainder directly certified. Among all verified 

applications, the majority were found to be consistent with their certification status. Thirty-three percent of 

verifications resulted in a change in certification status, with 21 percent of those resulting from non-response 

to the verification request. For school year FY 2004-05, SFAs were permitted to choose among three 

methods for selecting applications for verification. Results varied substantially by method. Verification results 

for school year 2005-06 currently are being reported and analyzed. As a result of a legislative change 

designed to better target error-prone applications, these data will reflect changes in verification sampling 

procedures by SFAs. They will not be directly comparable to the school year 2004-05 data. 

FNS also has secured resources and entered into a contract to conduct a nationally representative study of 

the NSLP/SBP eligibility determination process. It also has established the first improper payments rate. An 

improper payments rate for school year 2005-06 is anticipated to be available by August 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 improper payment measurement every 

five years. Additionally, as part of the current project, FNS intends to develop a methodology that uses data 

available from other sources to measure improper payments on a component of the NSLP annually. 

FNS Special Supplemental 

Nutrition Program for 

Women, Infants and 

Children (WIC) 

The data from the study of vendors in 2005 indicating a very low level of WIC vendor improper payments are 

reported in Section IV below. Corrective action plans and reduction targets will be developed in FY 2007 and 

submitted to OMB for approval. 

FNS Child and Adult Care 

Food Program 

(CACFP) 

The data from the new FDCH teiring accuracy determination and the Child Care Assessment Project (CCAP) 

are being analyzed. Corrective action plans and reduction targets will be developed in FY 2007 and 

submitted to OMB for approval.

FSA/CCC Milk Income Loss 

Contract Program 

(MILC) 

While statistical sampling of MILC was not required due to limited activity in FY 2005, FSA has concluded 

that that this program will benefit from many of the corrective actions targeted for CCC programs delivered 

through the field office structure. As with the other programs, it should be noted that compliance with the 

administrative procedures may have prevented the improper payment from being disbursed. For example, it 

was determined that a producer who did not certify whether he or she had a delinquent Federal non-tax debt 

but still received a payment was considered an improper payment. In such cases, while the producer may 

not have been a delinquent debtor and was entitled to receive the applicable payment, he or she failed to 

indicate his or her status, making it an improper payment. After further program review and additional 

corrective action, the program payment amount issued was determined to be accurate. 

FSA corrective action plans for reducing improper payments include: 

• Reiterating current program policies regarding program compliance through the issuances of national 

notices to State and county office personnel; 

• Developing a PowerPoint training presentation addressing the statistical sample findings and overall 

program compliance concerns in the various programs. This PowerPoint presentation will be made 

available to all State executive directors and office employees to assist when training county office 

employees. This training presentation will be the first of a series of training modules to address MILC 

policies and procedures; 

• Informing State executive directors of compliance issues that resulted in an improper payment and 

provide additional internal-control procedures to avoid these types of errors; 

• Enhancing existing software and/or develop automated programs that verify program eligibility and 

compliance, subject to funding; 
OTHER ACCOMPANYING INFORMATION 

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308 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Agency Program Corrective Actions Planned 

FSA/CCC 

(Cont’d) 

• Enhance individual accountability of controls by performing quarterly control testing on each employee’s 

program related payment transactions. A sample of five producer payments will be selected for each 

employee for testing each quarter. The results from these quarterly tests will be included as part of the 

employee’s annual performance plans for the county, district and State executive director. The 

employee’s individual results will be integrated into his/her annual performance rating. 

• Reviewing existing policy and procedures handbooks to determine program compliance inefficiencies. 

FSA will strengthen or eliminate inadequate program compliance controls to simplify the MILC approval 

process without compromising program integrity; and 

• Leveraging the Treasury Offset Program System (TOP) to verify Debt Collection Improvement Act 

(DCIA) compliance. This, in turn, may eliminate the need for a producer self-certification of the DCIA 

requirement. Current financial systems and security issues must be enhanced and addressed before 

FSA can use TOP to verify DCIA compliance for producers requesting MILC benefits. 

FSA/CCC Loan Deficiency 

Payments (LDP) 

A large percentage of the improper payments were caused by noncompliance with administrative 

procedures. It should be noted that compliance with these procedures may have prevented the improper 

payment from being disbursed. For example, it was determined that a producer who did not certify whether 

they had a delinquent Federal non-tax debt but still received a payment was considered an improper 

payment. In such cases, while the producer may not have been a delinquent debtor and was entitled to 

receive the applicable payment, he or she failed to indicate his or her status, making it an improper payment. 

After further program review and additional corrective action, the program payment amount issued was 

determined to be accurate. The State and county offices involved in the statistical sample have been notified 

of the findings and the necessary corrective actions. 

FSA corrective action plans for reducing improper payments include: 

• Reiterating current program policies regarding program compliance through the issuances of national 

notices to State and county office personnel; 

• Developing a PowerPoint training presentation addressing the statistical sample findings and overall 

LDP program compliance concerns. This PowerPoint presentation will be made available to all State 

executive directors and office employees to assist when training county office employees. This training 

presentation will be the first of a series of training modules to address LDP policies and procedures; 

• Informing State executive directors of compliance issues that resulted in an improper payment and 

provide additional internal control procedures to avoid these types of errors; 

• Enhancing existing software and/or developing automated programs that verify program eligibility and 

compliance, subject to funding; 

• Enhance individual accountability of controls by performing quarterly control testing on each employee’s 

program related payment transactions. A sample of five producer payments will be selected for each 

employee for testing each quarter. The results from these quarterly tests will be included as part of the 

employee’s annual performance plans for the county, district and State executive director. The 

employee’s individual results will be integrated into his/her annual performance rating. 

• Reviewing existing policy and procedures handbooks to determine program compliance inefficiencies. 

FSA will strengthen or eliminate inadequate program compliance controls in an effort to simplify the 

LDP approval process without compromising program integrity; and 

• Leveraging the Treasury Offset Program System (TOP) ability to verify Debt Collection Improvement 

Act (DCIA) compliance. This may in turn eliminate the need for a producer self-certification of the DCIA 

requirement. Current financial systems and security issues must be enhanced and addressed before 

FSA can use TOP for the purpose of verifying DCIA compliance for producers requested LDP benefits. 

FSA/CCC Direct and CounterCyclical Payments 

(DCP) 

A large percentage of the improper payments were due to noncompliance with administrative manual 

controls. It is important to note that compliance with administrative procedures may have prevented the 

improper payments. For example, while a producer did not have an AD-1026, Highly Erodible Land 

Conservation and Wetland Conservation Certification, on file, he or she is paid DCP benefits. It has been 

determined that the producer’s DCP payment is considered an improper payment. After the producer is paid, 

the county office requests an AD-1026. The producer then files the form. In this instance, while the producer 

was entitled to receive the applicable payment, the county office did not follow administrative procedure. 

The Office of Management and Budget Circular A-123, Appendix A identifies administrative compliance as a 

key internal control issue. The A-123 Review Team found that a lack of compliance with administrative 

procedures accounts for a large percentage of potential improper payments. Administrative procedures 

include obtaining appropriate authorizing signatures and obtaining and retaining required data, forms and 

supporting documentation. 
OTHER ACCOMPANYING INFORMATION 

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F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 309 

Agency Program Corrective Actions Planned 

FSA/CCC 

(Cont’d) 

• FSA’s corrective action plan for reducing improper payments includes the following actions developed 

under. 

A-123’s plan: 

• Provide training on key controls to field personnel and educate them on the importance of control 

procedures and the potential noncompliance risks. Training will be delivered through various means 

including in person and via AgLearn, a USDA enterprise-wide learning management system. Then, and 

the training will be followed by communications and job aids to help facilitate compliance to controls; 

• Enhance individual accountability of controls by performing quarterly control testing on each employee’s 

program related payment transactions. A sample of five producer payments will be selected for each 

employee for testing each quarter. The results from these quarterly tests will be included as part of the 

employee’s annual performance plans for the county, district and State executive director; and 

• Integrate the employee’s individual results into his/her annual performance rating. 

In addition to the A-123 corrective action plans, FSA’s plans for reducing improper payments include: 

• Developing a Power Point training presentation addressing the statistical sample findings and overall 

DCP program compliance concerns. This PowerPoint presentation will be made available to all State 

executive directors and office employees to assist when training county office personnel; and 

• Reiterating current program policies regarding program compliance through the issuances of National 

notices to State and County office personnel. 

FSA/CCC Conservation 

Reserve Program 

(CRP) 

A large percentage of the improper payments was caused by noncompliance with administrative procedures. 

The internal controls in place to support compliance with these procedures likely would have prevented the 

improper payment from being disbursed. For example, a producer who certified performance of the practice 

on the AD-245, page 2, after the practice expiration date but still received a cost-share payment was 

considered an improper payment. However, the producer may not have certified after the practice expiration 

date, the expiration date may have been extended but not indicated on the form or entered into the system. 

Because the extension was not updated on the form or in the system, this was considered an improper 

payment. The State and county offices involved in the statistical sample will be notified of the findings and 

the necessary corrective actions. FSA is requiring that all necessary corrective actions be completed no later 

than October 27, 2006, unless noted otherwise. 

FSA’s corrective action plans for reducing improper payments include: 

• Reiterating current program policies regarding program compliance through the issuances of national 

notices to State and county office personnel; 

• Developing an AgLearn training presentation addressing the statistical sample findings, overall CRP 

program compliance concerns and the program in general. This AgLearn presentation will be made 

available to all State executive directors and office employees to assist when training county office 

employees. FSA will investigate required training using AgLearn as a pre-condition of using CRP 

software. Training presentations will be prioritized based on the findings of this plan; 

• Requiring State executive directors to resolve compliance issues that resulted in an improper payment; 

• Enhancing existing Web-based software and retiring legacy systems to tie all program payments more 

closely to a single contract file. This migration will reduce the potential that contract payment 

documents and records will contain inconsistent or out-of-date information; 

• Reviewing existing policy and procedure to determine program compliance inefficiencies. FSA will 

strengthen or eliminate inadequate program compliance controls to simplify the CRP payment process 

without compromising program integrity; and 

• Requiring county offices with potential improper payments identified to review the payment and 

determine if it was proper had the procedures been followed. If not, the county office must establish a 

receivable, and take action to recover the overpayment and afford appropriate appeal rights. 
OTHER ACCOMPANYING INFORMATION 

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310 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Agency Program Corrective Actions Planned 

FSA/CCC Disaster Programs 

(CDP) 

A large percentage of the improper payments were due to noncompliance with administrative manual 

controls. It is important to note that compliance with administrative procedures may have prevented the 

improper payments. For example, a producer did not have an AD-1026, Highly Erodible Land Conservation 

and Wetland Conservation Certification, on file. However, the producer is paid CDP benefits. It has been 

determined that the producer’s CDP payment is considered an improper payment. After the producer is paid, 

the county office requests an AD-1026. The producer files the AD-1026. In such a case, while the producer 

was entitled to receive the applicable payment, the county office did not follow administrative procedure. 

OMB’s Circular A-123, Appendix A, identifies administrative compliance as a key internal control issue. The 

A-123 Review Team found that a lack of compliance with administrative procedures accounts for a large 

percentage of potential improper payments. Administrative procedure includes obtaining appropriate 

authorizing signatures and obtaining and retaining required data, forms and supporting documentation. 

FSA’s corrective action plan for reducing improper payments includes the following actions developed under 

A-123’s plans: 

• Training field personnel on key controls and teaching the importance of control procedures and the 

potential risks of noncompliance. Training will be delivered through various means including in person 

and via AgLearn, a USDA enterprise-wide learning-management system. Communications and job aids 

then will follow to help facilitate compliance to controls; 

• Enhance individual accountability of controls by performing quarterly control testing on each employee’s 

program-related payment transactions. A sample of five producer payments will be selected for each 

employee for testing each quarter. The results from these quarterly tests will be included as part of the 

employee’s annual performance plans for the county, district and State executive directors; and 

• Integrate the employee’s individual results into his/her annual performance rating. 

Additionally, FSA’s corrective action plan for reducing improper payments includes: 

• Developing a Power Point training presentation addressing the statistical sample findings and overall 

CDP program compliance concerns. This PowerPoint presentation will be made available to all State 

executive directors and office employees to assist when training county office (CO) employees; and 

• Reiterating current program policies regarding program compliance through the issuances of national 

notices to State and county office personnel. 

FSA/CCC Noninsured 

Assistance Program 

(NAP) 

A large percentage of the improper payments were due to noncompliance with administrative manual 

controls. It is important to note that compliance with administrative procedures may have prevented the 

improper payments. For example, a producer did not have an AD-1026, Highly Erodible Land Conservation 

and Wetland Conservation Certification, on file. However, the producer was paid NAP benefits. It has been 

determined that the producer’s NAP payment is considered an improper payment. After the producer is paid, 

the county office requests an AD-1026. The producer files the form. In such a case, while the producer was 

entitled to receive the applicable payment, the county office did not follow administrative procedure. 

OMB Circular A-123, Appendix A, identifies administrative compliance as a key internal-control issue. The A123 Review Team found that a lack of compliance with administrative procedures accounts for a large 

percentage of improper payments. Administrative procedure includes obtaining appropriate authorizing 

signatures and obtaining and retaining required data, forms and supporting documentation. 

FSA’s corrective action plan for reducing improper payments includes the following actions developed under 

the A-123 Review Team’s plan: 

• Training field personnel on key controls and teach the importance of control procedures and the 

potential risks of noncompliance. Training will be delivered through various means including in person 

and via AgLearn, a USDA enterprise-wide learning management system. Communications and job aids 

then will follow to help facilitate compliance to controls; 

• Enhance individual accountability of controls by performing quarterly control testing on each employee’s 

program-related payment transactions. A sample of five producer payments will be selected for each 

employee for quarterly testing. The results from these tests will be included as part of the employee’s 

annual performance plans for the county, district and State executive directors; and 

• Integrate the employee’s individual results into his or her annual performance rating. 

• Additionally, FSA’s corrective action plan for reducing improper payments includes: Reiterating current 

program policies regarding program compliance through the issuances of national notices to State and 

county office personnel. 
OTHER ACCOMPANYING INFORMATION 

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F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 311 

Agency Program Corrective Actions Planned 

FS Wildland Fire 

Suppression 

Management 

The first part of the corrective action plan has been implemented. The centralization of finance and budget to 

a central location has allowed standardization of the payment process. Additionally, the Internal Quality 

Assurance organization is enacting the requirements of OMB’s A-123 Appendix A. Thus, the internal controls 

relating to payments have been evaluated. Efforts also are underway to remediate any processes where 

controls have failed. Finally, improper payment patterns found from reviewing the results of IPIA and 

Recovery Auditing will result in recommendations to agency leaders for improvement in specific areas.

RD Rental Assistance 

Program 

The agency now is implementing a corrective action plan because of the report’s findings. Thus, the results 

of the corrective actions are not reflected in this report and may have impacted the error rate positively. 

The error rate increase is attributed to a change in the sampling plan and the revision to the survey form 

which captured more responsive information. Quality assurance issues appeared to be less of a problem 

with this re-designed instrument. Consequently, the data reported in this report may be more reliable. RD 

notes that, although the error rate increased, the dollar impact of the errors fell from $27 million in FY 2005 to 

$22.4 million in FY 2006. Recommendations for the FY 2006 report are the following: 

• Errors found in this report must be followed up by Loan Servicers within the next three months and 

achieve resolution; 

• State offices must train field staff, borrowers and property managers in appropriate required 

documentation and follow-up with tenants and income-verifiers; 

• The national office will continue to pursue access to the U.S. Department of Health and Human 

Services new hires data to be shared with State offices. This legislation currently is being prepared for 

review by OMB; 

• 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. State 

office staff must ensure that such shared data are used by borrowers and property managers. The new 

regulation, 7 CFR part 3560, requires State offices to report quarterly on their efforts to participate in 

wage matching, where available; 

• The national office must complete its evaluation and restructuring of the supervisory visit procedure to 

strengthen and provide more focus when reviewing tenant files; 

• The national office should employ an independent contractor to undertake this study in the future.An 

independent contractor will provide objective and impartial analysis; 

• The national office will add to the Multi-Family Housing Program’s Servicing Goals a requirement for 

State offices to be more aggressive in educating and training borrowers/management agents on 

calculating and documenting tenant’s incomes; 

• Add to HB-2-3560, Multi-Family Housing Asset Management Handbook, Chapter 6 – Project 

Occupancy, a check sheet for property management agents to review when verifying assets, income 

and adjustments to income; 

• Add to HB-2-3560, Multi-Family Housing Asset Management Handbook, Chapter 6 – Project 

Occupancy, a check list of required tenant file documentation; and 

• Develop a “Fact Sheet” for MFH tenants explaining their responsibilities and rights regarding income 

disclosure and verification. 

RMA Federal Crop 

Insurance 

Corporation Program 

Fund 

RMA is in the second year of the three-year review cycle established to determine the improper payment 

rate for the Federal Crop Insurance Program. The agency identified a lower-than-expected rate in the first 

round of random sampling, 1.90 percent absolute error. Despite this finding, the agency will not have a 

completed benchmark established until the review of 2006 crop year indemnities has been completed and 

reported in 2008. RMA negotiated and executed a new Standard Reinsurance Agreement starting in 2005. 

That agreement emphasizes improved quality controls and enhanced penalties that together should 

encourage participating companies who sell and service Federal crop insurance policies to improve the 

improper payments rate. 

NRCS Farm Security and 

Rural Investment 

Programs 

Causes of improper payments identified in NRCS’ risk assessments for Farm Bill programs can be 

categorized into four areas; statutory compliance, program compliance, eligibility and payment calculation. 

Each of the six programs the agency sampled had their own unique program rules which were incorporated 

into its testing. Three external audits on programs and one on its contracting tool, ProTracts, were in various 

stages of finalization during the planning and conducting of NRCS’ IPIA work. As initial findings of these 

audits as they applied to IPIA were incorporated into its review, NRCS tried to not duplicate work and testing 

already performed. At of the time of the review, no audit finding indicated an improper payment was 

determined by an audit. Specific internal controls resulting from these audits would not have been in effect 

for its sample period but will be tested once implemented. 

After reviewing the 765 samples NRCS found 24 improper payments. Starting with FY 2005, EQIP payments 

were made through the agency’s new contracting tool, ProTracts. Business rules and internal controls built 

into ProTracts helped eliminate many of the types of improper payments we found last year. This year, the 
OTHER ACCOMPANYING INFORMATION 

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312 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Agency Program Corrective Actions Planned 

NRCS 

(Cont’d) 

 agency tested the internal controls that relate to program documentation, eligibility and payment calculation. 

NRCS found no instances of errors made by the software for program documentation and eligibility. It did 

find minor payment calculation errors due to a rounding routine under certain conditions and included these 

in the error rate. This error previously was known to exist and was corrected when discovered during the 

fiscal year. Our sampling of ProTracts originated payments (more than half of all samples) produced 5 of 

these errors. None were found after the rounding routine was corrected. 

Two manually calculated payment errors were found on program payments made outside of ProTracts. One 

was a transposition while the other was a typing error. 

Documentation issues for program compliance continue to be a source of improper payments. In all cases, 

the errors were on manually generated contracts and not related to ProTracts. NRCS found 11 improper 

payments where documents were not completed according to program rules or were missing entirely. These 

will be included in its report to leadership. NRCS is planning to convert all open manual contracts in the 

WHIP program to ProTracts in the next year. This would have eliminated 20 percent of the errors found in 

this program. The agency plans on strengthening its quality assurance testing and updating its contracting 

manual to address these issues. 

The potential for a participant to receive payment from more than one program for the same practice was 

found in two samples as the field offices completed the questionnaires. The Farm Bill prohibits payments for 

the same practice from different programs on the same tract of land in the same fiscal year. An April 26, 

2006, external audit issued by the General Accounting Office on CSP highlighted this issue. A management 

decision will be made when that audit is final and NRCS is developing plans to implement the appropriate 

corrective action. Meantime, field offices have corrected the contracts to prevent the duplication of payments. 

NRCS is working on a way to uncover these cross over payments. 

Participant eligibility was a target area for this year’s testing. Specifically, NRCS tested for Highly Erodible 

Land compliance, Wetland compliance and Adjusted Gross Income determinations. ProTracts has 

automated eligibility determinations for contracts and payments made through that tool. Field personnel 

would need to manually verify eligibility before making payments for programs outside of ProTracts. NRCS 

found four instances where eligibility determinations were not made prior to the payment. Two were manual 

transactions made outside of ProTracts. During the review, NRCS determined that the participant was in 

compliance when these two payments were made. Another error involved the adjusted gross income 

determination on a payment to an entity. This was a contract converted into ProTracts and not reconciled 

properly by the field at conversion. There is no record of receiving the AGI certification. The fourth error was 

a payment for a structural practice where the file did not support claims the participant had control of the 

land. 

Three errors were found in the calculation of easement purchase prices. One of our programs, the Wetland 

Reserve Program, underwent an OIG audit last year. The audit recommended improvements. NRCS has 

modified its conservation easement appraisal process to adopt procedures and processes for real estate 

acquisition consistent with Uniform Standards of Professional Appraisals and the Uniform Appraisals 

Standards for Federal Land Acquisition (aka “Yellow Book). NRCS has hired a chief appraiser who will 

review all administrative reviews of appraisals and conduct a technical review on all appraisals exceeding $1 

million. In February 2006, NRCS issued a national bulletin to address the remaining recommendation. These 

modifications to NRCS’ easement acquisition process shall prevent improper payments. Recovery of the 

improper amounts found in its sample will be attempted. 

NRCS found one occurrence of a payment charged to Farm and Ranch Land Protection (FRPP) in error. 

FRPP only permits payments to co-operating entities to supplement the purchase of easements. All other 

costs are to be borne by the partnering co-operating entity. In this instance the payment was attributed to 

human error in entering the fund code. The transaction was corrected to the appropriate fund. 

The results of this years sampling will be reported to leadership. This information will be passed down to all 

State offices so that all may benefit from weaknesses found or where improvements can be made. Where 

specific action is needed to correct an error or where recovery is warranted, the State conservationist will be 

contacted. 
OTHER ACCOMPANYING INFORMATION 

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F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 313 

IV. Based on the Rate(s) Obtained in Step III, Set Annual Improvement Targets 

through FY 2007. 

Improper Payment Reduction Outlook FY 2005 – FY 2008 

The following tables contain summary level information 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. 

Improper Payment Sampling Results ($ in millions) 

Reported in FY 2005 Reported in FY 2006 

Program Outlays IP% IP$ Outlays IP% IP$ 

Marketing Assistance Loan Program, FSA/CCC 6,400 0.70% 45 7,950 20.26% 1,611 

Food Stamp Program, FNS 24,358 5.88% 1,432 28,160 5.84% 1,645 

National School Lunch & School Breakfast Programs, FNS [Note #1] 6,407 N/A N/A 6,506 N/A N/A 

Women, Infants and Children, FNS [Note #2] 

Total Program 

Certification Error Component 

Vendor Error Component 

3,422 

3,422 

3,422 

N/A 

N/A 

N/A 

N/A 

N/A 

N/A 

3,525 

3,525 

3,525 

N/A 

N/A 

0.60% 

N/A 

N/A 

21 

Child and Adult Care Food Program, FNS [Note #2] 

Total Program 

FDC Homes – Tiering Decisions 

FDC Homes – Meal Claims 

2,061 

888 

888 

N/A 

N/A 

N/A 

N/A 

N/A 

N/A 

2,065 

864 

864 

N/A 

1.80% 

N/A 

N/A 

16 

N/A 

Milk Income Loss Contract Program, FSA/CCC [Note #3] 245 0.09% 0.2 9 N/A N/A 

Loan Deficiency Payments, FSA 453 1.00% 5 4,790 9.25% 443 

Direct and Counter-Cyclical Payments, FSA/CCC [Note #4] N/A N/A N/A 8,546 4.96% 424 

Conservation Reserve Program, FSA/CCC [Note #4] N/A N/A N/A 1,815 3.53% 64 

FSA Disaster Programs, FSA/CCC [Note #4] N/A N/A N/A 2,365 12.30% 291 

Noninsured Assistance Program, FSA/CCC [Note #4] N/A N/A N/A 109 22.94% 25 

Wildland Fire Suppression Management, FS [Notes #2 & #5] 

Total Program 

Component Sampled 

1,980 

497 

N/A 

3.70% 

NA 

18 

725 

285 

N/A 

2.49% 

N/A 

7 

Rental Assistance Program, RD [Note #6] 846 3.19% 27 569 3.49% 22 

Federal Crop Insurance Corporation Program Fund, RMA [Note #7] 3,170 0.89% 28 3,206 1.92% 62 

Farm Security and Rural Investment Programs 1,027 1.55% 16 1,375 0.22% 3 
OTHER ACCOMPANYING INFORMATION 

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314 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Detailed Breakout of Improper Payment Rates Reported in FY 2006 ($ in millions) 

2006 

Outlays 

2006 

Rate 

2006 

Improper 

Payments 

Incorrect 

Disbursements 

(Dollars) 

Incorrect 

Disbursements 

(Percentage) 

Incomplete 

Paperwork 

(Dollars) 

Incomplete 

Paperwork 

(Percentage) 

Marketing Assistance Loan (FSA) $7,950 20.26% $1,611 $17 0.21% $1,594 20.05% 

Loan Deficiency Payments (FSA) $4,790 9.25% $443 $53 1.11% $390 8.14% 

Direct and Counter-Cyclical (FSA) $8,546 4.96% $424 $67 0.78% $357 4.18% 

Conservation Reserve Program (FSA) $1,815 3.53% $64 $10 0.55% $54 2.98% 

FSA Disaster (FSA) $2,365 12.30% $291 $56 2.37% $235 9.94% 

Nonissured Assistance (FSA) $109 22.94% $25 $3 2.75% $22 20.18% 

Food Stamp (FNS) $28,160 5.84% $1,645 $1,645 5.84% $0 0.00% 

Women, Infants, and Children (FNS) $3,525 0.60% $21 $21 0.60% $0 0.00% 

Child and Adult Care Food (FNS) $2,065 1.80% $16 $16 0.77% $0 0.00% 

Wildland Fire Suppression Management 

(FS) $725 2.49% $7 $0 0.10% $7 2.39% 

Rental Assistance (RD) $569 3.49% $22 $22 3.87% $0 0.00% 

Federal Crop Insurance Corporation (RMA) $3,206 1.92% $62 $62 1.93% $0 0.00% 

Farm Security and Rural Investment/ 

Conservation Security $2,695 0.22% $3 $2 0.09% $1 0.02% 

Total $66,520 6.97% $4,634 $1,975 2.97% $2,659 4.00% 

Future Reduction Targets for Improper Payments ($ in millions)

FY 2007 Estimates FY 2008 Estimates FY 2009 Estimates 

Program Outlays IP% IP$ Outlays IP% IP$ Outlays IP% IP$ 

Marketing Assistance Loan Program, 

FSA/CCC 4,565 18.00% 685 3,205 14% 256 10,050 10.00% 251 

Food Stamp Program, FNS [Note #8] 30,588 6.20% 1,896 32,168 5.8% 1,866 TBD 5.7% TBD 

National School Lunch & School Breakfast 

Programs, FNS [Note #8] 7,623 TBD TBD 7,777 TBD TBD TBD TBD TBD 

Women, Infants and Children, FNS [Note #8] 5,170 TBD TBD 5,185 TBD TBD TBD TBD TBD 

Child and Adult Care Food Program, FNS 

[Note #8] 2,074 N/A N/A 2,074 N/A N/A TBD TBD TBD 

Milk Income Loss Contract Program, 

FSA/CCC 351 16.00% 56 330 9.00% 30 N/A N/A N/A 

Loan Deficiency Payments, FSA/CCC 4,839 9.00% 436 4,258 6.00% 255 5,257 4.00% 131 

Direct and Counter-Cyclical Payments, FSA 8,962 6.00% 538 7,317 5.00% 439 6,483 4.00% 259 

Conservation Reserve Program, FSA/CCC 1,973 8.20% 158 2,100 6.00% 168 2,236 4.00% 56 

Disaster Programs, FSA [Note #9] 159 17.00% 27 192 18.00% 33 N/A N/A N/A 

Noninsured Assistance Program, FSA/CCC 102 26.00% 312 309 17.00 

Wildland Fire Suppression Management, FS 407 1.00% 4 410 0.80% 3 406 0.60% 2 

Rental Assistance Program, RD 769 3.44% 26 781 2.94% 23 793 2.44% 19 

Federal Crop Insurance Corporation Program 

Fund, RMA [Note #10] 3,321 4.70% 156 3,300 4.60% 152 3,300 4.50% 149 

Farm Security and Rural Investment Programs 291 0.80% 2 482 0.60% 2 556 0.50% 2 
OTHER ACCOMPANYING INFORMATION 

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F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 315 

Note #1: The NSLP-SBP programs plan to report error rates for the 2005-2006 school year in the FY 2007 report. The 

national benefit status error rate reported in FY 2006 on applications for school year 2004-2005 is 4.3 percent. 

Note #2: WIC, CACFP and the Wildland Fire Suppression Management all tested components of their total program. 

WIC tested a component of the payment process on a sample of all outlays. CACFP tested a component of the payment 

process of a component of the total outlays. Wildland Fire Suppression Management tested all of the payment process 

on a component of the total outlays. While Wildland Fire Suppression Management tested the higher risk vendor 

payments, it did not test the lower risk outlays related to salaries. 

Note #3: MILC was not tested in FY 2006 due to very low outlays during FY 2005. Testing will resume in FY 2007 

reviewing outlays during FY 2006. MILC expires, September 30, 2007. Thus, no outlays are expected beyond FY 2007. 

Note #4: The DCP, CRP, CDP and NAP programs were declared high risk in FY 2006. No testing was performed or 

required in FY 2005. 

Note #5: USDA is revising the FY 2005 results for the Wildland Fire Suppression Management program. Only the 

portion of the program related vendor payments was sampled and the 3.7-percent error rate should be applied only to 

that component of the program. The remaining component of the program, salaries, was not considered susceptible to 

improper payments and not sampled. The entire program will be sampled for FY 2007 reporting. 

Note #6: FY 2005 and FY 2006 results were based on partial samples of the current fiscal year. Starting with FY 2007 

reporting, the statistical sample will be based on the entire prior fiscal year. This will result in both the FY 2006 and FY 

2007 reporting results being based on FY 2006 outlays. 

Note #7: Both the FY 2005 and FY 2006 reports show results of the 2004 crop year. The FY 2005 report was from a 

industry compliance review performed by the insurance companies. The FY 2006 report is based on an internal review 

performed by government staff. 

Note #8: FNS programs will develop FY 2008 estimated outlay projections and reduction targets as part of the FY 

2008 budget process. Currently, only the Food Stamp reduction target is available. 

Note #9: The program currently is not authorized in FY 2008 and does not have any estimated outlays. 

Note #10: RMA has completed the first third of a three year testing cycle. Until all three years are complete, RMA 

cannot statistically project an error rate. 

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 expanded its recovery audit program to seven additional agencies in FY 2006. The remaining smaller programs 

were excluded from the review. All agencies used an independent recovery audit firm working on contingency. 

Specific types of payment errors found during the course of the recovery audit process include: 

Open credits identified on vendor statements - $373,860.53; and 
OTHER ACCOMPANYING INFORMATION 

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316 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Duplicate payments $5,556.10 

Steps taken to reduce future errors include strengthening internal controls by providing information related to all 

recovered monies and the underlying transactions to management. Additionally, training that indicates the causes of 

improper payments made is provided to various Forest Service employees. 

The most successful method of identifying funds to be recovered has been the review of vendor statements. Vendor 

statement reviews for FY 2006 were delayed until August 2006. USDA anticipates that these reviews will result in 

significant recoveries during FY 2007. Most amounts identified during FY 2006 were due to the vendor statements 

reviews started in FY 2005. 

FY 2006 Recovery Auditing Results ($ in Million) 

Agency 

Component 

Amount 

Subject to 

Review for FY 

2006 Reporting 

Actual 

Amount 

Reviewed and 

Reported 

Amounts 

Identified 

for 

Recovery 

Amount 

Identified 

/Actual 

Amount 

Reviewed 

FY 2006 

Amounts 

Recovered 

[Note #12] 

FY 2005 

Amounts 

Recovered

Forest Service 2,385.313 2,385.313 0.005 0.00% 0.164 0.189 

Natural Resources 

Conservation Service 1,745.703 1,745.703 0.000 0.00% 0.000 N/A 

Agricultural Research 

Service 484.787 484.787 0.000 0.00% 0.000 N/A 

Animal Plant Health 

Inspection Service 815.532 815.532 0.374 0.05% 0.374 N/A 

Farm Service Agency 178.361 178.361 0.000 0.00% 0.000 N/A 

Food Safety and 

Inspection Service 89.636 89.636 0.000 0.00% 0.000 N/A 

Rural Development 152.272 152.272 0.000 0.00% 0.000 N/A 

Agricultural Marketing 

Service 93.061 93.061 0.000 0.00% 0.000 N/A 

All Others 1,604.000 0.000 N/A N/A N/A N/A 

USDA Total 7,548.665 5,944.665 0.379 0.01% 0.538 0.189 

Note #12 Amounts recovered in FY 2006 include some recoveries identified in FY 2005. 

VI. Describe the steps the agency has taken and plans to take (including time line) to ensure 

that agency managers (including the agency head) are held accountable for reducing 

and recovering improper payments. 

FSA 

The following steps have or will be taken to ensure agency managers are held accountable for reducing and recovering 

improper payments: 

The A-123 Project Team’s corrective action plan requires compliance testing as part of performance review criteria. 

To enhance the importance of compliance at the individual employee level, a sample of five producer payments will 

be selected for each employee for testing each quarter. The results from these quarterly tests will be included as part 

of the employee’s annual performance review and rating. Moreover, these results will be rolled up into the 

performance plans for the county, district and State executive directors; 
OTHER ACCOMPANYING INFORMATION 

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F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 317 

National and State office Federal managers must ensure that program policies and procedures are provided to State 

and county office employees accurately and on time. Federal managers also responsible, as reflected in the 

performance based rating measures, for overall program administration at the national level; 

All county office employees are charged with paying producers and following all administrative steps in doing so. 

When program payments are made improperly, the tool of disciplinary action is available; and 

The Deputy Administrator for Field Operations (DAFO) will facilitate necessary meetings among the respective 

program areas. These meetings organized by DAFO would discuss additional action necessary for senior 

management to address accountability. 

FNS 

FNS 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. The goal for the Food Stamp Program is to continue to reduce the 

error rate. The agency goals and priorities are incorporated into each manager’s performance plan. 

FS 

The entire Albuquerque Service Center management team is held accountable by performance metrics that include 

compliance with the Improper Payments Information Act. Additionally, the agency chief financial officer will provide 

disbursement performance information to the agency head as part of the performance appraisals for senior leadership. 

RD 

RD has incorporated all the goals and objectives of the President’s Management Agenda (PMA) including IPIA in the 

performance standards for all senior executive service positions. Additionally, the field offices will incorporate a new 

servicing goal to implement reduction actions as part of their servicing goal compliance requirements. 

RMA 

RMA has revised its strategic plan to provide results to enhance accountability. It also has established procedures to 

ensure RMA management takes future corrective actions to address program vulnerabilities. Additionally, a strategic 

objective element was been placed into every employee’s performance plan agreement beginning in FY 2005. 

NRCS 

NRCS has incorporated all of PMA’s goals and objectives, including IPIA, in the performance standards for all senior 

executive service positions. These also are planned to be included in the regional assistant chiefs and state 

conservationist performance plans this year. 

VII A. Describe whether the agency has the information systems and other infrastructure it 

needs to 

reduce improper payments to the levels the agency has targeted. 

VII B. If the agency does not have such systems and infrastructure, describe the resources 

the agency requested in its FY 2007 budget submission to Congress to obtain the necessary 

information systems and infrastructure. 

While USDA is creating information systems and infrastructure to reduce improper payments, especially for programs 

susceptible to significant risk, efforts in some programs are constrained by limited resources. USDA has worked closely 
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318 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

with OMB to develop action plans that focus available resources on the most critical needs with regard to improper 

payment measurement and risk reduction. 

VIII. Describe any statutory or regulatory barriers which may limit the agencies’ corrective 

actions in reducing improper payments and actions taken by the agency to mitigate the 

barriers’ effects. 

FSA/CCC 

The Department of Agriculture Reorganization Act of 1994, Section 281 provides that “[E]ach decision of a State, 

county, or area committee or an employee of such a committee, made in good faith in the absence of misrepresentation, 

false statement, fraud, or willful misconduct shall be final not later than 90 calendar days after the date of filing of the 

application for benefits, [and] ...no action may be taken...to recover amounts found to have been disbursed as a result of 

the decision in error unless the participant had reason to believe that the decision was erroneous.” This statue commonly 

is referred to the “Finality Rule.” 

FNS 

The 2002 Farm Bill restricts the liability levels States can be sanctioned due to high error rates. It also restricts the 

amount of bonus funding available to States that do a good job reducing and maintaining a low error rate. Additionally, 

in many instances the goal of providing easy access to benefits must be balanced with the goal of reducing improper and 

erroneous payments. While the risks involved vary by program, some general characterizations can be made: 

Program administration is decentralized and can involve a myriad of governmental and non-governmental 

organizations; 

States and localities tend to focus on managing local funds, rather than Federal funds; and 

Proper implementation of nutrition-assistance programs requires a high accuracy rate. 

IX. Additional comments, if any, on overall agency efforts, specific programs, best practices, 

or 

common challenges as a result of IPIA implementation. 

USDA has no additional comments. 
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F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT 319 

Appendix C—Table of Exhibits 

Exhibit 1: Headquarters Organization..............................................................................................................3

Exhibit 2: FY 2006 and 2005 USDA Program Obligations Dedicated to Strategic Goals ..............................5

Exhibit 3: FY 2006 and 2005 USDA Staff Years Dedicated to Strategic Goals .............................................5

Exhibit 4: USDA Scorecard for FY 2006 ........................................................................................................6

Exhibit 5: Material Weaknesses Increased Slightly.......................................................................................34

Exhibit 6: Summary of Outstanding Material Weaknesses and Estimated Completion Dates ......................34

Exhibit 7: Initiatives Completed ....................................................................................................................38

Exhibit 8: Initiatives To Be Completed .........................................................................................................38

Exhibit 9: Decrease in Total Open Audit Inventory ......................................................................................39

Exhibit 10: Audit Follow-Up Definitions ........................................................................................................40

Exhibit 11: Inventory of Audits with Disallowed Costs ..................................................................................41

Exhibit 12: Distribution of Adjustments to Disallowed Costs.........................................................................41

Exhibit 13: Inventory of Audits with Funds To Be Put to Better Use .............................................................41

Exhibit 14: Increase in Audits Open One or More Years Past Management Decision Date ...........................41

Exhibit 15: Distribution of Audits Open One or More Years Past the Management Decision Date, Disallowed 

Costs and FTBU............................................................................................................................42

Exhibit 16: Audits Open One Year or More Past the Management Decision Date and Behind Schedule.......42

Exhibit 17: Increase U.S. Export Opportunities...............................................................................................52

Exhibit 18: Trends in Expanding and Retaining Market Access .....................................................................52

Exhibit 19: Support Foreign Food Assistance .................................................................................................55

Exhibit 20: Trends in Supporting Foreign Food Assistance ............................................................................55

Exhibit 21: Support Improvement in Foreign Countries’ Trade Policies ........................................................55

Exhibit 22: Increase U.S. Export Opportunities...............................................................................................58

Exhibit 23: Trends in Expanding and Retaining Market Access .....................................................................58

Exhibit 24: Increase the Use of Biobased Products .........................................................................................62

Exhibit 25: Agricultural Statistics Reports Released On-Time .......................................................................65

Exhibit 26: Trends in Agricultural Statistics Reports Released On-Time .......................................................65

Exhibit 27: Providing Tools to Help Farmers and Ranchers Stay Economically Viable.................................71

Exhibit 28: Trends in Providing Tools To Keep Farmers and Ranchers Economically Viable.......................71

Exhibit 29: Strengthen Rural Businesses.........................................................................................................75

Exhibit 30: Trends in Creating or Saving Jobs ................................................................................................75

Exhibit 31: Improving Rural Quality of Life Through Homeownership Opportunities ..................................80

Exhibit 32: Trends in Rural Home Ownership ................................................................................................80

Exhibit 33: Improving Rural Quality of Life Through Water and Waste Disposal Facilities..........................81

Exhibit 34: Trends in Water and Waste Disposal Service ...............................................................................81

Exhibit 35: Improving Rural Quality of Life Through Community Facilities.................................................81

Exhibit 36: Trends in Community Facilities....................................................................................................81

Exhibit 37: Improving Rural Quality of Life Through Electric Facilities .......................................................81

Exhibit 38: Trends in Electric Facilities ..........................................................................................................81

Exhibit 39: Improving Rural Quality of Life Through Telecommunications Facilities...................................82

Exhibit 40: Trends in Telecommunications Facilities .....................................................................................82
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320 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

Exhibit 41: Pathogen Reduction (Food Inspection)......................................................................................... 86

Exhibit 42: Trends in Pathogen Reduction (Food Inspection)......................................................................... 86

Exhibit 43: Public Health Awareness .............................................................................................................. 88

Exhibit 44: Trends in Public Health Awareness .............................................................................................. 88

Exhibit 45: Ensure the Capabilities of Plant and Diagnostic Laboratories are Improved................................ 90

Exhibit 46: Trends Improving the Capabilities of Diagnostic Laboratories .................................................... 90

Exhibit 47: Strengthen the Effectiveness of Pest and Disease Surveillance and Detection Systems............... 95

Exhibit 48: Trends in Strengthening the Effectiveness of Pest and Disease Surveillance and Detection Systems

...................................................................................................................................................... 95

Exhibit 49: Improve Access to Nutritious Food ............................................................................................ 101

Exhibit 50: Trends in Improving Access to Nutritious Food.......................................................................... 101

Exhibit 51: Promoting Healthier Eating Habits and Lifestyles...................................................................... 104

Exhibit 52: Trends to Promote Healthier Eating Habits and Lifestyles......................................................... 104

Exhibit 53: Increase Efficiency in Food Management................................................................................... 107

Exhibit 54: Trends in Increased Efficiency in Food Management ................................................................ 108

Exhibit 55: Healthy Watersheds, High Quality Soils and Sustainable Ecosystems....................................... 112

Exhibit 56: Trends in Application of Comprehensive Nutrient Management Plans...................................... 112

Exhibit 57: Enhanced Soil Quality ................................................................................................................ 116

Exhibit 58: Trends in Soil Quality Protection................................................................................................ 117

Exhibit 59: Hazardous Fuel Reduction.......................................................................................................... 124

Exhibit 60: Trends in Treatment of Hazardous Fuel...................................................................................... 125

Exhibit 61: Sustainable Forests and Grasslands ............................................................................................ 125

Exhibit 62: Trends in Protection of Non-federal Forests and Grasslands...................................................... 125

Exhibit 63: Improved Wildlife Habitat.......................................................................................................... 128

Exhibit 64: Trends in Wildlife Habitat Enhancement.................................................................................... 128
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Appendix D—Acronyms 

AALO – Agency Audit Liaison Officials 

ABAWD – Able-Bodied Adults Without Dependents 

AHMS – Animal Health Monitoring and Surveillance 

AI – Avian Influenza 

AIT – Assessment Implementation Team 

ALLRTE – All Ready to Eat 

AMP – Asset Management Plan 

ARMS – Agricultural Resources Management Survey 

ARS – Agricultural Research Service 

ART – Account Relationship Tool 

ASB – Agricultural Statistics Board 

ASEAN – Association of South East Asian Nations 

ASSERT – Automated Security Self-Elevation and Remediation Tracking 

ATM – Audit Tracking Module 

AWCC – Agricultural Wildlife Conservation Center 

B&I – Business and Industry 

BBP – Building Block Plan 

BEA – Bureau of Economic Analysis 

BSE – Bovine Spongiform Encephalopathy 

CACFP – Child and Adult Care Food Program 

CAFTA – Central American Free Trade Agreement 

CAP – Combined Application Projects 

CCAP – Child Care Assessment Project 

CCC – Commodity Credit Corporation 

CCPI – Cooperative Conservation Partnership Initiative 

CDC – U.S. Centers for Disease Control and Prevention 

CEAP – Conservation Effects Assessment Project 

CFP – Conference of Food Protection 

CHRP – Citrus Health Response Plan 

CNMP – Comprehensive Nutrient Management Plan 

CNPP – Center for Nutrition Policy and Promotion 

CORP – County Office Review Program 

CRP – Conservation Reserve Program 

CSP – Conservation Security Program 

CSREES – Cooperative State Research, Education and Extension 

Service 

CTA – Conservation Technical Assistance 

CWPP – Community Wildlife Protection Plan 

DAFO – Deputy Administrator for Field Operations 

DC – Disallowed Costs 

DCP – Direct and Counter-Cyclical Payments 

DCIA – Debt Collection Improvement Act 

DOI – United States Department of the Interior 

e-LDP – Electronic Loan Deficiency Payment 

EA – Enterprise Architecture 

EAB – Emerald Ash Borer 

ECMM – Enterprise Correspondence Management Module 

EDI – Electronic Data Interchange 

EPP – Emerging Plant Pest 

EQIP – Environmental Quality Incentives Program 

ERS – Economic Research Service 

EU-25 – European Union 

FAPSIM – Food and Agricultural Policy Simulator 

FB4P – Federal Biobased Products Preferred Procurement Program 

FCIC – Federal Crop Insurance Corporation 

FDCH – Family Day Care Homes 

FDMS – Federal Docket Management System 

FFE – The McGovern-Dole International Food for Education and Child 

Nutrition Program 

FLP – Farm Loan Program 

FLPIDS – Farm Loan Program Information Delivery System 

FMFIA – Federal Managers’ Financial Integrity Act 

FMLOB – Financial Management Line of Business 

FMMI – Financial Management Modernization Initiative 

FNS – Food and Nutrition Service 

FRPC – Federal Real Property Council 

FRPP – Farm and Ranch Land Protection 

FS – Forest Service 

FSA – Farm Service Agency 

FSP – Food Stamp Program 

FSRIA – Farm Security and Rural Investment Act of 2002 

FTA – Free Trade Agreement 

FTBU – Funds to Be Put to Better Use 

FY – Fiscal Year 

GAO – Government Accountability Office 

GLCI – Grazing Lands Conservation Initiative 

GMP – Good Manufacturing Practices 

GMSS – Global Marketing Support Services 

GWSS – Glassy-Winged Sharpshooter 

HACCP – Hazard Analysis and Critical Control Point 

HEI – Health Eating Index 

HFI – Healthy Forest Initiative 

HFRA – Healthy Forests Restoration Act of 2003 

HSPD-9 – Homeland Security Presidential Directive 9 

IAS – Integrated Acquisition System 

IICA – Inter-American Institute for Cooperation on Agriculture 

IOU – Investor Owned Utility 

IPIA – Improper Payments Information Act 
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322 F Y 2006 P ERFORMANCE AND A CCOUNTABILITY R EPORT

ISO – International Organization for Standardization 

IT – Information Technology 

MAL – Marketing Assistance Loan 

MFIS – Multi-Family Housing Information System 

MILC – Milk Income Loss Contract 

MWM – Master Woodland Manager 

NACMCF – National Advisory Committee on Microbiological Criteria for 

Foods 

NAFTA – North American Free Trade Agreement 

NAHSS – National Animal Health Surveillance System 

NAHLN – National Animal Health Laboratory Network 

NAIS – National Animal Identification System 

NAP – Noninsured Assistance Program 

NCES – National Center for Educational Statistics 

NDB – National Data Bank 

NDVI – Normalized Difference Vegetation Index 

NECX – North East Correctional Center 

NHANES – National Health and Nutrition Examination Survey 

NITC – National Information Technology Center 

NRCS – Natural Resources Conservation Service 

NSLP – National School Lunch Program 

NSS – The 2002 National Security Strategy of the United States 

OCFO – Office of the Chief Financial Officer 

OCIO – Office of the Chief Information Officer 

OEPNU – The Office of Energy Policy and New Uses 

OIG – The Office of Inspector General 

OMB – The U.S. Office of Management and Budget 

OPM – The U.S. Office of Personnel Management 

ORAS – Operations Review and Analysis Staff 

PAM – Polyacrylamide 

PART – Program Assessment Rating Tool 

PC – Plum Curculio 

PMA – Performance Management Agenda 

POAM – Plan of Action and Milestones 

PRCH – Purchase Order System 

PREP – Pathogen Reduction Enforcement System 

PP&E – Property, Plant and Equipment 

PRS – Performance Results System 

QC – Quality Control 

QSVP – Quality System Verification Program 

R&D – Research and Development 

RD – Rural Development 

RFE – Request for Information 

RMA – Risk Management Agency 

RND – Results Not Demonstrated 

RTE – Ready-to-Eat 

SAFE – Safety Awareness in the Food Environment 

SAT – Senior Assessment Team 

SBP – School Breakfast Program 

SCN – Soybean Cyst Nematode 

SCOAP – Sate and County Office Automation Project 

SEBAS – Socio-Economic Benefits Assessment System 

SFA – School Food Authority 

SMCC – Senior Management Control Council 

SOD – Sudden Oak Death 

SPOTS – Specific Placement of Treatments 

SPS – Sanitary and Phytosanitary 

SRA – Standard Reinsurance Agreement 

TCB – Trade Capacity Building 

TFP – Thrifty Food Plan 

TOP – Treasury Offset Program System 

TPA – Trade Promotion Authority 

TSC – Technical Service Center 

TTPP – Tobacco Transition Payment Program 

USAID – United States Agency for International Development 

USDA – United States Department of Agriculture 

USTR – United States Trade Representative 

WAOB – World Agricultural Outlook Board 

WEPS – Wind Erosion Protection System 

WFP – World Food Program 

WIC – The Special Supplemental Nutrition Program for Women, Infants 

and Children 

WRP – Wetlands Reserve Program 

WTO – World Trade Organization