Additional copies of this Performance and Accountability Report (PAR) 

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

To request paper copies of this report or other reports 

referenced herein, e-mail your 

specific request to pm@usda.gov. 

If you have comments or questions, e-mail them to pm@usda.gov. 

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

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

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

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

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

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

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

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

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

An Overview of the United States Department of Agriculture ........................................3 

Resources.......................................................................................................................7 

Performance Goals and Results ......................................................................................8 

Future Demands, Risks, Uncertainties, Events, Conditions and Trends ........................11 

Implementation of President’s Management Agenda ....................................................11 

Financial Statement Highlights ....................................................................................13 

Management Accountability And Control ....................................................................15 

II. Annual Performance Report .................................................................................. 17

STRATEGIC GOAL 1: Enhance Economic Opportunities for 

Agricultural Producers .........................................................................................18 

STRATEGIC GOAL 2: Support Increased Economic Opportunities and Improved 

Quality of Life in Rural America..........................................................................42 

STRATEGIC GOAL 3: Enhance Protection and Safety of the Nation’s 

Agriculture and Food Supply................................................................................53 

STRATEGIC GOAL 4: Improve the Nation’s Nutrition and Health ............................73 

STRATEGIC GOAL 5: Protect and Enhance the Nation’s Natural Resource Base 

and Environment ..................................................................................................85 

FY 2003 Program Obligations and Staff Years...........................................................106 

Data Assessment of Performance Measures................................................................114 

III. Systems, Controls And Legal Compliance........................................................ 128

Inspector General Act Amendments of 1988 ..............................................................128 

Management’s Report on Final Action (Audit Follow-up)..........................................128 

Federal Managers’ Financial Integrity Act Report on Management Controls..............135 

IV. Consolidated Financial Statements................................................................... 143

Notes to the Consolidated Financial Statements .........................................................149 

Required Supplementary Stewardship Information.....................................................197 

Required Supplementary Information.........................................................................209 

V. Report of the Office of Inspector General and Management’s Response....... 223

Appendices ............................................................................................................... 256

 Appendix A – Management Challenges............................................................. 257 

 Inspector General’s Statement...............................................................................257 

 Management’s Response to the OIG Report on Major USDA Management 

Challenges (September 2003) ....................................................................................... 265 

 Status of FY 2002 Major Management Challenges and Program Risks .......................... 273 

 Appendix B – Erroneous Payment Details ........................................................ 283 

 Appendix C – Exhibits......................................................................................... 288

 Appendix D – Acronyms ..................................................................................... 290

USDA Performance and Accountability Report for FY 2003

1 

MESSAGE FROM THE SECRETARY 

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

the Performance and Accountability Report for FY 2003, which provides 

the results of our performance and financial management. 

The report describes how USDA: 

• Implemented the key provisions of the Farm Security and Rural 

Investment Act of 2002; 

• Assisted farmers and ranchers affected by severe weather conditions; 

• Improved agricultural trade; 

• Protected public safety, homes and resources during another severe 

wildland fire season; 

• Supported the increased use of such renewable fuels as ethanol and 

biodiesel through research and incentives to spur production; 

• Improved and expanded conservation programs; 

• Spurred economic growth and created jobs in rural communities; 

• Invested in electronic access to serve our customers better and be more 

efficient; 

• Supported the creation of better community infrastructure, such as new 

water systems, hospitals, schools, housing projects and processing 

facilities; 

• Provided food-program assistance to improve the health and nutrition 

of low-income people and children; and 

• Protected the food and agriculture sector against intentional and 

accidental threats. 

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

Report section of this document. Except for data limitations explicitly discussed, I hereby provide 

reasonable assurance that the data herein are valid and reliable. 

This report satisfies reporting requirements of the Federal Managers’ Financial Integrity Act (FMFIA). 

FMFIA ensures that Federal programs are operated efficiently, effectively and in compliance with 

relevant laws. Therefore, except for those areas for improvement identified in this document, USDA is 

providing reasonable assurance that our systems of internal control comply with FMFIA’s objectives. 

FMFIA also requires financial systems to conform to certain standards, principles and other specifications 

to ensure timely, relevant and consistent financial information. Based on the work performed during FY 

2003 and prior years, the Department’s integrated financial-management system complies substantially 

with the objectives of FMFIA, with the exception of those financial system nonconformances identified in 

this report. 

USDA, “the people’s department,” is improving the quality of life for all Americans. I am proud of our 

accomplishments and the employees responsible for these accomplishments. 

Ann M. Veneman 

Secretary of Agriculture
USDA Performance and Accountability Report for FY 2003

2 

MESSAGE FROM THE CHIEF FINANCIAL OFFICER 

I am pleased to report that numerous valuable results were achieved in 

financial management in Fiscal Year 2003 at the United States Department of 

Agriculture (USDA). 

Through the individual excellence and collective successes of USDA’s 

associates, business partners and customers, we created value together by 

accomplishing break-through results, such as: 

• Sustaining a clean financial audit opinion in FY 2003 for the USDA, as 

was done for the first time ever in FY 2002, evidencing the Department’s 

improved accountability, internal control and data integrity; 

• Making substantial progress in reducing USDA’s material deficiencies 

that now number 8, a 58% reduction from 19 at the start of FY 2003 and a 

75% reduction from 32 just 24 months ago at the start of FY 2002. Our 

goal is to eliminate all material weaknesses in FY 2004; 

• Improving the productivity of cash used in USDA’s lending programs by 

as much as $300 million annually through more effective collection of 

delinquent debt; 

• Developing a useful strategic plan for USDA leading the way for the 

Department to align strategic direction, transform operating budgets and 

integrate more effective performance measures into its management 

processes throughout the enterprise; 

• Implementing information technology solutions relating to major 

corporate financial management and administrative systems financed by 

resourceful use of funds; 

• Expanding the customer base and effectiveness of the National Finance 

Center in Government-wide payroll operations and Federal employee 

services, retirement plan record-keeping and accounting operations; 

• Reforming the management of travel cards within USDA by establishing 

a “zero tolerance” policy for travel card misuse, removing more than $1 

billion of excess credit exposure by lowering credit and cash advance 

limits on more than 90% of cards, and reinforcing proper behavior 

through training and employee communications; and 

• Adding depth and breadth to USDA’s financial management leadership, 

managerial, supervisory and first-line personnel through career 

development, training and recruiting. 

USDA is focused on providing sound management of the resources under our stewardship. The 

extraordinarily valuable results in financial management at USDA in the past two years have been 

achieved with existing taxpayer funding by skilled career Government executives and dedicated 

associates. 

We are honored to serve America. 

Edward R. (Ted) McPherson 

Chief Financial Officer 
USDA Performance and Accountability Report for FY 2003 

Management Discussion and Analysis 

3 

I. MANAGEMENT DISCUSSION AND ANALYSIS 

AN OVERVIEW OF THE UNITED STATES DEPARTMENT OF 

AGRICULTURE 

Exhibit 1: Organization Chart 

 

Deputy Secretary 

James R. Moseley

General Counsel 

Nancy S. Bryson

Under Secretary 

for 

Farm and Foreign 

Agricultural Services 

J.B. Penn

Under Secretary 

for 

Rural Development 

Thomas C. Dorr

Inspector General 

Phyllis K. Fong

Director of 

Communications 

(Acting) 

Alisa Harrison 

Executive Operations*

Under Secretary 

for 

Food, Nutrition and 

Consumer Services 

Eric M. Bost

Under Secretary 

for 

Food Safety 

Elsa Murano

Under Secretary

for 

Research, Education 

and Economics 

Joseph Jen

Under Secretary 

for 

Marketing and 

Regulatory Programs 

William Hawks

Under Secretary 

for 

Natural Resources 

and Environment 

Mark Rey

Chief Financial 

Officer 

Edward R. McPherson 

Chief Information 

Officer 

Scott Charbo

Assistant Secretary

for 

Congressional 

Relations

Mary Waters 

Assistant Secretary 

for 

Administration 

(Acting) 

John Surina 

Assistant Secretary 

for 

Civil Rights 

Vernon Parker 

Secretary 

Ann M. Veneman

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

 Office of the Chief Economist and the National Appeals Division.

Mission Statement: USDA provides leadership on food, agriculture, natural resources and related issues based on sound public policy, the best-available 

science and efficient management.

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

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

United States (U.S.) economy has changed. USDA improves the quality of life for the American people 

by: 

• Enhancing economic opportunities and improving the quality of life for farmers and ranchers; 

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

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

• Supporting the sound, sustainable development of rural communities; 

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

• Working to improve Americans’ nutrition and reduce hunger. 
USDA Performance and Accountability Report for FY 2003 

Management Discussion and Analysis 

4 

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

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

rapidly diversifying, highly competitive business environment that is driven by sophisticated consumers. 

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

2003 Annual Performance Plan. There are five goals: 

• Goal 1 is to enhance economic opportunities for agricultural producers. 

• Goal 2 is to support increased economic opportunities and improved quality of life in rural America. 

• Goal 3 is to enhance the protection and safety of the Nation’s agriculture and food supply. 

• Goal 4 is to improve the Nation’s nutrition and health. 

• Goal 5 is to protect and enhance the Nation’s natural resource base and environment. 

To address the President’s Management Agenda (PMA), USDA has focused its management direction to: 

• Improve human-capital management, including competitive sourcing; 

• Enhance financial-management efforts; 

• Provide better electronic access to programs; and 

• Integrate budget formulation and accountability for performance. 

The Farm Security and Rural Investment Act of 2002 (FSRIA) governs Federal farm programs for the six 

years following its May 13, 2002, enactment. FSRIA’s provisions support the production of a reliable, 

safe and affordable food and fiber supply; promote stewardship of agricultural land and water resources; 

facilitate access to American farm products at home and abroad; encourage continued economic and infrastructure development in rural America; and ensure continued research to maintain an efficient and 

innovative agricultural and food sector. 

Highlights of FSRIA: 

• Alters the farm-payment program and introduces counter-cyclical farm income support; 

• Expands conservation programs and emphasizes farm environmental practices; 

• Modifies rules to make more borrowers eligible for Federal farm credit assistance; 

• Restores food-stamp eligibility for legal immigrants; 

• Adds several commodities to those requiring country-of-origin labeling; 

• Introduces animal welfare provisions; and 

• Introduces new biobased-product/bioenergy programs and restores existing programs. 

As USDA moves into the second year of FSRIA, its accomplishments include: 

• Implemented all key commodity program provisions quickly and efficiently; 

• Provided more than $10 billion in program payments for agricultural producers; 

• Released more than $1.8 billion for conservation assistance on working lands, including funding for 

Farm Bill and appropriated programs; 

• Implemented revisions to the Conservation Reserve Program with general sign-up, May 5-30, 2003; 

• Provided an additional $10 million for the Market Access Program and other additional funds for market-development activities; 

• Completed implementing the Technical Assistance for Specialty Crops Program, allocating $2 million 

in funding; 

• Launched the McGovern-Dole International Food for Education and Child Nutrition Program, allocating $100 million of funding to support school feeding and nutrition programs in developing countries; 

• Provided access to Food Stamp Program benefits for newly qualified legal immigrants; 

• Awarded substantial funds for rural-development assistance, including value-added grants, and water 

and waste-disposal funds; 
USDA Performance and Accountability Report for FY 2003 

Management Discussion and Analysis 

5 

• Published final regulations and solicitation of applications for an anticipated $1.4 billion in rural 

broadband loans and loan guarantees; 

• Awarded $22 million in grants to 114 renewable-energy systems and energy-efficiency improvement 

projects under the Renewable Energy Systems and Energy Efficiency Improvement Program; 

• Awarded $16 million in grants (the Department of Energy awarded an additional $7 million) to 15 

biomass research and development projects under the Biomass Research and Development Program; 

• Held 11 customer-outreach sessions across the country and in Puerto Rico; and 

• Installed Vernon Parker as the first USDA Assistant Secretary for Civil Rights. 

Mission Areas 

The mission areas are a collection of agencies that work together to support USDA’s goals. Some of the 

mission areas below may support more than one of the Department’s aforementioned strategic goals. 

Natural Resources and Environment Mission Area 

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 land’s health 

through sustainable management. FS manages the 192-million acres of National Forests and Grasslands 

for the American people. NRCS assists farmers, ranchers and others to manage private lands for environmental and economic sustainability. Both NRE agencies work in partnership with Tribal, State and local 

governments, communities, related groups and Federal agencies to protect the Nation’s soils, watersheds 

and ecosystems. 

Farm and Foreign Agricultural Services Mission Area 

The Farm and Foreign Agricultural Services (FFAS) mission area is comprised of the Farm Service 

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

FFAS mission area improves the livelihood of American farmers and ranchers through numerous programs and activities. FFAS programs strengthen American agricultural markets by stabilizing farm 

incomes, conserving the country’s natural resources, providing credit and risk-management products and 

services, and developing and expanding international markets. Working together, these programs contribute to making the American agricultural sector more productive and sustainable for the future. 

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

support and protect farm income and prices; help maintain balanced and adequate supplies of agricultural 

commodities, including food products, feeds and fibers; and help distribute these commodities efficiently. 

CCC delivers commodity, credit, export, conservation, disaster and emergency-assistance programs that 

help improve and strengthen the agricultural economy. 

Rural Development Mission Area 

The Rural Development mission area provides economic opportunities and improves the quality of life in 

rural America. This mission area addresses rural America’s need for basic utility services, single- and 

multi-family housing, and health and other community facilities while supporting new job opportunities. 

Food, Nutrition and Consumer Services Mission Area 

The Food, Nutrition and Consumer Services mission area operates through the Food and Nutrition Service (FNS) and the Center for Nutrition Policy and Promotion (CNPP). FNS administers Federal 

nutrition-assistance programs, including the Food Stamp Program, the Child Nutrition Programs and the 

Special Supplemental Nutrition Program for Women, Infants and Children. These programs provide ac-
USDA Performance and Accountability Report for FY 2003 

Management Discussion and Analysis 

6 

cess to nutritious food and support for better dietary habits for one in five Americans each year. CNPP 

links scientific research to the nutritional needs of consumers through science-based dietary guidance.

Food Safety Mission Area 

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

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

safety, and inspects and regulates these products in interstate and international commerce, including imported products. This mission area has significant responsibilities coordinating efforts among various 

Federal agencies, including the Department of Health and Human Services and the Environmental Protection Agency. 

Research, Education and Economics Mission Area 

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

and competitive U.S. food and fiber system. REE also strives to build strong and healthy communities, 

families and youth through integrated research, analysis and education. REE is composed of the Agricultural Research Service; the Cooperative State Research, Education and Extension Service; the Economic 

Research Service (ERS); and the National Agricultural Statistics Service, which support all USDA Agencies and constituents. 

Marketing and Regulatory Programs Mission Area 

The Marketing and Regulatory Programs (MRP) mission area is made up of the Agricultural Marketing 

Service; the Animal and Plant Health Inspection Service; and the Grain Inspection, Packers and Stockyards Administration. 

MRP facilitates the domestic and international marketing of U.S. agricultural products. It also helps protect the agricultural sector from plant and animal health-related threats while improving competitiveness 

and the economy. The mission area also helps protect U.S. borders from agricultural pests and diseases. 

Its agencies actively participate in setting national and international standards via Federal-State cooperation and international organizations. MRP also helps ensure the humane care and treatment of animals. 

Departmental Offices 

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

administrative functions. They support agencies in the delivery of services to all USDA customers and 

stakeholders. 
USDA Performance and Accountability Report for FY 2003 

Management Discussion and Analysis 

7 

RESOURCES 

Congressional appropriations are the primary funding source for USDA operations. FY 2003 program 

obligations totaled $118,850 million, an increase of $16,025 million compared to FY 2002. Staff-year 

resources totaled 113,759, rising 1,426 compared to FY 2002. The following charts illustrate total program obligations and staff years for FY 2003. 

Exhibit 2: FY 2003 USDA Program Obligations Dedicated to Strategic Goals 

USDA Program Obligations 

Dedicated to Strategic Goals 

FY 2003 

Actual 

Program Obligations ($ Mil) $118,850 

Strategic Goal 5: 

Protect and Enhance 

the Nation's Natural 

Resource Base and 

Environment

Strategic Goal 4: 

Improve the Nation's 

Nutrition and Health

Strategic Goal 3: 

Enhance Protection 

and Safety of the 

Nation's Agriculture 

and Food Supply

Strategic Goal 1: 

Enhance Economic 

Opportunities for 

Agricultural Producers

Strategic Goal 2: 

Support Increased 

Economic 

Opportunities and 

Improved Quality of 

Life in Rural America

36% 

39% 

13% 

Program 

Obligations 

3% 

10% 
USDA Performance and Accountability Report for FY 2003 

Management Discussion and Analysis 

8 

PERFORMANCE GOALS AND RESULTS 

Of the 40 performance goals contained in USDA’s FY 2003 Annual Performance Plan, 33 were met or exceeded, 4 were reported as deferred (unable to report progress until a specified date) and 3 were unmet. The 

Performance Section of this report provides analyses of these results. Information supporting the data’s 

quality and reliability is contained in the Data Assessment of Performance Measures section. The following 

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

the Department’s performance results. 

Exhibit 3: FY 2003 USDA Staff Years Dedicated to Strategic Goals 

USDA Staff Years 

Dedicated to Strategic Goals 

FY 2003 Actual 

Staff Years 113,759 

Strategic Goal 5: 

Protect and Enhance 

the Nation's Natural 

Resource Base and 

Environment

Strategic Goal 4: 

Improve the Nation's 

Nutrition and Health

Strategic Goal 3: 

Enhance Protection 

and Safety of the 

Nation's Agriculture 

and Food Supply

Strategic Goal 1: 

Enhance Economic 

Opportunities for 

Agricultural 

Producers

Strategic Goal 2: 

Support Increased 

Economic 

Opportunities and 

Improved Quality of 

Life in Rural America

Staff Years 

47% 

23% 

8% 

20% 

3% 
USDA Performance and Accountability Report for FY 2003 

Management Discussion and Analysis 

9 

Performance Scorecard for FY 2003 

Objectives Annual Performance Goals Result 

Strategic Goal 1: Enhance Economic Opportunities for Agricultural Producers 

1.1 1.1.1: Estimated annual trade opportunities preserved through WTO trade negotiations 

and notification process 

Exceeded 

1.1.2: Estimated gross trade value of markets expanded/retained by market access 

activities other than WTO notification process 

Met 

1.1.3: Average tariff rate on agricultural products worldwide Met 

1.1.4: Increase the new export protocols that facilitate access to foreign markets Exceeded 

Expand International Market 

Opportunities 

1.1.5: Increase the international animal and plant health standards adopted Exceeded 

1.2 1.2.1: Increase the activities/projects completed in support of international economic 

development and trade capacity building in developing and transition countries 

Met 

1.2.2: Share of countries’ food-import needs met through food-aid programs Met 

1.2.3: Improve food security and nutrition through the McGovern-Dole Food for Education Program by the number of daily meals and take-home rations for mothers, 

infants and schoolchildren 

Met 

Support International Economic 

Development and 

Trade Capacity 

Building 

1.2.4: Improve literacy and primary education through McGovern-Dole Food for Education Program Met 

1.3 Develop Alternative Markets for 

Agricultural Products and Activities 

1.3.1: Increase the use of bioenergy and biobased products Met 

1.4.1: Expand USDA risk-management tools available for agricultural producers to use 

in managing production and price risks 

1.4 Deferred 

1.4.2: Improve customer service by increasing the efficiency of loan processing Met 

1.4.3: Improve fiscal soundness of the direct-loan portfolio Met 

1.4.4: Eligible commodity production placed under marketing assistance loan or loan 

deficiency payment 

Unmet1

Provide RiskManagement 

Financial Tools to 

Farmers and 

Ranchers 

1.4.5: Increase farm commodity and loan programs that can be accessed, completed 

and accepted electronically 

Exceeded 

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

2.1 2.1.1: Create or save additional jobs through USDA financing of businesses Exceeded 

2.1.2: Reduce the Business and Industry Portfolio delinquency rate, excluding bankruptcy cases Exceeded 

Expand Economic 

Opportunities 

Through USDA 

Financing of Businesses 2.1.3: Improve the ability of small, rural towns to enjoy economic growth through provision of financing to support high-speed telecommunications services 

(broadband) 

Unmet 

2.2 Improve the Quality 

of Life Through 

USDA Financing of 

Quality Housing, 

Modern Utilities and 

Needed Community 

Facilities 

2.2.1: Improve the quality of life in rural America Met 

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

3.1 3.1.1: Conduct risk assessments of microbial, chemical and physical hazards to meat, 

poultry and egg products 

Met 

 3.1.2: Enhance industry compliance with regulatory requirements (Salmonella) Met 

3.1.3: Enhance industry compliance with regulatory requirements (Listeria monocytogenes) Met 

Enhance the 

Protection of 

Meat, Poultry and 

Egg Products 

from Foodborne 

Hazards in the 

U.S. 3.1.4: Develop new systems for detecting foodborne hazards Exceeded 

1

This performance goal will be revised to better reflect program intent. The program is working as intended. 
USDA Performance and Accountability Report for FY 2003 

Management Discussion and Analysis 

10 

Performance Scorecard for FY 2003 

Objectives Annual Performance Goals Result 

3.2 3.2.1: Increase the percent of known, significant introductions of plant pests or diseases that are detected before they spread from the original area of 

colonization and cause severe economic or environmental damage 

Deferred 

 3.2.2: Number of significant introductions of foreign animal pests or diseases that 

spread beyond the original area of introduction and cause severe economic or 

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

Met 

 3.2.3: Increase the number of States and territories, which meet the standards for 

preventing, detecting and responding to animal health emergencies 

Deferred 

 3.2.4: Increase the number of States that can provide necessary Federal animal diagnostic services Exceeded 

 3.2.5: Improve the capabilities of plant diagnostic laboratories Met 

Reduce the Number and Severity of 

Agricultural Pest 

and Disease Outbreaks 

3.2.6: Release a series of new or improved varieties of germplasm that exhibit enhanced disease resistance to each of the following plant diseases: Sclerotinia, 

downy mildew, rusts and exotic viral diseases 

Met 

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

4.1 Improve Access to 

Nutritious Food 

4.1.1: Improve Access to Nutritious Food Met 

4.2 Promote Healthier 

Eating Habits and 

Lifestyles 

4.2.1: Promote Healthier Eating Habits and Lifestyles Exceeded 

4.3 Improve Food 

Program Management and 

Customer Service 

4.3.1: Improve Food Program Management and Customer Service Deferred 

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

5.1.1: Continue to restore, rehabilitate and maintain fire-adapted ecosystems by treating hazardous fuels in both the Wildland Urban Interface (WUI) and non-WUI 

areas 

Unmet 

5.1.2: Ensure Federal fire management plans are in compliance with Federal Wildland 

Fire Policy 

Met 

5.1.3: Control unplanned and unwanted fires during initial attack Met 

5.1.4: Allotment acres administered to 100% of standard Exceeded 

5.1 Implement the 

President’s 

Healthy Forests 

Initiative and Other 

Actions to Improve 

Management of 

Public Lands 

5.1.5: Cleanup CERCLA sites on USDA-managed lands and facilities Exceeded 

5.2 5.2.1: Protect the productive capacity of agricultural and forestland Met 

5.2.2: Manage watersheds to provide clean and abundant water supplies Met 

Improve Management of Private 

Lands 

5.2.3: Ensure diverse wildlife habitats Met 

Actions on Unmet Goals 

USDA continuously works to improve its performance on unmet goals. The Annual Performance Report 

section of this report offers further discussion of the Department’s actions on these goals. They include: 

• Performance goal 1.4.4 (Eligible commodity production placed under marketing-assistance loan or 

loan-deficiency payment): Market prices were higher than the established loan rate for most of the 

eligible loan commodities throughout the crop year. Thus, the loan-deficiency payment option had 

limited availability. As market prices increase, the amount of government assistance needed to stabilize the farm economy is reduced. This performance goal is being discontinued because improved 

measures are needed to show program progress. 

• Performance goal 2.1.3 (Improve the ability of small, rural towns to enjoy economic growth through 

provision of financing to support high-speed telecommunications services, or broadband): Delays in 

promulgating regulations caused the Department to not meet its goal of increased broadband telecommunication access in rural areas. USDA accepted applications through July 31, 2003, for funding 
USDA Performance and Accountability Report for FY 2003 

Management Discussion and Analysis 

11 

such projects in FY 2003. Many of these applications remain under review for funding in FY 2004. 

Additional applications also are being accepted. 

• Performance goal 5.1.1 (Continue to restore, rehabilitate and maintain fire-adapted ecosystems by 

treating hazardous fuels in both Wildlife Urban Interface (WUI) and non-WUI): USDA is seeking 

ways to improve its results given its resource constraints. The Department recognizes that meeting the 

performance goal depends on factors external to USDA’s control, such as drought and the severity of 

the fire season. 

FUTURE DEMANDS, RISKS, UNCERTAINTIES, EVENTS, 

CONDITIONS AND TRENDS 

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

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

changes in 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. 

The events of September 11, 2001, make homeland security a continuing priority for USDA. The Department is working with the Department of Homeland Security to ensure that its programs help protect 

agriculture from intentional and accidental acts that might affect America’s food supply or natural resources. 

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

• Weather and other growing conditions at home and abroad; 

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

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

domestic and global markets greatly in any year; 

• 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 to move quickly across national and international boundaries; 

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

security and emergency preparedness; and 

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

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

rules. 

IMPLEMENTATION OF PRESIDENT’S MANAGEMENT AGENDA 

USDA has taken steps leading to improvements in all five President’s Management Agenda initiatives, 

which include human capital, competitive sourcing, financial performance, electronic government (eGov-
USDA Performance and Accountability Report for FY 2003 

Management Discussion and Analysis 

12 

ernment), and budget and performance integration. The Department’s management initiatives mirror the 

President’s Management Agenda. 

Human Capital 

USDA took significant action to improve this area: 

• Focused on closing the talent gap; 

• Systematically accessed current and future mission critical needs; 

• Utilized automated systems to streamline the hiring process; 

• Implemented a mentoring program; 

• Selected “showcase” agencies for pilot implementation of USDA’s Human Capital plan template; 

• Launched the Senior Executive Service Candidate Development Program with 81 candidates; 

• Collected Department-wide information to assess compliance with civil rights, Equal Employment 

Opportunity and related reporting; 

• Conducted job fairs; and 

• Linked human-capital needs with the strategic plan through a USDA-wide Human Capital Plan. 

Competitive Sourcing 

To improve its program, USDA has: 

• Developed a long-range plan to conduct studies on a continuing basis; and 

• Conducted competitions or converted more than 5,000 positions. 

Financial Performance 

USDA has made significant progress in this area: 

• Obtained clean audit opinions for 2003 and 2002; 

• Fully implemented the Foundation Financial Information System to provide accurate and timely financial information; 

• Focused on data integrity and feeder-system improvement; 

• Continued efforts to reduce erroneous payments; 

• Achieved substantial reduction in the number of material weaknesses; and 

• Enhanced the productivity of cash by increasing debt referrals to Treasury. 

eGovernment 

USDA has made significant progress in this area: 

• Provided financial and/or in-kind support for 19 of the 24 Presidential eGovernment Initiatives. This 

includes eAuthentication, eLearning, ePayroll, Geospatial One-Stop, eTravel, Recreation One-Stop, 

Financial Management, Integrated Acquisition, Asset Management and Disaster Help; 

• Developed collaborative USDA eGovernment Initiatives to transform the delivery of information and 

services to citizens, businesses, partners and employees; 

• Published new USDA Enterprise Architecture to serve as the baseline for FY 2005 information technology (IT) investment decisions; 

• Established new enterprise agreements for hardware, software and related IT services, resulting in an 

estimated cost avoidance of more than $115 million; 
USDA Performance and Accountability Report for FY 2003 

Management Discussion and Analysis 

13 

• Initiated IT Disaster Recovery and Business Resumption, and IT System Certification and Accreditation Programs to protect USDA’s information assets; and 

• Strengthened Department-wide IT business case development and project management. 

Budget and Performance Integration 

USDA has made significant strides in this area: 

• Developed strategic and performance plans that align goals and objectives with improved performance 

measures; 

• Integrated comprehensive performance information into the FY 2005 budget-decision process; 

• Completed Program Assessment Rating Tool (PART) evaluations for a number of programs; and 

• Began developing a quarterly financial and performance reporting process to facilitate the greater use 

of performance data, including the results of PART evaluations, in the management of programs. 

FINANCIAL STATEMENT HIGHLIGHTS 

Budgetary Resources and Outlays 

Appropriations, combined with other budgetary resources made available, and adjustments totaled $143.8 

billion in FY 2003, while outlays totaled $80 billion. 

Assets and Liabilities 

USDA’s assets and liabilities as of September 30, 2003, totaled $118.1 billion and $115.7 billion, respectively. Loans receivable of $73.6 billion, or 62 percent of total assets, is the single largest USDA asset. 

Consequently, Intragovernmental Debt of $76.1 billion, or 66 percent of total liabilities, representing borrowings used to make loans, remained the single largest liability. 

Net Cost of Operations 

USDA’s net cost of operations for FY 2003 totaled $83.2 billion. Food Stamps, Income Support and 

Child Nutrition – $25.6 billion, $17 billion and $10.9 billion respectively – represent USDA’s largest program costs. 
USDA Performance and Accountability Report for FY 2003 

Management Discussion and Analysis 

14 

Net Cost of Operations by Mission Area 

41.6

0.8 0.5

3.7 2.6 2.6

7

24.7

0

5

10

15

20

25

30

35

40

45

FNCS

FFAS

NRE

RD

REE

MRP

FSIS

DO

Billions

Key:

FNCS – Food, Nutrition and Consumer Services 

FFAS – Farm and Foreign Agricultural Services 

NRE – Natural Resources and Environment 

RD – Rural Development 

REE – Research, Education and Economics 

MRP – Marketing and Regulatory Programs 

FSIS – Food Safety and Inspection Service 

DO – Departmental Offices 

Debt Management 

USDA is the Federal Government’s largest provider of direct credit. The Department’s credit portfolio 

has totaled approximately $100 billion for the past three fiscal years. This portfolio represents about 32 

percent of the non-tax debt owed to the Federal Government. As of June 30, 2003, USDA’s current $6.7 

billion in delinquent receivables represent a 20-percent decrease from the $8.8 billion in delinquencies 

reported for FY 1996. During FY 1996, Congress passed the Debt Collection Improvement Act (DCIA). 

The $6.7 billion in delinquent debt represents an exposure risk of $14.4 billion of principal associated 

with the delinquency. Of this $6.7 billion, only $1.7 billion is eligible for collection using DCIA tools. 

The use of these tools is precluded for the remaining delinquent debt due to such statutory or administrative requirements as bankruptcy, litigation or debt owed by international/sovereign entities 

(approximately $3.6 billion of delinquent debt is international debt). Through concentrated management 

attention in the past year, USDA’s referral rate to the Treasury Cross-Servicing Program was 94 percent. 

Erroneous Payments 

USDA has developed comprehensive internal control and quality-assurance processes and systems to ensure that program payments made are accurate and complete. In FY 2003, the Office of the Chief Financial Officer issued a policy memorandum to all USDA agencies. The memorandum directed the 

implementation of program reviews to identify erroneous payments as required by the Improper Payments 

Information Act of 2002. In FY 2004, USDA agencies will develop statistically valid estimates for all 

programs identified as susceptible to significant erroneous payments. The agencies then will implement 

an action plan to reduce those payments. Agencies also will report erroneous-payment estimates and reduction goals to the President and Congress in USDA’s Performance and Accountability Report. 

USDA’s focus in this area has been on four programs: 

• The Food and Nutrition Service’s (FNS) Food Stamp Program; 

• FNS’ National School Lunch Program/School Breakfast Program; 

• FNS’ Women, Infants and Children Program; and 

• The Commodity Credit Corporation’s Commodity Loan Program. 

For a detailed report on these programs, see Appendix B. 
USDA Performance and Accountability Report for FY 2003 

Management Discussion and Analysis 

15 

MANAGEMENT ACCOUNTABILITY AND CONTROL 

USDA continues to assure compliance with the objectives of the Federal Managers’ Financial Integrity 

Act (FMFIA), except for the material weaknesses described in this report. USDA’s management controls 

program resulted in compliance with FMFIA requirements and OMB Circulars A–123, “Management 

Accountability and Control,” and A–127, “Financial Management Systems,” except for the weaknesses 

described later in this report. 

Within USDA, Subcabinet Officials and Agency and Staff Office Heads are responsible for the efficient 

operation of their programs and their programs’ compliance with relevant laws. These executives also 

ensure that their financial-management systems conform to applicable laws, standards, principles and related requirements. USDA’s goal is to eliminate material deficiencies by the end of FY 2004. 
USDA Performance and Accountability Report for FY 2003 

Management Discussion and Analysis

16

USDA made substantial progress in reducing the number of material deficiencies to 8, down from 19 at the start of FY 200

FY 2002. 

Summary of Material Deficiencies 

Federal Managers’ Financial Integrity Act Material Deficiencies 

Responsible 

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

Completion Date 

FNS 94-01: Some organizations have 

received excessive Federal funding. 

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

No Change 

99-01: Need better determination of household eligibility for school food programs. 

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

No Change 

01-01: Improper procurement of goods and services occurred in some programs. 

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

No Change 

FS 03-01: Financial management controls not adequate. Issue new policy to require supervisory review of property transactions and to improve capitalization controls. Finalize 

the process used to certify payroll. 

No Change 

FSA 00-01: International credit subsidiary 

and credit reform systems are not fully automated and integrated. 

Implement new system to interface with the general ledger. No Change 

OCIO 00-01: Department’s inability to 

protect fully its information and assets from fraud, misuse, inappropriate disclosure and disruption. 

Improve controls in risk assessment and mitigation, logical and physical access, disaster recovery and contingency planning, intrusion detection and response, certification and accreditation and security awareness. 

Extensive and wide-ranging weawithin USDA information securithave delayed the process. 

RD 96-02: The Multi-Family Housing 

(MFH) Program lacks adequate oversight and internal controls. 

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

layed. 

94-01: Direct Loan Servicing and Reporting system not in compliance with OMB policy. 

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

Implementation of system has blayed. 
USDA Performance and Accountability Report for FY 2003 

Annual Performance Report 

17 

II. ANNUAL PERFORMANCE REPORT 

USDA’s 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 carried out 

this mission in 2003 through such activities as: 

• Providing farmers and ranchers with risk-management and financial tools; 

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

• Ensuring the safety and protection of the Nation’s food supply; 

• Completing new Free Trade Agreements and opening new international 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. 

USDA’s public performance management reporting process includes the following key components: 

• A strategic plan that depicts the Department’s long-term goals and strategies; 

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

long-term goals; and 

• A performance and accountability report that shows Congress and the American people how well the 

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

Most of the Department’s programs and activities are represented in specific performance goals and targets. USDA also conducts and supports a broad range of research, educational and statistical activities 

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

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

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

research are presented throughout this section. 

Only Federal employees participated in the preparation of the performance information contained in this 

section. 

Upon USDA’s creation, 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.” These next chapters of the USDA Performance and 

Accountability Report show how the Department committed itself to keeping President Lincoln’s dream 

alive during 2003. 
USDA Performance and Accountability Report for FY 2003 

Annual Performance Report 

18 

STRATEGIC GOAL 1: ENHANCE ECONOMIC OPPORTUNITIES 

FOR AGRICULTURAL PRODUCERS 

Recognizing the importance of agricultural exports to the U.S. economy, USDA worked hard to resolve 

many outstanding trade issues in 2003. Major milestones of the Department’s work to ensure markets are 

kept open to U.S. agricultural products include: resolving a dispute with Russia involving U.S. poultry; 

negotiating an agreement with China to allow the export of U.S. biotech soy-beans; and stemming a number of trade actions against the U.S. by Mexico to allow for the continued flow of domestic products into 

that important market. 

The Department also worked to create more international opportunities for agricultural producers. In FY 

2003, USDA opened the export market for live cattle to Cuba for the first time in more than 40 years. 

USDA also successfully negotiated equivalent mitigation measures for the bluetongue and bovine leucosis viruses for live cattle being exported to the European Union. Working in international locations and 

scientific forums, USDA diplomats and scientists have been removing barriers to international trade, creating opportunities for U.S. agricultural producers. 

Objective 1.1: Expand International Marketing Opportunities

Overview 

The Department worked to ensure that agricultural producers had access to international markets. USDA 

assisted in completing two Free Trade Agreements (FTAs) and continues to work on the current or “Doha 

Round” of multilateral trade negotiations within the World Trade Organization (WTO) Framework. The 

WTO is hosting the trade negotiations to develop a comprehensive liberalization package for agriculture. 

USDA achieved major successes in resolving trade issues and monitoring existing agreements. This effort 

protected $2 billion worth of U.S. agricultural exports through the WTO notification process. Additionally, the U.S. successfully challenged Japan’s restrictions on U.S. apples at the WTO. 

Serving the Public 

On June 6, 2003, the U.S. and Chile signed a historic and cutting-edge FTA that, when fully implemented, eliminates bilateral tariffs, lowers trade barriers, promotes economic integration and expands 

Exhibit 4: Resources Dedicated to Enhancing Economic Opportunities 

FY 2003 

USDA Resources 

Dedicated to Strategic Goal 1 Actual 

Percent of 

Total USDA 

Program Obligations ($ Mil) $46,031 39% 

Staff Years 25,612 23% 

Exhibit 5: Resources Dedicated to Expanding International Marketing Opportunities 

FY 2003 

USDA Resources 

Dedicated to Objective 1.1 

Actual 

Percent of 

Goal 1 

Program Obligations ($ Mil) $6,169 13% 

Staff Years 6,064 24% 
USDA Performance and Accountability Report for FY 2003 

Annual Performance Report 

19 

opportunities for Americans and Chileans. This agreement typifies the benefit derived from the Department’s work in international trade policy. Within four years, U.S. farmers will gain duty-free access to the 

Chilean market for such important U.S. products as pork, beef, soybeans, durum wheat, feed grains, potatoes and many processed food products. USDA also completed an FTA with Singapore in FY 2003 and 

worked toward completing the Doha Round of multilateral trade negotiations. 

To capitalize on the market openings that trade agreements create, it clearly is in the best interest of the 

agricultural community that the U.S. Government works with industry groups to introduce domestic 

products to international markets. Through its market-development programs (e.g., Market Access Program and Foreign Market Development Program), USDA works with trade groups through cost-sharing 

cooperative agreements to take full advantage of market opportunities. USDA also offers political and 

commercial risk insurance through its General Sales Manager Programs to help exporters enter markets in 

countries lacking adequate financial liquidity to meet all their food import needs through commercial 

channels. 

An equally important function is trade education and outreach to increase domestic awareness of global 

opportunities, USDA export programs and the importance of trade and trade agreements. Important partnerships have been forged with universities, export-assistance centers, farm groups, State departments of 

agriculture, other State and Federal Government agencies, the media, and agricultural youth groups. 

USDA effectively uses this network of “partners” to convey to customers and stakeholders the message of 

export opportunities, Department programs and the importance of agricultural trade. 

Agriculture is one of the most export-dependent industries in the U.S. According to USDA research, 

about 96 percent of the world=s food consumers live outside U.S. borders. Sales of exported agricultural 

products are growing at two to three times the rate of the domestic market. This dynamic dramatically 

highlights the need to make the agricultural community aware of the export market. USDA data also 

show that, in FY 2002, agricultural exports: 

• Supported 800,000 jobs of which 60 percent are in urban communities; 

• Boosted farm cash receipts by 25 percent; 

• Increased export-related job wages by 18 percent; 

• Created another $1.47 in related economic activity for each export dollar; and 

• Benefited small businesses as 97 percent of all exporters are companies that employ three to four 

workers. 

In relation to imports, USDA programs protect the U.S. livestock, poultry and wildlife populations from 

incursions of exotic diseases and parasites, including those transmissible from animals to humans. These 

programs also ensure that the myriad of agricultural and natural plant resources—commercial grains, native floriculture, commercial nursery stock, forests, grasslands, wetlands and deserts—are protected from 

exotic pests or diseases. By using sound science to evaluate the potential risks associated with the movement of international products into the U.S., USDA becomes a model for other nations to emulate. This 

attribute increases the likelihood that fairer trading agreements, based on scientifically supported sanitary 

(animal health) and phytosanitary (plant health) standards, will be used by international trading partners 

when they consider allowing U.S. plant and animal imports. This element also facilitates the development 

of international animal and plant health standards. The adoption of international standards and the reduction of unfair trade barriers benefit U.S. agriculture. 

Challenges for the Future 

The next few years present exciting challenges for USDA, particularly in the trade policy arena. At the 

top of the Department’s list is a successful conclusion to the Doha Round. The outcome of these negotia-
USDA Performance and Accountability Report for FY 2003 

Annual Performance Report 

20 

tions could provide valuable new opportunities for sales of U.S. agricultural products overseas. It also 

could require changes in USDA’s export credit-guarantee programs, food aid and domestic support programs. 

The Department also is negotiating several regional and bilateral agreements. The largest would include 

34 democracies in the Western Hemisphere—a Free Trade Area of the Americas (FTAA). FTAA could 

expand U.S. agricultural exports by more than $1.5 billion annually. Other negotiations underway or 

planned include agreements with Australia, Morocco, five Central American countries and the Southern 

African Customs Union. USDA also is participating in the Asia Pacific Economic Cooperation forum and 

working with countries that want to join the WTO, such as Russia and Saudi Arabia. 

Another priority is confronting the issues surrounding products developed through biotechnology. The 

increasing number of countries issuing regulations related to these products presents a particular challenge, both for the Nation’s infrastructure and its food and agricultural exports. USDA is using all 

available avenues to ensure that countries adopt science-based policies in this area. 

Inherent in USDA’s objective to expand international market opportunities is the need to anticipate and 

prevent disruptions to trade caused by new market barriers. It is a measure of its success that many issues 

are resolved quickly with little public awareness. Virtually every day, USDA works with other Government agencies and private-sector representatives to try to prevent or resolve issues. 

During 2003, the Department implemented the Trade Adjustment Assistance for Farmers Program. This 

new program, established by the Trade Act of 2002, authorizes USDA to pay eligible producer groups 

when a Secretary determines that imports have contributed significantly to commodity price declines. 

The job of ensuring that animal and plant health issues are not used unfairly as barriers to trade becomes 

more complicated as trade increases. As a greater variety of plant and animal material enters this country, 

the risk rises that a new pest or disease will enter the Nation’s borders and cause significant damage to its 

valuable plant and animal resources. Technical experts must be prepared to respond to this growing array 

of potential risks and any emergencies which may arise. 

Additionally, there is an increased demand for information about pests and diseases from all parts of the 

world. There also is a demand for the technology to store, retrieve and analyze this data. Without the necessary data, pest-risk analyses cannot be developed, and protocols cannot be negotiated. 

Improve International Marketing Opportunities 

USDA works with the Office of the United States Trade Representative (USTR) to pursue new trade 

agreements and enforce provisions of existing agreements. In the trade policy arena, USDA works with 

industry partners to promote trade and outreach activities to educate producers, processors and exporters 

on emerging market opportunities in the increasingly competitive global marketplace. 

New market opportunities are created for agriculture producers when: (1) export markets are opened or 

reopened; and (2) better requirements are negotiated for certifying or testing the health of animals and 

plants with international destinations. USDA seeks to lessen the financial burdens on U.S. exporters and 

adhere more closely to international science-based standards. The U.S. agricultural sector and export 

businesses benefit from fewer barriers when moving products overseas. Businesses become more profitable, and the international community experiences less conflict. 

The most effective means of expanding international market opportunities is to make trade agreements 

with other countries covering the conditions applied to imports. A predictable system with basic sanitary 
USDA Performance and Accountability Report for FY 2003 

Annual Performance Report 

21 

and phytosanitary norms for fair and safe trade assures trading partners that products will ensure human 

health and safety and not harm their agricultural resources. U.S. Government agricultural attachés, located 

in more than 26 countries, help retain, expand and open international markets for U.S. food and agricultural products. They accomplish this task by negotiating with host government regulatory officials. These 

officials discuss pest and disease issues affecting food and agricultural commodities. They routinely intercede with host government officials when U.S. agricultural shipments do not meet the importing 

country’s requirements (e.g., certification errors, pest or disease detections, or other shipment irregularities). 

In cooperation with its stakeholders, USDA’s National Center for Import and Export (NCIE) develops 

scientifically based protocols and health-certification procedures for exporting U.S. livestock, wild or exotic zoological animals, poultry, other birds, germplasm and animal-derived products and byproducts. 

NCIE reviews import requirements and, where it finds unjustified requirements or restrictions, proposes 

changes to that country’s requirements reflecting advances in scientific knowledge and incorporate technically sound risk-management procedures. 

Exhibit 6: Increasing U.S. Marketing Opportunities 

Fiscal Year 2003 

Annual Performance Goals and Indicators 

Target Actual Result 

1.1.1 Estimated annual trade opportunities preserved through WTO trade negotiations and 

notification process ($ Mil) 

$1,400 $2,0001 Exceeded

1.1.2 Estimated gross trade value of markets expanded/retained by market access activities 

other than WTO notification process ($ Mil) 

$3,900 $3,9001 Met 

1.1.3 Average tariff rate on agricultural imports worldwide (Percentage) 65% 65%1 Met 

1.1.4 Increase the new export protocols that facilitate access to foreign markets (cumulative)2

46 60 Exceeded

1.1.5 Increase the international animal and plant health standards adopted 6 153 Exceeded

1

Result based on projected estimate. See the Data Assessment of Performance Measures section for more information. 2

Includes only protocols for live animals, poultry, hatching eggs, embryos and semen, not animal products or plants. 3

In addition to 4 new plant health standards, 11 animal health standards were modified. 

Analysis of Results. 

USDA exceeded its performance goal of 

$1.4 billion in trade opportunities preserved 

through the WTO trade negotiations and notifications process by $600 million, or 42 

percent. Major contributing factors to this 

year’s impressive performance were: 1) 

changes in Mexico's certification requirements for a number of U.S. livestock 

products and by-products, 2) an indefinite 

delay in implementation of China's new 

standards for imported cotton, and 3) Japan's 

agreement to review its tolerance level for a 

citrus pesticide used by U.S. exporters. 

Exhibit 7: Trade Policy Successes In FY 2003 Preserve 

$2 Billion Worth of U.S. Exports 

$1,999

$837

$1,329 $1,327

$2,000

1999

Baseline

2000200120022003

2003 result based on projected estimate. See the Data Assessment of 

Performance Measures section for more information. 
USDA Performance and Accountability Report for FY 2003 

Annual Performance Report 

22 

The impressive showing in FY 

2003 compares with FY 1999’s 

baseline of $1.99 billion. 

USDA projected only $1.4 billion in trade opportunities 

preserved in FY 2003. This 

projection was due to Department estimates of what other 

countries had in the notification process and what USDA 

thought could be resolved during the fiscal year. The Department’s performance also demonstrates the critical role of the WTO trade 

negotiations and notification process in preserving and expanding international market opportunities for 

American agriculture. As the U.S. Government continues to negotiate new bilateral, regional and multilateral trade agreements, the challenge will be to monitor enforcement effectively. This monitoring will 

assure that U.S. agriculture receives full benefits from negotiated reductions in tariff and non-tariff barriers. 

USDA met its performance goal for non-WTO, market-access activities. Through diligent monitoring and 

resolution of trade disputes with countries’ notification processes, USDA has made remarkable progress 

in retaining sales of U.S. agricultural products that likely would have been lost without active market intervention. Sales retained in FY 2003 are estimated at $3.9 billion, $2 billion above the baseline. The hard 

work of USDA’s domestic and overseas field offices and its working with other Federal and State agencies, and industry and international Government officials made this achievement possible. Major 

examples of market interventions include: 

• China: USDA obtained interim certificates to allow U.S. biotech soybean sales to China continue. 

China is a $1 billion-plus market for U.S. soybeans annually, with sales registrations already totaling 

$1.14 billion. 

• The European Union (EU): The U.S. won a countervailing duty case in the WTO with the EU, allowing shipments of U.S. wheat to continue with a market value of approximately $400 million. 

• Russia: Through focused negotiations, the Department resolved trade disputes involving U.S. poultry. 

The Russian market for U.S. poultry is estimated at $600 million. 

• Mexico: The January 1, 2003, elimination of import duties there and a worsening of the country’s agricultural and political situation have resulted in an increased number of trade actions against U.S. 

agricultural products. These products include poultry, pork, beef, dry beans, stone fruit and apples. The 

Foreign Agricultural Service, the Animal and Plant Health Inspection Service, the Food Safety Inspection Service and USTR worked together to remove a number of these barriers and prevent other actions 

from impacting U.S. agricultural exports to Mexico. Through these efforts, America’s $7.3 billion 

market for agricultural products in Mexico, its third-largest export market, grew. 

Future challenges include successful completion of the Doha Round multilateral trade agreements, and 

regional and bilateral agreements under negotiation or planned. Additional challenges include monitoring 

and enforcing the agreements. 

The performance goal on average tariff rate on agricultural imports worldwide was met. The measure has 

been discontinued because the 65-percent annual rate will be used indefinitely. While negotiating worldwide reductions in average tariff rates is an important and laudable goal of international trade 

negotiations, it likely will take several years to achieve success in this arena. 

Exhibit 8: Expand and Retain Market Access 

Fiscal Year Actual 

Trends 

1999 2000 2001 2002 2003 

Estimated gross trade value of 

markets expanded/retained by 

market access activities other 

than WTO notification process 

($Mil) 

Baseline: 1989 = $1,948 

$2,525 $4,349 $2,684 $3,818 $3,9001

1

Result based on projected estimate. See the Data Assessment of Performance Measures section for more information. 
USDA Performance and Accountability Report for FY 2003 

Annual Performance Report 

23 

USDA also exceeded its target of a cumulative total of 46 new export protocols 

for animals and animal semen and embryos that facilitate access to international 

markets. Fourteen new market protocols 

produced in FY 2003 plus the 46 markets 

from previous years produced a total of 

60. These moves helped USDA open international markets for U.S. producers. 

USDA addressed export issues by meeting with many U.S. trading partners, 

including Argentina, Australia, Brazil, 

Canada, Chile, Colombia, EU, Honduras, 

Hungary, Mexico, Morocco, New Zealand, Peru, Poland and Russia. 

USDA worked with these countries, China, Japan, Korea and Taiwan on export issues involving U.S. 

plant commodities. 

Events that may impact future successful negotiations for the export of U.S. animals include: (1) the diagnosis of bovine spongiform encephalopathy in Canada; (2) amendments to international animal health 

standards; and (3) any future outbreaks of animal diseases in the U.S. 

One of the most difficult challenges USDA faces is to negotiate the continuation of export markets when 

there is an outbreak of a contagious animal disease. In 2002, Low Pathogenic Avian Influenza struck U.S. 

poultry flocks. Exotic Newcastle Disease did the same in 2003. 

Another challenge has been brought by recent Free Trade Agreements, which have increased the numbers 

of requests for imports into this country substantially. This increase requires USDA to continue ensuring 

scientific rigor in its assessment of potential health threats while, at the same time, not impeding trade. As 

the Department develops import regulations, U.S. agricultural stakeholders ask it to ensure that agricultural exports are unimpeded by the sanitary and phytosanitary regulations of international trading 

partners. This element has resulted in USDA trade personnel becoming increasingly involved in negotiations with other countries and in international arenas where sanitary and phytosanitary standards are being 

developed and applied. It also has resulted in USDA renewing its efforts to conduct trade-capacity building in underdeveloped nations that might be markets for U.S. exports. These nations also would like to 

export to the U.S. 

USDA also exceeded its target for leading the adoption of six international animal and plant health standards. The international community adopted 4 new plant-health standards and modified 11 animal-health 

standards, making a total of 15 additions or changes. The Interim Commission on Phytosanitary Measures, established by the International Plant Protection Convention (IPPC) at its April 2003 annual 

meeting, adopted the phytosanitary standards. The standards cover evaluating the environmental risk and 

impact of quarantine pests, using irradiation for quarantine treatments and developing and using pest lists. 

This action brought the cumulative total of international plant health standards approved under the IPPC 

to 19. 

On the animal-health side, the Organization of International Epizootics (OIE), in its 71st General Session 

in May 2003, voted to adopt 11 changes to existing standards into the 2003 International Animal Health 

Code. USDA played a lead role in developing and implementing a strategy for resolving technical issues 

related to a new EU regulation that threatens more than $400 million in U.S. animal product exports. 

Exhibit 9: Increasing U.S. Market Opportunity 

Fiscal Year Actual 

Trends 

1999 2000 2001 2002 2003 

Increase the new or 

modified export protocols that facilitate 

access to foreign markets (Cumulative) 

N/A N/A N/A 46 

Baseline 

60 

Increase the international animal and plant 

health standards 

adopted 

N/A N/A N/A 7 

Baseline 

15 

N/A = Not Applicable 
USDA Performance and Accountability Report for FY 2003 

Annual Performance Report 

24 

Through complex negotiations with the Europeans, USDA secured clarifications and changes to the EU 

regulation that will help protect most of this trade. 

WTO, IPPC and OIE have obligations and objectives related to providing technical assistance to less-developed members. Developing countries may delay further trade reform and cooperation in the 

development of international standards — priority activities to the U.S. — until these countries address 

their capacity-building needs in a meaningful way. 

Finally, USDA faces an increasing number of situations where its intervention is necessary. The Department is working to assure national and international stakeholders and the global public that 

biotechnology-derived agricultural products are safe for release into the environment. This task is a new, 

growing and complex area of work, especially for the Department’s Animal and Plant Health Inspection 

Service’s overseas personnel. 

Program Evaluation. 

The compliance-review staff completed export-promotion and market-development program evaluations 

for performance reporting requirements. The evaluations are available within the Foreign Agricultural 

Service. Copies may be obtained by calling the compliance-review staff at (202) 720-6713. No evaluations on export protocols or international standards were performed during FY 2003. 

Selected Results in Research, Extension and Statistics for Objective 1.1

USDA provided the scientific basis for the U.S. Government's successful lawsuit against Japan. The lawsuit concerned import restrictions on U.S. apples grown in the Pacific Northwest. The Japanese 

government claimed that these apples might introduce the plant disease fire blight to its vegetation. In 

response, the country imposed trade barriers closing the market to U.S.-grown apples. While USDA 

found that mature, symptomless apples could not introduce fire blight into Japan, the Japanese Government continued the ban. The U.S. Government filed a lawsuit at the WTO. The Department presented its 

research, which helped USTR lawyers convert the scientific data into legal briefs. The WTO ruled in favor of the United States. This ruling should remove all or most of the restrictions limiting access to the 

Japanese market for U.S. apple growers. 

Japan is one of the leading markets for U.S. agriculture, purchasing more than $8 billion in 2002 despite 

barriers that constrain certain imports. In the context of WTO agricultural negotiations, USDA is reviewing Japan’s government policies that support or protect that country’s key commodity markets, and 

thereby bar imports. The studies find that Japan’s border barriers impede imports and help keep domestic 

prices high. This research and analysis will benefit U.S. negotiators, exporters and others interested in 

Japan’s agricultural markets.

USDA’s Engineering Research Unit (ERU) also developed an automated low-cost, near-infrared system 

for detecting such attributes as internal insects and protein in single-grain kernels. ERU established a Cooperative Research and Development Agreement with Perten Instruments to develop a commercial 

version of the Department’s prototype. The Unit received the first commercial prototype this spring. 

Commercial production should begin late this fall. 

Additionally, ERU developed a signal-processing algorithm and software to detect live and dead internal 

insect infestations in wheat using the Single-Kernel Characterization System 4100. Customers impacted 

are wheat millers and handlers. This software is a no-cost addition to existing instrumentation already in 

use by the wheat industry. The software’s creation addresses a high-priority industry need. This detection 
USDA Performance and Accountability Report for FY 2003 

Annual Performance Report 

25 

technology will benefit producers by helping ensure the purity and identity of grains. It also will determine end quality and ensure the safety and marketability of the U.S. grain supply. 

Special marketing initiatives through the Extension Service helped farmers earn extra income. The extra 

income was made up of $350 to $525 each for selected heifers in Missouri; $1,780 per farmer in West 

Virginia; $1,250 per producer annually through South Carolina State University efforts; and $300,000 for 

20,000 cattle in an Oklahoma State University program. 

Objective 1.2: Support International Economic Development and Trade Capacity 

Building 

Overview 

To enhance economic development and trade-capacity building in developing and transitioning economies, USDA focuses on: 

• Trade and investment liberalization; 

• Research and education; 

• Development of market information and mapping systems and processes; and 

• Institution building to support sustainable agricultural development. 

USDA also is working to strengthen linkages between U.S. agricultural communities and multilateral-development banks that will assist developing nations while also serving domestic agricultural interests. 

Serving the Public 

USDA launched the McGovern-Dole International Food for Education and Child Nutrition Program that 

was authorized by the Farm Security & Rural Investment Act of 2002. The program provides for the donation of U.S. agricultural commodities and associated financial and technical assistance to carry out 

preschool- and school-feeding programs in developing countries. The program also authorizes maternal-, 

infant- and child-nutrition programs. Its purpose is to improve food security, reduce the incidence of hunger and malnutrition, and improve literacy and primary education. 

USDA published the final rule for the program in June and immediately solicited program proposals. 

McGovern-Dole marked the first U.S. Government food-aid program to comply with the Government 

Paperwork Elimination Act. USDA offered a Web-based application process to receive proposals. The 

Department received more than 50 funding applications from private voluntary organizations. Internet 

submissions accounted for 31 of the proposals. 

Exhibit 10: Resources Dedicated to Support International Economic Development and Trade Capacity 

Building 

FY 2003 

USDA Resources 

Dedicated to Objective 1.2 Actual 

Percent of 

Goal 1 

Program Obligations ($ Mil) $4,600 10% 

Staff Years 722 3% 
USDA Performance and Accountability Report for FY 2003 

Annual Performance Report 

26 

Challenges for the Future 

USDA is helping developing countries participate more fully in the trade arena. The Department’s trade 

capacity-building efforts are aimed at helping countries participate in negotiations, implement agreements 

and connect trade liberalization to a program for reform and growth. Helping these countries achieve sustainable economic development and capacity to trade is a step in building future growth markets for the 

U.S. 

Unfortunately, significant food needs continue to hurt many in the world. USDA will be working closely 

with the World Food Program and private voluntary-relief organization partners. Their goal will be to 

ensure that the U.S. commitment to alleviating global hunger and malnutrition remains strong. 

Support International Economic Development and Trade Capacity Building 

Many developing and transition countries receive U.S. funds and technical assistance for agricultural development and trade to help spur economic growth. USDA, working with the United States Agency for 

International Development (USAID), the U.S. Food and Drug Administration and other Federal agencies, 

supplies technical assistance in a number of different fields to improve and expand capacity to produce 

and trade agricultural products. 

Analysis of Results. 

The performance goal was met. 

USDA’s efforts were focused 

on providing technical assistance to developing and 

transitioning economies in: 

• Bringing sanitary standards 

up to par with those of major 

import markets; 

• Developing credible statistical systems needed to 

monitor agriculture sector 

performance; and 

• Formulating agricultural 

policies and programs to achieve more trade avenues and ensure that the benefits are equitably realized. 

Technical assistance helping countries improve their sanitary standards results in improved food safety 

and health. Developing credible statistical systems to monitor agriculture sector performance is important 

because most of the countries assisted are agrarian-based. Formulating agricultural policies and programs 

to achieve freer trade are critical to sustainable economic development. 

The number of technical-assistance projects has increased 29 percent during the past 5 years. Adding to 

the challenge of these efforts is USDA’s involvement in reconstruction efforts in Iraq and Afghanistan. 

Exhibit 11: Promoting Assistance on International Economic Development 

Fiscal Year 2003 

Annual Performance Goals and Indicators 

Target Actual Result 

1.2.1 Increase the activities/projects completed in support of international economic development and trade capacity building in developing and transition countries (Cumulative)1,020 1,0201 Met 

1

Result based on projected estimate. See the Data Assessment of Performance Measures section for more information. 

Exhibit 12: Steadily Increasing Efforts To Assist Developing Countries 

Expand Economic Development and Trade Capacity 

Fiscal Year Actual 

Trends 

1999 2000 2001 2002 2003 

Increase the activities/projects 

completed in support of international economic 

development and trade capacity building in developing and 

transition countries (Cumulative) 

789 

Baseline 

967 1,005 1,0051

 1,0202

1

Revised to reflect final data.

2

Result based on projected estimate. See the Data Assessment of Performance Measures section for more information. 
USDA Performance and Accountability Report for FY 2003 

Annual Performance Report 

27 

USDA anticipates technical-assistance work will continue to be needed in transitioning economies of the 

Newly Independent States and developing countries in Asia, Latin America and Sub-Saharan Africa. 

Program Evaluation. 

No program evaluations were performed during FY 2003. 

Support Foreign Food Assistance 

More than 800 million people worldwide suffer from hunger and malnutrition—most of them children. 

The U.S is the world’s leader in international food aid, providing more than 50 percent of total worldwide 

food assistance to combat this challenge. Working with the USAID, non-profit organizations and American universities, USDA works continuously to meet immediate food-aid needs while seeking long-term 

solutions to alleviate global food insecurity. These activities foster economic growth and development. 

Development, in turn, increases the recipient countries’ ability to reduce their dependence on food aid, 

boosts domestic production and increases their reliance on commercial imports. The principle programs 

supporting these efforts are concessional food aid sales under Title I of P.L. 83-480, the Food for Progress 

Program and McGovern-Dole. 

Analysis of Results. 

The performance goals were 

met. An important overall goal 

of USDA’s economic development and trade capacitybuilding objective is to help 

other countries reduce their 

dependence on food aid. This 

reduction helps these countries 

meet domestic consumption 

needs, increase the amount of 

basic staple food-commodity 

needs met through domestic 

production, and shift their 

abilities to meet food-import 

needs through commercial 

sources. 

Exhibit 13: Increase Foreign Food Assistance 

Fiscal Year 2003 

Annual Performance Goals and Indicators 

Target Actual Result 

1.2.2 Share of countries’ food import needs met through food aid programs (Percentage) 1.40% 1.40%1 Met 

1.2.3 Improve food security and nutrition through the McGovern-Dole Food for Education 

Program by the number of daily meals and take-home rations for mothers, infants and 

schoolchildren (Mil.) 

1.75 1.751 Met 

1.2.4 Improve literacy and primary education through McGovern-Dole Food for Education 

Program: 

Met 

• Percent increase in enrollment for Girls/Boys 5% 5%1

• Percent increase in the proportion of children who are promoted 10% 10%1

1

Result based on projected estimate. See the Data Assessment of Performance Measures section for more information. 

Exhibit 14: Food For Education Program 

Fiscal Year Actual 

Trends 

1999 2000 2001 2002 2003 

Share of countries’ food 

import needs met through 

food aid programs (Percentage) 

1.99% 

Baseline 

1.06% 1.70% 1.50% 1.40%1

Improve food security and 

nutrition through McGovernDole Food for Education 

Program by the number of 

daily meals and take-home 

rations for mothers, infants 

and schoolchildren (Mil.) 

N/A N/A N/A N/A 1.751

Baseline 

Percent increase in enrollment for Girls/Boys N/A N/A N/A N/A 51

Baseline 

Percent increase in the 

proportion of children who 

are promoted 

N/A N/A N/A N/A 101

Baseline 

1

Result based on projected estimate. See the Data Assessment of Performance Measures section for more information. 

N/A = Not Applicable 
USDA Performance and Accountability Report for FY 2003 

Annual Performance Report 

28 

During 1999-2002, the share of countries’ food-import needs met through food-aid programs ranged from 

1-2 percent. While the target and projected estimate for the ratio is 1.4 percent in 2003, it may be difficult 

to reach because the large number of emergencies and relatively slow economic growth in many markets. 

Despite these challenges, USDA is expected to meet the long-term target of 0.8 percent by FY 2007. Because FY 2003 is McGovern-Dole’s first year of operation, baselines currently are being established. 

USDA expects to meet its targeted performance measures in each of the three measures cited in exhibit 

above. 

Program Evaluation. 

The Office of Management and Budget’s (OMB) Program Assessment Rating Tool (PART) recommended that new measures be developed for USDA’s Food Aid Programs’ (P.L. 480, Title I, Section 

416(b) and Food for Progress). The new measures would link long-term outcome goals of food security. 

The Foreign Agricultural Service (FAS) is working to develop annual performance measures that link to 

long-term strategic goals and measurements. Additionally, FAS will determine if new performance measures are consistent with measures used by USAID and such other organizations as the World Food 

Program. A full copy of the assessment may be found at 

www.whitehouse.gov/omb/budget/fy2004/pma/foodaid.xls. 

Selected Results in Research, Extension and Statistics for Objective 1.2 

To enhance and provide strategic impact to its long, productive history of cooperative research with Mexico, USDA met with that country’s research and funding institutions. The two groups identified five areas 

for joint research and cooperation: 1) water and environmental impact; 2) phytosanitary issues; 3) biotechnology and biosafety; 4) animal health; and 5) food safety. These areas impact trade or address 

environmental concerns required by the North American Free Trade Agreement and are priorities in the 

U.S.-Mexico Binational Commission’s Committee on Agriculture. These workshops identified almost 

100 new or ongoing research activities to pursue cooperatively as part of a strategic approach under the 

five areas. 

Specialty plant-based natural products are a basis for U.S. industrial development in areas such as biopharmaceuticals, bioveterinary products, food additives and biological control products. The plant sources 

can be developed agronomically as novel crops for U.S. agriculture. Through a carefully designed network of international research collaborations involving USDA scientists and those from EU member 

States in the Mediterranean region, USDA has succeeded in gaining access to natural products. This access will supplement U.S. technology developments and eventually provide expanded product portfolios 

for U.S. agriculture. 

Purdue University agricultural faculty, supported in part by USDA funds, is redeveloping agricultural 

education at Kabul University in Afghanistan. Faculty members also are establishing a distance-learning 

pilot program. These outreach efforts promote greater stability in the region. They also open new avenues 

of economic opportunity for people in Afghanistan. 

Dominican Republic farmers lost their entire tomato crop to disease. A Wisconsin scientist, supported in 

part by USDA funds, examined deoxyribonucleic acid (DNA) and identified Tomato Yellow Leaf Curl 

Virus from the eastern Mediterranean. The virus is spread by whiteflies. DNA is a group of complex 

compounds that controls cellular function and heredity. USDA worked with Dominican officials and the 

tomato industry to develop an integrated pest-management plan. The plan virtually eradicated the number 

of virus-carrying whiteflies. Researchers identified early-maturing hybrid tomatoes that produced good 

yields before the virus could grow again. 
USDA Performance and Accountability Report for FY 2003 

Annual Performance Report 

29 

Objective 1.3: Develop Alternative Markets for Agricultural Products and 

Activities 

Overview 

USDA’s programs are designed to develop alternative markets for agricultural products; stimulate new 

sources of domestic and international demand that will benefit farmers; increase economic activity and 

job formation in rural America; create a portfolio of more environmentally friendly products, energy and 

power; and enhance the energy security of the U.S. by reducing dependence on imported energy. 

Serving the Public 

These programs serve the agricultural sector, rural communities and their residents, and the broader U.S. 

economy. Farmers and ranchers benefit from increased demand for their products and from new crops 

used as feedstocks in renewable energy and biobased product production. Rural communities and their 

residents benefit from the new investment in handling and processing facilities used in the production of 

these commodities. New jobs in rural communities related to biobased handling and processing create 

new economic vigor and bring opportunities to the families living there. Renewable power production 

using animal waste as a feedstock can help solve difficult environmental problems for farmers, ranchers 

and their rural communities. 

Challenges for the Future 

The challenges to future success are: 

• The continued need for research and demonstration projects to develop and demonstrate more efficient 

technologies and processes to convert biobased feedstocks to biopower (electric power production 

from biomass) and other renewable power (solar, wind, geothermal), biofuels (ethanol and biodiesel), 

and biobased products (plastics, motor oils and lubricants, coatings, solvents, etc. made from biofeedstocks); 

• The need for continued research into the science of carbon sequestration (storing of carbon in living 

matter, such as trees, grass, etc.) and technologies and systems to enhance this process’ capacity and 

efficiency; 

• The continued need for public policies supporting the development and use of renewable energy and 

biobased products; 

• The need for public education about the environmental, performance and energy security benefits of 

using renewable energy and biobased products, and more effectively managing the carbon cycle; 

• The development of an infrastructure to support the efficient and economically viable development of 

renewable energy and biobased products; and 

• The development of sound measurement and accounting techniques for greenhouse gas (carbon dioxide, methane and nitrous oxide) activities and carbon sequestration. 

Exhibit 15: Resources Dedicated to Develop Alternative Markets for Agriculture Products and 

Activities 

FY 2003 

USDA Resources 

Dedicated to Objective 1.3 Actual 

Percent of 

Goal 1 

Program Obligations ($ Mil) $499 1% 

Staff Years 1,238 5% 
USDA Performance and Accountability Report for FY 2003 

Annual Performance Report 

30 

In response, USDA is creating regulations and other operating procedures under which the programs will 

operate to increase the use of bioenergy and biobased products. These programs, if successful, will make 

an important contribution toward creating market-based opportunities to both produce and consume increased amounts of bioenergy and biobased products. 

Increase the Use of Bioenergy and Biobased Products 

Broader use of renewable energy and biobased products will enhance environmental sustainability wherever these products are produced and used. Increased use of renewable energy and biobased products will 

enhance U.S. energy security by reducing the Nation’s dependence on imported energy. 

These programs, mostly created by the Farm Security & Rural Investment Act of 2002 (FSRIA), currently 

are being implemented and should be fully operational before the end of FY 2004. FSRIA also extended 

the biofuels program operational prior to its passing. Additionally, a program to develop accounting rules 

for greenhouse gas activities will create methodologies (methods used to estimate emissions) necessary 

for greenhouse gas reduction and carbon sequestration programs. Development of accounting rules for 

greenhouse gas activities will make the accurate measurement of the effect of greenhouse gas sequestration efforts and programs possible. 

These programs help the U.S. economy move toward increased leadership in renewable energy and biobased products technology. This feature creates profitable and environmentally friendly penetration of 

domestic and international markets for both these products and the technologies used in their production. 

Analysis of Results. 

The performance goal was met. USDA is reviewing draft regulations to create the framework for designating categories of products within the Biobased Products Preferred Procurement Program. The Federal 

Register is expected to publish the draft regulations for comments by December 2003. The next step is the 

designation of generic product categories, which are subject to preferred procurement by Federal agencies. 

Exhibit 16: Increase the Use of Bioenergy and Biobased Products 

Fiscal Year 2003 

Annual Performance Goals and Indicators 

Target Actual Result 

1.3.1 Increase the use of bioenergy and biobased products1 Met 

• Qualify the number of products in five or more categories of Biobased Products 

for preferred procurement by Federal agencies 

N/A N/A 

• Encourage a number of farmers to produce energy for their own use and sale (# 

farms, ranches, & businesses assisted) 

140 148 

• Develop a research, development and demonstration program to increase production of bioenergy, bioproducts and renewable energy (# projects funded) 

5 50 

• Develop accounting rules and guidelines for greenhouse gas offset activities in 

agriculture (Percentage) 

50% 50% 

1

FSA is developing measures to focus on the desired key outcomes of the CCC bioenergy program. The Agency is planning to 

provide new measures in time for the FY 2005 budget submission. 

N/A = Not Applicable 
USDA Performance and Accountability Report for FY 2003 

Annual Performance Report 

31 

USDA met its target by receiving, reviewing and acting on 

148 proposals from farmers, 

ranchers and small rural businesses. The proposals were for 

Federal assistance in producing 

renewable energy for their own 

use or sale, and providing energy-efficiency improvements. 

This number was based on all 

of the proposals submitted to 

Rural Business – Cooperative 

Service State offices. The proposals came in response to a 

Notice of Funds Availability 

published in the Federal Register for a grant-only program 

this fiscal year. The solicitation 

was for the Renewable Energy 

Systems and Energy Efficiency 

Improvements Program authorized under Title IX of FSRIA. As part of the solicitation, a Rural Development energy coordinator was 

designated to assist potential applicants in the application process. After USDA reviewed all 148 applications for programmatic and technical eligibility, the Department awarded 114 recipients (farmers, 

ranchers and rural small businesses) a total of $21.7 million of grant funds to assist in the development of 

renewable energy systems and energy-efficiency improvements. Of the 114 awards, 90 were for renewable energy systems totaling $20.2 million. The rest were for energy efficiency programs totaling $1.5 

million. 

The development and demonstration program for researching the use of bioenergy, bioproducts and renewable energy combines two programs. One component is the funding for research, development and 

demonstration provided under the Biomass Research and Development Act of 2000 and funded under 

FSRIA. The other component is the Commodity Credit Corporation (CCC) Bioenergy Program extended 

under FSRIA. The Department intends to separate these two components in FY 2004. 

USDA and the Department of Energy awarded $23 million in grants for 19 proposals under the Biomass 

Research and Development Program. USDA allocated $16 million for this activity to 15 proposals. The 

CCC Bioenergy Program component published a final rule implementing changes reflecting FSRIA provisions and conducted an enrollment for the program for FYs 2003 through 2006. CCC will approve and 

execute program agreements for 54 ethanol producers and 42 biodiesel producers this year. The 50 projects represent 10 grant projects awarded under the Biomass Research and Development component, 13 

new ethanol producers and 27 new biodiesel producers submitting agreements to participate in the Bioenergy Program component. The future challenges for the farm-produced energy program are increased 

development of farm bioenergy and development of market opportunities for such energy. The project 

also pushes for increased investment in new research, development and demonstration projects to improve 

the efficiency and acceptance of bioenergy and biobased products on the part of consumers. The CCC 

Bioenergy Program looks to increase the number of firms producing ethanol and biodiesel for sale to vendors and consumers. 

Exhibit 17: Bioenergy and Biobased Products Performance 

Fiscal Year Actual 

Trends 

1999 2000 2001 2002 2003 

Qualify the number of products in five or more categories 

of Biobased Products for preferred procurement by Federal 

agencies 

N/A N/A N/A N/A N/A 

Encourage a number of farmers to produce energy for their 

own use and sale (# farms, 

ranches and businesses assisted) 

N/A N/A N/A N/A 148 

Baseline 

Develop a research, development and demonstration 

program to increase production of bioenergy, bioproducts 

and renewable energy (# projects funded) 

N/A N/A N/A 2 

Baseline 

50 

Develop accounting rules and 

guidelines for greenhouse gas 

offset activities in agriculture 

(Percentage) 

N/A N/A N/A N/A 50% 

Baseline 

N/A = Not Applicable 
USDA Performance and Accountability Report for FY 2003 

Annual Performance Report 

32 

The above program also made way for the development of new accounting rules and guidelines for reporting greenhouse gas reduction and carbon sequestration activities. 

Program Evaluation. 

A joint evaluative effort that includes the Rural Business-Cooperative Service, the Department of Energy 

(DOE) and the DOE-affiliated National Renewable Energy Laboratory will be conducted in early FY 

2004. The CCC Bioenergy Program currently monitors and evaluates critical aspects of its program. It 

matches increased production projections with year-end actual production of increased ethanol and biodiesel by program participants. Copies may be obtained from the Farm Service Agency’s Warehouse 

Inventory Division at (202) 720-2121. USDA and DOE evaluate the Biomass Research and Development 

Act grant program. Additionally, a Federal Advisory Committee created by the Act provides an evaluation to the Secretaries of Agriculture and Energy. Copies may be obtained from the Under Secretary for 

Natural Resources and Environment at (202) 720-7173. 

A Program Assessment Rating Tool (PART) assessment was initiated on the Bioenergy Program as part 

of the FY 2005 budget process. A full copy of the completed evaluation will be available February 2004 

at www.whitehouse.gov/omb/part. 

Selected Results in Research, Extension and Statistics for Objective 1.3 

Until recently, starch-based disposable plates, cups and food wraps manufactured and sold to restaurants 

and food-packaging companies were made strictly from potato starch, in part, because of an objectionable 

odor when using less-expensive wheat starch. Using knowledge of the structure and properties relationship of wheat starch and associated proteins, USDA developed a wheat-based, starch-packaging 

composite. This composite had no odor and was less expensive than the original commercial formulation. 

This technology was transferred to an industrial partner that manufactures the starch-based packaging as 

part of a Cooperative Research and Development Agreement. It is being introduced to the market via development of wheat-starch based biodegradable plates. This innovation improves the economics of using 

agriculturally derived packaging material. It also creates new markets for wheat starch. 

Many universities, supported in part by USDA funds, are identifying new plant varieties to expand cropping options. Kentucky’s work with seedless watermelons led a group of farmers to plant 10 trial acres. 

The watermelons grossed $30,000. The growers expanded the planting in 2003. Florida A&M University 

is testing such alternative tropical crops as Habanero peppers. One hot-pepper grower who followed recommendations grossed more than $15,000 in his first year of production. Alaska is examining peony 

cultivars for the international cut-flower market. 

Supported in part with USDA funds, University of Nebraska research on chickpeas (garbanzo beans) 

helped establish it as a new high-value crop with export potential. More than 10,000 acres are produced in 

the State. The chickpeas provide twice the gross return on investment than the region’s traditional millet 

and wheat crops. Vermont researchers developed whey protein-based wood varnishes. Natural and safe 

for homes, kids and pets, these products can become a new market for dairies. 

Expanding ethnic markets are increasing the demand for goat meat in many States. Florida A&M University research, with USDA support, identified strategies that increase carcass yields by 15 percent. These 

strategies also improve weaning weights by 12 percent. 
USDA Performance and Accountability Report for FY 2003 

Annual Performance Report 

33 

Objective 1.4: Provide Risk Management and Financial Tools to Farmers and 

Ranchers 

Overview 

USDA has reduced program costs including preventing payments on potential fraudulent insurance 

claims, and developed new technology including data-mining efforts, Geographic Information Systems, 

infrared, the Common Computing Environment for county offices, and other information technologies. 

New specialty crop and livestock pilot programs currently are underway. Education and outreach programs have been enhanced and expanded to help more producers learn how to better mitigate their risks.

The Department also continued to establish and implement the framework for farm and commodity programs under FSRIA and the Agricultural Risk Protection Act. The acts provided America’s farmers and 

ranchers with a variety of risk-management and financial tools. These tools included crop insurance, direct and counter-cyclical payments, marketing-assistance loan benefits and farm operating and ownership 

loans to promote stability in the agricultural sector. Additionally, USDA continued its efforts to streamline and modernize its program delivery structure to provide more efficient service for its customers. 

Serving the Public 

USDA promotes, supports and regulates sound risk-management solutions to preserve and strengthen the 

economic stability of U.S. agricultural producers. This effort is conducted predominately through the 

Federal Crop Insurance Program. The program consists of many public and private risk-management alternatives designed to improve the economic stability of agriculture. The long-term agricultural 

producers’ capability to supply U.S. and global food-related markets depends on their ability to manage 

financial and natural risks associated with production. 

USDA also offers direct and guaranteed farm ownership and operating loans to farmers and ranchers who 

are temporarily unable to obtain private, commercial credit. These loans are particularly important to beginning and socially disadvantaged farmers and ranchers whose limited cash flow may preclude them 

from qualifying for a commercial loan. 

Operating loans may be used to purchase or lease such items as livestock, equipment, feed or seed or to 

cover operating expenses. Farm ownership loans are used to purchase farmland and build or repair buildings. Together, the producer and the Agency outline goals and objectives to steer the operation towards 

profitability. The Youth Loan Program is designed for those between the ages of 10 and 20 to borrow up 

to $5,000 to establish and operate income-producing projects. The money can be used to purchase animals, equipment or supplies, and to pay operating expenses. 

USDA’s commodity, price and income-support programs continue to be a testament to the country’s 

commitment to maintaining a balanced food and fiber industry for its consumers. Commodity, price and 

income support helps stabilize American farming and ranching operations. This assistance enables farmExhibit 18: Resources Dedicated to Provide Risk Management and Financial Tools to Farmers and 

Ranchers 

FY 2003 

USDA Resources 

Dedicated to Objective 1.4 Actual Percent of 

Goal 1 

Program Obligations ($ Mil) $34,763 76% 

Staff Years 17,587 69% 
USDA Performance and Accountability Report for FY 2003 

Annual Performance Report 

34 

ers and ranchers to reduce their risk of financial loss due to inclement weather or unfavorable global market conditions. 

Direct and counter-cyclical payments reduce financial risks and help producers meet their cash flow 

needs. Marketing-assistance loans provide producers interim financing at harvest time to meet cash flow 

needs without having to sell their commodities when market prices are at harvest-time lows. Enabling 

producers to store production at harvest facilitates more effective marketing of commodities throughout 

the year.

Although society has become increasingly dependent on technological advancement, four very basic human needs remain constant: food, water, clothing and shelter. USDA will continue working with 

American farmers, ranchers and producers to satisfy those basic needs with abundant, safe and affordable 

supplies of food and fiber by promoting responsible land and natural resource management. 

Challenges for the Future 

Today, about 80 percent of the acreage planted to major corps is at least minimally insured. Additionally, 

coverage is expanding by encouraging producers to purchase higher coverage levels and the development 

of products for new crops, livestock and revenue. These programs, along with diversified production, 

marketing and use of futures and options, allow each producer to customize their risk management strategy. USDA’s challenge is to continue to expand and improve these programs, and educate producers so 

that they can identify, quantify and manage their natural and economic risks. 

USDA will be reviewing its farm-loan program activities to assess the effectiveness and impact of its programs. Ensuring an efficient delivery of services is not necessarily dependent on funding increases. It also 

depends on training, human-capital planning and organizational efficiencies. Farm-loan program challenges include ensuring a highly trained staff, assisting farmers during economic distress and natural 

disasters, and offering credit to eligible borrowers unable to obtain it from other sources. 

Provide Risk-Management Tools to Farmers and Ranchers 

USDA provides and supports cost-effective means of managing risk for agricultural producers to improve 

the economic stability of agriculture. Agricultural producers face severe economic losses each year due to 

such unavoidable causes as drought, excessive moisture, severe weather, insects, reduced prices, reduced 

yields or any combination of these factors. USDA develops a variety of risk-management tools for use 

by agricultural producers. The Department continues to assess producers’ needs and private risk-management tools to ensure the availability of new and innovative risk-management alternatives. The 

increased percentages in insurance liability covered, participation and the number of commodities eligible indicate the acceptance of these products by producers, and a broadening of economic stability 

across the agricultural spectrum. 
USDA Performance and Accountability Report for FY 2003 

Annual Performance Report 

35 

Analysis of Results. 

This performance goal is deferred. Actual performance data 

pertaining to crop-year liability 

and acres covered are gathered 

from information USDA receives from insurance 

companies. These companies, in 

turn, receive data from the producers. The actual 2003 data will 

become available at the end of 

the second quarter of FY 2004. 

The data will be published in 

next year’s report. While the 

measures may be revised later, 

based on prior history, this performance goal is expected to be met. 

The Department measured the number of commodities eligible for crop insurance and participation in the 

Federal Crop Insurance Program. Expanding the number of eligible commodities is one way to provide 

economic opportunities for agricultural producers who have not had access to risk-management tools. 

Since 1999, an additional 34 commodities have become eligible for crop insurance. While USDA had 

projected that this number would increase by eight rather than four for the 2003 Crop Year, the Federal 

Crop Insurance Act requires that submissions of insurance policies and plans and related materials be developed by third parties and approved by the Federal Crop Insurance Corporation (FCIC) Board of 

Directors. These submissions, including all new and substantial product modifications, are subject to review by not less than five independent expert actuarial and underwriting reviewers. While several dozen 

of these comprehensive reviews are considered by the FCIC Board each year, not all are approved for 

implementation. These new FCIC product-development procedures, while causing some program development and implementation delays, will improve program integrity and reliability. 

USDA also announced pilot programs for fed and feeder cattle to protect producers from declining cattle 

prices. The Department also entered its second pilot year for two products for slaughter hogs in Iowa, 

subsequently approved expansion of the pilot in additional States and continued to test several specialty 

crops and pasture and forage products. These moves were designed to fulfill the requirements of the Agricultural Risk Protection Act of 2000. The act requires USDA to establish a competitive-grants program to 

Exhibit 19: Expand Use of Risk Management Tools 

Fiscal Year 2003 

Annual Performance Goals and Indicators 

Target Actual Result 

1.4.1 Expand USDA risk-management tools available for agricultural producers to use in 

managing production and price risks1: 

Deferred 

• Increase crop insurance coverage as measured by potential liabilities covered by 

crop insurance ($ Bil) 

40.6 Available 

Spring 

2004 

• Increase crop insurance participation as measured by planted acres having crop 

insurance coverage (Percentage) 

81.1% Available 

Spring 

2004 

• Increase the number of commodities eligible for crop insurance 366 362 

1

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

year in which the insured crop is harvested. 

Exhibit 20: Trends in the Use of Risk Management Tools 

Fiscal Year Actual 

Trends 

1999 2000 2001 2002 2003 

Increase crop insurance coverage as measured by 

potential liabilities covered by 

crop insurance ($ Bil) 

30.9 

Baseline 

34.5 36.7 37.3 Available 

Spring 

2004 

Increase crop insurance participation as measured by 

planted acres having crop 

insurance coverage (Percentage) 

72.5% 

Baseline 

76.9% 78.5% 81.1%1

 Available 

Spring 

2004 

Increase the number of commodities eligible for crop 

insurance 

328 

Baseline 

343 343 358 362 

1

Revised to reflect final data. 
USDA Performance and Accountability Report for FY 2003 

Annual Performance Report 

36 

educate agricultural producers about the full range of risk-management activities. Additionally, USDA 

announced an effort to better serve and increase crop-insurance participation in the 15 historically underserved States (CT, DE, MA, MD, ME, NH, NJ, NV, NY, PA, RI, UT, VT, WV and WY) targeted under 

the Agricultural Management Assistance Program. USDA provided additional subsidy for higher levels of 

insurance coverage to producers in these States for the 2003 Crop Year through the Targeted States Financial Assistance Program. 

Program Evaluation. 

A team of expert actuarial and underwriting reviewers from academia and the private sector conducted an 

inventory and analysis of the FCIC portfolio of crop insurance and risk-management products. The analysis, which currently is underway, is designed to provide background and guidance to the FCIC Board of 

Directors in its product-development strategy for the next several years. 

Another team conducted an inventory and analysis of existing FCIC policies, procedures, handbooks and 

other related material. The team’s work focused on the analysis of overlapping documentation and guidance, and procedural gaps. Team members submitted the evaluation to the FCIC Board. The board then 

directed the Risk Management Agency to take action on the findings. A review of the findings currently is 

underway. 

USDA also conducted program evaluations on the Quality Adjustment Program and the Use of Pack Factors in Stored Grains. Pack factors may be used in the loss-adjustment process to estimate the amount of 

settling or “packing” that occurs in stored grain. The Department used both internal staff and contractors 

to complete the evaluations. An additional eight evaluations currently are underway. 

USDA completed Pilot Program evaluations for pecans, blueberries and millet. Seventeen additional pilot 

crop evaluations currently are underway. As these evaluations are completed, the FCIC Board uses them 

during the approval process for new insurance plans. Copies of the completed evaluations are available at 

www.rma.usda.gov. 

OMB’s PART showed the Crop Insurance Program to be clear and its management relatively good. The 

PART stated that additional planning and performance measurement is needed because the program has 

yet to demonstrate the extent of its impact on farm income or reducing dependence on other governmentsupport programs. The Risk Management Agency will identify improvements in the program that will 

move it closer to becoming a complete risk-management tool for the agriculture sector. A full copy of the 

PART may be found at www.whitehouse.gov/omb/budget/fy2004/pma/cropinsurance.pdf.

Provide Credit to Agricultural Producers 

Farmers and ranchers who temporarily are unable to obtain sufficient credit may obtain credit assistance 

through USDA. They can use the assistance to finance their needs at reasonable rates and terms. Some are 

beginning or socially disadvantaged farmers who have suffered financial setbacks from natural disasters. 

These farmers also have limited resources with which to establish and maintain a profitable farm operation. Thus, the farm-loan program provides support to family farmers and ranchers who otherwise would 

be unable to contribute to the farm sector. 

To help ensure the effectiveness of these programs, it is important to provide timely financial resources 

and other assistance to borrowers when a need arises. Thus, USDA will continue to reduce processing 

times for loan requests each year. Borrower ability to pay installment debt on time is obviously a key indicator of financial strength and viability. Reduced losses in the program indicate that borrowers are 
USDA Performance and Accountability Report for FY 2003 

Annual Performance Report 

37 

experiencing greater success in meeting their financial obligations. The Department will continue to 

monitor the delinquency and loss rates of the direct loan portfolio closely. 

Analysis of Results. 

These performance goals were 

met. The average processing 

time for direct loans has decreased from 46 days in FY 

2000 to 40 days. This 13-percent decrease can be attributed 

to the ongoing streamlining 

process, improved monitoring 

through automation and a renewed focus on customer 

service through personnel hiring and training. USDA 

completed and implemented 

the direct emergency loan portion of the streamlining project 

during FY 2002. 

Similar results have been achieved for guaranteed loan processing. USDA revised its guaranteed loan 

regulations in FY 1999 to streamline all loan processes, including application processing. As a result, 

USDA’s guaranteed loan-processing time continued to decline during the 2003 loan season. The average 

guaranteed loan-processing time has dropped 30 percent, from 20 days in FY 2000 to 14 days. 

USDA’s direct operating and ownership loan programs target farm borrowers with less wealth, higher 

indebtedness, less capacity for further debt and lower income levels. Thus, USDA’s farm-loan programs 

carry a high degree of risk. Despite the risk, the Department surpassed its performance targets for both 

delinquencies and losses. Delinquency and loss rates in FY 2003 essentially are unchanged from the FY 

2000 baseline. They also remain well below the average loss (5.9 percent) and delinquency (17.6 percent) 

rates for the period 1993-2002. These performance measures help USDA assess the economic viability of 

borrowers. A low delinquency rate means more producers are on schedule with their loan payments and 

less likely to cease farming. Loss rates are an indicator of prior-year loan decisions and the overall farm 

economy. Additionally, low rates translate into reduced program costs. Government program payments, 

improved monitoring and loan officer training contributed to meeting the performance goal. State Office 

and Service Center staff also prioritized resolving a number of older delinquency cases. 

Exhibit 21: Improve Loan Processing Efficiency and Fiscal Soundness of the Direct Loan Portfolio 

Fiscal Year 2003 

Annual Performance Goals and Indicators 

Target Actual Result 

1.4.2 Improve customer service by increasing the efficiency of loan processing: Met 

• Reduce the average direct loan processing time (Days) 40 401

 

• Reduce the average guaranteed loan processing time (Days) 15 141

 

1.4.3 Improve fiscal soundness of the direct loan portfolio: Met 

• Maintain the direct loan delinquency rate at or below 15 percent (Percentage) 15% 12.5%1

 

• Maintain the direct loan loss rate at or below 5 percent (Percentage) 5% 4.5%1

 

1

Result based on projected estimate. See the Data Assessment of Performance Measures section for more information. 

Exhibit 22: Farm Loan Trends 

Fiscal Year Actual 

Trends 

1999 2000 2001 2002 2003 

Reduce the average direct 

loan processing time (Days) 

N/A 46 

Baseline 

44 42 401

Reduce the average guaranteed loan processing time 

(Days) 

N/A 20 

Baseline 

17 16 141

Maintain the direct loan delinquency rate at or below 15 

percent (Percentage) 

14.2% 12.4% 

Baseline 

11.3% 10.4% 12.5%1

Maintain the direct loan loss 

rate at or below 5 percent 

(Percentage) 

3.5% 4.2% 

Baseline 

3.3% 7.3% 4.5%1

N/A = Not Applicable 

1

Result based on projected estimate. See the Data Assessment of Performance Measures section for more information. 
USDA Performance and Accountability Report for FY 2003 

Annual Performance Report 

38 

USDA intends to continue using prudent underwriting practices, borrower supervision and training 

classes to maintain the direct-loan delinquency and loan-loss rates at or below target levels. A recently 

purchased Web-based, farm-planning tool will enhance the underwriting process and loan decision-making. This information system will allow USDA to manage the farm-loan programs more efficiently. 

Additionally, data gathered in the system will enable USDA to evaluate alternative performance measures 

for the farm-loan programs that are more outcome-oriented. These measures would indicate whether or 

not programs are in fact improving the economic viability of the Department’s customers. The challenge 

of maintaining low delinquency rates and targeted levels in FY 2004 will be influenced by commodity 

prices and weather-related disasters. 

Program Evaluation. 

A PART assessment was initiated on the Guaranteed Loans Program as part of the FY 2005 budget process. A full copy of the completed evaluation will be available February 2004 at 

www.whitehouse.gov/omb/part. 

Provide Income Support to Agricultural Producers 

Economic stability is provided to producers through multiple farm income-support programs. These programs include the marketing assistance loan and loan deficiency payment (LDP) program. Marketingassistance loans are provided to producers on a nine-month basis on their eligible crop stored either on the 

farm or in approved storage space. The heaviest loan activity is usually at harvest time when commodity 

prices generally are lower. To market their commodity effectively, producers obtain the loan and store the 

crop in anticipation of commodity prices increasing later after harvest time. Producers who choose not to 

obtain a marketing-assistance loan can obtain a loan-deficiency payment by agreeing to forgo the marketing-assistance loan. The LDP is a direct payment to the producer in an amount equal to the difference 

between the established loan rate for the eligible commodity and the announced alternative repayment 

rate. 

Eligible commodities for marketing-assistance loan and LDPs are wheat, corn, grain sorghum, barley, 

oats, soybeans, minor oilseeds, upland cotton, peanuts, wool, mohair, pelts, pulse crops, honey and rice. It 

is anticipated that the level of marketing-assistance loans and LDPs will remain about the same for 2004 

as for 2003. 

Exhibit 23: Provide Income Assistance 

Fiscal Year 2003 

Annual Performance Goals and Indicators 

Target Actual Result 

1.4.4 Eligible commodity production placed under marketing assistance loan or loan deficiency payment (Percentage)1

: 

Unmet 

• Wheat, corn, grain sorghum, barley, oats, soybeans, minor oilseeds, peanuts, 

wool, mohair, pulse crops and rice 

82% 13% 

• Upland cotton 97% 99% 

1

Performance data for marketing-assistance loans and LDPs are reported on crop year rather than fiscal-year basis. A crop year is 

defined as the year in which a crop is harvested. The final loan and LDP availability date for CY 2002 was May 30, 2003. 

Analysis of Results. 

USDA’s performance goal for the amount of eligible commodity production placed under marketing-assistance loan or LDP was not met. While government payments continued to be an important factor in 

stabilizing farm income, USDA issued significantly fewer LDPs in 2003 than it had in recent years. The 

Department made approximately 220,000 LDPs valued at nearly $550 million in 2003. This figure is a 
USDA Performance and Accountability Report for FY 2003 

Annual Performance Report 

39 

significant drop from the nearly three million LDPs ($6.25 billion) issued in 2001 (baseline). Demand for 

marketing-assistance loans increased in 2003, continuing the trend of recent years. USDA issued 193,000 

marketing-assistance loans worth more than $10 billion. This number compares with 160,000 loans ($6.5 

billion) issued in 2001 (baseline). In 2003, 13 percent of the eligible production of major commodities 

received an LDP or marketing-assistance loan. Ninety-nine percent of the eligible production of upland 

cotton received an LDP or marketing-assistance loan. 

While the performance goal was not met, the program worked as intended. Eligible producers may choose 

to receive marketing loan-gain benefits by receiving an LDP when the alternative repayment rate, which 

is based on terminal market rates, is lower than the established commodity-loan rate. Because market 

prices remained higher than the established loan rate for most of the eligible loan commodities (cotton 

and rice market prices were below the established loan rate the entire crop year) throughout the crop year, 

the LDP option had limited availability. Lower market gain activity and LDP program activity indicates 

that the market is getting stronger. As market prices increase, the amount of government assistance 

needed to stabilize the farm economy is reduced. 

Description of Actions and Schedules. 

No specific actions are planned to reach the unmet goal because the program is working as designed. 

USDA, in consultation with OMB, is developing new outcome-oriented performance indicators for its 

income-support programs. The current performance goal and indicators for marketing-assistance loans 

and LDPs will be discontinued. New indicators will be included in the FY 2005 performance budget. 

Program Evaluation. 

The Direct Payment Program PART assessment completed for the FY 2004 budget may be obtained at 

www.whitehouse.gov/omb/budget/fy2004/pma/directcrop.pdf. The FY 2004 PART stated that the Direct 

Payment Program is well managed and has a clear purpose. The PART also stated that its design could be 

improved and performance measures are needed to address program goals and delivery. As indicated 

above, the Farm Service Agency will be developing more outcome-oriented performance measures in FY 

2004 that will address this deficiency. A reassessment of this program was initiated as part of the FY 

2005 budget process. A full copy of the completed evaluation will be available February 2004 at 

www.whitehouse.gov/omb/part. 

A PART assessment was initiated on the Marketing Assistance Loan Program as part of the FY 2005 

budget process. A full copy of the completed evaluation will be available February 2004 at 

www.whitehouse.gov/omb/part. 

Improve Electronic Delivery of Information and Services 

Producers receive farm loans, commodity loans, direct payments and emergency assistance, and participate in conservation programs to help ensure their economic viability. These programs help farmers and 

ranchers produce an adequate food supply, maintain viable operations, compete for export sales of commodities in the world marketplace and contribute to the year-round availability of a variety of low-cost, 

safe and nutritious foods. 

To meet the needs of its customers more effectively, USDA is improving access to services and program 

information, and increasing the efficiency and ease of use of the number of farm commodity and farmloan programs that can be accessed, completed and accepted electronically. Transaction needs of USDA's 

business and industry customers who purchase, export, warehouse and transport commodities are targeted 

for FY 2004. 
USDA Performance and Accountability Report for FY 2003 

Annual Performance Report 

40 

Analysis of Results. 

The performance goal was exceeded. USDA increased the 

number of forms available electronically to USDA customers 

through the public eForms Web site 

from 143 to 208 forms. This action 

resulted in 74 percent of the accessible forms being transmitted 

electronically to USDA Service 

Centers for processing. This is a 17-percent increase from the 2002 baseline. To meet the future challenge of 

further improving the electronic delivery of information and services, USDA must enhance customer access 

to farm historical data for current and previous years. The Department also must enhance automatic data fillin forms and calculations, and multiple-signature capabilities. 

Program Evaluation. 

No evaluations were performed during FY 2003. 

Selected Results in Research, Extension and Statistics for Objective 1.4 

While the Federal Agriculture Improvement and Reform Act of 1996 and the Farm Security and Rural Investment Act of 2002 (FSRIA) introduced new programs that support farmers’ incomes, some of which do 

not depend on current production, factor use or commodity prices. USDA analysis of these decoupled payments finds little evidence that they distort markets. Department analysis of the effects of FSRIA’s 

provisions allowing base and yield updating and introducing counter-cyclical payments indicate that twothirds of farmers decline to update their payment base and yields. 

Recent USDA research has identified three broad demographic trends that will shape future U.S. food markets. These trends are more mature consumers, increased diversity and more people to feed. After further 

review, USDA translated these trends into projections of growth in food expenditures and demand for specific commodities between 2000 and 2020. This research examined whether the character of America’s 

farmlands and farm businesses will change as much as the profile of the U.S. population 20 years from now. 

USDA’s Agricultural Resource Management Survey (ARMS) is the primary source of information on the 

financial condition, production practices, resource use and economic well-being of America’s farm households. The survey data have provided the foundation for some of the most insightful research on farm 

households and farm business practices. In recent years, ARMS funding has lagged behind survey costs, 

affecting survey coverage and data quality adversely. With new funding, USDA is improving statistical accuracy and expanding the survey’s coverage. The Department also plans to make the ARMS data more accessible and user-friendly through Web-based dissemination. 

Exhibit 24: Expand Customer Access to Services 

Fiscal Year 2003 

Annual Performance Goals and Indicators 

Target Actual Result 

1.4.5 Increase farm commodity and loan programs that can be accessed, completed and 

accepted electronically (Percentage) 

68% 74%1 Exceeded 

1

Result based on projected estimate. See the Data Assessment of Performance Measures section for more information. 

Exhibit 25: Trends in Customer Access to Services 

Fiscal Year Actual 

Trends 

1999 2000 2001 2002 2003 

Increase farm commodity and 

loan programs that can be accessed, completed and 

accepted electronically (Percentage) 

N/A N/A N/A 63% 

Baseline 

74%1

N/A = Not Applicable 

1

Result based on projected estimate. See the Data Assessment of Performance 

Measures section for more information. 
USDA Performance and Accountability Report for FY 2003 

Annual Performance Report 

41 

Developed in part with USDA funds, global-positioning systems, geographic-information systems and remote sensing are helping decision-makers map and manage a wide variety of crops and natural resources 

nationwide. This technology gives them clear, detailed information. New low-cost field-environmental sensors developed at the University of Kentucky, Ohio State University and the University of Tennessee help 

farmers maximize economic return and environmental stability. 
USDA Performance and Accountability Report for FY 2003 

Annual Performance Report 

42 

STRATEGIC GOAL 2: SUPPORT INCREASED ECONOMIC 

OPPORTUNITIES AND IMPROVED QUALITY OF LIFE IN 

RURAL AMERICA 

USDA focuses on expanding economic opportunities in rural areas. Many rural communities lag behind 

Americans’ expectations of what the U.S. standard of living should be because of their remoteness, overall lower educational levels and their tendency to depend on narrowly defined economies, among other 

reasons. 

USDA’s Business and Industry Guaranteed Loan Program (B&I) supports loans to individuals, partnerships, corporations, cooperatives and other legal entities. B&I is designed to improve, develop or finance 

business and industry, create employment opportunities and improve the economic and environmental 

climate in rural areas. 

Biobased energy investments over the next few years will prevent tons of carbon dioxide from being released into the atmosphere. These investments also will save millions of kilowatt hours now wasted in 

low-efficiency energy production. Additionally, for rural communities to establish new economic gains, 

they must utilize such new and enabling technology as broadband.

Objective 2.1: Expand Economic Opportunities through USDA Financing of 

Businesses 

Overview 

USDA focuses on expanding economic opportunities in rural areas. Many rural communities are challenged by declining economies as they transition away from traditional economic bases, their distance 

from input or product markets, poor labor-force skills and rising international competition. The Department makes a variety of investments in rural communities, including: 

• Guarantees of bank loans to businesses; 

• Capitalizing local revolving loan funds that assist small businesses; 

• Grants to develop business infrastructure such as incubators or to undertake feasibility studies; 

Exhibit 26: Resources Dedicated to Support and Improve Rural America 

FY 2003 

USDA Resources 

Dedicated to Strategic Goal 2 Actual 

Percent of 

Total USDA 

Program Obligations ($ Mil) $15,920 13% 

Staff Years 9,001 8% 

Exhibit 27: Resources Dedicated to Expand Economic Opportunities through USDA Financing of 

Businesses 

FY 2003 

USDA Resources 

Dedicated to Objective 2.1 Actual 

Percent of 

Goal 2 

Program Obligations ($ Mil) $6,984 44% 

Staff Years 3,436 38% 
USDA Performance and Accountability Report for FY 2003 

Annual Performance Report 

43 

• Business-planning grants; 

• Technical assistance to help communities develop strategic plans for economic development; 

• Loans and technical assistance to agricultural cooperatives; 

• Grants to foster energy savings and alternative energy sources; and 

• Grants to stimulate the development of new enterprises based on value-added products. 

USDA also invests in critically needed infrastructure, such as broadband technology, that provides rural 

businesses access to emerging competitive opportunities. Today's advanced telecommunications networks 

allow rural communities to provide businesses with opportunities to compete locally, nationally and globally. These networks also will ensure that rural residents are equipped to compete in an increasingly 

information-oriented economy. 

Serving the Public 

B&I helps create and save jobs in rural America. This program guarantees up to 90 percent of a loan 

made by a commercial lender. Loan proceeds may be used for working capital, machinery and equipment, 

buildings and real estate, and certain types of debt refinancing. B&I expands the lending capacity of private lenders in rural communities. Participating lenders can make and service quality loans that provide 

lasting community benefits. B&I represents a true private-public partnership. 

USDA’s Broadband Telecommunications Program provides loans and loan guarantees for broadband services in rural communities. These loans facilitate deployment of new and innovative technologies to 

provide two-way data transmission of at least 200 kilobytes-per-second in communities with populations 

up to 20,000. These important investments in rural areas make high-speed data transmission available in 

low-density, remote areas that often have been ignored by the private sector. Since its inception in 2001, 

the program has grown quickly, reaching more than twice as many rural counties as in the initial year, or 

6 percent of all rural counties in 2003 alone. These investments in critical telecommunications infrastructure are essential to enabling rural businesses and communities to keep pace with rapid developments 

in the rest of America and the world. 

Challenges for the Future 

The rural economy faces different challenges than urban and suburban areas. These challenges include 

historic dependence on natural resources subject to cyclical trends, large-scale changes in technology and 

resulting efficiency gains in these industries, and the remoteness and low-density settlement of rural 

communities. The private sector often avoids investments in high-cost developments because of lack of 

profitability potential or information on which to base decisions. While USDA can foster rural economic 

development, success depends on sufficient numbers of highly trained staff in local offices. 

Because of a lack of biobased energy investments in technology and human capital, rural communities 

depend on low-efficiency energy production. This production releases tons of carbon dioxide into the atmosphere. It also wastes money and kilowatt hours. 

The effectiveness of USDA’s investments depends on its programs’ successes and national economic 

trends. The Department is working to improve its ability to provide services. 

Improve Rural Economic Opportunities 

Typically, business amenities, physical conditions and credit terms are inferior to those in urban areas. 

For example, rural banks are smaller and have more restrictive lending limits and standards than large 

urban institutions. Availability of Internet and Web services is inconsistent in rural areas, a distinct disad-
USDA Performance and Accountability Report for FY 2003 

Annual Performance Report 

44 

vantage to business growth. The rare publicly financed rural industrial park is smaller and has fewer 

amenities than those in suburban and urban areas. Even during high-growth economic periods, rural 

communities’ economic environments are less vigorous and infrastructures less developed than urban areas. Rural communities have neither the size nor depth of tax bases to publicly finance amenities that 

businesses need, such as transportation links, rehabilitated or expanded infrastructure and full-service industrial parks. 

B&I can guarantee loans for satisfactory credit risks. This program allows lenders to offer competitive 

terms and make loans of up to $25 million1

 in eligible areas. USDA also provides technical assistance and 

modest grants (frequently as a catalyst for attracting local private funds) for communities to launch the 

infrastructure necessary for businesses. Funding of small revolving-loan funds can help new borrowers 

and emerging local entrepreneurs. 

Analysis of Results. 

The performance goal 

was exceeded for the 

number of jobs computed 

to be created or saved. 

The figure was above 

2002 achievements. The 

number of jobs created 

or saved is related to the 

funding levels for business programs and 

general conditions in 

regional and national 

economies. These factors are external to USDA’s control. 

The number of jobs resulting from the Rural Business – Cooperative Service (RBS) in FY 2003 exceeded 

the target level. This level is attributed to Rural Business Enterprise Grants receiving $5 million more in 

funding from prior-year deobligations than was provided by the President’s budget. B&I also used carryover 

funds from FY 2002. Additionally, in FY 2003, Rural Development State offices substantially improved 

their ability to gather, record and report job information on all RBS programs consistently. 

The delinquency-rate goal was exceeded. The improvement is the result of: 1) improved underwriting and 

monitoring policies implemented by USDA, 2) some delinquent borrowers reorganizing under bankruptcy 

 

1

Up to $40 million may be guaranteed for certain value-added cooperative enterprises.

Exhibit 28: Strengthen Rural Businesses 

Fiscal Year 2003 

Annual Performance Goals and Indicators 

Target Actual Result 

2.1.1 Create or save additional jobs through USDA financing of businesses 73,944 88,611 Exceeded

2.1.2 Reduce the Business and Industry Portfolio delinquency rate, excluding bankruptcy 

cases (Percentage) 

9.5% 8.5% Exceeded

Exhibit 29: Estimated Jobs Created or Saved 

73,502

105,222

76,301

88,611 79,839

0

20,000

40,000

60,000

80,000

100,000

120,000

1999 2000 2001

(Baseline)

2002 2003
USDA Performance and Accountability Report for FY 2003 

Annual Performance Report 

45 

law, 3) lower interest rates helping borrowers maintain 

adequate cash flows even with 

depressed revenues, and 4) 

USDA State staffs working 

closely with borrowers and 

lenders, encouraging lenders to 

be proactive in assisting borrowers to improve marketing 

and operations. These actions 

allow borrowers’ gross revenues to support debt service and maintain employment. 

Current levels have not been utilized fully mainly because of economic weakness and the continuing downward trend in commercial credit costs. Business credit costs rose slightly at the end of the year. 

USDA’s challenges to overcoming general economic conditions include increased programs and reporting responsibilities, and the retirement of numerous seasoned loan and grant officers. These conditions 

reverberate the hardest in rural areas. Intractable high-poverty areas also require a scope and depth of 

technical support beyond USDA’s current financial and human resources. 

Program Evaluation. 

In a continuing effort to improve and track program results, USDA launched a mission-area-wide effort to 

review current performance measures and tracking systems, and develop new ones as needed. The Budget 

& Performance Integration team of USDA’s Rural Development staff meets regularly to develop and refine measures and tools to plan and track progress. 

It has been estimated that the economic benefit to the rural community, in addition to direct jobs created 

or saved, is $2.50 for every dollar in guaranteed loans closed. These investments make a continuing difference in rural communities, though only measured by the jobs computed in the initial year of the loan. 

The B&I delinquency rate represents myriad conditions. These conditions include national economic 

trends, local business events and the quality of Agency loan underwriting. While the Agency has no control over the first two external factors, it has begun strengthening loan underwriting. Additionally, the 

results have started to appear in the delinquency rates for the current year. 

A Program Assessment Rating Tool (PART) assessment was initiated on B&I as part of the FY 2005 

budget process. A full copy of the completed evaluation will be available February 2004 at 

www.whitehouse.gov/omb/part. 

Improve Telecommunication for Rural Residents 

USDA finances the deployment of a nationwide, rural broadband network. Since private capital for the 

deployment of broadband services in rural areas is insufficient, USDA incentives are that much more important. Providing rural residents and businesses with barrier-free access to today’s technological benefits 

will bolster the economy and improve the quality of life for rural residents. 

Building and delivering an advanced telecommunications network is affecting the Nation's economy, 

strength and growth significantly. Broadband networks in small, rural towns facilitate economic growth 

and provide the backbone for the delivery of increased educational opportunities over state-of-the-art 

telecommunications networks. While rural America can be defined by various statistics, the most important is that it is home to 65 million people. Just as the citizens in U.S. cities and suburbs benefit from 

Exhibit 30: Trends in Expanding Economic Opportunities 

Fiscal Year Actual 

Trends 

1999 2000 2001 2002 2003 

Reduce the Business and 

Industry Portfolio delinquency 

rate, excluding bankruptcy 

cases (Percentage)1

4.8% 4.2% 4% 10.3% 

Baseline 

8.5% 

1

Delinquency data for years 2002 forward reflect reconciliation of delinquency accounts 

at the time of conversion to a new Rural Business – Cooperative Service reporting system. 
USDA Performance and Accountability Report for FY 2003 

Annual Performance Report 

46 

access to broadband services, so should rural residents. In rural America, access to broadband plays a vital role in solving the problems created by time, distance, location and lack of resources. The promise of 

broadband is not just "faster access." It means: 

• New educational opportunities through distance learning, enabling rural students to take virtual field 

trips around the world; 

• Life-saving medical treatment via telemedicine networks, allowing specialists to guide surgeries hundreds of miles away; and 

• Economic growth and new markets, where businesses prosper and grow locally, while competing nationally and globally via high-speed networks. 

FSRIA established the new loan and loan-guarantee program "Access to Broadband Telecommunications 

Services in Rural Areas." This program is designed to provide funding for the cost of constructing, improving and acquiring facilities and equipment for broadband service in rural communities of 20,000 

people or less. Direct loans are made from the Treasury for the life of the facilities financed. Loans may 

be made at 4 percent to rural communities, where broadband service currently does not exist. Loan guarantees bear an interest rate set by the private lender consistent with the current applicable market rate for a 

loan of comparable maturity. The guarantees are made for no more than 80 percent of the principal 

amount. The number of counties receiving new service will measure the extent to which the deployment 

of broadband service is achieved. 

Analysis of Results. 

The performance goal was not 

met. The indicators assume an 

average of 8 counties per loan, 

an average loan size of $15 million per applicant and an annual 

lending level of approximately 

$350 million. Since this target’s 

development, the available funding increased fourfold to 

approximately $1.5 billion. Additionally, USDA has refined the 

factors used to determine the 

number of entities to receive financing and the number of 

counties to be served. Using a larger base of historical data from its other programs, USDA now estimates 

the average loan size to be approximately $10 million per applicant and the average number of counties 

served to be 9 per loan. The program did not start accepting applications until January 30, 2003, since 

regulations had not been published until that time. Due to the delay in publishing regulations and inviting 

Exhibit 31: Improve Telecommunication Services in Rural America 

Fiscal Year 2003 

Annual Performance Goals and Indicators 

Target Actual Result 

2.1.3 Improve the ability of small, rural towns to enjoy economic growth through provision 

of financing to support high-speed telecommunications services (broadband): 

Unmet 

• Number of entities 23 2 

• Number of counties 184 6 

Exhibit 32: Improving Broadband Communications

0

50

100

150

199920002001

2002

(Baseline)

2003

Entities

0

5

10

15

20

Counties

Counties

Entities
USDA Performance and Accountability Report for FY 2003 

Annual Performance Report 

47 

applications, only 2 applications for $5.5 million were approved. This resulted in six counties being 

served in FY 2003. 

Description of Actions and Schedules. 

The Broadband Program did not meet its goal because it did not start accepting applications until nearly 

the middle of the fiscal year. The delay is attributed to a longer-than-expected regulatory review process. 

The Rural Broadband Access Loans and Loan Guarantees Program was implemented January 30, 2003. 

Because this is a new program with significantly different regulatory and statutory requirements from its 

predecessor “pilot program,” eligible applicants need sufficient time to prepare and submit applications in 

accordance with the new rules and regulations. Initially, many of the applications received were declared 

incomplete because the applicants did not follow the new procedures. The application deadline for this 

year’s funding was July 31, 2003. The majority of the applications were not received until late July, resulting in processing delays. The review of these applications is ongoing and expected to result in 

additional projects being funded. 

Next year, the program will enter its first “full-year” of application processing. It will utilize the “State 

reserve” of funding allocations. These allocations could not be used this year due to regulations’ publication date. Using the allocations will entail the quarterly prioritization and approval of applications until 

April 1, 2004. On that date, the remaining State allocation funds will be combined in a national pool. This 

plan creates a more uniform, year-long process. 

Program Evaluation. 

A PART assessment was initiated on the Telecommunications Program as part of the FY 2005 budget 

process. A full copy of the completed evaluation will be available February 2004 at 

www.whitehouse.gov/omb/part. 

Selected Results in Research, Extension and Statistics for Objective 2.1 

The economies of individual rural areas differ. So do their resources and the opportunities and challenges 

they face. An interactive, Web-based, geographic-information system and an analytical study tool 

launched by USDA’s Economic Research Service (ERS) help users assess the causes and effects of diversity in rural America. The Web site provides a visualization of indicators for rural areas available from 

ERS and other Government agencies. These indicators include population change, the unemployment rate 

and median household income. 

USDA’s National Agricultural Statistics Service completed data collection for the 2002 Census of Agriculture with a response rate of 87.8 percent. This figure exceeds the previous census response of 86.2 

percent. Data analysis and review are continuing. Publication is scheduled for FY 2004. 

Missouri Cooperative Extension developed the Missouri Business Development Network to address small 

business owners’ marketing and economic concerns. The network allowed small business owners to receive individual counseling in marketing. Thanks to the network, sales increased by $73.1 million and 

369 jobs were created. 
USDA Performance and Accountability Report for FY 2003 

Annual Performance Report 

48 

Objective 2.2: Improve the Quality of Life through USDA Financing of Quality 

Housing, Modern Utilities and Needed Community Facilities 

Overview 

A major focus of USDA is improving the availability and affordability of good housing. The Department 

is doing this through loan and grant programs to help families achieve homeownership. These programs 

also are designed to develop multi-family housing and provide assistance to make homes affordable. Special emphasis is placed on improving home affordability for minorities. USDA also makes grants and 

loans to provide facilities that ensure safe drinking water and the proper treatment of wastewater and solid 

wastes. Other grants and loans are used to develop a broad range of other facilities, such as schools, libraries, fire and rescue equipment, and public buildings that enable communities to improve the quality 

and scope of community services. These services help rural residents achieve a quality of life more comparable with urbanites and suburbanites. 

Serving the Public 

USDA’s assistance reaches large numbers of rural Americans with services crucial to achieving a satisfactory quality of life. The Department provides direct and guaranteed loans to help rural citizens achieve 

homeownership. These loans served 44,130 households in 2003. USDA has made a special effort to increase the number of minority homeowners, reaching 8,442 households. The percentage of all loans to 

minority households rose from 14 percent in 2001 to 19 percent in 2003. USDA’s grants and loans to help 

rural communities obtain essential community facilities reached 10.3 million residents in 2003, a 53-

percent increase over the 2001 level. Additionally, the rural water and waste programs provided access to 

safe drinking water or sanitary wastewater disposal to 650,000 subscribers. Taken together, these investments bring important benefits to a large number of rural communities and citizens by increasing the 

availability of essential services and raising the quality of life. 

Challenges for the Future 

Special challenges to this objective continue to be funding levels, the increased cost of housing and delays 

in a budget enactment. As housing costs continue to rise, fewer homes ultimately can be financed with 

available funding levels. 

Improve the Standard of Living in Rural America 

USDA implements a wide variety of housing programs. Through its single-family housing direct- and 

guaranteed-loan programs, USDA helps families achieve homeownership. Other programs focus on assisting dwellers in rental housing, farm-worker housing, home rehabilitation and self-help new home 

construction. Supplementing these programs is a series of grants and loans to finance the development of 

facilities that are essential to a modern standard of living in rural communities. A wide range of public 

services can be assisted by these programs, including education, health, justice and public safety. USDA’s 

programs leverage federal funds with private capital to invest in rural infrastructure, technology and human-resource development. 

Exhibit 33: Resources Dedicated to Improving the Quality of Life 

FY 2003 

USDA Resources 

Dedicated to Objective 2.2 Actual 

Percent of 

Goal 2 

Program Obligations ($ Mil) $8,936 56% 

Staff Years 5,565 62% 
USDA Performance and Accountability Report for FY 2003 

Annual Performance Report 

49 

Analysis of Results. 

The performance goal was met. 

Overall, USDA demonstrated 

steady improvement in its performance level for improving 

the quality of life for rural citizens. 

USDA did not meet its homeownership target due to the 

increased cost of purchasing a 

home. With historically low 

interest rates, the housing industry represents the Nation’s 

leading economic force during 

the past year. Unfortunately, 

the increased demand for housing, particularly for entry-level starter homes, increased costs substantially 

above projections. Despite increased success in leveraging non-Federal funds to reduce loan costs, the 

average loan still increased more than 8 percent in FY 2003 from FY 2002 levels. Because of this increase, USDA only could achieve 95 percent of its target despite all funds being utilized. The future 

challenge is promoting further leveraging to ensure that the maximum numbers of families are served 

within available resources. 

The Department aggressively responded to the President’s goal of increasing minority homeownership by 

5.5 million families by the end of the decade. USDA’s “5-Star Commitment” to increase minority homeownership includes: 

• Lowering fees to reduce barriers to minority homeownership; 

• Doubling the number of self-help participants by 2010; 

• Increasing participation by minority lenders through outreach; 

• Promoting credit counseling and homeownership education; and 

• Monitoring lending activities to ensure a 10-percent increase in minority homeownership. 

Exhibit 34: Improving Rural Quality of Life 

Fiscal Year 2003 

Annual Performance Goals and Indicators 

Target Actual Result 

2.2.1 Improve the quality of life in rural America: Met 

• Increase financial assistance to rural households to buy a home 45,700 44,130 

• Increase the number of minority homeowners 8,400 8,442 

• Provide access for residents to new and/or improved essential community facilities (Mil. residents) 

7.2 10.3 

• Number of subscribers receiving new and/or improved water and/or waste disposal service (Mil.)1

0.65 0.652

1

Measure has been modified to reflect more accurately the program’s impact by capturing the benefits of drinking water and sanitary waste disposal improvements. The original measure (i.e., provide access for residents to clean drinking water; $2.06 million 

target) was limited to drinking water and calculated using the average number of persons per subscriber. That number varies 

widely and is not as accurate. 

2

Result based on projected estimate. See the Data Assessment of Performance Measures section for more information. 

Exhibit 35: Trends in Homeownership and Community Facilities 

Fiscal Year Actual 

Trends 

1999 2000 2001 2002 2003 

Increase financial assistance to rural households 

to buy a home 

55,941 

Baseline 

45,420 44,073 42,069 44,130 

Provide access for residents to new and/or 

improved essential community facilities (Mil.) 

N/A N/A N/A 6.8 

Baseline 

10.3 

Number of subscribers 

receiving new and/or 

improved water and/or 

waste-disposal service 

(Mil.) 

N/A 0.67 

Baseline 

1.01 0.79 0.651

N/A = Not Applicable 

1

Result based on projected estimate. See the Data Assessment of Performance Measures section for more information. 
USDA Performance and Accountability Report for FY 2003 

Annual Performance Report 

50 

USDA immediately reduced the fees on its 

guaranteed single-family 

housing program from 2 

percent (of the loan 

amount) to 1.5 percent 

for new loans and .5 percent for refinanced loans. 

These fees now are consistent with such other 

Federal lenders as the 

Department of Housing 

and Urban Development 

and the Veteran’s Administration. 

Additionally, each State 

was provided benchmarks and goals through 

2010. The States also have developed their own plans to meet the Secretary’s 5-Star Commitment. While 

13 percent of rural America is comprised of minorities, more than 19 percent of USDA loans reached minorities. In FY 2003, USDA helped 8,442 minorities achieve their dreams of homeownership. One of the 

major contributors to this success is USDA’s Mutual Self-Help Housing program, which serves more than 

50 percent of minority families. Through this program, groups of 6 to 12 families mutually build each 

other’s homes. This program has reduced the barriers experienced by many minorities in achieving 

homeownership significantly. Additionally, the default rate on loans made through this program generally 

is 400 basis points lower than other loans in the single-family housing portfolio. A basis point is an index 

that measures differences in yields on various financial instruments, such as mortgage default rates or 

rates of return on securities. A basis point equals one hundredth of a percentage point (0.01 percent). 

USDA exceeded its target for increased access for residents to new or improved essential-community facilities. Many rural communities are facing increased financial stress due to agricultural conditions 

(including drought, flooding and forest fires), the slowed economy and other factors. Additionally, many 

sectors, such as health care, are experiencing increased financial pressures. Working with its partners, 

USDA has been able to help meet many of these vital needs. 

Water and Waste Disposal loans and grants are provided to rural communities for the development, replacement or upgrading of such facilities. This effort includes poverty-stricken rural communities and 

those facing distress because of out-migration, natural disasters or economic distress due to Federal actions. Direct loans are repayable for a maximum term of 40 years. Since the program’s inception in 1937, 

Water and Waste Disposal borrowers have received $28 billion in direct loans, loan guarantees and grants 

as of September 30, 2002. FY 2003 saw $727 million in direct loans approved, $12 million in loans guaranteed and $650 million in grants awarded. 

Failing infrastructure is a common problem both in large cities and small rural systems. Additionally, investments in repairs and replacements usually do not generate more revenue. Smaller systems with a 

smaller user base cannot absorb these added expenses without significant rate increases. 

Some of these issues can be mitigated through better asset management, full-cost pricing and technology 

advances. Proper care of assets can extend their useful life and improve their productivity. Keeping the 

Exhibit 36: Homeownership Assistance 

30,000

35,000

40,000

45,000

50,000

55,000

60,000

19992000

2001 (Baseline)

20022003

All households

5,000

5,500

6,000

6,500

7,000

7,500

8,000

8,500

9,000

Minority households

All households

Minority
USDA Performance and Accountability Report for FY 2003 

Annual Performance Report 

51 

public aware of the benefits of safe drinking water can improve its willingness to pay the cost of unsubsidized service. Additionally, technology advances can provide lower cost solutions. 

A future challenge USDA faces is assisting rural communities most in need of the Department’s financial 

and technical services. These communities usually have the least resources for such services. This condition is exacerbated by droughts, limited water resources and other environmental maladies. Since 

solutions to difficult conditions often are expensive and with limited grant funds, it is unlikely that feasible projects can be developed. 

Program Evaluation. 

The results from OMB’s PART showed the Water and Waste Loan and Grant Program to be well-designed and managed. It also found that USDA succeeded in targeting assistance for water and wastewater 

infrastructure to poor rural areas. Additionally, the Department effectively collects and uses program data 

to manage the program. Accordingly, over the life of the program, fewer people in rural areas are experiencing barriers to accessing safe, affordable drinking water and wastewater disposal. The PART results 

produced an improved measure, which is included under performance goal 2.2.1. This PART may be 

found at www.whitehouse.gov/omb/budget/fy2004/pma/ruralwater.pdf.

In another study, OMB’s Common Measures Assessment concluded that USDA’s Rural Development 

Water and Environmental Programs compared favorably to similar programs in EPA, the Indian Health 

Service and Bureau of Reclamation. For more information, visit 

www.whitehouse.gov/omb/budintegration/common.html. 

OMB’s PART showed the Electric Program to be well-designed and effectively managed with a clear 

purpose. The PART awarded Rural Utilities Service (RUS) with a high management rating and found a 

disconnect between USDA’s strategic goals and the RUS electric program’s goals and measures. RUS 

targets its electric-hardship loans to high-poverty areas. To date, the RUS Electric Program has approved 

21 hardship loans worth $230 million. These hardship loans were approved for applicants who met ratedisparity thresholds, and consumers who fell below average per capita and household-income thresholds. 

Additionally, RUS received an actual FY 2003 hardship loan budget of $120 million. These loans will be 

targeted to high-poverty rates. A full copy of the PART may be found at 

www.whitehouse.gov/omb/budget/fy2004/pma.html. 

OMB’s PART showed the Multifamily Housing Program to be managed effectively. The program centers 

on the Rural Housing Service’s (RHS) Housing Act of 1949 Section 515 Rural Rental Housing and Section 521 Assistance. It makes loans to eligible entities to provide rental housing for low- or moderateincome families and the elderly in rural areas. The PART also found that while, over the life of the program, more decent and sanitary affordable rental housing has been provided in rural America, RHS 

cannot demonstrate whether this is related to its program or the economy. Rural Development has developed as part of USDA’s FY 2004 Annual Performance Plan a new set of performance measures that 

quantify success and identify solutions to better serve rural residents. Meantime, Section 521 makes assistance payments available to section 515 housing occupants. A full copy of the PART may be found at 

www.whitehouse.gov/omb/budget/fy2004/pma/rentassistance.xls. 

A PART assessment was initiated on the Community Facilities Direct Loan Program as part of the FY 

2005 budget process. A full copy of the completed evaluation will be will be available February 2004 at 

www.whitehouse.gov/omb/part. 
USDA Performance and Accountability Report for FY 2003 

Annual Performance Report 

52 

Selected Results in Research, Extension and Statistics for Objective 2.2 

Arizona’s Extension Connection program helps welfare recipients transition into the work force. More 

than 300 high-risk adults graduated from the program. More than half of those same adults have been employed for more than a year. Nebraska Cooperative Extension’s Building Nebraska Families program 

helped former welfare recipients raise their average income from $452 to $786 a month. 

As the number of Spanish-speaking people increases nationwide, Land-Grant universities bridge the language gap between farmers and employees with classes and publications. Ohio State Cooperative 

Extension produces an English/Spanish newsletter for Latinos working in horticulture. It also publishes 

Spanish for Greenhouse Supervisors, a collection of words used in floriculture. Idaho Extension arranged 

for-credit Spanish classes for Government employees and others. After the classes, 75 percent of the participants said that they were able to communicate better with Spanish-speaking clients. Purdue 

Cooperative Extension offered Workplace Spanish, a two-day course in language skills and cultural 

awareness. Attendees said that the course increased their understanding of Latino culture and their ability 

to serve their clients. 
USDA Performance and Accountability Report for FY 2003 

Annual Performance Report

53 

STRATEGIC GOAL 3: ENHANCE PROTECTION AND SAFETY 

OF THE NATION’S AGRICULTURE AND FOOD SUPPLY 

USDA remains committed to ensuring that consumers in America have the safest possible food supply. 

The Department is using science-based practices to diminish the incidence of foodborne illness associated 

with meat, poultry and egg products. These practices include recruiting scientifically trained employees 

and educating its current employees on scientific and technical principles. 

USDA continued to see results in its fight against Exotic Newcastle Disease, one of the world’s most infectious poultry diseases. In September, the Department eliminated the last remaining areas quarantined 

for the disease in Arizona, California, Nevada and Texas. The actions removed restrictions on the movement of birds, poultry and certain other articles from those areas. 

USDA also visited communities to deliver the message of safe food handling. The Department conducted 

a nationwide tour to educate and reinforce to consumers the importance of handling food safely. The 

USDA Food Safety Mobile traveled across the country. Mobile officials hosted almost 60 events in 40 

cities. They also worked with the media to stage more than 60 million viewings of food-safety messages. 

The Mobile depicted BAC!® – the notorious foodborne bacterium character that provides consumers with 

a memorable message about the four critical steps they must take to keep their food safe: Clean, Separate, 

Cook and Chill. 

Objective 3.1: Enhance the Protection of Meat, Poultry and Egg Products from 

Foodborne Hazards in the United States 

Overview 

Since 1998, USDA has used a science-based framework—the Pathogen Reduction/Hazard Analysis and 

Critical Control Points (PR/HACCP) system—to verify that plants identify and prevent food-safety problems. Under HACCP, meat and poultry plants must prove through operating under HACCP plans that 

they are addressing all biological, chemical and physical hazards most likely to occur. USDA verifies that 

plant practices are effective and result in the production of safe, unadulterated products. 

Exhibit 37: Resources Dedicated to Protect and Secure the Nation’s Food Supply 

FY 2003 

USDA Resources 

Dedicated to Strategic Goal 3 Actual 

Percent of 

Total USDA 

Program Obligations ($ Mil) $3,350 3% 

Staff Years 23,056 20% 

Exhibit 38: Resources Dedicated to Reduce Pest and Disease Outbreaks 

FY 2003 

USDA Resources 

Dedicated to Objective 3.1 Actual 

Percent of 

Goal 3 

Program Obligations ($ Mil) $1,142 34% 

Staff Years 10,674 46% 
USDA Performance and Accountability Report for FY 2003 

Annual Performance Report

54 

Risk assessment provides the framework for developing the scientific basis for USDA’s food-safety policies and programs. Through risk assessment, USDA identifies methods by which pathogens can be 

controlled by slaughter and/or processing plants. This information is used to enhance public health. For 

example, using information developed through risk assessment, the Department has identified methods to 

control such pathogens as Listeria monocytogenes. Listeria can cause severe illness and even death, particularly in at-risk populations.

Another key to enhancing public health is ensuring that employees executing USDA’s food safety responsibilities are scientifically and technically skilled. USDA is addressing the training and education of its 

workforce aggressively. In order to ensure consistent and accurate inspection, the Department has made a 

strong commitment to recruiting scientifically-educated employees and retooling its entire training and 

education program for all employees. These employees will be better able to identify and focus on activities that enhance public health. 

USDA also implemented policies and verified plants’ compliance to control E. coli O157:H7 and effectuate more rapid recall procedures. USDA is strengthening its outreach programs and partnerships to 

educate food handlers and others about food safety and help enhance public health. 

Additionally, USDA is identifying the Enterococci bacteria and testing its presence in retail food items. 

The Department’s work allowed it to obtain EPA approval for a product to prevent aflatoxin, which occurs in cottonseed. Cottonseed is an important feed for dairy cattle. USDA also has developed a method 

for classifying Listeria and detecting pathogens in sprouted food products from contaminated water. 

Serving the Public 

Science-based risk assessments drive USDA food-safety policies and programs to enhance public health. 

Risk assessment provides the framework for developing the scientific basis for USDA meat, poultry and 

egg product policies and programs. HACCP is the system that plants use to address the hazards identified 

in risk assessments. Through risk assessment, USDA has been able to identify methods by which plants 

can control pathogens. USDA recognizes that enhancing the public’s health in terms of safe meat, poultry 

and egg products is not a lone venture. It has formed many partnerships to provide food-safety information to the industry, the public and Federal, State and local agencies. The Department also works closely 

with academia to help provide guidance and assistance. 

Another important part of USDA’s responsibility is protecting meat, poultry and egg products from intentional contamination and bioterrorism. Information gained from risk assessments will help USDA 

continue its efforts to protect these products. 

While the results of risk assessments shape inspection policy, they also help USDA design food-safety 

education programs to increase consumer knowledge, and change behaviors to prevent foodborne illness. 

The program targets the general public and at-risk groups for foodborne illness – the very young, the elderly, pregnant women and people with chronic diseases or compromised immune systems. 

The Department also conducted 12 public meetings and scientific symposia to share information with and 

gather input from the public on food-safety topics that affect public health in FY 2003. Part of this initiative included the launch of a nationwide tour of the Food Safety Mobile. The Mobile offered food-safety 

demonstrations and discussions with consumers about the importance of safe food handling and steps 

they can take to reduce the risk of foodborne illness. 

USDA scientists developed a cost-effective, rapid and accurate procedure to identify genus and species of 

Enterococci in food products. Enterococci can harbor antibiotic resistance genes and transfer them to 
USDA Performance and Accountability Report for FY 2003 

Annual Performance Report

55 

harmful foodborne pathogens. The multiplex Polymerase Chain Reaction procedure detects the presence 

of the genes responsible for encoding antibiotic resistance. Results indicated that, although Enterococci

are prevalent among food items, the chances of transmitting antibiotic resistance from animal food products to humans are very low. This procedure is useful to producers, regulatory agencies and researchers in 

tracing and preventing both pathogens and antimicrobial resistance in food products. 

These accomplishments help ensure the continued safety of the U.S. food supply for both domestic and 

international consumers.

Challenges for the Future 

USDA’s greatest challenge in food safety is emerging and existing pathogens. The Department will continue to develop new science- and risk-based strategies to enhance the public health status as new 

pathogens are identified. Each year, USDA will examine organisms of concern and address these pathogens to raise industry awareness and the Department’s preparedness to develop new programs and 

policies to address these challenges. 

Reducing, controlling or eliminating pathogen and chemical contamination from food products requires a 

steady stream of new technologies and processes. The multifaceted food-safety research program produces the solutions to address specific problems confronting the U.S. agricultural/food industries. 

Strengthen Food Safety 

Over the past two years, USDA has been implementing a five-point strategy to reduce the incidences of 

foodborne illness further. The Department used HACCP as the foundation. This strategy includes improved management of inspectors, application of science in crafting regulations, better coordination with 

other agencies, an aggressive education campaign for food handlers and protection of the food supply 

against terrorist attack. USDA seeks to ensure that its food-safety policies and decisions are based on science. Scientific studies provide critical information to make the best decisions. 

Risk assessments help provide a better picture of the nature and reason microorganisms occur in the Nation’s supply of meat, poultry and egg products. Risk assessments are scientifically-based processes 

estimating the likelihood of exposure to a hazard and the resulting public health impact. Risk assessments 

provide a scientific framework for understanding the impact of a wide variety of variables by considering 

such key questions as: 

• What processes contribute to risk? 

• How much harm could occur? 

• How much can that potential harm be reduced by various intervention strategies? 

This ongoing scientific process has provided a growing body of knowledge that allows USDA to execute 

better methods for inspection and policy development based on food safety hazards. 

USDA uses risk communication to inform the public of foodborne hazards and what can be done to prevent or control them. 

During the last several years USDA has made significant improvements in its food-safety program. In 

May 2002, the Centers for Disease Control and Prevention reported a 21-percent decrease in all foodborne illnesses. 
USDA Performance and Accountability Report for FY 2003 

Annual Performance Report

56 

Exhibit 39: Conduct Risk Assessments 

Fiscal Year 2003 

Annual Performance Goals and Indicators 

Target Actual Result 

3.1.1 Conduct risk assessments of microbial, chemical and physical hazards to meat, poultry and egg products: Met 

• Number of risk assessments initiated 4 4 

• Number of risk assessments completed N/A 5 

N/A = Not Applicable 

Analysis of Results. 

The performance goal was met. 

The time between initiation 

and completion of a risk assessment can range from a few 

months to several years. Risk 

assessments vary greatly in 

complexity. The findings from 

one risk assessment may generate topics for additional ones. Such an occurrence could make it difficult to project targets for new studies in a given year. Or, as new pathogens emerge to pose a risk to public health, risk-assessment priorities 

may change. 

In FY 2003, USDA initiated four risk assessments. The risk assessment for Clostridium perfringens in 

Ready-to-Eat (RTE) foods provided USDA with information to set a risk-based performance standard for 

cooling RTE foods by assessing the risk of human illness associated with different cooking-performance 

standards. Clostridium perfringens is a bacterium that can cause foodborne illness. The vulnerability assessment of bioterrorism on imports looked at deliberate contamination. The risk assessment for Bovine 

spongiform encephalopathy (BSE) – Mitigation Scenarios considers various steps to limit human exposure to this disease. BSE, or mad cow disease, is a degenerative disorder affecting the nervous system of 

cattle. 

The baseline for risk assessments initiated was three. The baseline year of FY 2001 was chosen because it 

was the first year of full HACCP implementation. The number of risk assessments initiated may not increase each year. USDA determines when to initiate a new risk assessment. This decision normally is 

based on the emergence of a new pathogen or risk, outbreaks of foodborne illness or the development of 

new information or technologies. The results of a risk assessment can form the basis for policy, regulation 

and program development for a number of years. 

In FY 2003, USDA completed five risk assessments. The baseline was two. Four of the five are vulnerability assessments of bioterrorism relating to the production, processing and distribution of various Food 

Safety and Inspection Service-regulated products. Also completed was the risk assessment for Listeria 

monocytogenes in RTE deli meats, which began in 2002. The results of this risk assessment are being 

used so that food-safety policies and programs are based on risk and science. 

Future challenges include strengthening the application of risk assessment to regulatory and enforcement 

activities. Microbial risk assessment is a fairly new discipline that came into existence in the late 1980s. 

USDA is committed to improving the science of microbial risk assessments continuously. The Department also looks to enhance and expand the application of completed risk assessments to food-safety 

policy development. 

Exhibit 40: Number of Risk Assessments Initiated and Completed 

Fiscal Year Actual 

Trends 

1999 2000 2001 2002 2003 

Number of risk assessments 

initiated 

0 11 31

Baseline 

31 4 

Number of risk assessments 

completed 

2 0 2 

Baseline 

7 5 

1

Initiated assessments adjusted to match completed assessments. 
USDA Performance and Accountability Report for FY 2003 

Annual Performance Report

57 

Program Evaluation. 

The results from the Office of Management and Budget’s Program Assessment and Rating Tool (PART) on 

food safety showed the Food Safety and Inspection Service (FSIS) has a clear and significant role in protecting the Nation’s food supply. However, FSIS received lower scores in management and accountability. 

FSIS does not have procedures in place to measure cost effectiveness. While FSIS has been reducing incidences of foodborne illness, the program is not optimally designed to address food safety. Implementation 

of a new risk-based inspection system should be evaluated further to determine whether it would help FSIS 

meet its strategic and performance goals, and improve efficiencies and cost effectiveness. 

To address these findings, FSIS is evaluating the impact of implementing a risk-based inspection system. A 

full copy of the PART may be found at www.whitehouse.gov/omb/budget/fy2004/pma/foodsafety.xls. 

Risk assessments that will form the basis for regulations are peer-reviewed. Additionally, USDA held 

public meetings and other open forums on public health issues. Public comments are significant inputs 

into decision making. 

Interested parties may view pertinent documents or find a list of upcoming public meetings at 

www.fsis.usda.gov. 

Enhance Protection from Salmonella

Recent initiatives to enhance protection from Salmonella include the adoption of a new system to screen 

for the bacterium in RTE meat, poultry and pasteurized egg products. While it is as sensitive as the previously used system in detecting Salmonella, the new system reduces reporting time for negative samples 

by one to two days. Salmonella can cause salmonellosis, one of the most-common bacterial foodborne 

illnesses. Salmonellosis can be life-threatening, especially for at-risk populations. 

USDA inspectors continue to sample Salmonella in processing plants. These tests are used to trigger more 

intensive in-plant scrutiny and food-safety assessments. 

The Department has reduced the incidence of Salmonella on products prior to release into commerce by 

using its existing regulatory authorities for regulating meat, poultry and egg products. 

Analysis of Results. 

The performance goal was met. USDA made substantial progress in enhancing Salmonella protection. 

Overall, the incidence of Salmonella on raw products fell dramatically since full implementation of the 

PR/HACCP rule in FY 2000. It also exceeded the performance standards set by USDA for plants. 

Exhibit 41: Enhance Industry Compliance for Salmonella

Fiscal Year 2003 

Annual Performance Goals and Indicators 

Target Actual Result 

3.1.2 Enhance industry compliance with regulatory requirements: Met 

• Incidence of Salmonella on broiler chickens (Percentage) 11.6% 11.7% 

• Incidence of Salmonella on market hogs (Percentage) 4.3% 2.7% 

• Incidence of Salmonella on ground beef (Percentage) 2.8% 1.7% 
USDA Performance and Accountability Report for FY 2003 

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58 

While the incidence of Salmonella on broiler chickens was 

11.7 percent for FY 2003, just 

slightly higher than the FY 

2002 baseline of 11.6 percent, 

this figure still is well below 

the upper limit set by USDA 

performance standards. 

The incidence of Salmonella

on market hogs was 2.7 percent for FY 2003. This figure is lower than the FY 2002 baseline of 4.3 percent and well below the upper limit set by USDA performance standards. 

The incidence of Salmonella on ground beef was 1.7 percent for FY 2003. This figure is lower than the 

FY 2002 baseline of 2.8 percent and well below the upper limit set by USDA performance standards. 

The benefits to the American public are raw meat and poultry products with lower incidences of microbiological hazards. This hazard reduction should lower the risk of foodborne illness. 

USDA issued new procedures emphasizing the use of Salmonella testing results to trigger more intensive 

scrutiny and in-depth reviews of processing plants. The procedures focus on the need for a more scientific 

and systematic approach to food safety and enforcement of current regulations. 

Future challenges will be to conduct risk assessments and scientific-baseline studies for other pathogens of 

interest and emerging pathogens. The Department also will have to develop regulatory-performance standards to gain industry compliance. 

Program Evaluation. 

USDA reviewed the Salmonella testing program policies and practices. The Department conducted an 

internal evaluation of the Salmonella testing program with recommendations for improving it. The 

evaluation was designed to synthesize disparate aspects of policy and practice to provide a systems view 

of program components and their relation to one another. Most of the recommendations either have been 

incorporated into Agency programs or are in the process of being incorporated into new procedures. 

The Department is keeping the public and industry informed of these improvements at www.fsis.usda.gov

and through other communications opportunities. 

Enhance Protection from Listeria monocytogenes

When Listeria monocytogenes is found in RTE products, USDA takes action to prevent it from entering 

commerce. The Department also verifies the effectiveness of its recall procedures. 

USDA made significant progress developing science-based policies to enhance public health through 

more-effective control of Listeria monocytogenes. USDA released a directive to inspection program personnel on methods to verify that processing plants producing RTE products are preventing Listeria 

monocytogenes contamination. USDA published an interim final rule requiring establishments producing 

certain RTE meat and poultry products to take steps to reduce further Listeria monocytogenes incidence.

The rule is based on information gathered while developing the risk assessment. The interim final rule 

took effect October 2003. USDA is seeking comments through December 8, 2003. The Agency is acquainting industry with rule requirements by, among other ways, holding a series of workshops for 

smaller plants.

Exhibit 42: Trends in Industry Compliance for Salmonella

Fiscal Year Actual 

Trends 

1999 2000 2001 2002 2003 

Incidence of Salmonella on 

broiler chickens (Percentage) 

11.3% 8.7% 11.9% 11.6% 

Baseline 

11.7% 

Incidence of Salmonella on 

market hogs (Percentage) 

6.6% 7.6% 4.5% 4.3% 

Baseline 

2.7% 

Incidence of Salmonella on 

ground beef (Percentage) 

4.4% 3.6% 2.6% 2.8% 

Baseline 

1.7% 
USDA Performance and Accountability Report for FY 2003 

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59 

Analysis of Results. 

The performance goal was met. 

The incidence of Listeria 

monocytogenes was below the 

maximum target for FY 2003. 

There has been a consistent 

decline in Listeria incidence 

over the years. Although 1.03 

percent in FY 2002 was the 

baseline, USDA’s goal is to 

continue to reduce the incidence of Listeria monocytogenes. Listeria can cause severe illness and even death, particularly for at-risk 

populations. Any incidence of Listeria monocytogenes on RTE products constitutes adulteration under 

meat and poultry laws. Thus, USDA will stress the need to find new ways to improve the program and the 

oversight of meat and poultry plants’ HACCP operations. 

Program Evaluation. 

Following outbreaks of listeriosis, USDA reevaluated its policies and requirements for controlling Listeria monocytogenes on RTE meat and poultry products. This included hosting public meetings at which 

academia, industry, consumer and other constituencies provided scientific and anecdotal information 

about the pathogen. Based on this information and the risk assessment, USDA developed a directive and 

an interim final rule for Listeria monocytogenes. That information is available at www.fsis.usda.gov. 

Improve Detection of Foodborne Hazards 

With European Union financial support, USDA is partnering with the United Kingdom, Ireland, Denmark, Italy and South Africa to evaluate and develop “gold-standard” methods for the detection and 

enumeration of Campylobacter -- the world’s leading cause of bacterial-associated foodborne illness. 

Having these internationally defined methods increases the acceptability of products, particularly poultry, 

between trading partners. This study on Campylobacter is the first in a number of projects to develop unified methods for the detection of foodborne pathogens. Other pathogens under consideration include

Listeria, Salmonella and E. coli 0157:H7. 

Exhibit 45: Develop Systems for Detecting Foodborne Pathogens and Chemical Contaminants 

Exhibit 43: Enhance Industry Compliance for Listeria Monocytogenes

Fiscal Year 2003 

Annual Performance Goals and Indicators 

Target Actual Result 

3.1.3 Enhance industry compliance with regulatory requirements on the incidence of Listeria monocytogenes on Ready-to-Eat meat and poultry products (Percentage) 1.03%1 .9% Met 

1

In conducting an audit of Listeria monocytogenes data for the past three years, FSIS found a data-entry error for one sample. 

Exhibit 44: Trends in Industry Compliance for Listeria Monocytogenes

Fiscal Year Actual 

Trends 

1999 2000 2001 2002 2003 

Enhance industry compliance 

with regulatory requirements 

on the incidence of Listeria 

monocytogenes on Ready-toEat meat and poultry products 

(Percentage) 

1.91% 1.45% 1.26% 1.03%1

Baseline 

.9% 

1

In conducting an audit of Listeria monocytogenes data for the past three years, FSIS 

found a data-entry error for one sample. 

Fiscal Year 2003 

Annual Performance Goals and Indicators 

Target Actual Result 

3.1.4 Develop new systems for detecting foodborne hazards 3 4 Exceeded 
USDA Performance and Accountability Report for FY 2003 

Annual Performance Report

60 

Analysis of Results.

The performance goal was exceeded. Food-safety research is 

an ongoing process that investigates many dangerous 

pathogens and contaminants 

simultaneously. This creates 

numerous approaches to detecting, controlling, reducing or eliminating each threat. USDA transferred these 

four significant new technologies to regulatory agencies and the private sector for use in ensuring the safety 

of the U.S. food supply. These new processes will identify the Enterococci bacteria in retail food items, 

prevent aflatoxin in cottonseed used to feed dairy cattle, classify Listeria and detect pathogens in sprouted 

food products. In FY 1999, the base year for this report, USDA identified one accomplishment. This 

year’s report identifies four aforementioned new technologies, thereby exceeding the target. 

The future challenge for food-safety research is to expand the core capacity (basic, applied and developmental) needed to address current threats to the food supply. Another challenge is ensuring USDA 

promptly and effectively responds to meet all future needs. 

Program Evaluation. 

The Office of Scientific Quality Review peer reviewed relevant projects in the Food Safety National Program. Summary information on these reviews may be obtained from USDA/ARS National Program Staff at 

(301) 504-4674. 

A Program Assessment and Rating Tool assessment was initiated on the Food Safety Research Program as 

part of the FY 2005 budget process. A full copy of the completed evaluation will be available February 2004 

at www.whitehouse.gov/omb/part. 

Selected Results in Research, Extension and Statistics for Objective 3.1 

Rapid, easy, cost-effective and correct classification of bacterial pathogens is critical for regulatory-action 

agencies and industry. USDA scientists at the Animal Disease Research Unit, in collaboration with scientists at Washington State University, developed a new tool for “subtyping" strains of Listeria 

monocytogenes. Subtyping determines the strain affiliation of Listeria specimens isolated in the lab. This 

new tool will help epidemiologists trace outbreaks back to their source. It also will enhance Government 

and industry efforts to safeguard food supplies through environmental monitoring, disinfection, sanitation 

and other measures. 

Contaminated sprouts for human consumption are a critical concern for The Food and Drug Administration (FDA) and the sprout-growing industry. Irrigation water is the most critical control point in sprout 

growing since contaminated water may transfer pathogens to uncontaminated lots. USDA scientists have 

developed a method using immunomagnetic capture combined with time-resolved fluorescence. This 

method enables scientists to detect very low levels of pathogens within 6 to 8 hours. Although the technology was developed for spent irrigation water, it also can be used for whole growing sprouts. This new 

method will have a significant impact on industry and the FDA in allowing the high throughput, cost-effective screening of sprouted food products. 

In 2003, USDA and collaborators from Washington State University completed the collection of nationally representative plant-level data. The data described the costs of implementing HACCP requirements 

and making investments in food-safety technologies for meat- and poultry-slaughter and processing 

plants. USDA research showed that sanitation and process controls raised the costs of producing meat and 

Exhibit 46: Expand Approaches for Detecting Foodborne Pathogens 

and Chemical Contaminants

Fiscal Year Actual 

Trends 

1999 2000 2001 2002 2003 

Develop new systems for detecting 

foodborne hazards 

1 

Baseline 

2 3 2 4 
USDA Performance and Accountability Report for FY 2003 

Annual Performance Report

61 

poultry by about 0.5 percent under food-safety standards prior to PR/HACCP. Estimates also suggest that, 

while PR/HACCP raised production costs by about 1 percent, its benefits still outweigh costs. 

USDA also developed an interactive, Web-based data product called the foodborne illness calculator. The 

calculator is an interactive, Web-based data product released on USDA’s Economic Research Service 

Web site in FY 2003. It is designed to assist public and private policymakers estimate the health-protection benefits of their control efforts. Policymakers can use the calculator to estimate the change in societal 

costs of foodborne illness under different public and private control options for pathogens. The calculator 

allows users to choose a pathogen of interest, the number and severity of illnesses, and from several alternative methodologies employed by economists for calculating societal costs. 

Many universities, supported in part by USDA funds, are developing new knowledge technologies to enhance the Nation’s food-safety system. Dangerous strains of Campylobacter, Salmonella, E. coli and 

Listeria monocytogenes are among the leading pathogens plaguing the food industry. Arkansas scientists 

developed a single test that can detect all four, eliminating the need for time-consuming, individual tests. 

Using the same four bacteria, Tennessee scientists developed a geographic-information system to analyze 

where these illness-causing organisms appear in animal and human populations at 16 locations nationwide. After a listeriosis outbreak in 2002 killed 50 goats, Cornell University researchers used genetic 

fingerprinting techniques to help eliminate the outbreak’s source and control the disease. No deaths were 

reported during subsequent breeding cycles. A Georgia poultry scientist found the causes of fecal contamination in seven poultry plants. This discovery helped produce a safer product for consumers. It also 

saved the companies about $500,000 per day, the cost of shutting down each plant. 

Georgia scientists, supported with USDA funds, discovered that electrolyzed water eliminates foodborne 

pathogens on lettuce, apples, eggs and poultry in less than 30 seconds. This element, which is produced 

by passing electricity through a diluted salt-water solution, replaces the use of harsh chemicals. Another 

Georgia innovation accurately detects aflatoxin in peanuts. This discovery reduced sampling costs from 

$5 to 50 cents. Iowa State University scientists developed a hand-held detection system that reveals invisible fecal contamination. It can be used before and after meat is trimmed. California researchers 

developed a test to confirm and quantify seven common antibiotics in milk samples. The test was designed to protect the quality of the milk supply and the health of people allergic to certain antibiotics. 

Nebraska food scientists devised a simple, fast and accurate test that uses light instead of chloroform to 

detect cooking-oil freshness. 

As part of the Northern New England Seafood Alliance, the Maine Cooperative Extension Service offered 

courses certifying 600 seafood processors in Hazard Analysis of Critical Control Points (HACCP) principles. Post-training samples showed that implementing HACCP reduced Listeria monocytogenes

contamination in Ready-to-Eat crabmeat from 18 percent to zero. 

Objective 3.2: Reduce the Number and Severity of Agricultural Pest and Disease Outbreaks 

Exhibit 47: Resources Dedicated to Reduce Pest and Disease Outbreaks

FY 2003 

USDA Resources 

Dedicated to Objective 3.2 Actual 

Percent of 

Goal 3 

Program Obligations ($ Mil) $2,208 66% 

Staff Years 12,382 54% 
USDA Performance and Accountability Report for FY 2003 

Annual Performance Report

62 

Overview 

USDA protects the Nation’s animal and plant natural resources through such activities as: 

• Conducting offshore threat assessment and risk-reduction activities; 

• Regulating and monitoring conditions to reduce the risk of introduction of invasive species; 

• Ensuring the safe research, release and movement of agricultural biotechnology events, veterinary biologics and other organisms; 

• Managing issues related to the health of U.S. animal and plant resources and conflicts with wildlife; 

• Surveying for and detecting exotic pests and diseases in the U.S.; and 

• Preparing for emergencies with containment, management and eradication. 

The Department’s protection strategy has changed because of the transfer of 2,655 agricultural positions, 

made up of USDA inspectors and support personnel, to the Department of Homeland Security’s (DHS) 

Bureau of Customs and Border Protection. The Homeland Security Act of 2002 authorized this move. 

Thus, the strategic emphasis has shifted away from safeguarding agriculture by excluding pests and diseases at ports of entry to safeguarding through surveillance activities both abroad and domestically. The 

measure of passenger compliance with agricultural quarantine inspection regulations, which appeared in 

this section formerly, was transferred to DHS. The strategy also has changed because of the increased risk 

associated with accelerating travel and trade. In the past, USDA regulated incoming passengers, vehicles 

and cargo to keep pest and disease carriers out of the U.S. by intercepting them at entry ports. Now, the 

Department is focusing more on intensive surveillance, early detection and containing and eradicating 

invasive organisms before they spread. 

The Department also released five new germplasm lines or varieties with resistance to major fungal or 

viral diseases. Examples of these accomplishments include cowpea varieties with resistance to cucumber 

mosaic virus and Blackeye Cowpea Mosaic Virus, alfalfa germplasm with resistance to Summer Black 

Stem, a new fungal resistant rice cultivar and a strawberry variety with resistance to Angular Leaf Spot 

disease. 

Additionally, USDA developed several other new crop varieties with resistance to parasites and pests. An 

example of these accomplishments includes sunflower germ plasm with resistance to Race-F of the parasitic organism Orobanche. This organism is devastating sunflower production in Eastern Europe and the 

Middle East. 

Serving the Public 

The public benefits from these activities through cost reductions in pest and disease control and eradication measures. Other benefits include: 

• Facilitating the sale of U.S. agricultural products in other countries; 

• Allowing farmers to make adequate incomes; 

• Reducing Federal financial assistance; 

• Providing U.S. consumers with a wide variety of low-priced food and fiber; 

• Protecting public and private lands and property from environmental damage and loss of species; and 

• Preventing the suffering of animals and, in some cases, humans from disease. 

Enhancing the Nation’s capacity to protect its agricultural, food and natural resource systems from threats 

arising from endemic conditions, natural disasters, accidents and intentional acts is important to food and 

fiber producers, consumers of these products and the Nation’s public health. 
USDA Performance and Accountability Report for FY 2003 

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63 

The primary goal of any successful agricultural biosecurity program is to prevent entry of a pathogen or 

pest into a susceptible population of plants or animals. When preventive measures fail, it is imperative to 

have early detection, rapid and accurate assessment and immediate implementation of various interventions that prevent spread, control the infection and then begin the recovery phase. The early detection of 

pathogens, pests and other threats, rapid and accurate assessment, and immediate responses that reduce or 

prevent the damage and control the infection are an essential part of USDA partnerships with State agencies and universities. 

USDA is expanding its capacity to use scientific knowledge and expertise to ensure biosecurity of U.S. 

agricultural and rural communities, and secure and safe food production. Since many pests or pathogens 

are potential weapons for use by terrorist groups, the Department needs to be prepared for emerging 

threats – either accidental or deliberate. The effort focuses on pests and diseases that are economically 

significant, easily spread or have high infectivity at low-infective dose levels. 

Rapid, easy, cost-effective and correct detection operates on multiple levels. Intensive production systems, where the farmer or rancher has more direct contact with production units, require different 

detection systems than are needed in extensive production systems. There are different detection needs for 

small land area operations versus large land area operations. USDA, State and university diagnostic laboratory linkage helps trace outbreaks to their source. The linkage also allows the Department to safeguard 

food production and supplies through appropriate containment measures. 

These accomplishments help ensure the continued safety of U.S. food production for both domestic and 

international consumers. They also advance and expand the capacity of U.S. agriculture to provide a 

front-line defense for plant pathogens that attack several agronomic species. These species constitute the 

foundation of U.S. agricultural crop production. 

Challenges for the Future 

Globalization, Free Trade Agreements (FTAs) and transportation technologies have increased the risk of 

exotic invasive species. A key protection strategy has been to regulate and inspect imports of agricultural 

products most likely to be carrying such species. Recent FTAs have increased the number of requests for 

imports into this country significantly. This increase has placed an added burden on USDA to scientifically assess a growing list of potential animal and plant health threats while, at the same time, not 

impeding trade. 

The recent creation of the Department of Homeland Security included USDA’s port-of-entry inspectors. 

While this reorganization will allow USDA to focus on strengthening other activities in the protection 

system, it also poses challenges in coordinating and communicating plans and policies between the two 

organizations. 

To accomplish its mission, USDA coordinates with States, academic institutions and private industry in 

surveillance, detection and response to outbreaks. Organizations that have enjoyed autonomy and independence now must come together, communicate fully and work rapidly to contain outbreaks. With the 

heightened concerns about potential bioterrorism, the surveillance system needs to be expanded to include 

a range of other potential threats. 

The protection and safety of the Nation’s food production is a constant concern for producers and the industries that transport, store, process and deliver food products to the public. Reducing, controlling or 

eliminating agricultural pest and disease outbreaks requires a steady stream of new technologies and 

processes to detect, analyze and verify the emergence of pests and diseases before they become economic 

or health threats. The multiple-partner, diagnostic-laboratory partnership reduces the risks facing U.S. 
USDA Performance and Accountability Report for FY 2003 

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64 

agricultural producers by strengthening and increasing state linkages to the five National Plant Pest and 

Disease Diagnostic Centers. 

Sclerotinia is a serious crop disease. USDA implemented the Sclerotinia Initiative in cooperation with 

stakeholders from seven participating commodity groups to reduce the disease’s impact. Soybean rust, a 

devastating disease that is widespread in South America, may spread to the U.S. USDA plays an active 

role in collaborative efforts with stakeholders and non-Government organizations to develop a defensive 

strategy for the potential invasion of soybean rust. While USDA is developing molecular genetic tools 

and new sources of resistance to this serious pathogenic threat, research progress is impeded by a lack of 

adequate space in the Department’s Biological Safety Level-3 (BSLC-3, the highest security level for research on plants to prevent the escape of disease into the environment)-containment facilities. Sclerotinia 

and soybean rust are only two of the hundreds of serious plant diseases that could pose a threat to the security of American agriculture in the future. 

Reduce the Risk of Entry and Establishment of Pests and Diseases 

In order to reduce the risk of entry and establishment of pests and diseases, USDA does a range of interconnected activities collectively known as the “safeguarding system.” These activities include: 

• Collecting information on pests and diseases in other countries and assisting the respective countries’ 

governments with them; 

• Based on scientific risk assessments, deciding which imports may enter the U.S.; 

• Devising policies related to inspection for and treatment of prohibited or contaminated commodities at 

ports of entry; 

• Trapping and surveying to detect the presence of harmful, economically significant pests and diseases 

inside the country, or to delimit the boundaries of infestations; 

• Identifying pests and diseases intercepted at ports or discovered inside the country; 

• Releasing sterile insects or natural predators to prevent or manage the spread of pests; 

• Regulating transport of commodities into and out of quarantine zones; 

• Coordinating with states and academic institutions on emergency eradication efforts; 

• Conducting research related to these activities; and 

• Providing national leadership and expertise related to animal and plant health. 

The outcome of these efforts is a safer U.S. agriculture and environment. Harmful, economically significant pests and diseases are kept out of the country effectively. If they do enter, they are detected and 

eradicated before becoming established. 

The following discussion separates programs related to plant pests and diseases from those related to 

animal pests and diseases. Based on a broad review conducted in 1999, the National Plant Board requested that USDA coordinate a comprehensive invasive plant-pest detection system. Early detection 

greatly reduces potential economic and environmental losses and eradication costs. In response, the Department recently added 26 pest-survey specialists to its Plant Protection and Quarantine staff to help 

ensure that exotic plant pests and diseases are detected before they can spread. Until recently, many States 

and cooperators did not have the resources to conduct surveys according to USDA guidelines or at a level 

adequate to provide early detection of plant pests or diseases. Thus, increased funding has been allotted 

for State cooperators to increase their pest detection and survey infrastructure and activities. 

The Animal Health Monitoring System is a proactive animal health monitoring and surveillance system. 

The National Animal Health Monitoring System (NAHMS) delivers objective information regarding 

animal health as it pertains to U.S. trade, agricultural productivity, public health and on-farm quality as-
USDA Performance and Accountability Report for FY 2003 

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65 

surance. Information is developed and entered into NAHMS through data sharing and effective partnerships with animal commodity producer groups, State governments, university researchers and other 

Federal agencies. 

Analysis of Results. 

The performance goal for Plant 

Pest Detection was deferred. 

While the surveillance and detection goals long have been 

part of USDA’s mission, this 

measure remains under development as a formal 

management tool. Actual results will be available at the 

end of the calendar year. At 

that time, States participating 

in the Cooperative Agricultural 

Pest Survey program will have 

finished collecting data on field 

survey findings and entered 

them into the National Agricultural Pest Information 

System. This performance 

goal’s results will be published in next year’s report. 

The performance goal for animal diseases, new to USDA’s performance plan, was met. The numerical 

target of “1” was set after the major outbreak of Exotic Newcastle Disease already had occurred. The target would be better stated, “Not greater than the existing one.” The outbreak cost USDA and poultry producers millions of dollars because many flocks had to be depopulated and establishments decontaminated. 

These steps were necessary because the remaining poultry needed to be protected from this fatal disease. 

It is a continuing challenge to control the disease because the smuggling of parrots and hobby birds is a 

possible factor in its introduction and spread. USDA, working together with its partners in State Government and the private sector, has eliminated more than 15 endemic diseases from the U.S. This partnership 

also has prevented many exotic animal diseases from entering the country. These actions have protected 

U.S. livestock and poultry, the income of farmers who raise them, the international markets of the U.S.-

export community, the meat supply of U.S. consumers and human health. The value of the losses avoided 

by conducting monitoring programs far exceeds the cost. 

Exhibit 48: Strengthen the Effectiveness of Pest and Disease Surveillance and Detection Systems

Fiscal Year 2003 

Annual Performance Goals and Indicators 

Target Actual Result 

3.2.1 Increase the percent of known, significant introductions of plant pests or diseases that 

are detected before they spread from the original area of colonization and cause severe economic or environmental damage (Percentage) 

95% Available 

12/31/03 

Deferred 

3.2.2 Number of significant introductions of foreign animal pests or diseases that spread 

beyond the original area of introduction and cause severe economic or environmental 

damage, or damage to the health of animals or humans 

1 1 Met 

Exhibit 49: Strengthen the Effectiveness of Pest and Disease Detection 

and Management Systems

Fiscal Year Actual 

Trends 

1999 2000 2001 2002 2003 

Increase the percent of 

known, significant introductions of plant pests or 

diseases that are detected 

before they spread from the 

original area of colonization 

and cause severe economic 

or environmental damage 

(Percentage) 

N/A N/A N/A 85% 

Baseline 

Available 

12/31/03 

Number of significant introductions of foreign animal 

pests or diseases that spread 

beyond the original area of 

introduction and cause severe 

economic or environmental 

damage, or damage to the 

health of animals or humans 

N/A N/A N/A 0 

Baseline 

1 

N/A = Not Applicable 
USDA Performance and Accountability Report for FY 2003 

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66 

Program Evaluation. 

The results from the Office of Management and Budget’s Program Assessment Rating Tool (PART) 

showed that the Animal and Plant Health Inspection Service (APHIS) has a clearly defined purpose. 

APHIS is to seek additional input from sources outside of the Government, including peer evaluations 

when appropriate. While APHIS is considering the best way to seek the input, it has not identified an appropriate, non-Governmental organization capable of conducting an independent review of the program. 

APHIS believes that an inherent conflict of interest would prevent most organizations with sufficient expertise in areas of animal care and the program’s mission from conducting an objective review. These 

organizations either represent individuals and facilities regulated by the Animal Care Program, such as 

the American Zoo and Aquarium Association, or belong to the animal-protection community, such as the 

Humane Society of the United States. In either case, these organizations would have a bias preventing 

them from evaluating the program objectively. APHIS may invite international organizations or counterparts to conduct independent reviews. The Marine Mammal Commission also may be able to review the 

part of the program that focuses on marine mammals. 

APHIS needs to develop additional goals (including long-term goals) to measure its impact on the humane treatment of animals. In FY 2003, the Animal Welfare Program developed a long-term goal to 

ensure the humane care and treatment of animals covered under the Animal Welfare Act. To measure 

progress toward this goal, the program is tracking the number of animals affected by noncompliances 

noted by inspectors at regulated facilities. The measure is “number of animals affected by noncompliances documented on inspection reports.” A baseline, target and results were developed and submitted 

with the FY 2005 budget request. A full copy of the PART may be found at 

www.whitehouse.gov/omb/budget/fy2004/pma.pdf. 

PART assessments were initiated on the Animal and Plant Health Monitoring and Surveillance Programs 

as part of the FY 2005 budget process. These programs are divided by plant (Plant Detection and Animal 

and Plant Health Regulatory Enforcement) and animal (Animal Health, Animal and Plant Health Regulatory Enforcement, and Veterinary Biologics). A full copy of the completed evaluations will be available 

February 2004 at www.whitehouse.gov/omb/part. 

Improve Animal Emergency Management 

The Emergency Management System (EMS) is a joint Federal-State-industry effort to improve the ability 

of the U.S. to deal successfully with animal-health emergencies. These emergencies could range from 

natural disasters to introductions of exotic animal diseases. In addition to unintentional introductions of 

such diseases, EMS addresses intentional introductions and emerging diseases which could threaten trade. 

By ensuring that Federal, State and private organizations across the country are working actively to prevent, detect and respond to animal-health emergencies, USDA is improving the national infrastructure. It 

is doing this to protect the Nation’s food and fiber supply and public health. While the challenges of international travel and trade are increasing the odds of animal diseases spreading across borders, USDA 

and its partners can reduce the devastating effects that a large animal-health emergency would have on 

national and global economies significantly. They can do this by being prepared to move quickly to prevent small emergencies from growing to epidemic proportions. 

Currently, USDA is hiring emergency-management coordinators to work throughout the country and assist in developing emergency-response infrastructures. This staff will help coordinate emergencyresponse resources from all sources in each State (including State, Federal and private resources). For regional threats, they will help manage resources available in two or more States. Coordinators will monitor 

States’ progress in meeting established standards for emergency preparedness and response. Reviews of 

States and territories to determine their status in meeting the standards for animal-health emergencies will 

be conducted every two years. For the review, USDA and each State veterinarian conduct a joint self-
USDA Performance and Accountability Report for FY 2003 

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67 

assessment of the State’s preparedness and emergency-response capability. USDA emergencymanagement coordinators, as they are hired, will check this self-report. 

Analysis of Results. 

The performance goal was deferred. Results of the second 

review will be available December 31, 2003. Currently, a 

survey of State Veterinarians 

and Animal and Plant Health 

Inspection Service (APHIS) 

Veterinarians-in-Charge is being developed. This 

performance goal’s results will be published in next year’s report. 

Program Evaluation. 

The Emergency Management Program of the Animal and Plant Health Monitoring and Surveillance Programs conducts continual self-evaluations and receives input from the joint State-Federal industry 

National Animal Health Emergency Management System Steering Committee. Based on comments in the 

Animal Health Safeguarding Review, which may be obtained at 

www.aphis.usda.gov/vs/pdf_files/safeguarding.pdf, the program has enhanced emergency-response capabilities greatly by building a response system shared by local, State, Federal and Tribal entities. The 

program implemented an incident-command system in response to Avian Influenza in Virginia in 2002 

and Exotic Newcastle Disease in California and other States in 2003. State, Tribal and local Government 

cooperators were summoned to help contain the situation and eliminate the diseases. A copy of the review 

of the response to Avian Influenza in Virginia can be obtained by calling APHIS Veterinary Services 

Emergency Programs at (301) 734-8073. A copy of the evaluation of the response to Exotic Newcastle 

Disease will be available March 2004 by calling APHIS Policy and Program Development at 

(301) 734-8511. 

A PART assessment was initiated on the Animal and Plant Health Monitoring and Surveillance Programs 

(Emergency Management Systems) as part of the FY 2005 budget process. A full copy of the completed 

evaluation will be available February 2004 at www.whitehouse.gov/omb/part. 

Meantime, a recent internal management study, Analysis Paper: Emergency Management Coordination 

in APHIS, June 6, 2003, APHIS Policy and Program Development, Riverdale, Maryland, focused on 

USDA’s animal and plant-pest and disease emergency-response capability. Copies of the study may be 

obtained by calling APHIS Policy and Program Development at (301) 734-8511. 

A review (self-report) of animal health emergency-management systems in each State is underway. The 

self-report will be completed by the end of the first quarter of FY 2004. The emergency-management coordinators who are hired will meet with States in FY 2004. The coordinators will review the data 

Exhibit 50: Increase the Number of States and Territories Meeting Standards

Fiscal Year 2003 

Annual Performance Goals and Indicators 

Target Actual Result 

3.2.3 Increase the number of States and territories which meet the standards for preventing, 

detecting and responding to animal health emergencies. 

30 Available 

12/31/03 

Deferred 

Exhibit 51: Actual Number of States and Territories Meeting Standards

Fiscal Year Actual 

Trends 

1999 2000 2001 2002 2003 

Increase the number of States 

and territories which meet the 

standards for preventing, 

detecting and responding to 

animal health emergencies 

0 0 1 11

Baseline 

Available 

12/31/03 

1

Revised to reflect final data. 
USDA Performance and Accountability Report for FY 2003 

Annual Performance Report

68 

collected. When it is completed, the report from this review can be obtained by calling the APHIS Deputy 

Administrator, Veterinary Services, at (202) 720-5913. 

Improve Animal Diagnostic Services 

USDA partners with States to provide effective emergency-response systems to detect, respond to and 

eliminate outbreaks of invasive pests and diseases. Having a fully operational diagnostic laboratory located 

close to a detection site and linked to a national network increases the rapidity with which an unknown disease sample can be tested accurately. It also increases the probability of containing an introduction before it 

becomes a significant outbreak. To address these needs, Congress appropriated funds for the National Animal Health Laboratory Network (NAHLN) in FY 2002. As part of a pilot for NAHLN, 12 State/university 

diagnostic laboratories received funding. With the funding, the laboratories developed capacity and surveillance programs for high-priority exotic animal diseases considered to be bioterrorist threats. Additionally, 

contracts were established with 26 diagnostic laboratories to assist with testing for Chronic Wasting Disease 

and scrapie, both of which are animal nervous system diseases. 

Between these two networks, laboratories in 26 States are available to assist National Veterinary Services 

Laboratories (NVSL) in providing necessary Federal animal-diagnostic services. These laboratories are in 

the process of receiving training and further enhancing their laboratory facilities. 

Analysis of Results. 

The performance goal was exceeded. NVSL, working in 

conjunction with the Cooperative State, Research, Education 

and Extension Service, has developed a laboratory network 

modeled after a broader national response strategy to integrate Federal, State and local resources more tightly. This initiative will allow 

any type of animal health emergency to be managed effectively. Having laboratories across the country 

available to assist with various diagnostic-testing techniques prepares the U.S. for emergency animal disease-situations. Additionally, during large-volume testing periods, having these laboratories guarantees 

timely test results. During FY 2003, six additional States joined the combined network as participants. 

NAHLN laboratories received training in sensitive methods for distinguishing such viruses as Foot and 

Mouth Disease, Avian Influenza and Exotic Newcastle Disease. During FY 2004, USDA will look into bolstering the capabilities of the current laboratory network members before adding additional States.

Program Evaluation. 

A PART assessment was initiated on the Animal and Plant Health Monitoring and Surveillance Programs 

(Veterinary Diagnostics Program) as part of the FY 2005 budget process. A full copy of the completed 

evaluation will be available February 2004 at www.whitehouse.gov/omb/part. 

Exhibit 52: Ensure States Provide Animal Diagnostic Services

Fiscal Year 2003 

Annual Performance Goals and Indicators 

Target Actual Result 

3.2.4 Increase the number of States that can provide necessary Federal animal diagnostic 

services 

25 26 Exceeded

Exhibit 53: Increase in States that Provide Animal Diagnostic Services

Fiscal Year Actual 

Trends 

1999 2000 2001 2002 2003 

Increase the number of States 

that can provide necessary 

Federal animal diagnostic 

services 

N/A N/A N/A 20 

Baseline 

26 

N/A = Not Applicable 
USDA Performance and Accountability Report for FY 2003 

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69 

Improve Plant Diagnostic Laboratory Capabilities 

International Standards Organization (ISO) certification of the five National Plant Diagnostic Network 

(NPDN) Centers ultimately will establish harmonized leadership and coordination of the diagnostic laboratories. It also ensures the performance of timely diagnostics with uniform and adequate quality, and 

enhances the process of producing and maintaining a timely, comprehensive catalogue of pest- and diseaseoutbreak occurrences in a nationally accessible database. Certification and linked communication are essential to identifying new or uncommon pests and diseases accurately. USDA, in conjunction with the States, 

will expedite initial control responses, verify the physical boundaries of an outbreak and initiate regional or 

national containment strategies. 

Analysis of Results. 

The performance goal was met. 

No trend data are available 

since the Improve the Capabilities of Plant Diagnostic 

Laboratories effort began in 

FY 2003. 

NPDN certification is on 

schedule, with three of the five 

National Centers certified for 

soybean rust. 

USDA agencies partner with State agencies and universities to achieve a high level of agricultural biosecurity through the early detection, response and containment of outbreaks of invasive pests and diseases. 

Diagnostic laboratories, adequately staffed and stocked with cutting-edge technology, are essential to accomplishing this mission. 

Future challenges to broaden overall certification, specifically developing ISO-certification criteria, include the difficulty of coordination, regional differences and the development of standard criteria. The 

process of connecting State and university plant-diagnostic laboratories to NAPIS is slightly behind 

schedule because of unanticipated funding shortfalls. These shortfalls result from the budget difficulties 

that most States currently are facing. While just 25 States had at least 1 plant diagnostic laboratory connected to NAPIS, at the end of the year, all 50 were connected. 

Future challenges to improving the capabilities of plant diagnostic laboratories include the availability of 

sufficient non-Federal funding to link at least one laboratory in each State to NAPIS, and to continue to 

increase the number of connected laboratories in each State. 

Exhibit 54: Ensure the Capabilities of Plant and Diagnostic Laboratories are Improved

Fiscal Year 2003 

Annual Performance Goals and Indicators 

Target Actual Result 

3.2.5 Improve the capabilities of plant diagnostic laboratories: Met 

• Certify National Plant Pest and Disease Diagnostic Network Centers 3 31

• Connect State Plant Diagnostic Laboratories to the National Agricultural Pest Information System at Purdue University 

50 501

 

1

Result based on projected estimate. See the Data Assessment of Performance Measures section for more information. 

Exhibit 55: Improve the Capabilities of Plant Diagnostic Laboratories

Fiscal Year Actual 

Trends 

1999 2000 2001 2002 2003 

Certify National Plant Pest and 

Disease Diagnostic Network 

Centers 

N/A N/A N/A N/A 31

Baseline 

Connect State Plant Diagnostic Laboratories to the National 

Agricultural Pest Information 

System at Purdue University 

N/A N/A N/A N/A 501

Baseline 

N/A = Not Applicable 

1

Result based on projected estimate. See the Data Assessment of Performance Measures section for more information. 
USDA Performance and Accountability Report for FY 2003 

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Program Evaluation. 

No program evaluations were performed in FY 2003. All research projects undergo an external peer review at the beginning of their five-year program cycle. Any research findings undergo peer review before 

they are published in a scientific journal. New and improved varieties are not released until they successfully complete a rigorous evaluation of the claims made for them in uniform variety tests that are 

conducted at 24 or more locations. 

Research Plant Pathogens 

USDA develops and releases to potential users varieties and/or germplasm that are new or provide significantly improved (either through traditional breeding or biotechnology) characteristics enhancing pest 

or disease resistance. Routine delivery of these new genetic resources is needed to protect agricultural 

crops from the emergence of new races of virulent pathogens. These resources also can prevent the introduction of severe diseases in the U.S. by human transport or other means. 

Analysis of Results. 

The performance goal was met. 

USDA transferred five new 

crop varieties with enhanced 

pest and disease resistance 

traits into public domain repositories. Use of these five 

genetic resources by private 

sector major seed companies 

will ensure widespread adoption of this technology to 

sustain and improve U.S. agricultural productivity. Development of risk-reducing technologies is a central 

strategy in U.S. research efforts to guard against catastrophic economic losses due to crop pests and diseases. Continued development of technological advances in crop protection creates numerous approaches 

for improved detection, control or elimination of severe plant diseases. Research is different from most 

government programs. In FY 1999, the base year for this report, USDA released nine new or improved 

varieties. Currently, five significant accomplishments have been identified, meeting the target as established. 

USDA will determine the need for additional research to meet future threats to the security of the U.S. 

crop-production system. With simultaneous research taking place on different issues, diseases and agriculturally important crops, it is difficult to predict exactly when new varieties or germplasm will be ready 

for release. Thus, the number of significant releases will vary from year to year. 

Program Evaluation. 

The Office of Scientific Quality Review evaluated relevant projects in the Plant, Microbial, Insect Genetic 

Resources, Genomics & Genetic Improvement National Program. The Office also certified approved project plans. Summary information on these reviews is available from the USDA/Agricultural Research 

Exhibit 56: Report of Actual Variety and Germplasm Releases

Fiscal Year 2003 

Annual Performance Goals and Indicators 

Target Actual Result 

3.2.6 Release a series of new or improved varieties or germplasm that exhibit enhanced 

disease resistance to each of the following plant diseases: Sclerotinia, downy mildew, 

rusts and exotic viral diseases 

5 5 Met 

Exhibit 57: Variety and Germplasm Releases with Enhanced Resistance to Pests and Diseases

Fiscal Year Actual 

Trends 

1999 2000 2001 2002 2003 

Release a series of new or 

improved varieties or germplasm that exhibit enhanced 

disease resistance to each of 

the following plant diseases: 

Sclerotinia, downy mildew, 

rusts and exotic viral diseases 

9 

Baseline 

9 5 5 5 
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Service (ARS) National Program Staff. Copies of the reviews on crops may be obtained by calling the 

National Program Staff office at (301) 504-6252. Copies of the reviews on animals may be obtained by 

calling ARS’ National Program Staff office at (301) 504-7050. 

Selected Results in Research, Extension and Statistics for Objective 3.2 

The National Animal Germplasm Program has approved 37 chicken lines developed by the USDA. The 

lines will be included in the National Registry of Genetically Unique Animal Populations. USDA developed the registry to recognize important genetic resources that have had and continue to have a significant 

impact upon the research community and the industry. These unique chicken lines have enabled scientists 

to characterize agriculturally important poultry traits, especially those involved in viral disease resistance. 

The scientists also have applied the resulting information to control economically important diseases. 

Based on the development of kaolin clay-based insect repellents, evaluation of “soft” insecticides and development of biological control and other technologies, USDA developed a successful pilot project in 

California to control Pierce’s disease and its carrier, the glassy-winged sharpshooter. Pierce’s disease, 

which strikes grapevines, threatens the $33 billion wine industry, almonds and other agricultural crops, 

landscape plants and forest trees. 

USDA scientists and the Department of Defense patented the most promising new mosquito repellent in 

50 years. DEET, discovered in 1954 by USDA, is the most widely used repellent in the world. The new 

repellent, SS 220, is longer lasting at lower concentrations and, unlike DEET, is harmless to plastics. 

Mosquitoes transmit a wide variety of deadly diseases - such as malaria, dengue and West Nile fever - for 

which there are no vaccines. 

USDA scientists earned a patent for a novel biological control agent that destroys 95 percent of the 

aquatic stages of Culex pipiens, one of the most important West Nile virus carriers. The agent, CuniNPV, 

is a naturally occurring baculovirus that affects only Culex mosquitoes. When ingested by larvae, 

CuniNPV quickly multiplies, killing them before they transform into disease-transmitting adults. Besides 

sequencing the entire genome of CuniNPV, USDA scientists established that they could greatly increase 

effectiveness by simply combining it with low concentrations of magnesium. 

Veterinary medicine and animal disease diagnosis have improved thanks to new genetic technologies. 

These technologies speed vaccine and diagnostic-tool development. With USDA support, Tennessee researchers devised several antibodies that detect a substance called antigen 85 in cows infected with 

Johne’s disease. This disorder is one of the top three diseases in beef and dairy cattle. Johne’s disease also 

has caused $250 million-worth of annual economic losses. Scientists at the Virginia-Maryland Regional 

College of Veterinary Medicine developed a livestock vaccine against brucellosis, which affects both 

animals and humans. The complete genome sequence of Mycobacterium paratuberculosis, the bacterium 

that causes Johne’s disease, was deposited into a publicly accessible database. The availability of the genome sequence will lead to better detection methods, the development of vaccines and the disease’s 

ultimate eradication. 

A way to reduce chemical use in agriculture is to entice pests away from the cash crop and onto a moreappetizing perimeter “trap” crop. This plan would allow farmers to kill the bugs on the trap crop. Connecticut researchers, supported in part with USDA funds, used this approach with a pepper pest. The 

treatment left the cash crop nearly 100-percent pest-free, reducing pesticide use nearly 90 percent. It also 

saved growers up to $153 per acre. Kentucky State University scientists devised a mechanical means to 

reduce chemical use with honeybees, which are vital crop pollinators. The scientists installed special 

screens under hives to trap varroa mites, which are major honeybee predators. 
USDA Performance and Accountability Report for FY 2003 

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72 

USDA-supported scientists contributed to the completion of a 10X draft genome sequence of Fusarium 

graminearum. This microorganism causes head blight (scab) in wheat and barley. The draft has been deposited into a publicly accessible database. The availability of the sequence will increase the potential for 

developing methods to control this fungal pathogen. Fusarium graminearum caused more than $3 billion 

in losses to U.S. farmers in the 1990s. 
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STRATEGIC GOAL 4: IMPROVE THE NATION’S NUTRITION 

AND HEALTH 

USDA is strongly committed to improving the nutrition and health of everyone living in the United 

States. For example, in addition to increasing the resources households have for proper nutrition at home 

and at school, the Department’s Special Supplemental Nutrition Program for Women, Infants and Children (WIC) and the Food Stamp Program (FSP) invested more than $200 million and more than $300 

million, respectively, in nutrition donation in 2003. Also, in May 2003, the Department announced the 

purchase of 39.1 million pounds of fruit and vegetables for donation to schools, neighborhood shelters for 

needy families and other food-aid institutions. Overall, USDA distributed more than $1.3 billion worth of 

commodity foods in 2003. The Department’s distribution of these kinds of nutritious foods is making a 

real difference in the lives of children and low-income people across America. 

USDA also awarded more than $4 million worth of Team Nutrition training grants to help State agencies 

improve children’s lifelong eating and physical activity habits. Team Nutrition provides schools with nutrition-education materials for children and families. It also offers technical-assistance materials for 

school food-service directors, managers and staff. Additionally, the program provides materials to build 

school and community support for healthy eating and physical activity. State agency partners provide 

training and technical assistance to support these programs in local schools. 

Additionally, recent studies have shown that FSP, the Nation’s largest nutrition-assistance program, 

served an increased share of those eligible for benefits two years in a row. Evidence is strong that the program is reaching more working families and the accuracy of FSP payments is at the highest level of its 

history.

Objective 4.1: Improve Access to Nutritious Food 

Overview 

USDA’s nutrition-assistance programs represent the Federal Government’s primary effort to reduce hunger and improve nutrition among low-income people in the U.S. By working with States to maintain 

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

seeks to provide access to an adequate diet for those with low income and few resources. 

Exhibit 58: Resources Dedicated to Improve the Nation’s Nutrition and Health

FY 2003 

USDA Resources 

Dedicated to Strategic Goal 4 Actual 

Percent of 

Total USDA 

Program Obligations ($ Mil) $42,245 36% 

Staff Years 2,974 3% 

Exhibit 59: Resources Dedicated to Improve Access to Nutritious Food

FY 2003 

USDA Resources 

Dedicated to Objective 4.1 Actual 

Percent of 

Goal 4 

Program Obligations ($ Mil) $41,322 98% 

Staff Years 1,300 44% 
USDA Performance and Accountability Report for FY 2003 

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Serving the Public 

The Department manages nutrition-assistance programs that reach one in five people directly in the U.S. 

annually. Additionally, these programs promote better health for all people in the U.S. through more than 

$500 billion in food and nutrition education, guidance and promotion. USDA policy seeks to ensure that 

all Americans have access to a healthy and nutritious food supply, regardless of income. A well-nourished 

population is healthier, more productive and better able to learn. No child or family should go hungry. 

Challenges for the Future 

Periodic studies, conducted most recently for FY 2001, show that many eligible individuals and families 

do not participate in USDA’s nutrition-assistance programs. The USDA Strategic Plan for FY 2002-2007

includes strategies to improve access to a number of underutilized programs, particularly the Food Stamp, 

School Breakfast and Summer Food Service Programs. The strategies also call for education and outreach 

efforts to make eligible people aware of the availability of nutrition assistance. USDA’s ability to achieve 

its goals depends partly on sound legislative authority to promote effective access to nutrition assistance, 

and on adequate funding to support program participation. Additionally, as programs are delivered by 

third parties, with voluntary participation, responsibility for reaching program goals is shared by the Federal, State and local Governments, non-profits, and other cooperatives, including eligible recipients. 

Reduce Hunger and Improve Nutrition 

Resources distributed through 15 USDA programs represent the primary Federal effort to fight hunger 

and poor nutrition in the U.S. FSP helps participants improve their food-purchasing power through 

monthly benefits delivered primarily through electronic debit technology. The school meals programs 

provide meals and snacks to all school children with a free or reduced-price rate for those in low-income 

families. WIC provides supplemental food packages, nutrition education and referrals to health and human services for low-income pregnant women, breastfeeding and non-breastfeeding new mothers, and 

infants and children up to 5 years old. 

USDA is committed to improving access to and use of vital nutrition assistance and education programs 

for eligible low-income people. 

Exhibit 60: Improve Nutrition

Fiscal Year 2003 

Annual Performance Goals and Indicators 

Target Actual Result 

4.1.1 Improve Access to Nutritious Food (Mil): Met 

• Food Stamp Program participation (people) 20.7 21.3 

• Special Supplemental Nutrition Program for Women, Infants and Children participation (average monthly participation)1

7.7 7.6 

• National School Lunch Program participation 

(average daily participation) 

28.7 28.3 

• School Breakfast Program participation (average daily participation) 8.8 8.4 

• Child and Adult Care Food Program meals served 1,831 1,766 

• Summer Food Service Program participation (average daily participation) 2.0 Available 

02/04 

1

New measure under development. 
USDA Performance and Accountability Report for FY 2003 

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75 

Analysis of Results. 

The performance goal was met. 

Because program participation 

is voluntary, performance 

projections are estimated based 

on macroeconomic 

assumptions and other factors 

that impact the behavior of 

eligible populations. 

The increase in program participation from the 2002 level 

reflects the impact of decline in 

economic conditions for some 

U.S. households. It also reflects 

continuing efforts to ensure 

program access for eligible 

people. This participation 

shows that the programs can 

respond quickly and effectively 

to changing economic conditions, and provide access to 

nutritious food. In particular, FSP participation exceeded expectations, growing substantially over the FY 

2002 level. 

USDA made expanding the Summer Food Service Program a priority during 2003. The Department undertook national and regional efforts to improve program participation. USDA hopes that these efforts 

will contribute to improved access and participation in this underutilized program in future years. 

For the future, results related to this objective depend on a variety of factors. Such socioeconomic issues 

as the strength of the economy and job availability will shape the scope and impact of nutrition-assistance 

program performance. The quality of program delivery at the State and local levels also will impact results. Maintaining effective partnerships with State and local cooperators, in light of State-level resource 

constraints, remains an ongoing challenge. 

Program Evaluation. 

USDA completed the following analyses and evaluations: 

• Characteristics of Food Stamp Households: FY 2002 (Advance) (FNS) 

• Trends in Food Stamp Program Participation Rates: 1999 to 2001 (FNS) 

• Food Stamp Participation Rates and Benefits: An Analysis of Variation Within Demographic Groups 

(FNS) 

• Expunging Food Stamp EBT Benefits: A Case Study of the Elderly in Three States (FNS) 

• Characteristics of Food Stamp Households: FY 2001 (FNS) 

• Reaching Those in Need: State Food Stamp Participation Rates in 2000 (FNS) 

• Elderly Participation and the Minimum Benefit (FNS) 

• Empirical Bayes Shrinkage Estimates of State Food Stamp Participation Rates for 1994-1999 and 

1998-2000 (FNS) 

• Evaluation of the School Breakfast Program Pilot Program Interim Report (FNS) 

Exhibit 61: Trends in Improving Nutrition

Fiscal Year Actual 

Trends1

1999 2000 2001 2002 2003 

Food Stamp Program participation (people) 18.2 17.2 

Baseline 

17.3 19.1 21.3 

Special Supplemental Nutrition Program for Women, 

Infants and Children participation (average monthly 

participation)2

. 

7.3 7.2 

Baseline 

7.3 7.5 7.6 

National School Lunch Program participation 

(average daily participation) 

26.9 27.2 

Baseline 

27.5 28.0 28.3 

School Breakfast Program 

participation (average daily 

participation) 

7.4 7.6 

Baseline 

7.8 8.1 8.4 

Child and Adult Care Food 

Program meals served 

1,638 1,671 

Baseline 

1,6813 1,7373 1,766 

Summer Food Service Program participation 

(average daily participation) 

2.2 2.1 

Baseline 

2.1 1.9 Available 

02/04 

1

All data is in millions. 

2

New measure under development. 

3

Revised to reflect final data. 
USDA Performance and Accountability Report for FY 2003 

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76 

• Household Food Security in the United States, 2001 (ERS) 

• The Emergency Food Assistance System–Findings From The Client Survey (ERS) 

• Hunger: Its Impact on Children’s Health and Mental Health (ERS) 

• The Emergency Food Assistance System–Findings From the Provider Survey (ERS) 

• Exploring Food Purchase Behavior of Low-Income Households: How Do They Economize? (ERS) 

• Food Stamp Caseloads Over the Business Cycle (ERS) 

• Food Stamp Leavers Research Study—Study of ABAWDs Leaving the Food Stamp Program in South 

Carolina (ERS) 

• Food Stamp Leavers Research Study—Study of Nonwelfare Families Leaving the Food Stamp Program in South Carolina (ERS) 

• The WIC Program: Background, Trends and Issues (ERS) 

• Feeding Low-Income Children When School Is Out—The Summer Food Service Program (ERS) 

Reports prepared by FNS are available at: www.fns.usda.gov/oane/MENU/Published/Publications.htm. 

Reports prepared by ERS are available at www.ers.usda.gov/Publications/. 

Additionally, the Government Accounting Office (GAO) released the following audits related to this objective: 

• Food Stamp Employment and Training Program: Better Data Needed to Understand Who is Served 

and What the Program Achieves (GAO-03-388): GAO examined the population served by the Food 

Stamp Employment and Training Program (E&T), the program’s services and what is known about 

E&T’s outcomes and effectiveness. GAO has recommended improvement in data collection and 

evaluation of the program. While USDA officials agreed to consider GAO’s recommendations, they 

expressed concern over the costs of implementing them in light of competing priorities.

• Food Assistance: Potential to Serve More WIC Infants by Reducing Formula Cost (GAO-03-331):

GAO examined the extent to which WIC agencies have reduced their use of non-contract brands of infant formula to lower WIC program costs. GAO recommended that USDA work with WIC agencies to 

reduce nonstandard formula use. USDA plans to analyze the level of need and, if warranted, work with 

State agencies to develop policy and train local agencies on formula usage.

GAO reports are available at www.gao.gov. 

A Program Assessment Rating Tool assessment was initiated on the Food Stamp Program as part of the 

FY 2005 budget process. A full copy of the completed evaluation will be available February 2004 at 

www.whitehouse.gov/omb/part. 

Selected Results in Research, Extension and Statistics for Objective 4.1 

Limited-resource families in the Oregon State University Nutrition Program learned budgeting, menu 

planning, product labeling and comparison shopping. The program helped these families eat healthier and 

get the most for their money. More than 60 percent of those who complete the program say that they now 

read nutrition-facts labels to make healthier choices. Forty-four percent say they have enough food each 

month. Cooperative Extension expects to save Oregon more than $3.60 in future health costs for every $1 

invested to improve nutrition behaviors. 

National data show that each dollar invested in the Expanded Food and Nutrition Education Program 

(EFNEP) leads to $10.64 in savings in future health care costs. EFNEP is a national Cooperative Extension program that targets low-income homemakers with young children. Delaware EFNEP doubled the 
USDA Performance and Accountability Report for FY 2003 

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77 

number people consuming more dairy, fruit, vegetables, breads and cereal products. It also allowed this 

same group to get all of their recommended nutritional daily allowances. A Purdue University EFNEP 

program is tailored to Spanish-speaking residents. Almost half the participants in this program made the 

recommended changes in nutrition for their households. In Arizona, 11,640 youths began eating better 

and experienced improved overall nutrition. 

Objective 4.2: Promote Healthier Eating Habits and Lifestyles 

Overview 

Eating right is vital to promoting health and reducing the risk for death or disability due to such chronic 

ailments as heart disease, certain cancers, diabetes, stroke and osteoporosis. Sadly, a large gap remains 

between recommended dietary patterns and what Americans actually eat. USDA’s nutrition programs focus on improving eating behaviors through nutrition promotion and services. These programs also 

provide technical assistance, training and resources for State and local agency staff to ensure delivery of 

quality services. 

Serving the Public 

Promoting healthy eating and lifestyle behaviors is a vital public health issue. Overweight and obesity 

soon will rival cigarette smoking as a leading cause of premature death and disability in the U.S. According to the Surgeon General’s 2001 Call to Action to Prevent and Decrease Overweight and Obesity, the 

costs related to obesity and inactive lifestyles reach into the billions of dollars annually. Based on the 

Surgeon’s General report, the human cost attributed to this cause is approximately 300,000 deaths annually. The burden of medical costs and the loss of productivity are shared by all Americans. 

Nutrition, health and education professionals look to USDA to provide the information, tools and educational materials they need to help people improve their diets. Additionally, USDA develops and 

distributes information, and provides assessment and educational tools for the general public. One such 

tool is the Interactive Healthy Eating Index (IHEI). The Index allows an individual to assess daily food 

intake and compare it to current national standards. In 2003, individuals used IHEI more than one million 

times to help them check their own food choices and identify how they could be improved. 

Additionally, USDA’s nutrition education for the public will focus on providing information that will motivate Americans to improve their food choices. This focus includes a particular emphasis on attaining and 

maintaining a healthy weight. Because low-income people and members of certain ethnic groups experience a disproportionate share of diet-related problems and risk factors, USDA’s nutrition-assistance 

programs include strategies to convey motivational messages and behavior-focused nutrition guidance to 

encourage healthier eating habits. Tools such as the Eat Smart. Play Hard. campaign and Team Nutrition help nutrition, health and education professionals reach low-income families, children and their 

caregivers make healthy choices together early in life and beyond. 

Exhibit 62: Resources Dedicated to Promote Healthier Eating Habits and Lifestyles

FY 2003 

USDA Resources 

Dedicated to Objective 4.2 Actual 

Percent of 

Goal 4 

Program Obligations ($ Mil) $757 2% 

Staff Years 551 19% 
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Challenges for the Future 

As the Surgeon General’s report notes, more than 6 in 10 Americans are overweight or obese, with the 

number growing. The most recent statistics from the Center for Disease Control and Prevention indicate 

that 15 percent of 6-to-19-year-old children and adolescents are overweight. These numbers are even 

higher among low-income Americans. To meet the challenge posed by obesity and diet-related diseases, 

USDA will continue to focus its efforts on: 

• Using sound science to provide healthy school meals; 

• Promoting breastfeeding; 

• Developing educational materials with information designed to help Americans improve their food 

choices; and 

• Maintaining a healthy weight. 

While an understanding of healthy eating is vital knowledge, it is not enough. Messages and materials 

must be crafted to convince Americans to make such positive changes as selecting a balanced diet with 

more fruits and vegetables, and being sensible about calorie intake. 

Healthier Eating Habits and Lifestyles 

A healthy diet, which includes fruits and vegetables, can lessen the risk for certain chronic illnesses. Thus, 

USDA encourages and promotes eating these foods through its nutrition-assistance programs. For babies, 

breastfeeding has been shown to make a significant difference in their health in infancy and beyond. 

Since all Americans can benefit from improving their diets, USDA is distributing educational materials 

with simple, clear messages about what and how much Americans should eat. 

Analysis of Results. 

The performance goal was exceeded. In the three areas for which data are available, USDA successfully 

implemented its nutrition promotion and diet-quality improvement strategies. Its key accomplishments 

include: 

• Increasing support for consumption of fruits and vegetables through nutrition-assistance programs. Partial data indicates an increase over last year’s level and a continuation of a trend of increases in recent 

years. This trend represents improved variety in the diets of program participants. 

• Continued monitoring and oversight of the nutrition quality of meals served through school meal programs. USDA’s partners conducted more School Meal Monitoring Reviews than last year. USDA’s 

partners also continued steady progress in meeting the goal of reviewing all schools in a five-year cyExhibit 63: Improve America’s Diet

Fiscal Year 2003 

Annual Performance Goals and Indicators 

Target Actual Result 

4.2.1 Promote Healthier Eating Habits and Lifestyles: Exceeded 

• Support for fruits and vegetables provided through nutrition assistance programs 

($ Mil) 

8,246 8,3511

 

• School Meals Initiative monitoring reviews conducted by State agencies 2,900 4,1131

 

• Percentage of WIC mothers initiating breastfeeding (Percentage, data collected 

biennially) 

N/A N/A 

• USDA nutrition education materials and education interventions disseminated 

(Mil. of pieces) 

6.1 19.61

 

1

Result based on projected estimate. See the Data Assessment of Performance Measures section for more information. 

N/A = Not Applicable – data collected every two years. 
USDA Performance and Accountability Report for FY 2003 

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cle. Results of these reviews are used by State and local agencies to target corrective action to improve 

meals. 

• Increased dissemination of nutrition-education materials to targeted audiences and the general public. 

The current level of disseminated materials increased from FY 2002. The increase reflects a large distribution of materials due to increased demand for nutrition information from USDA’s program 

cooperators. Additionally, the Department increased its use of the Internet as an efficient means to allow more Americans to access these materials. These science-based, tested nutrition-education 

materials can make a real difference in improving peoples’ diets and motivating other healthy behavioral changes. 

While data on breastfeeding in 

WIC are unavailable this year, 

USDA is committed to continue its efforts to promote it as 

the preferred infant-feeding 

practice. The Department also 

looks to sustain the increase in 

breastfeeding-initiation rates 

that have occurred over the 

past several years. 

A key challenge for the future 

in achieving results is the priority the American population 

places on healthy eating and 

maintaining a healthy weight. 

USDA’s nutrition education 

efforts are designed so that 

program participants and the general public are influenced by a wide range of messages. The Department’s ability to promote dietary improvements and regular exercise will be impacted by societal 

behavior, including the changing of products and practices in the food marketplace. 

Program Evaluation. 

USDA completed the following analyses and evaluations: 

• Environmental Scan and Audience Analysis for Phase II of Eat Smart. Play Hard (FNS) 

• Survey of the Public Health Nutrition Workforce (FNS) 

• Effects of Food Assistance and Nutrition Programs on Nutrition and Health (FNS) 

• Evaluation of the USDA Fruit and Vegetable Pilot Program: Report to Congress (ERS) 

• Balancing Food Costs with Nutrition Goals in WIC (ERS) 

• Factors Affecting the Macronutrient Intake of U.S. Adults (ERS) 

• Effects of Food Assistance and Nutrition Programs on Nutrition and Health: Volume II, Data Sources 

(ERS) 

Reports prepared by FNS are available at: www.fns.usda.gov/oane/MENU/Published/Publications.htm. 

Reports prepared by ERS are available at www.ers.usda.gov/Publications/. 

Additionally, GAO released the following audits related to this objective:

• School Lunch Program: Efforts Needed to Improve Nutrition and Encourage Healthy Eating (GAO03-506): GAO examined schools’ efforts to provide and promote healthy meals, and Federal, State 

and local actions to overcome factors that deter healthy eating. It recommended that the USDA and 

Exhibit 64: Trends in Improving America’s Diet

Fiscal Year Actual 

Trends 

1999 2000 2001 2002 2003 

Support for fruits and vegetables provided through nutrition 

assistance programs ($ Mil) 

6,692 6,747 

Baseline 

7,102 7,628 8,3511

School Meals Initiative monitoring reviews conducted by 

State agencies 

2,937 3,939 

Baseline 

4,073 3,517 4,1131

Percentage of WIC mothers 

initiating breastfeeding (Percentage, data collected 

biennially) 

N/A 44.5% 

Baseline 

N/A 48.3% N/A 

USDA nutrition education 

materials and education interventions disseminated (Mil. of 

pieces) 

.38 2.2 

Baseline 

3.4 14.8 19.61

N/A = Not Applicable 

1

Result based on projected estimate. See the Data Assessment of Performance Measures section for more information. 
USDA Performance and Accountability Report for FY 2003 

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the Departments of Health and Human Services and Education help schools promote nutrition education while still meeting the demands of State standards-based assessments. GAO also wants the 

Departments to direct states to identify a focal point to promote collaborative efforts that would further develop nutrition-education activities for the schools. 

• School Meal Programs: Few Instances of Foodborne Outbreaks Reported, but Opportunities Exist to 

Enhance Outbreak Data and Food Safety Practices (GAO-03-530): GAO found that about 3 percent 

of the 7,390 foodborne outbreaks reported nationally from 1990-1999 occurred in schools. It recommended that CDC add school meals as an outbreak category to its report, the Agricultural Marketing 

Service (AMS) highlight its more stringent school procurement specifications on its Web site, and 

FNS and AMS promote training and certification of key food service personnel, and study the advantages and disadvantages of donating precooked or irradiated food. USDA generally accepted the 

report’s recommendations. 

GAO reports are available at www.gao.gov. 

Selected Results in Research, Extension and Statistics for Objective 4.2 

USDA has developed new search applications to provide the American public with easy, user-friendly 

access to USDA’s unique food composition data through personal digital assistants, personal computers 

and the Web-based National Nutrient Database. These applications allow consumers and health professionals to access the information needed to make better choices and recommendations for healthier foods 

more easily. 

Researchers in the Processed Foods Research unit at the Western Regional Research Center (WRRC) developed and licensed a technology for forming 100-percent fruit health bars from pears to add value and 

create new markets for pears. In collaboration with USDA, the industrial partner now is producing the 

bars commercially in a plant in North Bonneville, Washington, which is an area of high unemployment. 

Ninety new jobs have been created. This grassroots effort of pear growers has expanded into other fruits 

from the Western states. This action is designed to enhance grower profitability and assist people in the 

U.S. in meeting their daily requirements for fruits. 

Researchers in the Processed Foods Research Unit at WRRC developed casting technologies to produce 

100-percent fruit and vegetable wraps. They entered into a Cooperative Research and Development 

Agreement with an industrial partner to scale up the production process for these films. ARS researchers 

successfully enhanced the production of the 100-percent fruit and vegetable wraps. 

Researchers, with USDA funding support, demonstrated that the hormone leptin functions less effectively 

in obesity-prone mice when they consume high-fat diets. Leptin is produced by fat cells and involved in 

appetite regulation. The researchers also discovered the mechanisms responsible for this effect. Normally, 

leptin is an important component of a feedback system between adipose tissue and the brain to match 

rates of energy utilization with rates of energy intake. These studies are relevant to humans because leptin 

resistance is a hallmark of essentially all forms of human obesity. Knowledge gained from the studies improved USDA’s understanding of how leptin functions in humans. It also guided the development of 

effective treatments and intervention strategies. 

USDA-supported researchers identified factors that determine fruit and vegetable consumption by lowincome African-American mothers of young children. They did this by using the Transtheoretical Model 

to explain behavior change. This model is used by researchers to develop effective interventions to promote health-behavior changes. While all mothers enrolled in the study expressed some concern about 

their children eating healthier diets, those who already had or were preparing to make changes in their 

children’s diets used more complex strategies to increase fruit and vegetable consumption. The results 
USDA Performance and Accountability Report for FY 2003 

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will be used to develop educational materials tailored specifically for use in nutrition counseling for African-American mothers of young children. 

Missouri Cooperative Extension taught the Show-Me Nutrition curriculum to 14,000 students at risk for 

obesity. After completing the education program, 53 percent made healthier food and beverage choices in 

the school cafeteria. 

Objective 4.3: Improve Food Program Management and Customer Service

Overview 

USDA is strongly committed to attaining the best-possible program outcomes while preventing program 

abuse or wasting taxpayer dollars. The Department also wants to ensure that nutrition-assistance programs 

serve those in need at the lowest possible costs. USDA continued to improve stewardship by reducing 

program error and continuing its use of electronic technology to enhance customer service. 

Serving the Public 

Maintaining public trust in the Department’s nutrition-assistance programs is vital to their success and 

continued public support. The sheer size of these programs demands that the utmost attention be given to 

applying efficient management practices and preventing errors in distributing benefits. In the Food Stamp 

Program (FSP), collaborative efforts between States and USDA to improve payment accuracy have 

worked, resulting in more program benefits issued in the proper amounts. 

In the School Lunch Program, the risk of erroneous payments remains a significant concern. Work undertaken by USDA provided important information about the size of the problem and its complexities. 

USDA is working to develop strategies to address certification inaccuracy without compromising access 

for eligible children or unduly burdening school authorities. 

Challenges for the Future 

To meet the challenge of continued improvements in payment accuracy in the FSP, USDA continues to 

dedicate significant resources to this area. Nevertheless, there are two significant challenges that will affect success in the future:

• Congressional action has changed the quality-control process. It remains to be seen how States will 

react to the lowered risk of penalties for poor performance and less incentives for good performance. 

• State budgets have been and will continue to be extremely tight. This factor could hurt State performance in the payment-accuracy arena.

Regarding the National School Lunch Program (NSLP), USDA is aware of the growing discrepancy over 

time between the number of children certified for free meals and the estimates of those eligible. While 

certification errors alone do not result in Government losses, they represent a risk of erroneous payments. 

Exhibit 65: Resources Dedicated to Improve Food Program Management and Customer Service

FY 2003 

USDA Resources 

Dedicated to Objective 4.3 Actual 

Percent of 

Goal 4 

Program Obligations ($ Mil) $166 0%1

Staff Years 1,123 38% 

1

Less than 1 percent (0.4 percent) 
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Payment errors occur only when ineligible students actually receive meals. This is a daily decision. No 

data are collected to document if or how often those who are certified actually participate. To improve 

information in this area, USDA is exploring the feasibility of a nationally representative study of the level 

of NSLP payment error. The Department also is seeking funding and authority for regular assessments of 

a variety of key program outcome measures. These measures include the level of certification error and 

program loss as part of Child Nutrition reauthorization. 

Improve Food Management Efficiency 

USDA continued to implement strategies to reduce erroneous payments within the Food Stamp and 

School Meal Programs. Efforts resulted in more program benefits being delivered in the proper amounts. 

Additionally, continued development and deployment of electronic debit technologies resulted in improved customer service by reducing stigma and improving program management. 

Exhibit 66: Increase Efficiency in Food Management

Fiscal Year 2003 

Annual Performance Goals and Indicators 

Target Actual Result 

4.3.1 Improve Food Program Management and Customer Service: Deferred 

• Increase the Food Stamp payment accuracy rate (Percentage; Cumulative) 91.5% Available 

Spring 

2004 

• Decrease the number of children certified for free school meals in excess of those 

estimated eligible (Percentage) 

25% TBD 

Analysis of Results. 

The performance goal was deferred. FY 2003 performance 

data with respect to FSP payment accuracy will not become 

available until FY 2004. Available data for FY 2002 indicate 

that program integrity continues to improve, representing 

better targeting of the taxpayer 

investment in this program to 

those most in need. 

The most important factor in maintaining improved performance in this area is the need for State partners 

to continue and renew their commitment to utilize findings from the Quality Control system. This commitment will improve payment accuracy. To support State improvement, USDA will continue efforts to 

resolve Quality Control liabilities through settlements which require States to invest in specific program 

improvements. The Department also will support States in improving accuracy with “best practices” information sharing, develop specific intervention plans for high issuance/high error rate States and 

encourage States to adopt available options that simplify program rules. 

A results measure currently is unavailable for NSLP certification accuracy because USDA is refining 

its methodology for calculating certification error. Since the FY 2003 Annual Performance Plan

measure and targets were set, the Department has continued to explore alternative analyses of data 

that may match program-eligibility requirements more closely. While these alternatives vary in the 

level of discrepancy between the total number of free certifications and the estimates of those eligiExhibit 67: Trends in Increasing Efficiency in Food Management

Fiscal Year Actual 

Trends 

1999 2000 2001 2002 2003 

Increase the Food Stamp 

payment accuracy rate 

(Percentage; Cumulative) 

90.1% 91.1% 91.3% 

Baseline 

91.7% Available 

Spring 

2004 

Decrease the number of 

children certified for free 

school meals in excess of 

those estimated eligible 

(Percentage) 

27% N/A1 N/A1

 N/A1 TBD 

1

Measurement methodology is being revised. 
USDA Performance and Accountability Report for FY 2003 

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ble, the evidence remains clear that certification accuracy is a serious problem that must be addressed. 

The Department does not believe that such a measure is feasible using available data sources. USDA has 

recommended a number of policy changes to address certification accuracy as part of Child Nutrition reauthorization with an approach that balances the need to improve integrity with promoting program 

access for eligible children. Department recommendations include: 

• Expanding the use of “direct certification” for school meals of children already participating in other 

means-tested programs. This approach can improve accuracy without causing barriers to eligible children already participating in the Food Stamp Program. 

• Improving the paper-based application process by providing for year-long certifications using a single 

application for all children in a household, increasing the verification sample and requiring a robust follow-up process to encourage eligible children to remain on the program; and 

• Continuing to test methods to improve the application and verification processes through a program of 

applied research and analysis. This includes a nationally representative study of certification error and 

the number of dollars lost to program error. 

Program Evaluation. 

USDA completed the following analyses and evaluations related to this outcome: 

• Evaluation of the National School Lunch Application/Verification Pilot Projects (FNS) 

• Evaluation of the School Breakfast Program Pilot Program Interim Report (FNS) 

• Food and Nutrition Service Regional Office Verification Activity (FNS) 

• The Food Assistance Landscape (ERS) 

• Rural Welfare Reform: Lessons Learned (ERS) 

• Assessment of WIC Cost-Containment Practices (ERS) 

• Aiming for Targets, Saving on Arrows: Insights from Two USDA Food Assistance Programs (ERS) 

• Direct Certification in the National School Lunch Program—Impacts on Program Access and Integrity 

(ERS) 

Reports prepared by FNS are available at: www.fns.usda.gov/oane/MENU/Published/Publications.htm. 

Reports prepared by ERS are available at www.ers.usda.gov/Publications/. 

Additionally, the Office of Inspector General (OIG) and GAO released the following audits related to this 

objective:

• Controls over the Access, Disclosure and Use of Social Security Numbers (27601-29-CH): OIG concluded that, while Federal-level controls are in place and functioning, improvements are needed at the 

State and county food stamp offices of Wisconsin and Illinois to protect social security numbers from 

identify theft. USDA generally agreed with the report’s findings and recommendations. 

• School Meal Programs: Revenue and Expense Information from Selected States School-Meal Programs: Revenue and Expense Information from Selected States (GAO-03-569): GAO explored how 

overall revenues and federal reimbursement in particular, from school years 1996-2000 compared with 

the expense of producing meals during this timeframe. GAO found that, for the six States reviewed, the 

primary revenue sources are federal reimbursements and food sales. Approaches to enhance program 

revenues focused on increasing participation and a la carte sales. The report contains no recommendations.
USDA Performance and Accountability Report for FY 2003 

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GAO reports are available at www.gao.gov. OIG reports are available at 

www.usda.gov/oig/rptsaudits.htm. 

The Office of Management and Budget completed a Program Assessment Rating Tool (PART) review of 

NSLP. While the review showed that NSLP is generally well-designed and has a clear purpose, it also 

found that the program’s performance measures do not link to long-term goals adequately. The PART 

also noted that inaccuracy in the certification of participants remains an important problem. Based on the 

findings, USDA intends to pursue program changes to increase certification accuracy and improve measures related to erroneous payments and other aspects of program performance. A copy of the PART 

assessment may be found at www.whitehouse.gov/omb/budget/fy2004/pma/nationalschool.pdf. 

Selected Results in Research, Extension and Statistics for Objective 4.3 

USDA conducted the first nationally representative survey of the emergency food-assistance system. This 

system includes food pantries, emergency kitchens, food banks and other organizations. The findings indicate that this informal network provides more than 173 million meals and distributes about 2.9 billion 

pounds of food annually. Public and private food-assistance providers or organizations work together to 

offer more comprehensive aid than either could offer alone. 

The Department’s Economic Research Service also launched The Food Assistance Landscape. This firstever periodic publication highlights USDA’s food-assistance efforts. Several important studies were completed that provide policymakers, program agencies and others with information to improve the 

Department’s food-assistance programs. These studies included an evaluation of a pilot program to provide fruits and vegetables to schools. Also examined were infant-formula pricing in WIC’s Special 

Supplemental Nutrition Program and the background, trends and issues surrounding WIC. 
USDA Performance and Accountability Report for FY 2003 

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STRATEGIC GOAL 5: PROTECT AND ENHANCE THE 

NATION’S NATURAL RESOURCE BASE AND ENVIRONMENT 

USDA assisted the approximately 100,000 residents of Lake Arrowhead, California, by providing more 

than $13 million to the Lake Arrowhead and Idyllwild areas of the San Bernardino National Forest. This 

funding was to address the significant wildfire threat from thousands of dead and dying trees caused by 

California’s worst-recorded drought. 

Large stands of trees and vegetation suffered severe damage on more than 354,000 acres of the San Bernardino and San Jacinto Mountains. This left the resulting stressed and weakened trees vulnerable to 

rapidly increasing bark beetle populations and such pathogens as root disease and mistletoe. The funding 

was used for removing dead and stressed trees and brush, thinning overstocked stands, replanting trees 

and vegetation, and providing technical assistance to private landowners and communities. 

In another action demonstrating the Department’s commitment to protecting the environment, USDA accepted two million acres of the Nation’s most environmentally sensitive land into the Conservation 

Reserve Program (CRP). CRP allowed eligible farmers and ranchers to establish voluntarily long-term 

conservation practices on highly erodible and environmentally sensitive cropland. In exchange, they received 10 to 15 years of annual rental payments and cost-share assistance for maintaining those practices. 

Additionally, the USDA Forest Service partnered with State Foresters, conservation organizations, landgrant institutions, Indian tribes and forest landowner organizations. The groups worked together to develop an interim rule for the Forest Land Enhancement Program (FLEP) authorized by the Farm Security 

and Rural Investment Act of 2002. Non-industrial, private forest landowners may receive cost-share, 

technical and educational assistance under FLEP from State forestry organizations. This assistance enables landowners to implement forest-stewardship plans on their properties. Thus, they maintain the 

land’s productive health and provide public goods and services. 

State Foresters interested in participating in FLEP prepare priority plans with the State Forest Stewardship Coordinating Committee to identify priorities. States adopting priority plans are granted FLEP funds 

by the Forest Service for assistance in support of forest-stewardship activities. The funds then are used to 

sustain non-industrial, private forest lands. 

Through its Conversation Technical Assistance (CTA) program, USDA helped private resource managers 

and State, local and Tribal governments assess their resources and develop plans to meet their objectives. 

The Department provided planning assistance through CTA on more than 18 million acres. This assistance came in the form of site-specific planning on individual operations and area-wide plans for larger 

landscapes. For example, USDA helped develop a long-range plan to solve water and other natural resource conservation concerns in the Klamath River Basin of Oregon and California. This plan contains 

long-term solutions to enhance water quantity and quality. These solutions involve applying good management, planning and information to mitigating the impacts of drought and protecting public health. The 

Exhibit 68: Resources Dedicated to Protect the Nation’s Natural Resource Base and Environment

FY 2003 

USDA Resources 

Dedicated to Strategic Goal 5 Actual 

Percent of 

Total USDA 

Program Obligations ($ Mil) $11,306 10% 

Staff Years 53,117 47% 
USDA Performance and Accountability Report for FY 2003 

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assessments that USDA assisted the local conservation districts to conduct as a basis for this plan were 

CTA activities. Financial assistance for implementing the plan is being provided through programs authorized by the Farm Security and Rural Investment Act of 2002 (FSRIA). 

In FY 2003, USDA effectively continued to execute activities to implement the expanded public investment in conservation provided by FSRIA. The Department continued to write clear and flexible program 

rules. USDA produced the proposed and final rules for the Farm and Ranch Lands Protection Program; 

the final rule for the Conservation of Private Grazing Land and Environmental Quality Incentives Program; and the interim final rule for Technical Service Provider Assistance. 

One of USDA’s goals for FY 2003 was to ensure that every producer knew about farm bill programs and 

had an opportunity to participate. Department employees and partners in every State worked to inform the 

public about these programs. USDA received thousands of applications for farm-bill funds because of 

these outreach efforts. Underserved segments of the producer population were well represented. 

A key element of USDA’s outreach involved posting the national and local priorities for conservation 

programs onto the Internet. Having access to these priorities helps producers focus their time and effort 

on submitting applications that have the best chance of being approved. This assistance demonstrated one 

more way in which USDA’s electronic government efforts produce better service for its customers. 

To help provide the technical assistance that the expanded programs entail, USDA implemented the 

Technical Service Provider (TSP) process. TSPs are non-USDA technical specialists certified to deliver 

conservation technical services to farmers and ranchers participating in USDA conservation programs. 

TSPs were authorized by FSRIA as a strategy to meet conservation goals while reducing the need for substantial increases in Federal staff. The names of certified specialists are available to landowners, farmers, 

ranchers and others seeking conservation technical assistance on a National, Web-based registry called 

TechReg. More than 1,600 potential TSPs have applied for certification through the TechReg site. More 

than 1,000 of these providers have completed the certification process. Additionally, “not to exceed” 

payment rates for categories of technical services provided by TSPs have been established for each State, 

based on USDA’s total cost to provide technical assistance for conservation practices. 

Objective 5.1: Implement the President’s Healthy Forests Initiative and Other 

Actions to Improve Management of Public Lands 

Overview 

USDA is dedicated fully to implementing the President’s Healthy Forest Initiative to reduce the threat of 

catastrophic wildfires and protect communities. The Department is improving processes involving the 

National Environmental Policy Act (NEPA), administrative appeal rules, timely consultation by Federal 

agencies and implementing Council on Environmental Quality guidelines. USDA is improving the management of public lands for the enjoyment of U.S. citizens to promote and sustain the health of all 

Exhibit 69: Resources Dedicated to Implementing the Healthy Forest Initiatives and Other Actions

FY 2003 

USDA Resources 

Dedicated to Objective 5.1 Actual 

Percent of 

Goal 5 

Program Obligations ($ Mil) $5,671 50% 

Staff Years 38,168 72% 
USDA Performance and Accountability Report for FY 2003 

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National Forest System lands, and ensure the viability of the U.S. natural resource base and the environment in the future. In this goal, USDA’s focus is on Improving Fire Management, Managing Sustainable 

Rangelands and the Cleanup of Hazardous Wastes. 

Together, USDA and the U.S. Department of the Interior (DOI) implemented the National Fire Plan 

(NFP) as described in Managing the Impact of Wildfires on Communities and the Environment, and in the 

10-Year Comprehensive Strategy Implementation Plan released in May 2002. USDA and DOI are working to reduce catastrophic wildfire risks, protect rural communities and increase firefighting readiness. 

USDA is responsible for managing federally owned rangelands in the National Forest System to assure 

their sustainability. There are approximately 90 million acres of rangeland within USDA grazing allotments. Rangelands are a type of land on which grasses, forbs and shrubs dominate the natural vegetation. 

The land is managed as a natural ecosystem. Grazing allotments are an area of land designated for livestock grazing under USDA permit. 

Serving the Public 

To implement NFP effectively, USDA and DOI worked with the States to develop a 10-year Comprehensive Strategy and a collaborative Implementation Plan. These documents guide USDA’s efforts to protect 

communities and manage wildland fire on and around the 192 million acres of National Forest and Grasslands. The Western Governor’s Association, the National Association of State Foresters, the National 

Association of Counties and the Intertribal Timber Council endorsed the 10-year Comprehensive Strategy 

and Implementation Plan. 

Qualified USDA employees oversee grazing allotments by implementing management direction from 

NEPA analyses for grazing allotments under permit to members of the public. Improved management of 

grazing allotments and improved monitoring have resulted in public benefits, including the maintenance 

or improvement of watershed conditions and habitat of endangered species. 

Challenges for the Future 

USDA’s main challenge is to reduce the risk of catastrophic wildfire on public lands. The Department 

also must protect communities in the Wildland-Urban interface. The interface is an area where structures 

and other human development meet or intermingle with undeveloped wildland or vegetative fuel. 

To meet the Implementation Plan’s goals, USDA and DOI have adopted three guiding principles: 1) Protect communities and high-priority watersheds at risk, 2) Enhance collaboration among governments and 

stakeholders, and 3) Increase accountability through performance measures and monitoring. 

Improved monitoring and management of grazing allotments in the future, through the implementation of 

new decisions that are analyzed under NEPA procedures, represent a continuing challenge for the 

USDA’s range-management program. 

Improve Fire Management 

In September 2002, The National Academy of Public Administration released the report, Wildfire Suppression: Strategies for Containing Costs. The report recommends four strategic initiatives designed to: 

• Hasten the job of reducing fuel loads and sharing the cost; 

• Mitigate fire hazards at the interface between people and wildlands; 

• Make managing large incidents more efficient and accountable; and 

• Speed the contributions of science, technology and information management to cost-effective fire 

management. 
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In response, the Forest Service (FS) developed two Action Plans designed to reduce large wildland firesuppression costs. The first, “Large Fire Cost Reduction Action Plan,” emphasizes actions to reduce large 

fire-suppression costs. The plan recommends increased training, awareness and accountability for decisions; a provision of assistance to line officers making large fire-cost decisions; changing some 

organization procedures; developing additional decision-support computer systems; and providing a 

greater degree of administrative oversight. The second, “Fire and Aviation Operations Action Plan,” provides direction to line officers, agency administrators and field managers to focus on four areas: 

preparedness, cost containment, hazardous fuel treatment and firefighter and public safety. These plans 

define strategies and tactics managers will use to reduce large fire-suppression costs while maintaining 

safety and effectiveness. 

The Hazardous Fuels program reduces hazards in the interface area. This program includes coordination 

with partners and projects on State and private lands to maximize benefits across the landscape. USDA 

emphasizes continuous maintenance. 

Exhibit 70: Reduce Risk of Catastrophic Fire

Fiscal Year 2003 

Annual Performance Goals and Indicators 

Target Actual Result 

5.1.1 Continue to restore, rehabilitate and maintain fire-adapted ecosystems by treating hazardous 

fuels in both the Wildland Urban Interface (WUI) and non-WUI areas (Mil. of acres) 

1.6 1.4 Unmet 

5.1.2 Ensure Federal fire management plans are in compliance with Federal Wildland Fire Policy (Percentage) 75% 75% Met 

5.1.3 Control unplanned and unwanted fires during initial attack (Percentage) 99% 99% Met 

Analysis of Results. 

The performance goal for the 

treatment of hazardous fuels 

was not met. Accomplishment 

was 1.4 million acres, compared 

with the target of 1.6 million 

acres. The severe fire season 

required a funding transfer from 

the hazardous fuels account. 

This transfer was designed to 

maintain the capability to conduct vegetation-management 

treatments and activities in areas that will reduce the risk of 

wildland fires to communities. 

Drought and a severe fire season – factors external to 

USDA’s control – caused FS to fall short of the FY 2003 target for hazardous fuel reduction treatments. 

The performance goal for fire management plans was met. These plans are being updated to comply with 

Federal Wildland Fire Policy and in conjunction with revisions being undertaken for National Forest Land 

and Resource Management Plans. USDA expects 75 percent of Fire Management Plans to be compliant and 

on schedule to be 100 percent compliant by calendar year 2004, in coordination with the four DOI bureaus 

having wildland fire-fighting management responsibilities. 

Exhibit 71: Trends in Reducing Risk of Catastrophic Fire

Fiscal Year Actual 

Trends 

1999 2000 2001 2002 2003 

Continue to restore, rehabilitate and maintain fireadapted ecosystems by 

treating hazardous fuels in 

both the Wildland Urban Interface (WUI) and non-WUI 

areas (Mil of acres) 

1.4 0.8 1.4 

Baseline 

1.3 1.4 

Ensure Federal fire management plans are in compliance 

with Federal Wildland Fire 

Policy (Percentage) 

N/A N/A N/A 50% 

Baseline 

75% 

Control unplanned and unwanted fires during initial 

attack (Percentage) 

98.3%1 97.5%1 98.7%1

Baseline 

99% 99% 

N/A = Not Applicable 

1

Revised to reflect USDA and DOI jointly developed data. 
USDA Performance and Accountability Report for FY 2003 

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The performance goal for the initial control of fires was met. USDA wildland fire-preparedness resources 

controlled 99 percent of unplanned wildland fires during initial attack in FY 2003. Controlling wildland fires 

during initial attack reduces threats to life and property, protects forest resources and reduces wildland firesuppression expenses. The ability to control fires with initial attack results in fewer acres burned and less 

catastrophic wildfires. Large fires imperil private homes and businesses, destroy such USDA infrastructure 

as campgrounds and administrative facilities, and threaten the health and lives of the rural residents and firefighters. Resource loss from large fires includes reduced water quality, degraded fish and wildlife habitat 

and burned timber. Additionally, firefighting costs escalate rapidly once more suppression resources are 

mobilized. Meeting the target of controlling 99 percent of fires with initial attack helps prevent these negative consequences of large fires and contains the cost of large fires. 

Future challenges include reducing unit costs for fuel treatment in the wildland-urban interface (WUI) while 

addressing a number of issues. These issues include smoke management, air quality, using mechanical versus prescribed fire for fuel treatments, prolonged drought in many areas of the western U.S., human-caused 

fires, administrative appeals of proposed fuel-treatment projects and potential litigation that delay the work. 

The success of initial attack to control unplanned and unwanted fires hinges largely on the level of firepreparedness resources available, such weather conditions as drought, the reduction of hazardous fuel levels 

and the severity of the fire season. 

Description of Actions and Schedules. 

The projected accomplishment of 1.4 million acres of hazardous fuel treatment is approximately 200,000 

less than the target of 1.6 million acres. Treating fewer acres leaves some areas of the country more at risk 

from wildland fire than if they had been treated as planned. USDA will consider those areas as a priority 

for treatment next fiscal year. The Department also will continue to treat as much acreage of priority hazardous fuel as practical. This treatment is part of implementation of the President’s Healthy Forest 

Initiative (HFI). Some of the challenges to reducing hazardous fuel levels, such as inefficient NEPA regulations, Endangered Species Act consultation, appeals and litigation, are addressed by HFI. Other 

challenges and barriers USDA will confront include steep and fragile lands precluding mechanical treatment, lack of markets for non-commercial trees, endangered species concerns and barriers to the use of 

prescribed fire to treat fuels. These barriers include private homes interspersed with wildland areas, 

smoke distribution concerns and the precise weather and fuel conditions required for safe burning. Wildfire ignitions and droughts leading to conflagrations largely are beyond the control of USDA. The 

Department will focus on public and firefighter safety, and protection of communities as it responds in 

future years to high fire risk. 

Program Evaluation. 

The Office of Management and Budget’s (OMB) Program Assessment Rating Tool (PART) on Wildland 

Fire Management Program determined that the program has a clear and well-focused purpose and design. 

In order to track and control firefighting efficiency, a systematic cost-containment strategy is needed. The 

Forest Service (FS) needs to develop a real-time obligations system to improve the accountability of firefighting costs and accuracy of wildland-fire obligations. FS also needs to ensure that States are paying 

their fair share of costs. OMB also recommended the completion of a fire-preparedness model to focus on 

efficient allocation of available resources. Additionally, OMB recommended that FS establish project criteria consistent with the 10-year implementation strategy to ensure that all hazardous fuels-reduction 

funds are targeted as effectively as possible. A full copy of the PART can be found at 

www.whitehouse.gov/omb/budget/fy2004/pma/usdawildlandfire.xls. 

Additionally, while OMB’s PART on the Capital Improvement and Maintenance Program determined 

that the program has a clear and important purpose, in order to improve the management of the public’s 

physical assets, financial data-quality improvements are needed. FS needs to improve the collection of 
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timely, reliable and complete financial data of physical assets. Additionally, annual performance measures must be linked to ongoing management initiatives. A full copy of the PART can be found at 

www.whitehouse.gov/omb/budget/fy2004/pma/nationalforest.xls. 

The General Accounting Office (GAO) report Wildland Fire Management: Additional Actions Required 

to Better Identify and Prioritize Lands Needing Fuel Reduction (GAO-03-805) describes the hazardous 

fuel problem on public lands. The report also portrays the range of issues that may impact hazardous fuelreduction treatments as they are accomplished. GAO makes several specific recommendations to ensure 

that Federal lands needing the most fuel reduction are treated. In response, USDA is evaluating methods 

to identify more accurately the amount and location of lands with excess fuel buildup. The Department 

also is facilitating the prioritization of fuel-reduction treatments. Additionally, USDA is working with 

States and other partners to refine WUI and its application in prioritizing fuel-reduction treatments. A 

copy of the report may be found at www.gao.gov. 

Managing Sustainable Rangelands 

USDA is responsible for managing Federally owned rangelands in the NFS to assure watershed sustainability. Land managers base their management decisions on environmental analyses and assessments of 

land conditions pursuant to the NEPA. Implementing environmental-protection measures contained in 

decisions supported by NEPA analyses provide for the maintenance, restoration or rehabilitation of NFS 

rangelands to provide the public benefits of economic enterprise and environmental protection. There are 

approximately 90 million acres of rangeland within FS grazing allotments. 

Ranchers and farmers who live on private lands near NFS lands benefit from a permit program managed 

by USDA. The program allows these landowners to use higher-elevation national forest lands for part of 

their forage needs during the summer. They graze their livestock on their own lands during the fall, winter 

and spring. By providing high-elevation forage during the dry summer months, the program contributes 

economically to ranching and farming operations. The plan maintains open space and provides winter 

habitat for wildlife. 

Analysis of Results. 

The performance goal was exceeded. NEPA analyses have 

identified necessary environmental protection measures 

that address past grazing practices, Endangered Species Act 

concerns, riparian area concerns, State-listed sensitive 

species concerns, and expanding deer and elk populations. These new measures, along with new Forest 

Service (FS) range management guidelines requiring periodic, on-the-ground USDA monitoring of allotment compliance, often have led to a decline in acres available for grazing. Appeals and litigation of 

decisions have increased substantially in recent years. These legal issues have led to a further decline in 

Exhibit 72: Maintain Rangeland Allotments

Fiscal Year 2003 

Annual Performance Goals and Indicators 

Target Actual Result 

5.1.4 Allotment acres administered to 100 percent of standard (Mil of acres) 24.5 381 Exceeded 

1

Result based on projected estimate. See the Data Assessment of Performance Measures section for more information. 

Exhibit 73: Administering Livestock Grazing Allotments 

Fiscal Year Actual 

Trends 

1999 2000 2001 2002 2003 

Allotment acres administered 

to 100 percent of standard 

(Mil of acres) 

N/A 45.0 

Baseline 

44.0 21.0 381

N/A = Not Applicable 

1

Result based on projected estimate. See the Data Assessment of Performance Measures section for more information. 
USDA Performance and Accountability Report for FY 2003 

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91 

the acreage of NFS lands for the same use. The decline from the 2000 baseline reflects a shift in management emphasis from administering allotment acres to standard toward updating management plans 

consistent with new NEPA analyses. By administering more than 42 percent of the approximately 90 million acres of rangeland within USDA grazing allotments to standard each year, the Department manages 

all acres to standard over a four-year period. This reflects the implementation of required directions found 

in decision documents, allotment-management plans and biological opinions. An allotment is considered 

managed to standard when all management direction is implemented for that year. This management approach protects and enhances the Nation’s natural resource base and environment. The public benefits 

through clean water, soil conservation, available habitat for threatened and endangered plant and animal 

species, forage for wildlife, the maintenance of open space, and the production of forage for domestic 

animals grazing on public lands. Limited availability of trained staff challenges FS to accomplish required 

visits to all allotments on the ground and administer them over a three-year period. Shifting USDA rangemanagement staff to allotment management once the backlog of NEPA analysis is completed should increase acres managed to standard in future years. 

Program Evaluation. 

PART assessments were initiated for the Forest Legacy, Land Acquisition and McIntire-Stennis Cooperative Forest Research Programs as part of the FY 2005 budget process. A full copy of these completed 

evaluations will be available February 2004 at www.whitehouse.gov/omb/part. 

Cleanup of Hazardous Wastes 

USDA established the Hazardous Materials Management Program in the 1980s to clean up environmental 

contamination on Department-managed lands. These lands are the headwaters of many of the Nation’s 

most significant watersheds. Among the most important benefits and services that ecosystems and watersheds provide are water for drinking and irrigation, recreation, employment opportunities and havens for 

biodiversity. Contamination that degrades or interrupts those benefits and services harms the economy at 

all levels. When fish cannot survive in a community’s streams because of sedimentation or contamination 

from heavy metals, pesticides or other pollutants, development and revitalization are impacted adversely.

Analysis of Results. 

USDA performed 50 site cleanups under the Comprehensive Environmental Response, Compensation 

and Liability Act (CERCLA) during FY 2003. This is 33 percent of the 5-year goal. The performance 

goal of 26 percent was exceeded. While the number of cleanups completed in FY 2003 exceeds the baseline rate for 1998 through 2002, it is unlikely that this performance level will be maintained once the 

smaller, simpler, less-expensive cleanups are done. 

Exhibit 74: Cleanup USDA-Managed Lands

Fiscal Year 2003 

Annual Performance Goals and Indicators 

Target Actual Result 

5.1.5 Cleanup Comprehensive Environmental Response, Compensation and Liability Act 

(CERCLA) sites on USDA-managed lands and facilities (Cumulative percent of fiveyear goals to complete 150 cleanups) 

26 33 Exceeded 
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CERCLA provides broad Federal authority to respond 

directly to releases or threatened releases of hazardous 

substances that may endanger 

public health or the environment. Analysis reveals that 

more than 40,000 sites are releasing, could release or are 

potential threats to release such 

substances. Upon investigation, many may be determined 

too small a threat to human health or the environment to warrant action. Based on historical percentages, 

USDA estimates that between 5 and 10 percent of the 40,000 sites will require some level of CERCLA 

cleanup. Each completed investigation narrows this range. USDA uses five-year performance goals to 

compensate for these types of uncertainty. 

The Department has cleaned up between 200 and 300 CERCLA sites so far. An exact number is unavailable because the cleanups performed under the various environmental laws were not distinguished until 

the late 1990s. While Resource Conservation and Recovery Act requirements called for USDA to “clean 

up” more than 2,000 underground storage tanks (USTs), the Department’s actions did not reduce its inventory of CERCLA sites requiring cleanup. 

All environmental cleanups are not the same because they yield differing degrees of benefits for the public. USDA agencies substantially completed the UST cleanup program in about 10 years at a small 

fraction of the estimated cost needed to complete the CERCLA cleanup program. Most USTs had not 

leaked and proven technologies were available to address all but a few of those that had. That is not the 

case with CERCLA cleanups, which involve much more toxic, environmentally persistent and technically 

challenging pollutants. 

The public benefits of USDA’s environmental cleanup program include safeguarded or restored: 

• Places of work; 

• Sources of drinking and irrigation water; 

• Areas in which to hunt, fish, camp, boat, swim or hike; 

• Natural resources that strengthen the American economy; and 

• Refuges for biodiversity and subsistence hunting and gathering. 

The 50 environmental cleanups delivered, in varying degrees, these public benefits. These USDA environmental cleanups targeted heavy metals (e.g., arsenic, lead, mercury), persistent pesticides (e.g., 

coumaphos) and wood-treating chemicals (e.g., pentachlorophenol). Many of the newly cleaned sites had 

released pollutants at toxic levels to streams or groundwater for years. 

Program Evaluation. 

No program evaluations were performed during FY 2003. 

Selected Results in Research, Extension and Statistics for Objective 5.1 

Southern Utah, like many areas throughout the U.S., faces increasing threats of wildfire due to residential 

growth in areas prone to wildland fire. USDA researchers and local managers are developing fuel and 

Exhibit 75: Cleanup Program Performance

Fiscal Year Actual 

Trends 

1999 2000 2001 2002 2003 

Cleanup CERCLA sites on 

USDA-managed lands and 

facilities (Cumulative percent 

of 5-year goal to complete 150 

cleanups) 

Baseline: 1998-2002 = 22 

percent of the 5-year goal per 

year 

44 60 91 1101

 33 

1 Five-year goal for 1998-2002 exceeded. 
USDA Performance and Accountability Report for FY 2003 

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93 

vegetation information to model fire behavior and effects across the landscape, and to produce maps to 

display this information. Researchers are assisting land managers in using the data, models and protocols 

to support fuel-treatment decisions. Fuel maps developed from the cooperative project in Utah have been 

used successfully to model wildfire, and these techniques can be expanded to other areas of the country. 

USDA and the Department of Interior’s Bureau of Land Management staff collaborated to develop and 

revise Ecological Site Descriptions (ESDs) for rangelands in portions of the southwestern U.S. ESDs represent the core technology at the base of rangeland management. The new ESDs are consistent with new 

scientific theory and can be used by ranchers and natural resource professionals. They are providing a 

model for ESD revisions for remaining areas of the Nation’s grazing lands. These new descriptions provide more ecologically based tools for management of public and private rangelands. 

Department researchers, in cooperation with state agencies and other partners, established the Fire Consortia for Advanced Modeling of Meteorology and Smoke. This national initiative, a network of regionalmodeling consortia, provides high terrain resolution (4 KM grid spacing) weather and smoke dispersion 

predictions of up to 72 hours into the future. Fire managers used these predictions during the Biscuit and 

Hayman fires that occurred in the summer of 2002 in southwest Oregon and central Colorado respectively 

to protect lives and public health, and to develop a plan for prescribed burning. 

Research by USDA scientists in the Albuquerque Bosque on the Rio Grande River have identified fuelsreduction practices that will preserve cottonwoods and other native plants, reduce wildfire risk via fuels 

removal, control spread of exotic woody shrubs and have positive or neutral impacts on wildlife species. 

A Connecticut urban and community-forestry project, supported with USDA funds, helped 38 communities enact shade-tree ordinances and plant 1,700 trees. Connecticut Cooperative Extension specialists 

trained more than 160 urban-forestry volunteers who worked on community-service projects in their 

hometowns. 

In Arizona, which provides little shade, studies show that proper tree placement can reduce home-cooling 

costs by 20 percent. Working with an electric company, Cooperative Extension distributed more than 

1,469 trees to 509 residents in FY 2002. Master Gardener volunteers showed people how to plant the trees 

for the best results. 

Objective 5.2: Improve Management of Private Lands 

Overview 

USDA uses a “portfolio” approach in helping farmers, ranchers and owners of private, non-industrial forest land conserve natural resources, while producing food, fiber, energy and other agricultural goods and 

services. The portfolio includes: 

• Technical assistance tailored to the needs of individual producers; 

• Financial assistance in the form of cost shares and incentive payments to apply key practices on working land; 

Exhibit 76: Resources Dedicated to Improve Management of Private Lands

FY 2003 

USDA Resources 

Dedicated to Objective 5.2 Actual 

Percent of 

Goal 5 

Program Obligations ($ Mil) $5,635 50% 

Staff Years 14,948 28% 
USDA Performance and Accountability Report for FY 2003 

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94 

• Easements and rental payments to protect sensitive land; and 

• Research, technology development, resources inventory and assessment programs to provide the information and effective tools resource managers need to be good stewards of the Nation’s land and 

water. 

USDA’s assistance on private, non-industrial forest land is provided through State departments of forestry. Assistance on agricultural land is provided in partnership with local conservation districts and State 

conservation agencies. 

Serving the Public 

Farmers, ranchers and private forest landowners manage two-thirds of the Nation’s land. They are the 

primary stewards of U.S. soil, air and water. Society gains from good stewardship. Thus, the Nation has 

established public programs to provide land managers with the science-based information and expertise 

they need to practice good stewardship. Other programs share the costs that land managers incur in seeking to protect and enhance their natural resources. Since the 1930s, USDA, in partnership with local 

conservation districts, has helped land managers protect their soil and water resources, working directly 

with them on their land. In recent years, an increasing part of USDA’s assistance has been devoted to 

helping land managers meet the requirements for environmental quality enacted in local, State or Federal 

laws and regulations. 

USDA’s assistance for private forestland enables landowners to better assess the current and potential 

future value of their forest resources. It also helps them produce the goods and services they desire. Professional resource managers and service foresters prepare forest stewardship plans. They work closely 

with individual landowners to develop management strategies that address unique private objectives. 

Because not all resource issues can be addressed by individuals working separately, USDA’s watershed 

planners and other 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. 

USDA conducts research and develops and transfers technology, including conservation standards, specifications and guidelines for conservation practices. The Department also collects and disseminates data on 

water and soil conditions and related resources. The information and technical tools developed and provided to the public through USDA activities are the fundamental basis for sustaining natural resources. 

USDA information reaches a wide and diverse audience with increasing emphasis on electronic communications technology. 

Challenges for the Future 

The dynamic nature of the Nation’s economy results in a continuous challenge to maintain past gains. For 

example, between 1997 and 2001, land managers converted almost 23 million acres of cropland to other 

uses. They also converted almost 17 million acres of land from other uses to cropland. While almost 6 

million fewer acres of cropland existed in 2001 than in 1997, 17 million acres needed new conservation 

systems after their conversion to cropland. Many of the 23 million acres converted to other uses also 

needed new conservation systems appropriate for those new uses. On millions of acres of other cropland 

that remained in production between 1997 and 2001, farmers changed their cropping system or equipment. This modification required conservation-system changes so that the new production process would 

not cause resource deterioration. 
USDA Performance and Accountability Report for FY 2003 

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95 

Greater population densities exert greater pressures on the environment. Continuing demand for new sites 

for homes and industries, transportation and recreation results in conversion of agricultural land to nonagricultural uses and fragmentation of open space. As the landscape increasingly becomes a mosaic of 

developed areas scattered within agricultural land, the need for conservation increases while the options 

available to producers may be constrained. 

Many environmental and social factors continue to threaten the existence and health of much of the Nation’s remaining non-industrial private forestland. Landowners who do not know how to manage or assess 

the value of their forested properties often convert them to non-forest uses or sell them to developers. 

Fragmented and parceled forest areas are less functional in terms of the services they can provide. This 

aspect makes them less valuable and even more threatened by conversion or subject to a lack of management. USDA continues to identify effective ways to provide landowners with the technical assistance they 

need to manage and enhance the productivity of their forested properties. USDA also continues to consider the full range of forest uses and values so that all landowner objectives are provided for and 

encouraged. 

Maintain Resource Health and Productive Capacity 

Privately owned cropland, rangeland, pastureland and forestland make up a substantial and vibrant agricultural economy that provides food and fiber for the Nation. Conservation helps ensure that these 

important agricultural lands sustain productivity and support healthy plant, animal and human communities. Farmers, ranchers and forestland owners are responsible for protecting the resource base against 

changes that would reduce their properties’ capacity for sustained use. USDA assists landowners and land 

managers in adopting environmentally sound management practices. Land managers who receive Department assistance are more likely to plan, apply and maintain conservation systems that support 

agricultural production and environmental quality as compatible goals. 

USDA provides information and technical and financial assistance to land managers to maintain the productive capacity of land and water for agricultural uses. USDA’s Conservation Operations provides the 

basic resource-inventory data, technical tools and comprehensive planning approach producers need. 

Technical and financial assistance to apply conservation practices are provided through the Environmental Quality Incentives Program (EQIP) and other programs authorized by FSRIA. The Grasslands 

Reserve Program and Wetlands Reserve Program (WRP) provide long-term protection of environmentally sensitive land through long-term or permanent easements. The Conservation Reserve Program 

(CRP) provides rental payments through 10-15-year contracts. FSRIA also authorized USDA to provide 

cost-share, technical and education assistance through the Forest Land Enhancement Program (FLEP) to 

implement stewardship plans. These plans are designed to maintain the productive health of the land. 

They also provide public goods and services, and local economic diversification. 
USDA Performance and Accountability Report for FY 2003 

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96 

Analysis of Results. 

The performance goal was met. 

As a result of the actions taken 

with USDA assistance, producers maintained the 

productive capacity of more 

than 61 million acres of agricultural land (27 million acres 

of working land and 34.1 million acres in CRP) or 6 percent 

of the Nation’s total cropland 

and grazing land. The conservation practices applied on 

working land this year will 

continue to provide protection 

for many more years. During 

the next few years, the amount 

of land on which conservation 

is applied each year will increase substantially as a result 

of the increased assistance authorized by the Farm Security 

and Rural Investment Act of 

2002 (FSRIA). The major challenge for continued progress in 

maintaining the productive capacity of natural resources is to 

assist producers in planning for 

sustainable resource management. This planning would 

Exhibit 77: Maintain Productive Health of Land

Fiscal Year 2003 

Annual Performance Goals and Indicators 

Target Actual Result 

5.2.1 Protect the productive capacity of agricultural and forestland: Met 

• Protect against degradation (Mil acres) 

- Working1 cropland and grazing land with new conservation practices 16 27 

- Highly erodible and other environmentally sensitive cropland and grazing land 

under long-term land retirement contracts (Cumulative) 

34.4 34.12 

• Total erosion prevented (Mil tons)3 474.5 4792

 

• Carbon sequestered in soil and vegetation through long-term retirement of crop 

and grazing land (Mil metric tons per year)4

16.8 172

 

• Non-industrial private forestlands under approved stewardship management plans 

(Mil acres) 

1.6 1.62

 

1

Does not include land retired from production under CRP contracts. 2

Result based on projected estimate. See the Data Assessment of Performance Measures section for more information. 3

Includes working cropland and CRP land. 

4

The performance measure for carbon sequestration was included in the USDA FY 2004 Annual Performance Plan under Objective 5.2.2. While carbon sequestration benefits both soil productivity and the atmosphere, the performance measure has been 

moved to this objective because the primary emphasis is on the benefits to soil productivity. 

Exhibit 78: Trends in Land Management

Fiscal Year Actual 

Trends 

1999 2000 2001 2002 2003 

Working cropland and grazing land with new 

conservation practices (Mil. 

acres) 

N/A 20.7 

Baseline 

21.8 25.6 27 

Highly erodible and other 

environmentally sensitive 

cropland and grazing land 

under long-term land retirement contracts (Cumulative, 

Mil. Acres) 

29.8 31.5 

Baseline 

33.6 33.9 34.11

Total erosion prevented on 

working cropland and CRP 

land (Mil. tons)2

Baseline: Total cropland 

erosion in 1982 = 3.07 billion 

tons 

368 470 507 475 4791

Carbon sequestered in soil 

and vegetation through longterm retirement of crop and 

grazing land (Mil. Metric tons 

per year) 

14.6 15.5 

Baseline 

16.1 16.3 171

Non-industrial private forestlands under approved 

stewardship management 

plans (Mil. acres) 

1.9 

Baseline 

1.4 1.6 1.6 1.61

N/A = Not Available 

1

Result based on projected estimate. See the Data Assessment of Performance Measures section for more information.

2

FY 1999 includes only CRP lands. Other years include working cropland and CRP 

lands. 
USDA Performance and Accountability Report for FY 2003 

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97 

require land managers to take a comprehensive approach that covers their entire operation and considers 

the operating unit as part of a larger landscape. USDA’s efforts to support this comprehensive approach 

rely on the assistance provided through its Conservation Technical Assistance, Water Resources and research programs. 

The reported performance on working cropland and grazing land exceeded the target level for several reasons: 

• The budget as enacted provided a higher funding level than that on which the target was based; and 

• Program delivery was streamlined, making more time available for planning and application. 

The data for conservation practices applied to working land include 16 million acres of cropland and grazing land. On this land, producers applied all conservation measures needed to protect the resource base 

during 2003. Conservationists call this the “resource management system” level of conservation. Assuming that applied management is maintained properly, the land’s productive capacity will be sustained 

under long-term use. On an additional 11 million acres, practices were applied to resolve specific resource 

issues, while others issues were left for a later date. FSRIA modified EQIP, the Department’s largest financial-assistance program for working land, to emphasize this incremental approach. 

The 34.1 million acres of environmentally sensitive land enrolled in CRP includes 24.6 million acres of 

highly erodible cropland. Due to wind and water (sheet and rill), this cropland eroded an average 15 tons 

per acre per year before CRP enrollment. This rate is almost three times the current average croplanderosion rate. Erosion is reduced to less than one ton per acre on lands enrolled in CRP. An additional indicator of soil-health benefits, carbon sequestered in vegetation and soils enrolled in CRP, is estimated to 

be increased a total of 17 million metric tons. The majority of the increased carbon is sequestered in the 

soils. 

Research has shown that agricultural cultivation of more than 20 years significantly reduces soil carbon 

levels between 20 to 60 percent on lands previously maintaining forest ecosystems or native grasses. Reforestation, or the planting of grass on CRP land in retirement, increases the terrestrial carbon sink. It also 

helps mitigate climate change. 

In the early 1980s, USDA redirected activities to address the erosion problems that had increased in severity for a number of years. The baseline condition, as identified in the 1982 National Resources 

Inventory, showed a total annual cropland erosion of 3.07 billion tons. By 1995, erosion on all cropland, 

including CRP land, had been reduced by 38 percent to about 1.9 billion tons per year. The Department 

assisted farmers and ranchers in reducing the erosion through three major strategies. USDA assisted in 

removing highly erodible land from production through CRP. The Department provided technical assistance for application of acceptable management systems to operators of highly erodible cropland who 

received benefits from USDA income support and supply-control programs. USDA offered conservation 

technical assistance to producers who were controlling erosion on their land voluntarily without Department financial assistance. Since 1995, there has been little change in the tons of cropland soil eroded 

annually. While the assistance that USDA provided each year since 1995 was adequate to maintain progress between 1985 and 1995, it did not expand significantly the progress the Department had made to 

that date. 

In support of stewardship management plans for non-industrial private forest lands, USDA field units 

have developed grants for State Foresters to provide technical and financial assistance to private landowners. This assistance will allow the landowners to develop forest stewardship plans. These plans will 

help them maintain resource health and productivity while providing public goods and services, and contributing to the local economy. The plans developed in 2003 add approximately 15 percent fewer acres to 
USDA Performance and Accountability Report for FY 2003 

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98 

the total acreage managed under forest stewardship plans than were added in the baseline year. These new 

acres add to each State’s total acreage. 

Future challenges include the large number of non-industrial private forest landowners without forest 

management training, and widely varying management objectives. FLEP will make additional funds 

available for State Foresters. The foresters will be able to use the funds to increase the level of technical, 

financial and educational assistance to non-industrial private forest landowners. 

Program Evaluation. 

GAO completed a review of USDA activities for the protection of highly erodible cropland and wetlands 

(GAO-03-418, April 2003). The report recommended strengthening oversight of these activities. While 

the Statement of Action still is being prepared, activities already are underway to address the audit’s five 

recommendations. A new automated system for distributing and tracking compliance reviews has been 

implemented. It will serve as the prototype design for a Web-based system in 2004. A copy of this review 

may be obtained at www.gao.gov. 

The Economic Research Service is conducting a congressionally mandated study of CRP’s economic effects. Meantime, USDA conducted and published an environmental impact statement on CRP’s 

environmental benefits. The environmental-impact statement identifying CRP’s impacts may be obtained 

at www.fsa.usda.gov/dafp/cepd/epb/nepa.htm. The Department also conducted a cost/benefit analysis of 

CRP during the rulemaking process. The analysis concluded that CRP benefits included reduced commodity payments, increased farm income and enhanced soil productivity. A copy of the analysis may be 

obtained by calling the Farm Service Agency, Conservation and Environmental Programs Division, at 

(202) 720-6221. 

An economic analysis of FSRIA’s potential impact estimated that its technical-service provider process 

will benefit the Nation’s natural resources. According to the analysis, the process will: 

• Accelerate the adoption of conservation practices; 

• Increase environmental and resource benefits; 

• Maintain and enhance long-term productivity of the resource base; 

• Reduce non-point source pollution damage and farming costs; and 

• Contribute to an increase in net farm income. 

A copy of the analysis may be obtained by calling the Natural Resources Conservation Service (NRCS), 

Resource Economics and Social Sciences Division, at (202) 720-5009. 

The results of the Office of Management and Budget’s (OMB) FY 2004 Program Assessment Rating 

Tool (PART) showed that the Farm and Ranch Lands Protection Program is administered effectively. The 

program prioritizes applications at the State level and selects the best projects for protecting important 

agricultural lands from development. The PART also stated that the program has no appropriate longterm performance measures. In response, NRCS conducted an internal review of the program in 2003. A 

copy of the PART assessment may be found at www.whitehouse.gov/omb/budget/fy2004/pma/farmland.pdf.

PART assessments were initiated on the Soil Survey, Conservation Technical Assistance, National Resources Inventory and Plant Materials Programs as part of the FY 2005 budget process. A full copy of 

these completed evaluations will be available February 2004 at www.whitehouse.gov/omb/part. 

Additionally, eight states (AZ, MA, MD, MI, NE, NM, TN, and UT) conducted Forest Stewardship Program reviews. The results of the reviews may be obtained by calling the Cooperative Forestry Division at 

(202) 205-1602. 
USDA Performance and Accountability Report for FY 2003 

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99 

Clean and Abundant Water Supplies 

The ability of water resources to meet the Nation’s needs is an increasing concern in many areas. Concerns focus on the water supply’s quality and quantity. Agriculture is one potential source of pollutants in 

the Nation’s waters. Runoff from agricultural operations can carry sediment, bacteria, nutrients, salinity 

and pesticides into the Nation's streams, lakes and estuaries. Pollutants also can seep through the soil to 

groundwater. While the most extensive threat to water quality from agricultural activities is sediment, the 

greatest current public concern is the possibility of excess nutrients and pathogens entering water from 

poorly managed animal agriculture facilities. This concern particularly is relevant in areas of concentrated 

livestock production. Water demand is growing nationwide. The needs for competing uses must be considered to find the best balance. Agriculture is the major water consumer. It accounts for nearly 80 

percent of all water consumption nationwide. The major agricultural use of water is irrigation. 

Comprehensive, locally-led watershed planning and management can ensure that the Nation’s watersheds 

provide adequate supplies of clean, well-managed water. USDA has a major role in assisting individuals, 

Tribes and communities with comprehensive water resources planning and management. USDA’s water 

resources programs provide technical and financial assistance to help local and State entities plan and implement projects to protect water quality, improve its supply and enhance wildlife habitat. The 

Department’s Conservation Operations provides the basic resource inventory data, including soil moisture 

and water supply forecasts, on soil properties and water. It also offers technical tools and a comprehensive 

planning approach for producers. Technical and financial assistance to apply conservation practices is 

provided through FSRIA-authorized programs. CRP, the Grasslands Reserve Program and WRP provide 

long-term protection of environmentally sensitive land. USDA’s activities to improve management of 

water supplies and protect water quality are executed in cooperation with such entities as Tribal governments, State conservation agencies, State Foresters, resource conservation and development councils, 

conservation districts, irrigation districts, the U.S. Department of Interior’s Bureau of Reclamation and 

the Environmental Protection Agency (EPA). 

Exhibit 79: Ensure Clean and Abundant Water Supplies

Fiscal Year 2003 

Annual Performance Goals and Indicators 

Target Actual Result 

5.2.2 Manage watersheds to provide clean and abundant water supplies: Met 

• Animal feeding operations with comprehensive nutrient management plans 

(Number) 

- Developed 4,556 4,860 

- Applied 3,0131 3,237 

• Working land with new conservation measures applied to reduce potential for 

off-site pollution by nutrients (Mil. acres) 

4.1 4.7 

• Sheet and rill erosion prevented (Mil tons)2 216 2143

 

• Reduced nitrogen applications on land under long-term land retirement contract 

(Thousand tons) 

691 6553

 

• Reduced phosphorus applications on land under long-term land retirement contract (Thousand tons) 

106 1033

 

• Land in buffers under long-term land retirement contract (Mil. acres) 2.4 2.43

 

• Land benefiting from application of improvements to irrigation management (Mil 

acres) 

1.5 1.8 

• Increase national implementation rate: 

- Forestry best management practices (Percentage) 89% 89%3 

- States conducting effectiveness monitoring 26 263 

1

The target was stated incorrectly in the published plan. 

2

Includes only CRP. 

3

Result based on projected estimate. See the Data Assessment of Performance Measures section for more information. 
USDA Performance and Accountability Report for FY 2003 

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100 

Analysis of Results. 

The performance goal was met. 

Indicators for this performance 

goal identify actions that producers are taking with USDA 

assistance to minimize the risk 

that pathogens, sediment, 

phosphorus and nitrogen will 

move from agricultural operations into the environment. 

Applying erosion-control practices, including conservation 

buffers on working lands, improving nutrient management 

and retiring critical areas from 

crop production, reduce the 

potential for off-site movement. Implementation of 

comprehensive nutrient management plans for animalfeeding operations ensures that 

collection, storage and disposal 

of animal wastes are managed 

in ways that minimize the potential for environmental 

damage. 

Although FSRIA provided for 

increased funding for conservation, slight decreases 

occurred in the number of 

comprehensive nutrientmanagement plans assisted in 

2003 as compared to 2002. The 

acreage amount of working 

land where nutrient management was applied also showed 

a slight drop in the same period. This is because many 

conservation measures, such as 

comprehensive nutrient management plans, cannot be completed in a single year. Performance on these 

indicators will increase sharply in future years as producers who contracted for assistance this year complete their application of conservation practices. 

Sedimentation in surface water bodies is the greatest single impairment to water quality associated with 

agricultural activities. Reduction of water-driven (sheet and rill) erosion and installation of conservation 

buffers through long-term land retirement contracts protect surface and ground water from sedimentation 

and nutrient (nitrogen and phosphorus) runoff. While estimates of sediment and nutrient load reductions 

attributable to CRP currently are unavailable, water-quality benefits are demonstrated by the 214 million 

tons of sheet and rill erosion and fertilizer-application reductions on CRP land. Buffers intercept sediment 

Exhibit 80: Trends in Water Resources Protection 

Fiscal Year Actual 

Trends 

1999 2000 2001 2002 2003 

Animal feeding operations 

with comprehensive nutrient 

management plans (Number)1 

 

- Developed N/A 6,314 6,206 5,214 

Baseline 

4,860 

- Applied N/A 4,405 4,315 3,352 

Baseline 

3,237 

Working land with new conservation measures applied 

to reduce potential for offsite pollution by nutrients 

(Mil. acres) 

2.7 4.3 

Baseline 

5.4 5.5 4.7 

Sheet and rill erosion prevented (Mil. tons)2

175 201 

Baseline 

214 215 2143

Reduced nitrogen applications on land under longterm land retirement contract (Thousand tons) 

553 605 

Baseline 

634 681 6553

Reduced phosphorus applications on land under longterm land retirement contract (Thousand tons) 

80 87 

Baseline 

99 104 1033

Land in buffers under longterm land retirement contract (Mil. acres) 1.2 1.3 

Baseline 

1.7 2.1 2.43

Land benefiting from application of improvements to 

irrigation management (Mil. 

acres) 

N/A 1.25 

Baseline 

1.25 1.9 1.8 

Forestry best management 

practices (Percentage)4

87% 

Baseline 

89%3

States conducting effectiveness monitoring4

Not 

Tracked 

17 

Baseline 

Not 

Tracked 

Not 

Tracked 

263

1 Technical guidance for comprehensive nutrient management plans (CNMPs) was first 

implemented in FY 2002. The data for FY 2000 and 2001 are for waste management 

systems, which may be less complex and comprehensive than CNMPs. 

N/A = Not Available 

2

Includes only CRP data. 

3

Result based on projected estimate. See the Data Assessment of Performance Measures section for more information.

4

FY2000 data are from the biannual NASF Nonpoint Source Pollution Monitoring Report. 
USDA Performance and Accountability Report for FY 2003 

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101 

and nutrients before they reach water bodies. Long-term CRP contracts cover 2.4 million acres of buffers. 

These buffer practices primarily impact water quality: almost 1.4 million acres of grass filterstrips and 

riparian (trees) buffers, 160,000 acres in wellhead protection areas, 90,000 acres of grass waterways and 

280,000 acres in permanent vegetation to reduce salinity. 

Irrigated agriculture makes a significant contribution to the U.S. farm economy—nearly 40 percent of 

total crop sales come from irrigated acreage, which accounts for only about 15 percent of all cropland. 

Inadequate management of irrigation water can increase irrigation costs and degrade soil and water resources. Improvements in irrigation water management can help maintain the viability of the irrigated 

agricultural sector, and protect and improve soil and water quality. USDA continues to provide assistance 

through the Conservation Technical Assistance Program. Additionally, increased technical and financial 

assistance was provided through EQIP, the Ground and Surface Water Conservation Program and the 

Klamath-Basin Program. USDA’s assistance resulted in saving an estimated 4.5 million acre-inches of 

water. An acre-inch is the amount of water needed to cover an acre of land with a layer of water one-inch 

deep. For future years, USDA will set performance goals in terms of water conserved rather than acres 

with improved management. Water conservation is only one of the benefits of improved irrigation-water 

management. Others include reductions in irrigation-induced erosion, salinity delivered to ground and 

surface water, and drought vulnerability. 

The National Association of State Foresters (NASF) facilitates data monitoring and compilation in compliance with Forestry Best Management Practices (BMPs) performed by State Foresters. BMPs are 

developed autonomously by each State under authority delegated to them by EPA, usually under the lead 

of the State Forester. These State BMPs vary considerably in terms of objectives and means from State to 

State. To date, the State BMP program has been successful in improving forest products harvest and 

transportation activities. It also has maintained water quality and quantity and avoided adoption of total 

maximum daily load standards and discharge-permit requirements for forest management. 

Taxpayer benefits from increased BMP implementation include: 

• Maintenance of water quality for municipal water supplies without the expense of costly filtering systems; 

• Protection and improvement of aquatic habitats for fish and other species; and 

• Avoidance of new discharge-permit requirements for forest management that would lower the availability and raise the cost of forest products. 

Future challenges include the relatively short duration of ownership, the continued decrease in the parcel 

size of non-industrial private forest land and the lack of forest management knowledge of new forest 

owners. 

A major challenge is to develop a practical and reliable methodology to document the effects of conservation practices on water quality. USDA is conducting studies to develop this methodology. The National 

Resources Inventory-Conservation Effects Assessment Project (NRI-CEAP) is an interagency effort that 

will provide data and analytical models to produce scientifically defensible estimates of conservationprogram benefits. In 2005, NRI-CEAP will provide initial estimates on conservation systems’ effects on 

cropland condition and the movement of sediment and nutrients from farm fields.

Program Evaluation. 

A cost-benefit assessment of CRP demonstrated that the benefits associated with CRP lands include reduced erosion and nutrient runoff, increased producer income and reduced commodity-program 

payments. A copy of this assessment may be obtained by calling the Farm Service Agency, Conservation 

and Environmental Programs Division, at (202) 720-6221. 
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USDA conducted and published an environmental-impact statement for CRP, evaluating the program’s 

impact on water quality. The statement is available at www.fsa.usda.gov/DAFP/CEPD/EPB/nepa.htm. 

The Department is participating in a cooperative agreement between the Office of Risk Assessment and 

Cost-Benefit Analysis and the Food & Agricultural Policy Research Institute at the University of Missouri. The agreement is designed to estimate CRP enrollment impacts on edge-of-field nutrient and 

sediment runoff and nutrient seepage beyond the root zone, and changes in soil carbon levels. 

A cost-benefit analysis (CBA) of EQIP found that the program benefits the adoption of conservation practices. Additionally, when installed or applied according to technical standards, EQIP will achieve 

economic and environmental gains. Other benefits are long-term productivity maintenance of the resource 

base, reductions in non-point source pollution damage and wildlife enhancements. A copy of the analysis 

may be obtained at www.nrcs.usda.gov/programs/eqip. 

USDA contracted with NASF to compile results from State-level monitoring of Forestry BMPs. NASF’s 

Water Resources Committee will oversee the evaluation. The committee consists of seven State Foresters 

(American Samoa, HI, KY, MD, NE, OH and VA) who promote forest-management practices. These 

practices are designed to protect water quality and prevent water-quality problems. Results of the evaluation will be available from NASF in FY 2004 at www.stateforesters.org.

A PART assessment was initiated on the Snow Survey and Water Supply Forecasting Program as part of 

the FY 2005 budget process. A full copy of the completed evaluation will be available February 2004 at 

www.whitehouse.gov/omb/part. 

Wildlife Habitat 

The rural landscape provides critical habitat, food and safety for much of the Nation’s wildlife. Many of 

the conservation practices that farmers and ranchers apply to cropland and grazing land improve the habitat those lands provide for wildlife. Additional actions are needed to protect specific ecosystems and 

landscapes—including wetlands, grasslands, floodplains and certain types of forests. These ecosystems 

can help support wildlife and aquatic species. They also can provide benefits in the form of recreation, 

hunting and other forms of agro-tourism. 

USDA assists in improving fish and wildlife habitat through the programs that help producers manage 

working lands. The Department helps producers evaluate the effects of production practices while developing comprehensive plans through the Conservation Technical Assistance Program. USDA provides 

financial assistance for restoring and improving important wildlife habitat, including wetlands, native 

grasslands and species at risk through WRP, CRP, the Wildlife Habitat Incentives Program and EQIP. 

USDA’s activities for protecting wetlands and fish and wildlife habitat are cooperative actions conducted 

in partnership with Tribal governments, State agencies, private sector organizations and interest groups, 

and Federal land-management agencies. 
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Analysis of Results. 

The performance goal was met. 

The land protected in USDA’s 

reserve programs and the 

working land where practices 

were applied will provide a 

better habitat. This better habitat will enable the landscape to 

support healthy and diverse 

wildlife populations. The Department will continue to 

increase its assistance for protection of wetlands and wildlife 

habitat. 

Since the early 1980s, USDA 

has given increasing attention 

to protecting wetlands. Wetlands are among the most 

biologically diverse areas on 

earth. They provide habitat for 

a rich mixture of plants and 

animals--including many rare, 

threatened and endangered species. Wetlands protect shorelines, filter impurities from water, help control 

floodwaters, regulate waterflow and help reduce soil erosion. Between 1992 and 1997, 101,000 acres of 

wetlands were converted to other uses. During that same period, almost 69,000 acres were gained annually for an overall average of 32,600 acres per year. Agriculture accounted for 26 percent of the losses and 

52 percent of the gains. Compared to earlier periods, this represents a dramatic slowing of the rate of wetland loss. Much of the reduction in loss of agricultural wetlands results from USDA’s programs and 

activities to restore wetlands and discourage their conversion to agricultural uses. The indicators in this 

plan reflect the key strategy of restoring wetlands under permanent and long-term easements in the WRP 

and long-term contracts in the CRP. Because the reserves have proven to be popular and effective, FSRIA 

expanded these efforts. 

Exhibit 81: Improve Wildlife Habitats

Fiscal Year 2003 

Annual Performance Goals and Indicators 

Target Actual Result 

5.2.3 Ensure diverse wildlife habitats: Met 

• Increase protection of wetlands by enrolling in the Wetlands Reserve Program 

wetlands identified as high priority by States (Mil. acres, Cumulative) 

1.5 1.5 

• Wetlands and associated upland under multi-year CRP contracts (Mil. acres) 1.9 1.91

 

• Apply new management practices to improve wildlife habitat on working cropland, 

grazing land, forest and other land (Mil. acres) 

7 10.1 

• Land retired from cropping and grazing and restored to ecosystems with high 

benefits for wildlife, including threatened and endangered species (Mil. acres, 

Cumulative) 

3.5 3.51

 

1

Result based on projected estimate. See the Data Assessment of Performance Measures section for more information. 

Exhibit 82: Trends in Enhancement of Wetlands and Wildlife Habitat 

Fiscal Year Actual 

Trends 

1999 2000 2001 2002 2003 

Increase protection of wetlands by enrolling in the 

Wetlands Reserve Program 

wetlands identified as high 

priority by States (Mil. acres, 

Cumulative) 

0.785 

Baseline 

0.934 1.074 1.27 1.5 

Wetlands and associated 

upland under multi-year CRP 

contracts (Mil. acres) 

1.3 1.5 

Baseline 

1.7 1.7 1.91

Apply new management practices to improve wildlife habitat 

on working cropland, grazing 

land, forest and other land 

(Mil. acres) 

N/A 7.5 

Baseline 

8.1 10 10.1 

Land retired from cropping 

and grazing and restored to 

ecosystems with high benefits 

for wildlife, including threatened and endangered species 

(Mil. acres, Cumulative) 

1.6 2.5 

Baseline 

3.0 3.3 3.51

1

Result based on projected estimate. See the Data Assessment of Performance Measures section for more information. 

N/A = Not Applicable 
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USDA is helping producers and other land managers enhance wildlife habitat for a wide range of species. 

Because the target species varies by site, national-level baselines and targets have been set only in terms 

of acres of habitat affected. On a majority of the acreage of working cropland, wildlife habitat is a secondary use. USDA also provides technical and financial assistance to landowners and others to develop 

upland, wetland, riparian and aquatic habitat areas on their property through the Wildlife Habitat Incentives Program (WHIP). WHIP offers 1-year, 5-10-year and 15-year agreements. The 15-year agreements 

authorized under FSRIA fund up to 100 percent of the costs for implementing practices designed to restore and protect essential plant and animal habitat. This enables landowners to implement beneficial 

wildlife habitat practices that do not offer economic return, such as declining species like bog turtles and 

bats. 

The 3.5 million acres of sensitive wildlife ecosystems restored under long-term land retirement contracts 

(CRP) include 1.9 million acres of wetland and upland buffers, 390,000 acres of rare and declining habitat, 220,000 acres of longleaf pine habitat, and 50,000 acres of shallow water areas for wildlife. 

Additionally, about 18 million acres of land enrolled in CRP since 1996 have been established with covers determined locally to be “best suited to wildlife.” Under CRP, wildlife habitat is created through 

consolidation of large blocks of land with undisturbed vegetation. This consolidation forms vital space 

where wild populations can breed and expand. While not all of the 39 million acres enrolled in CRP are 

planted and managed specifically for wildlife, most of it provides valuable habitat. 

Future challenges are to bring interested parties together to develop landscape scale plans to achieve effective habitat enhancement. Pursuing environmental quality across a diverse landscape mosaic will better 

safeguard wildlife populations and healthy ecosystems. The alternative is limiting conservation to small, 

specialized and isolated tracts. 

Program Evaluation. 

A CBA demonstrated that the environmental benefits associated with CRP lands include wildlife recreation opportunities, increased producer income and reduced commodity program payments. A copy of the 

CBA may be obtained by calling the Farm Service Agency, Conservation and Environmental Programs 

Division, at (202) 720-6221. 

U.S. Geological Survey wildlife biologists surveyed CRP participants in 2001 and 2002 on attitudes about 

the program’s administration. The survey focused on the program's emphasis on wildlife. Of those surveyed, 73 percent called the amount of attention given to wildlife habitat in CRP enrollment requirements 

appropriate. Additionally, 20.9 percent said that grazing would be the most suitable management practice 

for their CRP lands, while 24.7 percent preferred burning. A copy of the report A National Survey of Conservation Reserve Program (CRP) Participants on Environmental Effects, Wildlife Issues, and Vegetation 

Management on Program Lands may be obtained by calling the Farm Service Agency, Conservation and 

Environmental Programs Division, at (202) 720-6221. 

OMB’s PART showed that WHIP is managed effectively, prioritizes funding for rare, threatened and endangered fish and wildlife, and leverages significant resources from partners. PART also stated that 

WHIP did not have appropriate, long-term performance measures. NRCS is developing better measures 

for the program. An internal review scheduled for 2003 has been postponed until 2004. A copy of the 

PART assessment may be found at www.whitehouse.gov/omb/budget/fy2004/pma/habitatincentives.pdf. 

Selected Results in Research, Extension and Statistics for Objective 5.2 

USDA researchers examined the net effects of species diversity within the plant community on long-term 

carbon sequestration in soils. Pastures planted in the Northeastern States with 3- and 11-species mixtures 
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had greater photosynthetic rates and greater total root biomass than those planted with a 2-species mixture. Additionally, the pastures had a greater proportion of root biomass concentrated in the lower soil 

profile. Increasing plant-species diversity in pastures could help mitigate the adverse effects of greenhouse gas emissions that may contribute to global climate change by increasing the potential for soil 

carbon sequestration. 

USDA measured nitrate-nitrogen in surface waters and in shallow wells at two different depths to determine the extent of seasonal movement of nitrogen from poorly drained grass seed fields. The results 

showed low concentrations of nitrate-N in water originating from these fields. The use of direct seeding, 

rather than conventional tillage, further lowered nitrate-N losses without reducing crop yield. These data 

showed that perennial grasslands in western Oregon function much like buffer strips and are highly effective in preventing nutrient movement into ground and surface waters. 

Recent USDA research assesses the effects that restrictions on the land application of animal manure 

would have on the costs to animal-feeding operations. While results suggest that livestock and poultry 

farms’ net income could decline by more than $1 billion (around 3 percent), the outcome depends heavily 

on the extent to which cropland operators are willing to use manure. It also depends on the degree to 

which livestock price increases offset cost increases. USDA research suggests that, while net returns in 

the crop sector could increase by more than $400 million as manure nutrients replace commercial fertilizer, consumers could face slightly higher prices for animal products. 

Tennessee Cooperative Extension programs encourage farmers Statewide to increase their no-till and conservation tillage practices. Organizers estimate that these tillage changes have reduced soil-erosion 

potential by 20 million tons. Using techniques learned from Georgia Cooperative Extension, farmers in 

one county switched to conservation tillage on 9,000 acres in 2002. They produced yields comparable to 

conventional tillage at less cost, saving $30 per acre. 

Leafy spurge, an invasive noxious weed, is spreading throughout the West. It costs Oregon ranchers at 

least $13 million a year in lost income and ineffective herbicide treatments. Oregon State University scientists, supported in part by USDA, use angora goats to reduce the need of herbicide use. One-hundred 

goats on a 150-acre ranch reduced herbicide costs by $10,000 per year. Translated Statewide, this could 

cut herbicide costs by $1 million. North Dakota State University scientists also found that sheep suppressed the growth of leafy spurge by more than 90 percent. 

Texas A&M University and New Mexico State University researchers, supported by USDA, found that 

lining irrigation canals can prevent water seepage of up to seven cubic feet per second per mile. Utah 

State University researchers helped 70 large water users with water audits and irrigation scheduling. This 

assistance reduced water use up to 28 percent last year. The 67 million gallons saved annually translates 

economically to $207,146. 

USDA-supported researchers in several States are working to develop methods to reduce harmful manure 

odor from hog farms. Purdue University researchers reduced the odor by changing the pigs’ diet. By reducing the crude protein and adding synthetic amino acids, they cut nitrogen levels in manure by up to 30 

percent. They also reduced ammonia concentrations in the air in half and dropped detectable odors and 

“rotten egg” gas emissions by 40 percent. South Dakota State University researchers developed a biofilter 

that hog farmers can build themselves for as little as $1,500. The biofilter also can reduce odor in a confinement facility by as much as 97 percent. Michigan State University scientists are adding ozone to 

stored swine manure to remove odor and render it safe as fertilizer. 
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FY 2003 PROGRAM OBLIGATIONS AND STAFF YEARS Fiscal Year 2003 Program Obligations Incurred The following table depicts the component agencies and staff offices of the Department of Agriculture with total program laccount allocated to each objective. The program level dollars are displayed in millions and have been rounded to the nearefunding was allocated to more than one objective when the amount for each objective was significant and could be identifie

vides a general indication of the funding dedicated to each objective. Staff office and departmental management accounts gUSDA objectives and, in most cases, have been reallocated equally among all strategic objectives. 

USDA FY 2003 Program Obligations 

(Dollars in Millions) 

Objectives 

Agency Account 

Program 

Obligations 1.1 1.2 1.3 1.4 2.1 2.2 3.1 3.2 4.1 

OSEC Office of the Secretary 54.0 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.OCFO OCFO 15.0 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1. Working Capital Fund 356.0 27.4 27.4 27.4 27.4 27.4 27.4 27.4 27.4 27.OCIO OCIO 38.0 2.9 2.9 2.9 2.9 2.9 2.9 2.9 2.9 2. Common Computing Environment 144.0 18.0 18.0 18.0 18.0 18.0 18.0 0.0 0.0 0.DA Agriculture Buildings and Facilities Rental Payments 198.0 15.2 15.2 15.2 15.2 15.2 15.2 15.2 15.2 15. Departmental Administration 57.0 4.4 4.4 4.4 4.4 4.4 4.4 4.4 4.4 4. Hazardous Materials Management 12.0 - - - - - - - - - OC OC 9.0 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.OIG OIG 77.0 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5. IG Assets Forfeiture Funds+B18 1.0 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.OGC OGC 36.0 2.8 2.8 2.8 2.8 2.8 2.8 2.8 2.8 2.OCE OCE 11.0 0.7 0.7 2.8 0.7 0.7 0.7 0.7 0.7 0.NAD NAD 14.0 1.1 1.1 1.1 1.1 1.1 1.1 1.1 1.1 1.OBPA OBPA 7.0 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.ERS Economic Research 70.6 9.9 3.5 3.5 12.7 2.8 4.2 3.5 4.9 4.NASS NASS 155.4 77.3 0.0 - 7.5 45.7 - 13.8 - ARS ARS Salaries and Expenses 1,107.4 - - 104.1 - - - 104.1 626.8 33. Buildings and Facilities 81.2 - - 7.6 - - - 7.6 46.0 2. ARS-No Year Funds 11.8 - - 1.1 - - - 1.1 6.7 0.
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USDA FY 2003 Program Obligations 

(Dollars in Millions) 

Objectives 

Agency Account 

Program 

Obligations 1.1 1.2 1.3 1.4 2.1 2.2 3.1 3.2 4.1 

ARS (Cont.) Miscellaneous Contributed Funds 21.5 - - 2.0 - - - 2.0 12.2 0. Collaborative Research with the Newly Independent 

States (AID) FY 03-04 

5.0 - - 0.5 - - - 0.5 2.8 0.

CSREES Extension Activities 484.8 33.9 19.4 43.6 24.2 24.2 24.2 24.2 58.2 38. Research and Education Activities 582.2 52.4 52.4 75.7 17.5 17.5 17.5 40.8 81.5 29. Integrated Activities 45.9 0.0 0.0 0.6 0.6 0.6 0.6 3.7 22.0 6. Native Americans Institutions Endowment Fund 1.7 0.1 0.1 0.2 0.1 0.1 0.1 0.1 0.2 0. Community Food Projects 5.0 - - - - - - - -  Outreach for Socially Disadvantaged Farmers and 

Ranchers 

6.8 - - - 6.8 - - - - 

APHIS Salaries and Expenses 1,435.4 172.2 - - - - - - 1,263.2  Buildings and Facilities 2.2 - - - - - - - 2.2  Trust Funds 14.6 - - - - - - - 14.6 FSIS FSIS-Salaries & Expenses 838.6 - - - - - - 838.6 -  FSIS-No Year Funds 31.0 - - - - - - 31.0 -  Trust Funds 3.7 - - - - - - 3.7 - GIPSA Salaries and Expenses 33.2 13.6 0.7 1.7 14.6 2.7 - - -  Inspection and Weighing Services 35.9 35.9 - - - - - - - AMS Marketing Services 110.7 110.7 - - - - - - -  Payments to States and Possessions 1.3 1.3 - - - - - - -  Perishable Ag. Commodities Act Fund1 (10.2) (10.2) - - - - - - -  Funds for Strengthening Markets/Income/Supply 1,285.5 1,285.5 - - - - - - -  Wool Research Development and Promotion Trust 

Fund 

2.2 2.2 - - - - - - - 

 Expenses & Refunds, Inspection & Grading of Farm 

Products 

93.5 93.5 - - - - - - - 

 Payment to Expenses & Refunds, Inspection & 

Grading of Farm Products 

0.5 0.5 - - - - - - - 

RMA Administrative and Operating Expenses 70.2 - - - 70.2 - - - - 

Federal Crop Insurance Corporation Fund 2,902.0 - - - 2,902.0 - - - - 

FSA Salaries and Expenses 1,447.1 - - - 1,316.9 - - - -  State Mediation Grants 4.0 - - - 4.0 - - - - 
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USDA FY 2003 Program Obligations 

(Dollars in Millions) 

Objectives 

Agency Account 

Program 

Obligations 1.1 1.2 1.3 1.4 2.1 2.2 3.1 3.2 4.1 

FSA (Cont.) Agricultural Credit Insurance Fund (Prog.) 790.1 - - - 790.1 - - - -  Agricultural Conservation Demonstration Program 

Account 

0.6 - - - - - - - - 

 Dairy Indemnity Program 0.4 - - - 0.4 - - - -  Agricultural Conservation Program 5.7 - - - 5.7 - - - -  Emergency Conservation Program/Transfer to CCC 27.4 - - - - - - - -  Agricultural Credit Insurance Fund 23.7 - - - 23.7 - - - -  Farm Storage Facility Loan Direct Financing Acct. 66.0 - - - 66.0 - - - -  Ag. Conservation Guarantee Financing Acct. 0.8 - - - 0.8 - - - -  Agricultural Credit Insurance Fund-Direct (Fin.) 1,701.6 - - - 1,701.6 - - - -  Agricultural Credit Insurance Fund-Guar. (Fin.) 222.8 - - - 222.8 - - - -  CCC Apple Loans Direct Loan Financing Account 1.0 - - - 1.0 - - - -  CCC Apple Loans Direct Loan Program Fund 1.3 - - - 1.3 - - - -  CCC Export Loans Program Account 722.7 - 722.7 - - - - - -  Commodity Credit Corporation 33,948.5 4,073.8 - 156.4 27,487.0 - - - -  CCC Export Guarantee Financing Account 738.2 - 738.2 - - - - - -  CCC Export Guaranteed Loans Liquidating Account 1.8 - 1.8 - - - - - -  CCC Emergency Boll Weevil Direct Loan Financing 

Account 

0.3 - - - 0.3 - - - - 

 CCC Farm Storage Facility Loans Program Account 0.8 - - 0.8 - - - - - NRCS Conservation Operations 815.0 - - - - - 48.9 - -  Watershed Rehabilitation Programs 29.0 - - - - - 29.0 - -  Biomass Research and Development Program 14.0 - - 14.0 - - - - -  Farm Security and Rural Investment Programs 1,213.0 - - - - - 12.1 - -  Resource Conservation and Development 50.0 - - 0.5 - - 26.0 - -  Watershed Surveys and Planning 11.0 - - - - - 6.1 - -  Watershed and Flood Prevention Operations 185.0 - - - - - 42.6 - -  Wildlife Habitat Incentive Program 1.0 - - - - - - - - RD Rural Community Advancement Program 1,053.0 - - - - 452.8 600.2 - -  Salaries and Expenses 673.0 - - - - 269.2 403.8 - - 
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USDA FY 2003 Program Obligations 

(Dollars in Millions) 

Objectives 

Agency Account 

Program 

Obligations 1.1 1.2 1.3 1.4 2.1 2.2 3.1 3.2 4.1 

RHS Rental Assistance Program 724.0 - - - - - 724.0 - -  Rural Housing Assistance Grants 48.0 - - - - - 48.0 - -  Mutual and Self-Help Housing Grants 42.0 - - - - - 42.0 - -  Rural Housing Insurance Fund (Prog.) 798.0 - - - - - 798.0 - -  Rural Housing Insurance Fund (Liq.) 401.0 - - - - - 401.0 - -  Rural Housing Insurance Fund Direct (Fin.) 2,648.0 - - - - - 2,648.0 - -  Rural Housing Insurance Fund-Guar. (Fin.) 109.0 - - - - - 109.0 - -  Rural Community Facility Loans-Direct (Fin.) 373.0 - - - - - 373.0 - -  Farm Labor Housing 32.0 - - - - - 32.0 - -  Rural Community Facility Loans-Guar. (Fin.) 3.0 - - - - - 3.0 - - RBCS Rura Cooperative Development Grants 60.0 - - - - 60.0 - - -  Renewable Energy Program 22.0 - - - - 22.0 - - -  Rural Development Loan Fund (Prog.) 24.0 - - - - 24.0 - - -  Rural Economic Development Grants 4.0 - - - - 4.0 - - -  Rural Economic Development Loans (Prog.) 3.0 - - - - 3.0 - - -  Rural Economic Development Loans (Fin.) 22.0 - - - - 22.0 - - -  National Sheep Industry Improvement Center Revolving Fund 1.0 - - - - 1.0 - - -  Rural Development Loan Fund -Direct (Fin.) 58.0 - - - - 58.0 - - -  Rural Business and Industry Direct Loans (Fin.) 6.0 - - - - 6.0 - - -  Rural Business and Industry Direct Loans-Guar. 

(Fin.) 

121.0 - - - - 121.0 - - - 

 Rural Empowerment Zones/Enterprise Communities 27.0 - - - - 27.0 - - - RUS RETRF (Prog. Acct.) 193.0 - - - - 135.1 57.9 - -  Rural Telephone Bank Program Account 7.0 - - - - 4.9 2.1 - -  Distance Learning and Medical Link Programs 68.0 - - - - 47.6 20.4 - -  High Energy Cost Grants 19.0 - - - - 13.3 5.7 - -  Rural Communication Development Fund 3.0 - - - - 2.1 0.9 - -  Distance Learning Telemedicine Direct Loan (Fin. 

Acct.) 

83.0 - - - - 58.1 24.9 - - 
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USDA FY 2003 Program Obligations 

(Dollars in Millions) 

Objectives 

Agency Account 

Program 

Obligations 1.1 1.2 1.3 1.4 2.1 2.2 3.1 3.2 4.1 

RUS (Cont.) Rural Development Insurance Fund (Liq. Acct.) 132.0 - - - - 92.4 39.6 - -  Rural Telephone Bank (Fin. Acct.) 196.0 - - - - 137.2 58.8 - -  RETRF (Fin. Acct. - Direct) 5,308.0 - - - - 3,715.6 1,592.4 - -  Rural Water & Waste Disposal Loans (Direct Fin. 

Acct.) 

1,138.0 - - - - 796.6 341.4 - - 

 RETRF (Liq. Acct.) 998.0 - - - - 698.6 299.4 - -  Rural Telephone Bank (Liq. Acct.) 28.0 - - - - 19.6 8.4 - -  Appalachian Reg. Commission Transfer 17.0 - - - - 11.9 5.1 - -  Dept. of Commerce Transfer 3.0 - - - - 2.1 0.9 - - FAS Scientific Activities Overseas (Foreign Curr. Prog)2 (7.8) - (7.8) - - - - - -  Trade Adjustment Assistance for Farmers 2.4 2.4 - - - - - - -  Salaries and Expenses 197.8 128.6 69.2 - - - - - -  Title I Ocean freight Differential Grants 30.3 - 30.3 - - - - - -  P.L.480 (Liq. Acct.) 9.2 - 9.2 - - - - - -  P.L.480 (Prog.) 87.6 - 87.6 - - - - - -  P.L 480 Title II 1,530.9 - 1,530.9 - - - - - -  Program & Grants Accounts 248.4 - 248.4 - - - - - -  P.L.480-Direct (Fin. Acct.) 652.7 - 652.7 - - - - - -  Food for Progress (Russia) 208.3 - 208.3 - - - - - -  Debt Reduction (EAI) Fin. Acct. 47.2 - 47.2 - - - - - -  McGovern-Dole Account 100.0 - 100.0 - - - - - - FNS Food Donations Programs 59.5 - - - - - - - - 59. Food Stamp Program 25,688.0 - - - - - - - - 25,431. Commodity Assistance Program 169.0 - - - - - - - - 169. Food Program Administration 139.0 - - - - - - - - 87. Special Supplemental Nutrition Program (WIC) 4,686.0 - - - - - - - - 4,358. Child Nutrition Programs 11,034.0 - - - - - - - - 11,034.FS Land Acquisition Title VIII 2.4 - - - - - - - -  Capital Improvement and Maintenance 654.6 - - - - - - - - 
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USDA FY 2003 Program Obligations 

(Dollars in Millions) 

Objectives 

Agency Account 

Program 

Obligations 1.1 1.2 1.3 1.4 2.1 2.2 3.1 3.2 4.1 

FS (Cont.) Forest and Rangeland Research 328.3 - - - - - - - -  State and Private Forestry 444.6 - - - - - - - -  National Forest System 1,644.7 - - - - - - - -  Wildland Fire Management 1,913.6 - - - - - - - -  Payments to States 282.7 - - - - - - - -  Payments to States, Northern Spotted Owl Guarantee 18.7 - - - - - - - -  Management of National Forest Lands for Subsistence Uses 5.6 - - - - - - - -  Emergency Pest Suppression Fund 0.2 - - - - - - - -  Working Capital Fund 227.6 - - - - - - - -  Land Acquisition 169.8 - - - - - - - -  Recreation Fees for Collection Costs 0.8 - - - - - - - -  Federal Payment, Payments to States, National 

Forests Fund 

137.6 - - - - - - - - 

 Timber Roads, Purchaser Elections3 (0.2) - - - - - - - -  Roads and Trails for States, National Forest Fund 17.4 - - - - - - - -  Timber Salvage Sales 70.5 - - - - - - - -  Expenses, Brush Disposal 8.0 - - - - - - - -  Range Betterment Fund 3.4 - - - - - - - -  Payment to Minnesota from the National Forests 

Fund 

2.1 - - - - - - - - 

 Licenses Programs4 (10.7) - - - - - - - -  Restoration of Forest Lands 2.2 - - - - - - - -  Acquisition of Lands to Complete Land Exchanges 4.0 - - - - - - - -  Operation and Maintenance Quarters 6.9 - - - - - - - -  Timber Sale Pipeline Restoration Fund 2.2 - - - - - - - -  Recreation Fee Demonstration Program 37.1 - - - - - - - -  Midewin National Tallgrass Prairies Rental Fees5 (0.3) - - - - - - - -  Land Between the Lakes Management Fund3 (0.2) - - - - - - - -  Cooperative Work Trust Fund 36.7 - - - - - - - - 
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USDA FY 2003 Program Obligations 

(Dollars in Millions) 

Objectives 

Agency Account 

Program 

Obligations 1.1 1.2 1.3 1.4 2.1 2.2 3.1 3.2 4.1 

FS (Cont.) Reforestation Trust Fund 22.0 - - - - - - - -  Gifts and Bequests 0.5 - - - - - - - -  Payments to Counties, National Grasslands5 (0.8) - - - - - - - -  Federal Highway Transfer (FS) 9.5 - - - - - - - - Total 118,850 6,169 4,600 499 34,763 6,984 8,936 1,142 2,208 41,32Total by Goals* 46,031 15,920 3,350 4*Goal and objective totals have been rounded to the nearest whole number. Totals may not add due to rounding. 1Negative balance is a result of investments with commercial banks. Investments create de-obligations in the account. At the end of FY 2003 there was n

lier de-obligation. 

2Negative balance is due to the transition from the old central accounting system to the new system (FFIS). When overseas transactions were reconciled

eliminated. Funds were de-obligated to bring the account into sync with Treasury. 

3Negative balance due to adjustment of funds in FY 2003 to ensure that both current and historical data were aligned appropriately between the budgetar4Negative balance in FY 2003 is a result of 2002 restated financial activity. 5Negative balance is due to reviews and adjustments of on-going payments to States. Transfers from the receipts accounts had not been completed. Res

ducted. 
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Fiscal Year 2003 Staff Years The table below depicts the component agencies and staff offices of the Department of Agriculture with estimated staff yea

objective. Staff years have been rounded to the nearest tenth and have been allocated to more than one objective when the ative was significant and could be identified. Staff offices and departmental management generally support all USDA objecthave been reallocated equally among all objectives. 

USDA FY 2003 Staff Years 

Objectives 

Agency 

Staff 

Years 1.1 1.2 1.3 1.4 2.1 2.2 3.1 3.2 4.1 4.2 4.

OSEC 70 5.4 5.4 5.4 5.4 5.4 5.4 5.4 5.4 5.4 5.4 OCFO 1,650 126.9 126.9 126.9 126.9 126.9 126.9 126.9 126.9 126.9 126.9 1OCIO 310 23.8 23.8 23.8 23.8 23.8 23.8 23.8 23.8 23.8 23.8 DA 684 52.6 52.6 52.6 52.6 52.6 52.6 52.6 52.6 52.6 52.6 DA/HMM 6 - - - - - - - - - - OC 98 7.5 7.5 7.5 7.5 7.5 7.5 7.5 7.5 7.5 7.5 OIG 621 47.8 47.8 47.8 47.8 47.8 47.8 47.8 47.8 47.8 47.8 OBPA 64 4.9 4.9 4.9 4.9 4.9 4.9 4.9 4.9 4.9 4.9 OGC 319 24.5 24.5 24.5 24.5 24.5 24.5 24.5 24.5 24.5 24.5 OCE 53 4.1 4.1 4.1 4.1 4.1 4.1 4.1 4.1 4.1 4.1 ERS 438 70.1 21.9 21.9 78.8 21.9 30.7 21.9 30.7 21.9 21.9 NAD 119 9.2 9.2 9.2 9.2 9.2 9.2 9.2 9.2 9.2 9.2 NASS 1,076 461.1 - - 58.0 320.9 - - 96.0 - - ARS 8,622 - - 845.0 - - - 845.0 5,345.6 120.7 120.7 1CSREES 360 28.8 28.8 28.8 18.0 14.4 14.4 21.6 36.0 25.2 25.2 APHIS 7,462 895.4 - - - - - - 6,566.6 - - FSIS 9,479 - - - - - - 9,479.0 - - - GIPSA 707 289.9 14.1 35.4 311.1 56.6 - - - - - AMS 3,361 3,361.0 - - - - - - - - - RMA 515 - - - 515.0 - - - - - - FSA 5,905 - - - 5,786.9 - - - - - - FSA Non-Federal 12,368 - - - 10,512.8 - - - - - - NRCS 12,140 - - - - - 1,140.7 - - - - RD 6,788 - - - - 2,715.2 4,072.8 - - - - FAS 1,002 651.3 350.7 - - - - - - - - FNS/CNPP 1,528 - - - - - - - - 825.1 76.4 6FS 38,014 - - - - - - - - - - Total 113,759 6,064 722 1,238 17,587 3,436 5,565 10,674 12,382 1,300 551 1Total by Goals* 25,612 9,001 23,056 2,974 *Goal and objective totals have been rounded to the nearest whole number. Totals may not add due to rounding. 
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DATA ASSESSMENT OF PERFORMANCE MEASURES

Strategic Goal 1: Enhance Economic Opportunities for Agricultural Producers 

Objective 1.1: Expand International Market Opportunities 

Improve International Marketing Opportunities 

Data for the World Trade Organization and tariff rate are projected estimates based on results posted to 

the performance-tracking system within the Foreign Agricultural Service (FAS) during the first three 

quarters of FY 2003. Estimates for the fourth quarter of the reporting year 2003 are derived by estimating 

the sum value of trade-policy disputes currently under negotiation. USDA believes the disputes will be 

resolved successfully by the end of the fiscal year. Data are reliable and used by Agency and Department 

officials to highlight successes in the trade-policy arena. 

While USDA uses an automated performance-tracking system to collect and analyze actual performance 

data from the Department’s network of overseas offices and its headquarters, there often is a lag time between reported successful resolution of trade issues and estimated value to U.S. agriculture. This also can 

happen with independent verification through the U.S. Government’s official trade statistics. There is no 

known remedy immediately available to address this problem. 

The primary sources of trade data are U.S. Customs (which was absorbed into the Department of Homeland Security), information compiled by the U.S. Census Bureau, the USDA publication Foreign 

Agricultural Trade of the United States and other databases. For some products, trade data are not recorded. Thus, estimating the potential value of a sanitary and phytosanitary (SPS) accomplishment may 

be a challenge, especially where new exports to a previously closed market are concerned. In arriving at 

these estimates, USDA considers such factors as similar exports by other countries, the importing countries’ respective purchasing power and sales into comparable markets. In addition to trade data, other 

sources include market reports compiled by USDA and industry estimates. 

The raw data on animal-export protocols are complete, reliable and of good quality. The lists of new export protocols negotiated by the National Center for Import Export are updated monthly and can be 

obtained at www.aphis.usda.gov/vs/ncie/iregs/animals/history.html. Program management staff has collected and posted the data where any errors can be seen by all interested parties and, if necessary, 

corrected. 

The data for the number of international standards adopted are complete, final, reliable and of good quality. USDA’s Animal and Plant Health Inspection Service (APHIS) personnel who attend the meetings of 

standard-setting bodies helped develop these international standards. The personnel provides updates to 

the Trade Support Team. The team then reports these accomplishments in the annual SPS Accomplishments Report. These standards are documented on the Web sites of the International Plant Protection 

Convention, the North American Plant Protection Organization and the International Organization of Epizootics. APHIS is developing a new performance measure for FY 2005 for Trade Issues Resolution and 

Management, which will reflect proposed increases in funding more accurately. 
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Objective 1.2: Support International Economic Development and Trade Capacity Building 

Support International Economic Development and Foreign Food Assistance 

Projected estimates indicate that USDA expects to meet its budgeted number of activities and projects 

completed to support international economic development and trade-capacity building. Data are based on 

results for the first three quarters. Estimates for the fourth quarter of the reporting year 2003 are derived 

by estimating the sum value of trade-policy disputes currently under negotiation. USDA believes the disputes will be resolved successfully by the end of the fiscal year. They are deemed to be reliable and are 

used by Agency and Department officials to highlight successes in the trade-policy arena. 

An automated performance-tracking system is in place to collect and analyze actual performance data 

from USDA’s network of overseas offices and its headquarters. However, there often is a time lag between the reported successful resolution of trade issues and estimated value to U.S. agriculture, and 

independent verification through the U.S. Government’s official trade statistics. There is no known remedy immediately available to address this problem. 

Objective 1.3: Develop Alternative Markets for Agricultural Products and Activities 

Increase the Use of Bioenergy and Biobased Products 

The data upon which performance information is based is complete and reliable. It represents the universe 

of applications for program participation received during the open-enrollment periods during FY 2003. 

Data quality is high since they represent the universe of actual sign-ups in the programs, proposals for 

funding or projects funded under the programs. Certification is approved by program managers. 

Objective 1.4: Provide Risk Management and Financial Tools to Farmers and 

Ranchers 

Provide Risk Management Tools to Farmers and Ranchers 

The data are deferred until the end of the second quarter of FY 2004 because of the unavailability of actual crop-year data. Analysis has shown that 99 percent of the acreage and liability data will be reported 

to USDA during the first quarter of the new fiscal year. Once received, the Department will take extensive steps to verify the data’s accuracy and validity. Thus, final actual data for any given fiscal year is 

unavailable until the second quarter of the following fiscal year. Additionally, the forecasted participation 

rates are calculated from USDA baseline projections of acres planted. Prior to FY 2003, the Department’s 

baseline information contained planted acreage data for 13 principle crops. As of this fiscal year, the baseline information has been changed to seven major crops. This report contains updates to information 

submitted in previous performance reports to reflect more complete Federal crop-insurance data. Data for 

the number of commodities eligible for crop insurance are derived from internal sources and considered 

final and reliable. 

Provide Credit to Agricultural Producers 

Data for these indicators are projected estimates. The projected year-end results are based on actual data 

through August 31, 2003. 

Most farm-loan program data originates from the Agency’s accounting system and is subject to internal 

and external audits. Service Center staff enters progress as applications are processed. The reliability of 

this data has been improving through system changes and reviews. 
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Comprehensive reviews are conducted annually to ensure that loan decisions are sound and program implementation complies with statutes and regulations. Additionally, the Office of Inspector General (OIG) 

audited FSA’s Government Performance and Results Act process in FY 2001-02. OIG did not identify 

any problems related to the reliability of indicators for the farm loan programs. 

Reports generated from the Executive Information Service System and the Intranet are the primary means 

of measuring farm loan program performance. The National Office reviews these reports quarterly to 

monitor progress toward achievement of the performance goals. Web-based FOCUS programs have been 

developed to monitor performance.

Provide Income Support to Agricultural Producers 

Data for eligible commodity production are final. Actual production data are from the National Agricultural Statistics Service (NASS) Published Estimates Database, which can be found at 

www.nass.usda.gov:81/ipedb/. Loan and Loan Deficiency Payment (LDP) data are from the year 2002 

National Loan Summary Report and the crop year 2002 LDP Summary Report. These two query reports 

may be found on the Online Reports section of FSA’s Price Support Division (PSD) Web page at 

www.fsa.usda.gov/dafp/psd/. 

Data for the amount of commodity placed under marketing assistance loans and LDP originates from the 

USDA Service Centers, where it is input by FSA staff. This data then is uploaded daily to an automated 

system maintained at Kansas City. To help ensure accuracy, FSA personnel perform periodic spot checks 

to verify the quantity and eligibility of commodities placed under loan or LDP. 

NASS production data may not be final for some commodities for up to two years after the end of the 

crop year. Additionally, NASS may not always have data for every State in which the PSD database 

shows loan or LDP activity. This report only includes data for those States with both loan and/or LDP 

data and NASS data. Therefore, a data limitation is that results may not always account for 100 percent of 

loan/LDP activity and actual production. 

Improve Electronic Delivery of Information and Services 

Data are projected estimates, with year-end projections based on system data as of September 16, 2003. 

Data source is a Web-based Database maintained and verified by FSA’s Forms, Graphics and Records 

Branch within the Management Services Division. Data are updated daily as additional forms are added 

or a change in the status of a form occurs. For example, forms may become obsolete or programs expire. 

Reports are generated on request for Agency management. 

Information contained in the Database constantly changes because of program changes or system enhancements, which allow additional forms to be added. 

Strategic Goal 2: Support Increased Economic Opportunities and Improved 

Quality of Life in Rural America 

Objective 2.1: Expand Economic Opportunities through USDA Financing of 

Businesses 

Improve Rural Economic Opportunities 

Business program data are collected in two ways. The Finance Office records and reports total loan and 

grant obligations, as of the date of obligation. These data are collected as part of the obligation process. 

Additionally, Rural Development uses one of its own systems, GLS, to collect more information for man-
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agement and evaluation purposes. This information includes the number of jobs created or saved. Data on 

delinquency status mostly are reported by lenders directly to GLS. In other cases, Rural Development 

staff reports the information. 

The data are final and complete as of September 2003 year-end calculations. While hundreds of lenders 

report the financial performance of their borrowers semi-annually to the Rural Business-Cooperative Service, all lenders currently are not reporting. There also is no consistency to the timing of their reports. In 

lieu of this, the Finance Office’s financial data have been found acceptable to OIG, as are State Officeverified data on the financial performance of loans. Data for jobs created or saved are obtained by State 

Office staff and entered into GLS. These data are reliable when they have been updated and verified by 

State staff. USDA computes the jobs saved or created based on feasibility projections accompanying loan 

documents. The jobs are counted only in the initial year. The delinquency rate, excluding bankruptcy 

cases, is based on feasibility projections accompanying loan documents. 

While the percentage of States verifying third-party financial and jobs data have improved each year, further improvements remain stalled due to staffing limitations and competing assignments. Rural 

Development has entered into an agreement with ERS to design and complete a model to better compute 

and measure the impacts of business programs in rural communities. These programs include such “quality of life” issues as health and education. 

Improve Telecommunication for Rural Residents 

Data are actual, final and complete. The county data are collected from each approved loan application. 

Applicants are required to detail their proposed service territories. This includes the number of subscribers to be served and location by county. Loan funds are advanced only for approved purposes. Measuring 

the extent to which broadband service is deployed in rural America on a county-by-county basis will enable Rural Development to assess improved economic conditions because of the availability of highspeed telecommunications network access for residents and business. 

The data on the number of counties to be served for each loan are derived from applicants’ loan applications. Data must be complete before loans can be approved. While applicants are required to perform 

market surveys of their proposed service areas, the actual counties served may vary from the plan if all 

funds are not used or the borrower later requests a change of purpose from the original loan application. 

Overall, the data on counties served are reliable. 

All applications undergo an extensive review to determine eligibility. Additionally, all approved applications must show feasibility from a financial and technical standpoint. Applicants also are required to 

perform market surveys of their proposed service areas. Therefore, the data are reliable. As previously 

noted, the data on the number of counties to be served for each loan approved come from the applicant’s 

loan application. The data are dependent upon the borrower drawing down loan funds and constructing 

the system as portrayed in the applicant’s loan design. Loan funds only may be used for the approved 

purposes for which the loan was made. Thus, variances may result if a borrower does not draw down all 

loan funds or requests approval for a change of purpose from the original loan. This could result in a different number of counties served from the plan. 

Objective 2.2: Improve the Quality of Life through USDA Financing of Quality 

Housing, Modern Utilities and Needed Community Facilities 

Improve the Standard of Living in Rural America 

Homeownership data are actual, final and complete. The initial entry point for homeownership data is the 

Web-based UniFi system. This centralized server application ensures viable data collection. It tracks per-
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formance and forecast needs. Information entered into UniFi also uploads nightly into the MortgageServ 

(a.k.a. Fasteller) system that is used to obligate funds, establish closed loans, administer escrow accounts, 

manage defaulted loans and perform other administrative functions. Brio, a query and reporting tool, 

serves as the interface between the data warehouse and Rural Development staff. 

Homeownership data originate in systems used to obligate funding and are reliable. Data for initial 

placement of households into their own homes are reliable since they are linked directly to homeownership loans maintained in Rural Development’s financial accounting systems. This is despite the fact that 

no adjustments are made for later defaults and the resulting loss of homeownership that lowers net homeownership achieved. Homeownership data are based on loan obligations collected in the Dedicated Loan 

Origination and Servicing system and stored in the Rural Development’s Data Warehouse. As such, the 

data on number of households is auditable. Data represents the population served based on available U.S. 

census information. Rural Development’s National Office screens the data annually for completeness and 

they are reliable. 

Community Facilities program data are complete and final. They are collected by means of two streams 

of input. The Finance Office records and reports total loan and grant obligations as of the date of obligation. These data are collected as part of the obligation process. Additionally, Rural Development collects 

information for management and evaluation purposes. Data on delinquency status are reported by the Finance Office for Community Facilities Direct loans, and by lenders for the Community Facilities 

Guaranteed loans. 

Community Facilities data are entered into GLS by field staff at the time program funds are obligated. 

Data are final, complete and reliable, and represent the population served based on available U.S. census 

information. Rural Development’s National Office screens the data annually for completeness and they 

are reliable. Population data served by community facilities are estimates. Rural Development’s National 

Office screens data annually for irregularities. Given the variety of service areas served by different types 

of community facilities (e.g., libraries, fire equipment, health clinics), estimation is an art, not a precise 

science. Population estimates served by community facilities are much less reliable as indicators of the 

extent of benefits. Rural Development is developing mapping technologies that will enable more consistent determination of service areas for community facilities. Data are reliable, based on engineering 

studies used for design of new or expanded public utilities systems. 

New program applications are developed using the Community Programs Application Processing (CPAP) 

system. CPAP is a software tool used by field staff to work directly and interactively with applicants regarding planned system characteristics. The program contains a number of edit checks to enhance 

reliability. The data are stored on a server and moved nightly to the Data Warehouse for permanent storage and reporting. This manner of developing system plans greatly enhances data reliability since they are 

integral to program planning. 

The number of subscribers (650,000) receiving new or improved water or wastewater service are determined by USDA’s Rural Development field staff. This number, then, are entered into the Rural 

Community Facilities Tracking System. This figure is a projected estimate based on approximately 10 

months of actual data. It is adjusted for the remaining time and available funding. 
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Strategic Goal 3: Enhance Protection and Safety of the Nation’s Agriculture 

and Food Supply 

Objective 3.1: Enhance the Protection of Meat, Poultry and Egg Products from 

Foodborne Hazards in the U.S. 

Strengthen Food Safety 

The data used to develop risk assessments are complete, reliable and of good quality. They are the best 

data that the food-safety and public-health community can assemble. USDA works with partners and contractors to ensure the data’s quality and the science behind risk assessments. If a risk assessment is to be 

used as the basis for a regulation, it is peer reviewed by experts from academia, other government agencies and/or the public-health community.

Enhance Protection from Salmonella and Listeria monocytogenes

The data are complete, reliable and of good quality. The data are derived from sampling programs and 

analysis of product samples taken from meat and poultry plants by USDA employees. The samples are 

analyzed by Food Safety and Inspection Service (FSIS) and International Organization for Standardization-accredited laboratories to ensure accurate results. The results of the analyses are entered into the 

Pathogen Reduction Enforcement System. The information is used to schedule future sampling at FSISinspected plants. FSIS considers the data to be extremely reliable and bases policy, program decisions and 

resource allocation upon this data. 

Improve Detection of Foodborne Hazards 

Data for developing systems for detecting foodborne hazards are complete, highly reliable and of good 

quality. Each research unit submits annual progress reports via USDA’s state-of-the-art, electronic-information and database system. Line and program managers review the information and report their findings 

to Congress, customers, stakeholders, partners and the general public. Progress reports are available at 

www.ars.usda.gov. Once you arrive at the site, click on “Research.” The reports also are available at the 

Food Safety Research Information Office (FSRIO) at the USDA-National Agricultural Library. FSRIO is 

the source for all Federal food-safety research information, having absorbed the role and duties of the 

Joint Institute for Food Safety Research. Data from the USDA Food Safety Research Program must meet 

FSRIO’s quality standards. Customers and stakeholders provide the Department with continual feedback 

on the data’s quality, relevance, value and usefulness. 

Objective 3.2: Reduce the Number and Severity of Agricultural Pest and Disease Outbreaks 

Reduce the Risks of Entry and Establishment of Pests and Diseases 

The data on plant-pest detection cannot be complete and final until the surveys are finished at the end of 

the calendar year. Surveys are based on plant-pest biology instead of fiscal years. Recent increases in the 

program’s appropriation and funding for State cooperators will increase the number of surveys. The data 

are retrieved from the National Agricultural Pest Information System (NAPIS) after they have been recorded by State and university cooperators working under cooperative agreements. The data are reliable 

because they track actual finds or the absence of pests. The final percentage reported is based on the findings from NAPIS, pest risk assessments and the New Pest Advisory Group. 

The data on animal pests and disease are complete, final, reliable and of good quality. Veterinary Services’ management officials use many information sources to alert them to the possibility of new diseases. 

Information on the presence or absence of animal diseases is collected monthly from each State’s Chief 
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Animal Health Official. The diseases for which the information is collected are those that are listed as 

being most serious by the Office International des Epizooties (OIE). When a suspected animal disease 

outbreak occurs, USDA investigates. Databases have been developed to track exotic animal disease investigations. The emerging animal disease database is verified and analyzed on a quarterly basis by the 

Emergency Programs Staff. 

Other important surveillance information is found in NAHMS’ database. The National Animal Health 

Reporting System (NAHRS) is a joint effort of the U.S. Animal Health Association (USAHA), the 

American Association of Veterinary Laboratory Diagnosticians (AAVLD) and USDA's APHIS. NAHRS 

is considered one part of a comprehensive, integrated animal health surveillance system in the U.S. 

Reporting criteria for OIE’s disease list were developed by commodity working groups consisting of representatives from USAHA, AAVLD, the respective industry, USDA and private practitioners. The 

commodities currently covered are cattle, sheep and goats, equine, swine, and commercial poultry and 

food fish. OIE’s list can be found in the NAHRS Operational Manual/Uniform Methods and Rules. More 

information about USDA’s animal disease-monitoring surveillance can be found at 

www.aphis.usda.gov/vs/ceah/cahm/index.htm. 

Improve Animal Emergency Management 

The data on the number of States and territories which meet the standards for preventing, detecting and 

responding to animal-health emergencies, once reported, will be complete, final, reliable and of good 

quality. They are based on a self-assessment provided jointly by USDA’s Area Veterinarian in Charge, 

the Department’s Emergency Management Coordinator (when all are hired) and the State Veterinarians. 

The assessments are verified by peer reviews and test exercises. Each test exercise contains an evaluation 

component that assesses the preparedness and response capability of the coordinated responders. APHIS 

expects to have all coordinators in place by the end of FY 2005. 

Improve Animal Diagnostic Services 

The NAHLN Steering Committee determines the criteria for adding diagnostic laboratories to the Network. A letter is sent to each newly accepted laboratory recognizing its membership. Contracts are 

initiated for those laboratories selected to assist with Chronic Wasting Disease (CWD) and scrapie testing. Those two lists are reviewed and the number of States represented is tallied and used as the data 

source for animal-diagnostic services. 

The data are complete, final, reliable and of good quality. Approval is provided either by the steering 

committee or the NVSL director before a laboratory can be placed on a list identifying them as NAHLN 

or as a contract CWD/scrapie laboratory. Since the data are merely a tally of those States involved, statistical misrepresentation is impossible. Managers use the information to evaluate whether their laboratories 

have access to adequate backup in an animal disease emergency situation. Ongoing listings of both 

NAHLN laboratories and the CWD/scrapie laboratories are maintained. 

Improve Plant Diagnostic Laboratory Capabilities 

The data represent actual and projected accomplishments. The data are direct counts of accomplishments–the number of laboratories receiving certification and connected to the National Agricultural Pest 

Information System. State and university partners report the data to National Program Leaders for review 

and verification through certification providers and Purdue University. 

This new effort of improving plant diagnostic laboratory capabilities makes it impossible to provide any 

data other than the numbers of laboratories achieving certification or linkup. As the effort continues, more 
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valid and specific performance data will become available. Specifically, the data will represent the combined performance measurement score (0 to 100) reflecting annual and periodic (five-year) scientific, 

academic or expert and stakeholder review of the relevance, quality and performance of the portfolio of 

diagnostic activities. Scores represent the respective panels’ assessment along a continuum from exceeding expectations, to meeting expectations, to needing improvement in one or more of the three 

dimensions. This scoring procedure, based on OMB’s new Research and Development Criteria, currently 

is under development, and baseline measures will be developed in FY 2004. 

Research Plant Pathogens 

Data represents actual accomplishments and are highly reliable. 

All intramural research projects undergo an external peer review at the beginning of their five-year program cycle. Any research findings undergo peer review before they are published in a scientific journal. 

New and improved varieties are not released until they successfully complete a rigorous evaluation of the 

claims made for them in uniform variety tests that are conducted at 24 or more locations. 

The formal system of annual progress reports is received via a state-of-the-art, electronic-information and 

database system. Initial reviews were conducted by line management prior to submission to National Program Staff for final review and reporting to Congress and stakeholders. 

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

Objective 4.1: Improve Access to Nutritious Food 

Reduce Hunger and Improve Nutrition 

The data are of good quality and highly reliable. Data for the Food Stamp Program (FSP) and the Special 

Supplemental Nutrition Program for Women, Infants and Children (WIC) are 12-month, fiscal-year participation averages. National School Lunch Program (NSLP) and School Breakfast Program (SBP) data 

are nine-month, fiscal-year participation averages. The summer months are excluded because activity in 

minimal. Child and Adult Care Food Program (CACFP) meals served are a 12-month cumulative total. 

Summer Food Service Program (SFSP) average daily attendance is reported only for the month of July. It 

should be noted that the only bases for estimating SFSP activity is initial data for meals served in June. 

These data have been subject to substantial revision in prior years. July data for average daily attendance 

are not available until the end of November. 

Internally, agency managers use USDA data regularly with confidence. 

Some of the users who accept the reliability of USDA data regularly include: 

• The Office of Management and Budget (OMB): OMB accepts and utilizes the Department’s budget 

projections biannually. These include the use of both complete and preliminary data. 

• Food and Nutrition Service (FNS): USDA publicly releases its data on the FNS Web site monthly. 

Any use of preliminary data always is labeled as such. 

• The Office of Inspector General (OIG): OIG auditors accept USDA data annually as part of the documentation for the FNS (and now USDA) financial statement. 

• The Government Accounting Office (GAO): GAO routinely uses the eligibility, participation and financial information in the National Data Bank (NDB) in its reports to Congress and the general public. 

There have been no reported instances of data reliability being questioned subsequent to publication in 

GAO reports. 
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State agency reports are submitted to FNS regional offices. The reports are reviewed for completeness 

and consistency. The State agency validates and certifies the data. Regional office analysts review State 

agency submissions to verify completeness, reliability and quality. If the data are acceptable, the regional 

analyst posts them to the NDB Preload System. The System is a holding area for data review prior to release. If the data are unacceptable as provided, regional office personnel reject the report and contact the 

State agency. Data posted by regional personnel into the NBD Preload are reviewed at FNS Headquarters 

by staff of the Program Reports, Analysis and Monitoring Branch, Budget Division. If data are reasonable 

and consistent with previous reports, they will be downloaded to the NDB Production System for public 

release. If not, headquarters rejects the reports and contacts the regional office. The office then informs 

the State agency that it must provide more reasonable data or a valid explanation of apparent inconsistencies. 

Objective 4.2: Promote Healthier Eating Habits and Lifestyles 

Healthier Eating Habits and Lifestyles 

Data for support for the purchase of fruits and vegetables and School Meal Monitoring Reviews are projected estimates. Data on the USDA purchase of fruits and vegetables for commodity distribution 

programs come from the Processed Commodities Inventory Management System (PCIMS) and the Food 

Distribution Program on Indian Reservations (FDPIR). Data maintained in both systems record the 

amount of inventory of fruits and vegetables purchased by USDA for its programs along with the corresponding program costs. 

Estimates of the proportion of food stamp benefits or Child Nutrition Program meal reimbursements used 

to support fruits and vegetables are based on national studies and data sets. The estimate of the amount of 

food stamp benefits spent on fruits and vegetables is based on data collected in 1996. That data indicated 

that about 20 percent of the dollars available for household food is spent on fruits and vegetables. Similarly, estimates of the amount of Child Nutrition Program meal reimbursements are based on 1996-97 

data collection that indicated public schools spent about 20 percent of all food dollars on fruits and vegetables. Since all Child Nutrition Programs have similar meal-pattern requirements, this percentage has 

been applied to all program estimates. An analysis of the WIC food packages suggests that slightly more 

than 15 percent of total WIC food benefits are spent on fruits and vegetables. Currently, there is no information available that suggests purchasing patterns have changed sufficiently over the last five years to 

require revision of these estimates. 

While data on School Meal Monitoring Reviews are obtained from the State administering agencies that 

conduct the reviews, the agency’s ability to ensure that they are complete and accurate is limited because 

their collection is voluntary and informal. These limitations exist because of strong opposition from the 

school food service community to a more formal data collection process. Despite the collection process’ 

flaws, the data are the best-available on the oversight of school-meals quality. 

PCIMS tracks commodity purchases for nutrition-assistance programs. USDA staff enters and validates 

PCIMS data. FDPIR data are obtained from Defense Department billing information and verified through 

USDA administrative records. Both are maintained in database systems. Estimates of the portion of food 

benefits or meal reimbursements spent on fruits and vegetables utilize information obtained from nationally representative studies. These studies provide the most current estimates of food expenditures on fruits 

and vegetables. USDA is unaware of any significant limitations on the data’s validity or accuracy. 

Data for the percentage of WIC mothers breastfeeding are deferred because performance data is available 

only biennially. Targets are set only for those years. This information comes from a biennial analysis of 

WIC participation data provided by State agencies. The data represent a census of WIC participants and 

are reliable. 
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Data for dissemination of USDA nutrition-education materials are projected estimates. Contractors, which 

include the National Technical Information Service, U.S. Chamber of Commerce and the District of Columbia Archival Research Catalogue, distribute materials for USDA. They provide distribution reports to 

USDA, which are verified through management reviews and other reporting mechanisms as resources 

permit. 

Additionally, USDA staff collects and compiles data for its own hard-copy dissemination efforts from 

internal mailing lists and Agency print orders. The Department also collects information on Web 

downloads using WebTrends software. The software tracks Web-site traffic over time. USDA compiles 

Web data monthly and verifies its accuracy. The Department is unaware of any significant limitations of 

the data’s validity. 

Data on the overall number of materials released cannot be linked directly to the number or proportion of 

participants reached by these events. USDA plans to evaluate the impact of its nutrition-education efforts 

as resources permit. 

Objective 4.3: Improve Food Program Management and Customer Service 

Improve Food Management Efficiency 

The most-current Quality Control data available are for FY 2002. Final conclusions about a more current 

rate cannot be made until the established methodology for calculating it is completed. The Food Stamp 

payment accuracy data are used annually to support the Food Stamp Quality Control process based on 

statistically valid methodology. The process uses a systematic random sampling of FSP participants. The 

results of these activities are used to determine individual States combined payment-error rate. This rate is 

made up of over-issuances and under-issuances of FSP benefits. A regression formula is applied to the 

results of the reviews to arrive at the official error rates. The Quality Control error rate is valid and accepted by GAO and OIG. 

State agencies select cases monthly that are reviewed to determine the accuracy of the eligibility and 

benefit-level determination. They include a client interview and a process of getting verification of all 

elements of eligibility, and the basis of issuance of Food Stamp benefits. Federal reviewers validate a 

sample of the State’s reviews by conducting a second review. State agencies can verify and validate data 

through an informal review process. This process and the protections in place to ensure the data’s accuracy are based on an agreement between the States and Federal reviewers. The process has proven to be a 

sound method of arriving at reliable data. 

A results measure currently is unavailable for NSLP certification accuracy because USDA is refining the 

methodology for calculating certification error. Since the FY 2003 Annual Performance Plan measure 

and targets were set, the Department has continued to explore alternative analyses of data that may match 

program-eligibility requirements more closely. These alternatives vary in the discrepancy level between 

the total number of free certifications and the estimates of those eligible. 
USDA Performance and Accountability Report for FY 2003 

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

and Environment 

Objective 5.1: Implement the President’s Healthy Forests Initiative and Other Actions 

to Improve Management of Public Lands 

Improve Fire Management 

The data for Fire Management are reliable, of good quality and certified by the respective line officer. They 

are based on actual FY 2003 performance data. USDA wildfire program managers collected, compiled and 

analyzed the data. Data for hazardous fuels were reported through the National Fire Plan Operations and 

Reporting System. This system was co-developed by USDA and Department of Interior land-management 

agencies. Field units reported data for the fire-management plans and success in controlling wildfires during 

initial attacks directly to national headquarters. The Office of Management and Budget uses the data in preparing the President’s budget to Congress. The data are generated from the USDA accounting system and 

subject to internal and external audits. 

Managing Sustainable Grasslands 

Rangelands-management data are considered reliable and of high quality. Rangeland data were projected 

estimates from 10 months of actual 2003 performance data and 2 months projected data. Data are based 

on FS records of acres contained within individual allotments and are records certified by the respective 

line officers. Employees who manage rangelands and grazing allotments enter data into the Management 

Attainment Reporting System. This data reflect the implementation of required directions found in decision documents, allotment management plans and biological opinions. An allotment is considered 

managed to standard when all management direction is implemented for that year. Data reported through 

September are estimates. Actual final figures will become available between late-October and midNovember. The data are valid for each allotment that is assessed. Data from assessed allotments are 

joined with similar data for the remaining allotments. This combination results in a reliable rollup of quality data to USDA. 

Cleanup Hazardous Wastes 

Each agency has assigned responsibility for planning, implementing, documenting and reporting results in 

the environmental cleanup program to a professional staff at an appropriate organizational level. The data 

is reliable and used throughout the year by the agencies and USDA. 

With respect to data quality, there may be issues associated with specific sites targeted for cleanup. During any given fiscal year, the specific cleanups declared complete may differ from those identified as 

performance targets. Deviations may be due to unexpected findings, emergencies or delays in working 

with States and other stakeholders. Agency environmental coordinators review planned and actual performance, and senior management confirm the results before reporting is finalized. The Department then 

reviews all reported data. 

Objective 5.2: Improve Management of Private Lands 

Maintain Resource Health and Productive Capacity 

Data for protection of working cropland and grazing land and data for erosion reduction on working cropland are collected through the NRCS Performance and Results Measurement System (PRMS). Data for 

these indicators are final. 
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Data are reported by agency employees and partners in each field office across the Nation. Ongoing quality assurance activities are designed to minimize variation in data-definition interpretation. State-level 

managers certify the quality of their data. Data-quality checks also are conducted at the national level. 

Additional training is provided if reviews indicate a need. GAO conducted a review (GAO/RCED-00-83) 

of the accountability system, including PRMS. Data are considered reliable for use in monitoring progress 

toward goals and demonstrating use of program funds. Improvements to be implemented in FY 2004 are 

designed to improve data quality while reducing the reporting burden for field-level employees.

Data reported for land under long-term retirement contract are projected estimates. They are direct enumerations based on Conservation Reserve Program (CRP) contract file data. Year-end estimates are based 

on actual data through August, plus projected performance for the remaining two months of the fiscal 

year. Data are derived from the Farm Service Agency (FSA) National CRP Contract and Offer Data Files. 

The data are reliable and of acceptable quality. CRP data are uploaded from the USDA Service Centers to 

the automated CRP data files weekly. These files record the conservation practice installed and the location of land relative to National and State priority areas. They also document the erodibility index (EI) 

and other soil characteristics of the land enrolled in each contract. To help ensure program integrity, service center employees conduct on-site spot checks. They also review producer files prior to annual 

payment issuance to ensure conservation practices are maintained in accordance with program requirements. CRP acreage and soils descriptions could be considered certified by the contract’s completion and 

accompanying conservation plan approval process. 

CRP’s erosion impacts are projected estimates using regional average National Resources Inventory 

(NRI) erosion rates on CRP land in 1997 (after CRP). These rates are compared with erosion rates estimated to have occurred on CRP land in 1982 (before CRP). Erosion rates before CRP are estimated by a 

multi-step process. First, 1982 average erosion rates by county, type of erosion and erodibility index from 

the NRI are assigned to each CRP contract. The rates are based on the contract’s county, erosion type and 

EI. State (and regional, if needed) average erosion rates are used to assign erosion rates to CRP contracts 

that do not have assigned rates after the first step. Erosion prevented by type is the difference between the 

before and after estimates. NRI data for resource attributes are the highest quality available and are reliable and acceptable. Erosion estimates are considered preliminary because the models used are updated 

and improved periodically. 

Carbon sequestration data are projected estimates using CRP contract and current global change research 

data. The CRP contract data are sorted to identify the area in grass and tree cover. The tree data then are 

sorted by region and age. For grasslands, projected estimates of the carbon sequestered per acre are obtained from the Agricultural Research Service (ARS). Those estimates then are merged with CRP contract 

data to estimate total carbon sequestered by CRP grasslands. FS estimates of the carbon sequestered per 

acre by region, tree species and age are merged with the corresponding data from CRP contract data. This 

is done to estimate total carbon sequestered by CRP forestlands. Total carbon sequestered is the sum of 

the grassland and forestland estimates. These projected estimates provided by ARS and FS are the best 

available and considered reliable and acceptable. Data from USDA was developed in 2001 through 2002. 

The data for estimating the amount of carbon sequestered remains under development. Current estimates 

rely on the extrapolation of regional parameters. Additional research may lead to improved measurement 

capabilities, resulting in more accurate estimates. While the data currently reported represent the best estimates available at this time, they could change as the USDA/Department of Energy carbon-accounting 

rules are completed. 

Data on acreage under approved forest stewardship management plans are collected by the Forest Service 

(FS) from the State Foresters and entered into the Performance Measurement Accountability System. The 

projected number of acres of non-industrial private forestlands under approved stewardship management 
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plans equals that of the planned accomplishments for the year. The Forest Stewardship Program is administered by the State Foresters under FS grants that stipulate that State Foresters report on grant 

accomplishments after the end of the grant period. 

Because forest stewardship plans must be approved by the State Foresters, they are prepared by professional foresters and include acreage of forest land. The data are deemed reliable and of high quality. 

The respective regional FS office reviews each State’s implementation of the Forest Stewardship Program 

every five years. These reviews include field inspection of a selection of properties to verify acreage covered in the plans. Additionally, FS headquarters executes a program and management review of each 

regional office every five years. FS also has begun a direct-mail survey of a sample of program participants to determine the degree of implementation of management activities included in the stewardship 

plans. The survey also is designed to assess whether the program affected non-industrial, forest-landowner management decisions on the ground. 

Clean and Abundant Water Supplies 

Data for planning and application of comprehensive nutrient management plans (CNMPs) for animalfeeding operations, application of all nutrient-management measures on working land and irrigation water 

management on working cropland are collected through PRMS. Data for these indicators are final. 

Data are reported by agency employees and partners in each field office across the Nation. Ongoing quality assurance activities are designed to minimize variation in interpretation of data definitions. FY 2002 

marked the first year of implementation of new guidance for CNMPs. Extensive training of field staff was 

conducted prior to implementation. GAO conducted a preliminary review of the system. Data are considered reliable for use in monitoring progress toward goals and demonstrating use of program funds. 

System enhancements to be implemented in FY 2004 are designed to further improve data quality while 

reducing the reporting burden for field-level employees. 

Data for sheet and rill erosion, reductions in phosphorous and nitrogen, and carbon sequestration are projected estimates. They are estimated based on models which are updated and improved periodically. Yearend estimates of buffer acreage are based on actual data through August, plus projected performance for 

the remaining two months of the fiscal year. Projected performance is based on the estimated number of 

acres that will be enrolled through CRP signup during September. The reliability of erosion indicators is 

discussed in the “Maintain Resource Health and Productive Capacity” section above. Reduced nitrogen 

and phosphorus applications are projected estimates. The estimates are derived using CRP contract data 

and National Agricultural Statistics Service (NASS) fertilizer-usage data. Land under long-term retirement contract is assumed to have been growing a normalized mix of crops by State. Reduced nutrient 

applications are projected estimates. These estimates are derived by merging fertilizer applications rates 

with CRP State acres. NASS surveys provide the best quality, crop-specific, fertilizer-usage data in the 

Nation. The data are reliable and accurate. 

Data for the land buffer indicator are direct enumerators from the FSA National CRP Contract and Offer 

Data Files. They are considered reliable and of acceptable quality. The amount of land managed as buffers is a subset of the total acres under long-term land retirement contract. Conservation practices, such as 

grass-filter strips and riparian buffers planted with trees, are identified within the contract data. The data 

are considered reliable and of acceptable quality. 

The National Association of State Foresters (NASF) facilitates the monitoring and compilation of data on 

compliance with Best Management Practices (BMP), which are performed by State Foresters. The data 
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projected for performance goals indicate that both the percentage of forestry BMPs and the number of 

States conducting effectiveness monitoring were met. The USDA does not have responsibility for developing or monitoring BMPs. BMP implementation and effectiveness monitoring are carried out by the 

States and data are compiled by the NASF. While BMP data are believed to be reliable and accurate, 

USDA does not directly monitor implementation or effectiveness of BMPs and has no program to determine data reliability and quality. 

Wildlife Habitat 

Data for acreage enrolled in WRP are reported through the NRCS WRP National database. Data for conservation that benefits wildlife applied on working land are collected through the NRCS PRMS. Data for 

these indicators are final. 

Data are reported by agency employees and partners in each field office across the Nation. Ongoing quality assurance activities are designed to minimize variation in interpretation of data definitions. State-level 

managers certify the quality of their data in PRMS. Data-quality checks also are conducted at the national 

level. WRP data provided by field and State offices are reviewed for accuracy by the national program 

manager. Data are considered within acceptable limits for current uses. System enhancements to be implemented in FY 2004 to both the program reporting databases and the performance reporting system are 

designed to further improve data quality while reducing the reporting burden for field-level employees.

CRP data for wetlands and wildlife habitat are projected estimates. They are direct enumerators of CRP 

contract data. Year-end estimates are based on actual data through August, plus projected performance for 

the remaining two months of the year. Projected performance is based on the estimated number of acres 

that will be enrolled through continuous CRP signup during September. Data are reliable and of acceptable quality. CRP data are uploaded from the USDA Service Centers to the automated CRP data files 

weekly. CRP Offer Data Files are uploaded following each general sign-up period. These files record the 

conservation practice installed, location of land relative to National and State priority areas, EI and other 

soil characteristics of the land enrolled in each contract. To help ensure program integrity, service center 

employees conduct on-site spot checks. They also review producer files prior to annual payment issuance 

to ensure conservation practices are maintained in accordance with program requirements. 
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128 

III. SYSTEMS, CONTROLS AND LEGAL COMPLIANCE 

INSPECTOR GENERAL ACT AMENDMENTS OF 1988 

MANAGEMENT’S REPORT ON FINAL ACTION (AUDIT 

FOLLOW-UP) 

Introduction

USDA’s Office of the Chief Financial Officer (OCFO) oversees audit follow-up for the Department. 

OCFO works with agencies and the Office of Inspector General (OIG) to identify and resolve issues that 

affect the timely completion of corrective actions. 

The Inspector General Act Amendments of 1988 require reporting on audit reports that remain open more 

than one year past the date of management decision. The report must include: 

• Beginning and ending balances for the number of audit reports and dollar value of disallowed costs and 

funds to be put to better use; 

• The number of new management decisions reached; 

• The disposition of audits with final action; and 

• For each audit report, the date issued, dollar value and an explanation of why final action has not been 

taken. For audits in formal administrative appeal or legislative solution, reporting may be limited to the 

number of affected audits. 

Specific definitions of terms used in this section are provided on the next page. 

Highlights

During FY 2003, USDA agencies completed corrective actions on 65 audits. An additional 55 audits 

reached management decision. The current inventory of audits with management decision is 217, down 

from 227 at the beginning of the year. 

Audit Follow-Up Process

Audit follow-up ensures that prompt and responsive action is taken once management decisions are 

reached on recommendations contained in final audit reports. USDA agencies are required to prepare 

combined time-phased implementation plans and interim progress reports for all audits that remain open 

one or more years beyond the management decision date. Time-phased implementation plans are submitted at the end of each 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. 

Agencies also provide quarterly interim progress reports 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. 
USDA Performance and Accountability Report for FY 2003 

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129 

Resolved Audit Inventory 

Resolved audits are those for which management decisions have been reached on all recommendations 

in the audit report. 

At the beginning of the fiscal year, USDA agencies and OIG reached management decisions on all 

recommendations in 227 audits. During the fiscal year, agencies and OIG reached management decisions on 

an additional 55 audits. Management completed corrective actions on 65 audits. The total resolved audit 

inventory is 217, which includes 5 audits in appeal status. 

Exhibit 84: Decrease in Total Resolved Audit 

Inventory

Exhibit 85: Increase in Reportable Audits 

246

244

226

217

200

220

240

260

280

FY 00 FY 01 FY 02 FY 03

Number of Audits

147

161

159

148

140

146

152

158

164

FY 00 FY 01 FY 02 FY 03

Number of Audits

The number of reportable audits represents those audits with management decisions but without final action one or more years past the management decision date. Although the number of reportable audits has 

increased, the percentage of audits behind schedule remained at 60 percent (88 of 147 in FY 02 and 96 of 

161 in FY 03.) Agencies have completed corrective actions on 56 audits that only are pending collection 

of associated disallowed costs. An additional 21 audits are scheduled for completion by September 30, 

2003; however, final action documentation will not be evaluated this reporting period. 

Exhibit 83: Audit Follow-Up Definitions

Disallowed Cost A questioned cost that management sustains or agrees is not chargeable to the government. 

Final Action The completion of all actions that management has concluded 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 made. 

Funds To Be Put to 

Better Use (FTBU) 

A recommendation by OIG that funds could be used more efficiently if management took actions to 

implement and complete the recommendation, including: 

• Reductions in outlays; 

• Deobligation of funds from programs or operations; 

• Withdrawal of interest subsidy costs on loans or loan guarantees, insurance, or bonds; 

• Costs not incurred by implementing recommended improvements related to the operations of the 

establishment, a contractor, or grantee; 

• Avoidance of unnecessary expenditures noted in pre-award reviews of contract or grant agreements; or 

• Any other savings, which are specifically identified. 

Management Decision Management's evaluation of the audit findings and recommendations, and the issuance of a final 

decision agreed to by management and OIG concerning its response to the findings and recommendations. 
USDA Performance and Accountability Report for FY 2003 

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130 

Beginning and Ending Inventory for Audits with Disallowed Costs and Funds 

to Be Put to Better Use (FTBU) 

Of the 65 audits that achieved 

final action during the period, 

34 audits contained disallowed costs. The number of 

disallowed cost audits remaining in the inventory at the end 

of the fiscal year is 97 with a 

monetary value of 

$99,386,645. 

Final action occurred on 10 

audits that involved funds to 

be put to better use (FTBU) 

amounts. USDA projects 

more efficient use for 99 percent of the amount identified, based on the corrective actions implemented. 

The number of FTBU audits remaining in the inventory to date is 44 with a monetary value of 

$618,691,774. 

Adjustments to Disallowed Costs 

For audits with disallowed costs that achieved final action, OIG and management agreed to collect a total 

of $45,438,779 of which $31,654,816 was recovered. However, OIG and management made adjustments 

worth $13,783,963 (30 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. 

Exhibit 86: Inventory of Audits With Disallowed Costs 

Disallowed Costs # of Audits Amount ($) 

Beginning Balance 111 $126,636,309 

Plus: New Management Decisions 20 $18,189,115 

Total Audits Pending Collection 131 144,825,424 

Adjustments (13,783,963) 

Revised Subtotal 131,041,461 

Less: Final Actions 34 

Disallowed Costs Recovered (3,654,816)1

Property in Lieu of Cash (28,000,000) 

Audits Pending Final Action at the End of the Period 97 99,386,645 

1

This amount does not include $83,019 of interest collected. 

Exhibit 87: Inventory of Audits With Funds to be Put to Better Use

Funds to be Put to Better Use # of 

Audits 

Amount ($) 

Beginning Balance 45 $586,962,365 

Plus New Management Decisions 9 $49,032,556 

Total Audits Pending 54 635,994,921 

Less: Final Actions 10 

Funds to Be Put to Better Use: 

FTBU Implemented 17,175,794 

FTBU Not Implemented 127,353 

Total FTBU Amounts 17,303,147 

Audits Pending Final Action at The End of The Period 44 618,691,774 

Exhibit 88: Distribution of Adjustments to Disallowed Costs 

Category Amount ($) 

Change in Management Decision 267,741 

Legal Decision 11,639,005 

Write-Off 1,172,512 

Agency Documents 455,932 

Agency Discovery 33,002 

Appeal 215,771 

Total $13,783,963 
USDA Performance and Accountability Report for FY 2003 

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131 

Reportable Audit Statistics by USDA Agency 

Reportable audits are separated into three groups: 

• Audits without final action for which corrective action is continuing as planned and deemed to be on 

schedule; 

• Audits behind schedule which have missed their original estimated completion dates; and 

• Audits for which all administrative actions have been completed and the only action remaining is the 

collection of disallowed costs. 

Exhibit 89: Distribution of Audits, Disallowed Costs and FTBU by USDA Agency 

Audits On Schedule Audits Behind Schedule Audits Under Collection 

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

AMS 1 - - - - - - - - 

APHIS - - - 3 - - 4 8,891,635 - 

ARS - - - 1 - - - - - 

CR 1 - - - - - - - 

DA - - - 4 27,259 249,866 - - - 

FNS 1 41,898 6,145,810 12 8,840 67,220,249 8 9,514,741 499,860 

FS 1 2,500,000 - 25 1,350,000 70,269,210 - - - 

FSA/CCC - - - 8 697,225 208,043,386 32 21,659,558 8,540,768 

FSIS - - - 2 - - - - - 

NASS - - - 2 - - - - - 

NRCS - - - 2 - 2,970,003 1 21,033,708 - 

OCFO 5 - - 1 - - - - - 

OCIO - - - 2 - - - - - 

RBS - - - 4 4,202,351 100,000 1 850,000 - 

RD - - - 3 - - 1 264,000 - 

RHS - - - 17 1,268,495 189,366,322 2 25,102 - 

RMA - - - 9 69,217 23,818 6 1,650,792 13,264,866 

RUS - - - 1 - - 1 35,118 - 

Totals 9 2,541,898 6,145,810 96 7,623,387 538,242,854 56 63,924,654 22,305,494 

Reportable audits that are behind schedule are listed individually and categorized by the reason final action has not occurred. The categories are: 

• 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 (OGC) or OIG advice; 

• Conclusion of external action; and 

• Administrative action. 

Audits previously reported to Congress are identified by an asterisk. 
USDA Performance and Accountability Report for FY 2003 

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Exhibit 90: Audits One Year or More Past the Management Decision Date and Behind Schedule Audits Date Issued 

Estimated Completion Date 

Audit Title 

(U.S. 

(42) Pending issuance of policy/guidance 03006-1-AT 09/19/95 12/31/03 FSA Management of the Dade County, Florida ASCS Office 03601-15-KC* 03/31/00 10/31/03 FSA Emergency Conservation Program 03601-36-TE* 06/08/00 03/31/04 FSA Farm Loan Program Guaranteed Loans 04099-1-AT 06/01/01 02/28/04 RHS Guaranteed Multi-Family Housing Loans 04099-1-HQ* 02/01/96 02/28/04 RHS Legislative Proposals to Strengthen the Rural Rental Housing Program 04099-3-KC 02/25/02 12/31/03 RHS FY 2001 Financial Statement Field Confirmation Review, Nebraska 04600-5-KC* 09/30/93 02/28/04 RHS Rural Rental Housing Program, Servicing of HUD Section 8/515 Projects 04600-47-CH* 09/30/94 02/28/04 RHS Rural Rental Housing Program, Management Operations 04601-1-KC* 12/16/96 02/28/04 RHS Rural Rental Housing Program, Additional Servicing of Section 8/515 Projects 04801-4-CH* 02/12/99 01/31/04 RHS Evaluation of Rural Rental Housing Tenant Income Verification Process 05600-4-TE* 09/30/93 03/30/04 RMA FCIC Crop Year 1991 Claims 05601-5-TE* 03/15/99 12/31/03 RMA Prevented Plantings of 1996 Insured Crops 08001-2-HQ 03/29/02 03/31/04 FS Aviation Security Over Aircraft Facilities 08002-2-SF* 11/28/00 11/28/03 FS Valuation of Lands Acquired in Congressionally Designated Areas Land Adjustment Program 08003-2-SF* 08/05/98 11/28/03 FS Toiyabe/Humboldt National Forest Land Adjustment Program 08003-5-SF* 12/15/00 12/31/03 FS Land Acquisitions and Urban Lot Management Program 08003-6-SF* 07/14/00 11/28/03 FS Zephyr Cove Land Adjustment 08099-6-SF* 03/27/01 12/31/03 FS Security Over USDA Information Technology Resources 08099-37-AT* 08/24/92 09/30/03 FS FY 1991 Financial Statements 08099-42-AT* 08/03/93 09/30/03 FS FY 1992 Financial Statements 08401-4-AT* 07/18/96 12/31/03 FS FY 1995 Financial Statements 08401-7-AT* 07/13/98 09/30/03 FS FY 1997 Financial Statements 08401-12-AT 02/26/02 03/31/04 FS FY 2001 Financial Statements 08601-1-AT* 03/29/96 12/31/03 FS Management of Hazardous Waste at Active or Abandoned Mines 08601-7-SF* 05/23/95 11/28/03 FS Controls Over Research Services Provided to External and Forest Service Clients 08601-27-SF 03/28/02 11/28/03 FS Review of National Land Ownership Adjustment Team Effectiveness 08801-3-AT* 06/16/00 09/30/03 FS Real and Personal Property Issues 08801-6-SF* 01/19/00 11/28/03 FS Land Adjustment Program San Bernadine National Forest & South Zone 23099-1-FM* 03/30/00 TBD OCIO Security Over Data Transmission in the Department Needs Improvement 24601-1-CH* 06/21/00 03/31/04 FSIS Food Safety and Inspection Service Laboratory Testing of Meat and Poultry Products 27010-11-CH* 08/25/97 09/30/04 FNS National School Lunch Program – Verification of Applications in Illinois 27099-13-SF* 03/23/01 12/31/03 FNS Appeal Process 27600-6-AT* 03/31/95 09/30/04 FNS Day Care Homes Nationwide 27601-3-CH* 03/22/96 09/30/04 FNS Food Stamp Program—Disqualified Recipient System 27601-7-SF* 08/23/99 09/30/04 FNS Presidential Initiative: Operation Kiddie Care 33601-1-CH* 06/29/96 01/31/04 APHIS Licensing of Animal Exhibitors 
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Exhibit 90: Audits One Year or More Past the Management Decision Date and Behind Schedule Audits Date Issued 

Estimated Completion Date 

Audit Title 

(U.S. 

34001-1-HQ* 12/17/96 12/31/04 RBS Minority Enterprise Financial Acquisition Corp., Cooperative Agreement, Kansas City, KS 34099-2-AT 09/14/01 01/30/04 RBS Business and Industry Loan Program, Fort Gaines, GA 34601-1-HY* 07/22/98 12/31/03 RBS Business and Industry Loan Program—Morgantown, West Virginia 50099-4-HQ 10/16/01 09/30/03 OO USDA’s Physical Critical Infrastructure Program 50801-3-HQ* 09/29/97 08/31/04 FSA Minority Participation in FSA’s Farm Loan Program 85099-1-HQ 09/10/01 12/31/04 RD Cooperative Agreement with the Washington State Department of Community, Trade, and Economic Development (6) Pending conclusion of investigation, negotiation or administrative appeal04801-3-KC 03/31/99 10/31/03 RHS Bosley Management, Inc. – Sheridan Wyoming 04801-6-HY* 03/17/99 09/30/03 RHS Rural Rental Housing Program, Lewiston Properties, Fayetteville, NY 05099-2-KC* 07/14/98 07/31/04 RMA Quality Control for Crop Insurance Determinations 23801-1-HQ* 08/20/98 03/31/04 OO Review of Office of Operations Contract with B&G Maintenance, Inc. 27099-22-CH 02/22/02 TBD FNS Opportunities Industrialization Center of Greater Milwaukee 34004-5-HY* 02/18/00 TBD RBS Audit of Procurement Operations, Virginia State Office, Richmond, Virginia (16) Pending receipt and/or processing of final action documentation 04601-2-AT 03/25/99 10/17/03 RHS Guaranteed Rural Housing Loan Program 04801-9-SF* 01/27/99 12/30/03 RHS Rural Rental Housing Program—DBSI Realty Corporation, Boise, ID 04801-11-TE 09/23/99 09/30/03 RHS Calhoun Property Management—Mansfield, Louisiana 05099-1-KC* 03/03/98 11/30/03 RMA Transfer of Catastrophic Risk Protection Policies to Reinsured Companies 05099-6-KC* 09/30/99 11/30/03 RMA Servicing of Catastrophic Risk Protection Policies 05401-8-FM 03/30/00 10/31/03 RMA FY 1999 FCIC Financial Statements Report on Management Issues 08401-9-AT* 02/25/00 09/30/03 FS FY 1999 Financial Statements 08601-4-AT* 03/31/98 09/30/03 FS Wildlife and Fisheries Habitat Management 08601-25-SF* 06/22/01 09/30/03 FS Working Capital Fund Enterprise Services 08801-3-SF* 06/16/00 09/30/03 FS Financial Disclosure and Outside Employment Reporting Requirements 24601-1-FM 04/04/01 10/30/03 FSIS Review of FSIS Staffing and Budget Management 50099-3-TE* 07/20/01 10/01/03 NRCS Grants/Agreements with the National Fish and Wildlife Foundation 50099-5-HQ 06/27/02 09/30/03 DA Locating New Office and Facilities in Rural Areas 50099-11-FM* 03/25/98 10/31/03 DA Review of Controls in the Payroll/Personnel and T&A Systems 50601-2-CH* 03/30/01 12/30/03 RD Verification of the Government Performance and Results Act – Program Performance in Rural Development 85401-6-CH 02/27/02 12/30/03 RD FY 2001 Financial Statement Audit (14) Pending systems development, implementation, or enhancement 02099-1-FM 12/04/01 09/30/05 ARS IT Security 03099-32-KC* 12/22/99 09/30/03 FSA Controls Over Administrative Payment Operations 04099-72-FM* 09/28/90 09/30/03 RHS Collection Systems and Other Selected Areas 06401-11-FM 07/13/00 03/31/04 CCC FY 1999 Financial Statements 06401-14-FM 06/27/01 03/31/04 CCC FY 2000 Financial Statements 
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Exhibit 90: Audits One Year or More Past the Management Decision Date and Behind Schedule Audits Date Issued 

Estimated Completion Date 

Audit Title 

(U.S. 

08001-1-HQ* 06/28/00 03/31/05 FS Implementation of the Government Performance and Results Act 09600-5-HQ* 04/01/92 09/30/04 RUS FY 1991 Management Letter 10099-1-TE 02/01/02 09/30/04 NRCS Security Over IT Resources 26099-2-FM 03/25/02 09/30/03 NASS Information Technology Security 27099-4-KC* 01/31/00 10/31/04 FNS Food Stamp Program Participation by Disqualified Retailers 27099-18-HY* 09/05/01 12/31/03 FNS Security Over Information Technology Resources 27601-8-CH* 01/21/97 10/31/04 FNS Food Stamp Program—Retailer Monitoring with Store Tracking and Redemption Subsystem 50401-21-FM* 05/29/98 09/30/06 RHS Audit of the Rural Development Consolidated Financial Statements for FY 1996 50601-3-CH* 07/23/01 12/30/03 APHIS Assessment of APHIS & FSIS Inspection Activities to Prevent the Entry of Foot and Mouth Disease (6) Pending results of internal monitoring or program review 05099-1-TE* 09/30/97 07/31/04 RMA Reinsured Companies Actual Production History Self-Reviews 05600-1-TE* 09/28/89 07/31/04 RMA Crop Year 1988 Insurance Contracts with Claims 26099-1-FM* 05/14/01 09/30/03 NASS Security of NASS Information Technology Resources 27099-9-HY* 12/14/99 09/30/03 FNS State Option Food Stamp Program 27401-8-HY* 06/27/97 09/30/05 FNS FY 1996 Financial Statements 50099-28-FM* 07/18/00 12/31/03 OCIO President’s Council on Integrity and Efficiency Critical Infrastructure Protection Review (4) Pending results of request for change in management decision05099-8-KC* 03/31/00 TBD RMA Standard Reinsurance Agreement Reporting Requirements 08099-9-TE 06/22/01 09/30/03 FS Challenge Cost Share Program 08401-1-AT* 06/20/95 10/31/03 FS FY 1994 Financial Statements 50099-19-FM 01/02/01 10/31/03 OCFO Review of Controls Over Selected USDA Administrative Systems (1) Pending OGC or OIG advice 33004-1-AT 03/07/00 TBD APHIS Plant Protection and Quarantine Activities in Florida (5) External Action Required 04004-4-CH* 03/13/98 12/31/03 RHS Evaluation of Rural Rental Housing Tenant Income Verification Process in East Lansing, MI 04801-5-KC* 11/02/98 11/01/03 RHS Rural Rental Housing Program, Brookview Management, Inc., St. Louis, MO 08601-5-SF* 09/30/93 09/30/05 FS Graduated Rate Fee System 08801-4-TE* 02/15/98 11/28/03 FS Collection of Royalties on Oil and Gas Production 27010-24-SF 01/09/02 10/31/03 FNS Child and Adult Care Food Program Crystal Stairs, Inc. (2) Pending Administrative Action 03099-47-KC 10/31/01 09/30/03 FSA Security Over FSA/CCC IT Resources 04099-1-HY* 11/07/95 12/31/03 RHS Rural Rental Housing Program, Whistleblower Complaint, San Juan, PR Total Number Audits (96) Total $ 7
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FEDERAL MANAGERS’ FINANCIAL INTEGRITY ACT REPORT ON 

MANAGEMENT CONTROLS 

Background 

USDA has made substantial progress by reducing the number of material deficiencies to eight. This result 

continues the downward trend that began in FY 2000 when there were 33 material deficiencies. It further 

demonstrates the Department’s commitment to operating its programs efficiently and effectively in accordance with the Federal Managers’ Financial Integrity Act (FMFIA). FMFIA requires agencies to provide 

reasonable assurance that: 

• Obligations and costs comply with applicable laws and regulations; 

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

• Transactions are accounted for and properly recorded. 

Additionally, FMFIA requires a separate statement as to whether financial management systems conform 

to standards, principles and other requirements to ensure that Federal managers have timely, relevant and 

consistent financial information for decision-making purposes. USDA’s goal is to eliminate material internal control weaknesses and financial system nonconformances by the end of FY 2004, which 

complements the related goal of sustaining an unqualified audit opinion. This will be achieved through 

the continuous evaluation of USDA programs, operations and financial systems; financial-statement audits, other OIG and GAO audits; management and system reviews; and prompt attention to correcting the 

causes of identified weaknesses. 

Under the Federal Financial Management Improvement Act (FFMIA), agencies are required to report 

whether financial management systems substantially comply with the Federal financial management systems requirements, Federal accounting standards and the U. S. Government Standard General Ledger at 

the transaction level. If any agency is not in compliance, it must implement a remediation plan to upgrade 

its financial management systems. Three USDA component agencies have outstanding FFMIA noncompliances. Remediation plans will be included in the FY 2003 Five-Year Financial Management Plan. 

USDA’s administrative systems are FFMIA compliant. 

Highlights 

The “Message from the Secretary” provides USDA’s assurance statement for FMFIA reporting. This 

message states that USDA complies with the objectives of FMFIA Sections 2 (internal controls) and 4 

(financial management systems), except for the weaknesses described in this section. In cooperation with 

OIG and the Office of the Chief Financial Officer (OCFO), Agency heads and managers have worked 

diligently to address and correct existing and any newly discovered weaknesses. 

USDA agencies provided annual assurance statements and reports on material weaknesses and/or financial management system nonconformances. At that time, a determination was made as to whether the 

weaknesses were agency-level material deficiencies. OCFO staff reviewed each agency-level material 

deficiency to determine whether it met the criteria for a Departmental material deficiency. The criteria for 

reportable, corrected and downgraded material weaknesses and financial management system nonconformances are listed on the next page. 

During the fiscal year, USDA reduced the number of material deficiencies by more than half. The Department exceeded its projected target by closing 12 material deficiencies. USDA began the year with 19 

material deficiencies and completed or determined that 12 weaknesses were no longer material. The De-
USDA Performance and Accountability Report for FY 2003 

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136

partment also added one new material weakness for a year-end total of eight outstanding material deficiencies. Six material weaknesses and two financial management system nonconformances account for 

the outstanding material deficiencies. While one material weakness and one financial management system 

nonconformance scheduled for completion have been delayed until FY 2004, one other material weakness 

was completed ahead of schedule, and seven were determined to be no longer material. The FY 2004 goal 

is to eliminate the remaining material deficiencies. 

Management Controls Program 

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

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

Systems.” 

Within USDA, Subcabinet officials, agency heads and heads of staff offices 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 the OIG, USDA’s management works aggressively to determine its 

material deficiencies’ origins and correct them quickly. 

USDA Guidelines for Reportable Material Deficiencies 

A Departmental material weakness is a deficiency in internal controls that satisfies one or more of the 

following criteria: 

• Merits the attention of the Executive Office of the President and the relevant Congressional oversight 

committees; 

• Violates statutory or regulatory requirements; 

• Deprives the public of needed services; 

• Significantly weakens safeguards against waste, loss, unauthorized use or misappropriation of funds, 

property or other assets; 

• Significantly impairs fulfillment of the Department’s mission; 

• Results in a conflict of interest; or 

• Is of a nature that omission from the annual Report on Management Controls could reflect adversely on 

the actual or perceived management integrity of the Department. 

A Departmental material financial system nonconformance satisfies one or more of the following criteria: 

• Merits the attention of the Executive Office of the President and the relevant Congressional oversight 

committees; 

• Prevents USDA’s primary financial management system from achieving central control over agency 

financial transactions and resource balances; or 

• Prevents compliance of the primary financial management system with standards published by the 

OMB Circular A–127, which includes the availability of timely, consistent and relevant financial information for decision-making purposes. 

USDA Guidelines for Reporting a Corrected or Downgraded Material Deficiency 

To report a material deficiency as corrected or downgraded, USDA must have: 

• The demonstrated commitment of senior-level managers to resolve the material deficiency as evidenced by resource deployment and frequent and regular monitoring of corrective action progress; 
USDA Performance and Accountability Report for FY 2003 

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137

• Provided substantial and timely documented progress in completing corrective actions for the material 

deficiency; 

• Completed the most significant corrective actions, with the remaining actions being minor in scope and 

not having a material effect on the program or operation; and 

• Implemented corrective actions that have eliminated or minimized the cause(s) of the material deficiency. 

Material Weaknesses and Nonconformances Reported in the FMFIA and 

FFMIA 

Information technology (IT) is a major issue for 

USDA. It impacts the Department’s ability to efficiently and effectively deliver its programs and 

provide meaningful and reliable reporting. While 

the Department and its agencies continue to improve the security over its IT resources, significant 

progress is still needed. 

USDA’s ability to protect its assets from fraud, 

misuse and disruption needs strengthening. The 

Department, under the direction of the Office of 

the Chief Information Officer (OCIO), will continue to develop policy, publish guidance and 

regulations, and provide training in the areas of 

information system risk assessment and mitigation, physical and logical access controls, disaster 

recovery and contingency planning, intrusion detection and response, certification and accreditation, and security awareness. The Exhibit on the next page 

provides a description and a summary of the corrective actions planned for the remaining material deficiencies. 

Historical Data on Material Deficiencies 

The Department has reduced the number of material deficiencies from a high of 33 in FY 2000 to 8 

for FY 2003. This result is a 76-percent decrease in the number of outstanding material deficiencies 

reported during the past four years. Corrected deficiencies continue to exceed the number of new deficiencies reported. 

Exhibit 91: Material Deficiencies Decline

11 10

15

8 9

2 1

33 32

19

12

8

0

10

20

30

40

2000 2001 2002 2003

Corrected Deficiencies New Deficiencies

Remaining Deficiencies
USDA Performance and Accountability Report for FY 2003 

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Exhibit 92: Summary of Outstanding Material Deficiencies and Estimated Completion Dates 

Responsible 

Agency Material Deficiency Description 

Corrective Actions 

Remaining To Be Taken 

Year 

Identified 

Current 

Estimated 

Completion

Date 

 Section 2 Material Weaknesses 

FNS 94-01: Management of the Child and 

Adult Care Food Program (CACFP): Management and monitoring of weaknesses in 

the CACFP need strengthening. Sponsoring organizations have been identified as 

receiving excessive Federal funding for 

meal service and administration. 

Publish the CACFP management 

improvement regulations. Conduct 

management evaluations in approximately half of the CACFP SAs. 

Reassess, revise, and implement 

training on final regulations. 

FY 1994 FY 2004 

99-01: National School Lunch (NSL) and 

Breakfast Program Eligibility: Data indicate a problem with the integrity of 

household eligibility determination for free 

and reduced-price meals. 

Develop and implement legislative 

provisions requiring SAs to collect 

and report on data verification activities to FNS. 

FY 1999 FY 2004 

 01-01: Procurement in the Child Nutrition 

Program: Improper procurement of goods 

and services have been found to occur in 

the NSL, School Breakfast and CACFP and 

Summer Food Service Programs. 

Revise procurement guidance and 

evaluate its effectiveness against 

improper procurement of goods and 

services. 

FY 2001 FY 2004 

FS 03-01: Internal Control Weakness: Overall financial management controls not 

adequate.

Provide training and issue new policy 

requiring supervisory review of property transactions and to improve 

capitalization controls. Finalize the 

process to certify payroll. 

FY 2003 FY 2004 

OCIO 00-01: USDA Information Security Weaknesses: Weaknesses have been 

identified in the Department’s ability to 

protect its assets from fraud, misuse, and 

disruption. 

Improve controls in the Department’s 

information security in the areas of 

risk assessment and mitigation, 

physical and logical access controls, 

disaster recovery and contingency 

planning, intrusion detection and 

response, certification and accreditation and security awareness. 

FY 2000 FY 2004 

RD 96-02: Oversight of the Multi-Family 

Housing Program (MFH): The MFH Program lacks adequate oversight and 

internal controls which has led to program 

abuse by program participants. 

Publish Final Rule for Multi-Family 

Housing Loan Programs. 

FY 1992 FY 2004 

Section 4 Financial Management System Nonconformances 

RD 94-01: Direct Loan Servicing and Reporting Subsystem: Direct Loan Servicing 

and Reporting system not in compliance 

with OMB Circular A-127, “Financial Management Systems.” 

Complete incremental implementation of the Rural Utilities Loan 

Servicing System to replace legacy 

loan systems. 

FY 1994 FY 2004 

FSA 00-01: Foreign Credit Reform Systems: 

Systems are not full automated and integrated into the Commodity Credit 

Corporation’s Core Accounting System 

(CORE). 

Implement new General Sales Manager System to interface directly with 

the CORE general ledger and replace the Financial Management 

System accounting structure in the 

Automated P.L. 480 Umbrella System (APLUS) with the CORE 

accounting structure. 

FY 2000 FY 2004 
USDA Performance and Accountability Report for FY 2003 

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139

Summary of Corrected or Downgraded Material Weaknesses 

Material deficiencies for corrective actions completed or deemed no longer material as of September 30, 

2003, are summarized below. 

Exhibit 94: Material Deficiencies Corrected or No Longer Material 

Responsible Agency Number and Title of Material Deficiencies Year 

Identified 

Status Completed/Downgraded 

DA 01-01: USDA’s Agencies’ Internal Control Purchase Card Management 

System (PCMS) 

2001 Completed 

FNS 91-01: Management of Food Stamp Program Recipient Claims 1991 Downgraded 

91-02: Administration of the Food Stamp Program (FSP) at State Agencies 1991 Downgraded 

 01-02: Administrative Cost Reimbursement Made to Partner Agencies 

Operating Food Assistance Programs Under the Auspices of FNS 

2001 Downgraded 

FS 91-02: Adequacy of Financial Systems 1989 Downgraded 

 92-01: Administration of Lands Special Use Permits 1992 Downgraded 

 00-01: Performance Reporting 2000 Downgraded 

 01-01: Timber Sale Environmental Analysis 2001 Downgraded 

FSA 01-01: Reimbursable Claims Not Made for Excess Ocean Freight Payments 2001 Completed 

OCFO 01-01: USDA’s Financial Statement Preparation is Not Timely or Reliable 2001 Completed 

OCIO 01-01: Information Security Weaknesses at the National Information 

Technology Center (NITC) 

2001 Completed 

 02-01: Security Weaknesses in USDA’s Controls Over Web Site Content 2002 Completed 

Material Weaknesses Corrected 

DA-01-01: USDA’s Agencies’ Internal Controls Purchase Card Management System (PCMS)

USDA’s Departmental Administration issued revised regulations and policies on PCMS, developed and 

deployed PCMS software oversight queries and completed ALERTS training for USDA agencies. 

FSA-01-01: Reimbursable Claims Not Made for Excess Ocean Freight Payments

The Commodity Credit Corporation (CCC) submitted excess ocean freight billings to the Maritime Administration on the basis of finalized documentation. CCC also established accounts receivable for excess 

ocean freight for FYs 1994-2002 in the FY 2003 financial statements. 

OCFO-01-01: USDA’s Financial Statement Preparation is Not Timely or Reliable 

USDA deployed the Financial Statements Data Warehouse October 1, 2002, and successfully used it to 

produce the FY 2002 USDA Consolidated Financial Statements. The Department also performed a comprehensive analysis regarding the ability to use Federal Agencies’ Centralized Trial Balance System 

Exhibit 93: Material Deficiencies Aging Analysis

Fiscal Year Identified 2000 and Prior 2001 2002 2003 Total 

Beginning Balance FY 2003 11 6 2 - 19 

Add: New Weaknesses Reported in FY 2003 - - - 1 1 

Deduct: Completed or Deemed Nonmaterial 5 6 1 - 12 

Pending Completion 6 0 1 1 8 
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140

(FACTS) file formats for interfacing programmatic data. The analysis showed that FACTS is not feasible 

for interfacing. Thus, USDA deployed a generic interface for summary financial data from the program 

systems. 

OCIO-01-01: Information Security Weaknesses at the National Information Technology Center (NITC)

During FY 2003, NITC issued policy and procedures to require all new resources or services deployed by 

customer agencies to meet security requirements prior to implementation. Installation and review procedures outline and describe the requirements for all mid-range systems deployment including Operating 

System hardening procedures as specified by OCIO/Cyber Security. The NITC Foundation for Security 

Policy maps out a comprehensive “blueprint” for all security directives and policies issued by NITC. 

NITC established the S/390 Firewall system and completed Phase 2 of the Enterprise Cyber Security Project to separate Public and Intranet traffic. NITC common resources (TN 3270 and FTP) requiring public 

Internet access were identified and deployed in the Demilitarized Zone (DMZ). A DMZ is a computer 

host that prevents outside users from obtaining direct access to an organization’s data. The encryption of 

all sensitive data transported in and out of the DMZ through NITC common resources was enabled 

through the use of Secure Socket Layer for TN 3270/SSL and Secure/FTP. NITC customers are being 

notified of the encrypted services available from the public Internet and that all unencrypted access from 

the public Internet will be disallowed as of January 1, 2004. 

OCIO-02-01: Security Weaknesses in USDA’s Controls over Web Site Content 

OCIO published two departmental directives that provide guidance to USDA agencies in evaluating publications prior to being posted on Home pages or Web pages. The directives are designed to determine if 

any potential Web site content contains sensitive security information. The directives also include criteria 

for USDA agencies to use to challenge or eliminate such content. USDA maintains an inventory of 

agency Web sites. 

Material Weaknesses Downgraded 

A material weakness may have been downgraded for one of two reasons. The control vulnerability is no 

longer considered to be material or the vulnerability no longer exists based on absent or weakened control(s) that are within the span of the agency’s authority to correct. While downgraded as a material 

weakness, it is still possible for these problems to be reported in other sections of this report (such as improper payments or management challenges). USDA will continue to monitor and assess the downgraded 

weaknesses. 

FNS-91-01: Management of Food Stamp Program Recipient Claims 

Over the last several years, the Food Nutrition Service (FNS) has worked with Food Stamp Program State 

agencies to guide them toward improving claims systems and claims collection. FNS also implemented a 

review system by which regional offices monitor and evaluate recipient-claims activity in each State. This 

review is designed to identify systems that are working properly. Any State with significant problems is 

required to submit an acceptable corrective-action plan and timetable. Regions then monitor progress 

against the plan in each State. This emphasis has resulted in significant measurable progress: 

• Today, the number of States passing review is 39, compared to only 10 in 1998; and 

• The amount of Nationwide issuance by these 39 States is 72 percent. This is an increase from 23 percent of Nationwide issuance by States having acceptable claims systems in 1998. 

FNS will continue to focus on this area and monitor State progress toward further improvement. 
USDA Performance and Accountability Report for FY 2003 

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141

FNS-91-02: Administration of the Food Stamp Program (FSP) at State Agencies

During the past 15 years, FNS has established National control measures to guide State Agencies through 

error rate reduction efforts. These new measures have demonstrated progress; error rates have been reduced to the lowest in program history. During the fiscal year, FNS implemented a new methodology for 

a multi-tiered approach to error reduction. This methodology: 

• Supported different levels of intervention based upon the size and status of each State; 

• Enhanced the Quality Control and Payment Accuracy Extranet to include extensive payment accuracy 

materials; 

• Implemented the revised FNS Handbook 310 and associated forms; 

• Began development of data analysis based on new reporting requirement; 

• Implemented a monitoring process that allows for early identification and intervention to help States 

whose reported error rates are rising; and 

• Published the FSP Accuracy Best Practices Guide. 

FNS-01-02: Administrative Cost Reimbursement Made to Partner Agencies Operating Food Assistance 

Programs Under the Auspices of FNS 

State agencies managing financial aspects of USDA food-assistance programs follow controls established 

under general Federal and program-specific guidelines when claiming Federal reimbursement for program operations and Automated Data Processing (ADP) acquisitions. During the fiscal year, FNS: 

• Developed additional supportive guidance in key areas; 

• Evaluated the effectiveness of the revised Special Supplemental Nutrition Program for Women, Infants 

and Children (WIC) cost allocation guidance; 

• Provided training and technical assistance to the States; 

• Planned and implemented the National Tracking System for tracking APDs; 

• Participated on the ADP Reform Committee that produced decisions to pursue regulations to increase 

the submission threshold; 

• Evaluated Financial Management reviews and single audits; and 

• Determined that there were no new trends that indicated new national controls or guidance was necessary. 

FS-91-02: Adequacy of Financial Systems 

The Forest Service (FS) completed procedures for reconciling FFIS interfaces with subsidiary systems. It 

also defined the required documentation for reconciliations. FS developed financial statements from a 

single, official trial balance using USDA’s new Financial Statements Data Warehouse. The agency established procedures to validate that the general ledger is in balance for budgetary and proprietary accounts. 

The procedures include all recorded transactions prior to preparing year-end financial statements. The 

pilot project for incident accounting was launched to address recommendations from the needs assessment. The project also incorporates new OMB direction. The results of the pilot testing were successful. 

FS now transfers obligations to FFIS daily. An electronic training package for managers was developed 

and currently is being reviewed. FS issued 27 CFO Bulletins in FY 2002 and 18 in FY 2003. The CFO 

Bulletins do not expire and carry the same authority as policy incorporated in the directives system. 

FS-92-01: Administration of Lands Special Use Permits 

FS continued its efforts to incorporate comments on proposed revisions to categorical exclusions for special uses. OMB classified the proposed rule as non-significant. Field units were trained on the 

requirements for special uses. The Final Rule is expected to be published October 2003. 
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142

FS-00-01: Performance Reporting 

FS designated the Associate Chief and Chief Operating Officer as the responsible official for agency performance accountability. This designation includes the development of a Performance and Accountability 

System (PAS). A comprehensive action plan with milestones was developed for implementing PAS. 

Agency output measures were refined and linked to output measures in the strategic plan for development 

of the FY 2005 budget and inclusion in PAS. FS tied its measures to the Budget Formulation and Execution System activities. It also used the measures to assess and report on the performance of Agency 

programs, and for budget formulation. 

FS-01-01: Timber Sale Environmental Analysis 

FS drafted manuals and handbooks for standard review procedures of environmental assessments, and 

implementation of NEPA and other environmental regulations. Standard reviews were completed for 52 

sales nationwide.
USDA Performance and Accountability Report for FY 2003 

Consolidated Financial Statements 

143

IV. CONSOLIDATED FINANCIAL STATEMENTS 
USDA Performance and Accountability Report for FY 2003 

Consolidated Financial Statements 

144

Department of Agriculture 

CONSOLIDATED BALANCE SHEET 

As of September 30, 2003 and 2002 

(in millions) 

2003 2002 Restated

Fund Balance with Treasury (Note 3) 36,480 $ 39,617 $ 

Investments (Note 5) 45 96

Accounts Receivable, Net (Note 6) 666 242

Other (Note 10) 7 1

Total Intragovernmental 37,198 39,956

Cash and Other Monetary Assets (Note 4) 141 165

Investments (Note 5) 15 15

Accounts Receivable, Net (Note 6) 1,755 1,866

Loans Receivable and Related Foreclosed Property, Net (Note 7) 73,590 75,543

Inventory and Related Property, Net (Note 8) 278 749

General Property, Plant, and Equipment, Net (Note 9) 4,919 5,040

Other (Note 10) 245 284

Total Assets 118,141 123,618

Accounts Payable 1,206 571

Debt (Note 12) 76,140 75,933

Other (Note 14) 19,942 21,394

Total Intragovernmental 97,288 97,898

Accounts Payable 3,614 2,774

Loan Guarantee Liability (Note 7) 883 1,077

Debt Held by the Public (Note 12) 80 84

Environmental and Disposal Liabilities (Note 13) 21 22

Other (Notes 14 & 15) 13,860 10,843

Total Liabilities 115,746 112,698

Commitments and Contingencies (Note 16)

Unexpended Appropriations 16,810 25,619

Cumulative Results of Operations (14,415) (14,699)

Total Net Position 2,395 10,920

Total Liabilities and Net Position $ 123,618 118,141 $ 

Assets (Note 2):

Intragovernmental

Net Position:

Intragovernmental:

Liabilities (Note 11):

The accompanying notes are an integral part of these statements.
USDA Performance and Accountability Report for FY 2003 

Consolidated Financial Statements 

145

Department of Agriculture 

CONSOLIDATED STATEMENT OF NET COST 

For the Years Ended September 30, 2003 and 2002 

(in millions) 

2003 2002 Restated

Intragovernmental Gross Costs 7,707 $ 7,897 $ 

Less: Intragovernmental Earned Revenues 1,089 983

Intragovernmental Net Costs 6,618 6,914

Grants 63,099 51,595

Loan Cost Subsidies (778) (994)

Indemnities 3,848 4,165

Commodity Program Costs 6,568 5,934

Stewardship Land Acquisition 239 212

Other 14,396 15,053

Total Gross Costs with the Public 87,372 75,965

Less: Earned Revenues from the Public 10,799 10,040

Net Costs with the Public 76,573 65,925

Net Cost of Operations $ 72,839 83,191 $ 

Program Costs (Notes 17, 18, & 19):

Gross Costs with the Public:

The accompanying notes are an integral part of these statements.
USDA Performance and Accountability Report for FY 2003 

Consolidated Financial Statements 

146

Department of Agriculture 

CONSOLIDATED STATEMENT OF CHANGES IN NET POSITION 

For the Years Ended September 30, 2003 and 2002 

(in millions) 

Cumulative Cumulative

Results of Unexpended Results of Unexpended

Operations Appropriations Operations Appropriations

Beginning Balances $ 26,196 (15,443) $ (22,286) $ 31,849 $ 

Prior Period Adjustments (Note 19) 744 (577) 708 (358)

Beginning Balances, as Adjusted (14,699) 25,619 (21,578) 31,491

Appropriations Received 76,572 75,848

Appropriations Transferred In (Out) (219) 3,068

Other Adjustments (rescissions, etc.) (16) (4,812) (4,514)

Appropriations Used 80,373 (80,350) 80,135 (80,274)

Nonexchange Revenue 6 2

Donations and Forfeitures of Cash 35

Transfers In (Out) without Reimbursement 3,790 (379)

Other Budgetary Financing Sources (105)

Donations and Forfeitures of Property 1 14

Transfers In (Out) without Reimbursement (2,019) (1,351)

Imputed Financing from Costs Absorbed by Others 581 1,328

Other 724 74

Total Financing Sources 83,475 (8,809) 79,718 (5,872)

Net Cost of Operations (83,191) (72,839)

Ending Balances $ 16,810 (14,415) $ (14,699) $ 25,619 $ 

Budgetary Financing Sources:

Other Financing Sources:

2003 2002 Restated

The accompanying notes are an integral part of these statements. 
USDA Performance and Accountability Report for FY 2003 

Consolidated Financial Statements 

147

Department of Agriculture 

COMBINED STATEMENT OF BUDGETARY RESOURCES 

For the Years Ended September 30, 2003 and 2002 

(in millions) 

Non-Budgetary Non-Budgetary

Financing Financing 

Budgetary Accounts Budgetary Accounts

Budgetary Resources:

Budget Authority:

Appropriations Received 83,967 $ 84,606 $ 

Borrowing Authority (Note 21 & 22) 49,343 10,257 $ 34,055 9,689 $ 

Net Transfers (189) (2,171)

133,121 10,257 116,490 9,689

Unobligated Balances:

Beginning of Period (Note 23) 18,627 5,264 24,895 2,341

Net Transfers, Actual (439) (58)

18,188 5,264 24,837 2,341

Spending Authority From Offsetting Collections:

Earned

Collected 24,301 7,721 21,808 7,182

Receivable from Federal Sources 1,596 62 (695) (762)

Change in Unfilled Customer Orders

Advance Received 289 148

Without Advance from Federal Sources 47 57 55 664

26,233 7,840 21,316 7,084

Recoveries of Prior Year Obligations 3,854 437 2,664 288

Permanently not Available (57,168) (4,275) (52,406) (1,893)

Total Budgetary Resources 124,228 19,523 112,901 17,509

Status of Budgetary Resources:

Obligations Incurred (Note 20):

Direct 70,628 13,721 64,730 12,245

Reimbursable 36,758 29,544

107,386 13,721 94,274 12,245

Unobligated Balance:

Apportioned 5,832 5,343 4,347 4,252

Exempt from Apportionment 328 1 280

Other Available 9 299

Unobligated Balance not Available 10,673 458 13,701 1,012

16,842 5,802 18,627 5,264

Total Status of Budgetary Resources 124,228 19,523 112,901 17,509

Relationship of Obligations to Outlays:

Obligated Balance, Net, Beginning of Period (Note 23) 19,211 13,762 19,164 10,812

Obligated Balance, Net, End of Period:

Accounts Receivable (2,645) (170) (1,048) (107)

Unfilled Customer Orders from Federal Sources (313) (732) (267) (676)

Undelivered Orders 14,143 15,351 14,517 14,107

Accounts Payable 9,830 422 6,009 438

21,015 14,871 19,211 13,762

Outlays:

Disbursements 100,262 12,058 92,239 9,105

Collections (24,590) (7,721) (21,956) (7,182)

75,672 4,337 70,283 1,923

Less: Offsetting Receipts 1,550 1,293 862 130

Net Outlays 74,122 $ 3,044 $ 69,421 $ 1,793 $ 

2003 2002 Restated

 The accompanying notes are an integral part of these statements. 
USDA Performance and Accountability Report for FY 2003 

Consolidated Financial Statements 

148

Department of Agriculture 

CONSOLIDATED STATEMENT OF FINANCING

For the Years Ended September 30, 2003 and 2002 

(in millions) 

2003 2002 Restated

Resources Used to Finance Activities:

Budgetary Resources Obligated

Obligations incurred $ 106,519 121,107 $ 

Less: Spending authority from offsetting collections and recoveries 38,364 31,352

Obligations net of offsetting collections and recoveries 82,743 75,167

Less: Offsetting receipts 2,843 992

Net obligations 79,900 74,175

Other Resources

Donations and forfeitures of property 1 14

Transfers in (out) without reimbursement (2,019) (1,351)

Imputed financing from costs absorbed by others 581 1,328

Other 724 74

Net other resources used to finance activities (713) 65

Total resources used to finance activities 79,187 74,240

Resources Used to Finance Items not Part of the Net Cost of Operations:

Change in budgetary resources obligated for goods, services and benefits 

 ordered but not yet provided 400 3,100

Resources that fund expenses recognized in prior periods 2,354 3,691

Budgetary offsetting collections and receipts that do not affect net cost of operations

Credit program collections which increase liabilities for loan guarantees or allowances for subsidy (14,829) (12,950)

Other (11,835) (10,189)

Resources that finance the acquisition of assets 28,477 26,694

Other resources or adjustments to net obligated resources that do not affect net cost of operations 2,644 131

Total resources used to finance items not part of the net cost of operations 7,211 10,477

Total resources used to finance the net cost of operations 71,976 63,763

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 42 88

Increase in environmental and disposal liability 1

Upward/Downward reestimates of credit subsidy expense (315) (260)

Decrease in exchange revenue receivable from the public 597 125

Other 2,839 1,272

Total components of Net Cost of Operations that will require or generate 

 resources in future periods (Note 27) 3,164 1,225

Components not Requiring or Generating Resources:

Depreciation and amortization 522 531

Revaluation of assets or liabilities (38) 397

Other 7,567 6,923

Total components of Net Cost of Operations that will not require or generate resources 8,051 7,851

Total components of Net Cost of Operations that will not require or generate 

 resources in the current period 11,215 9,076

Net Cost of Operations $ 72,839 83,191 $ 

The accompanying notes are an integral part of these statements.
USDA Performance and Accountability Report for FY 2003 

Consolidated Financial Statements 

149

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

As of September 30, 2003 and 2002 

(in millions) 

Note 1. Significant Accounting Policies 

Reporting Entity 

The Department provides a wide variety of services in the United States and around the world in seven 

distinct mission areas: Natural Resources and Environment (NRE); Farm and Foreign Agricultural Services (FFAS); Rural Development (RD); Food, Nutrition, and Consumer Services (FNCS); Food Safety 

and Inspection Services (FSIS), Research, Education, and Economics (REE); and Marketing and Regulatory Programs (MRP). 

Principles of Consolidation 

The financial statements are prepared in accordance with generally accepted accounting principles for the 

Federal Government. The financial statements include the accounts of the Department of Agriculture 

(USDA) and the following agencies, including four Government corporations: 

Forest Service (FS) 

Natural Resources and Conservation Service (NRCS) 

Farm Service Agency (FSA) 

Foreign Agricultural Service (FAS) 

Risk Management Agency (RMA) 

Federal Crop Insurance Corporation (FCIC) 

Commodity Credit Corporation (CCC) 

Rural Housing Service (RHS) 

Rural Business Service (RBS) 

Rural Utilities Service (RUS) 

Rural Telephone Bank, a corporation (RTB) 

Food and Nutrition Service (FNS) 

Food Safety and Inspection Service (FSIS) 

Agricultural Research Service (ARS) 

Cooperative State Research, Education, and Extension Service (CSREES) 

Economic Research Service (ERS) 

National Agricultural Statistics Service (NASS) 

Agricultural Marketing Service (AMS) 

Animal and Plant Health Inspection Service (APHIS) 

Grain Inspection, Packers, and Stockyards Administration (GIPSA) 

Alternative Agricultural Research and Commercialization Corporation (AARC) 

Significant intradepartmental activity and balances have been eliminated, except for the Statement of 

Budgetary Resources that is presented on a combined basis. 
USDA Performance and Accountability Report for FY 2003 

Consolidated Financial Statements 

150

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. 

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. 
USDA Performance and Accountability Report for FY 2003 

Consolidated Financial Statements 

151

Direct loans obligated and loan guarantees committed before fiscal 1992 are valued using the presentvalue method. Under the present-value method, the outstanding principal of direct loans is reduced by an 

allowance equal to the difference between the outstanding principal and the present value of the expected 

net cash flows. The liability for loan guarantees is the present value of expected net cash outflows due to 

the loan guarantees. 

Inventories and Related Property

Inventories to be consumed in the production of goods for sale or in the provision of services for a fee are 

valued on the basis of historical cost using a first-in, first-out method. Operating materials and supplies are 

valued on the basis of historical cost using a weighted average method. Commodities are valued at the lower 

of cost or net realizable value using a weighted average method. 

Property, Plant and Equipment

Property, plant, and equipment (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. The capitalization threshold for personal property and 

real property was changed from $5,000 to $25,000 effective October 1, 2002 and October 1, 2001, respectively. 

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. 

Contingencies

Contingent liabilities are recognized when a past event or exchange transaction has occurred, a future outflow or other sacrifice of resources is probable, and the future outflow or sacrifice of resources is 

measurable. 
USDA Performance and Accountability Report for FY 2003 

Consolidated Financial Statements 

152

Note 2. Non-Entity Assets 

FY 2003 FY 2002

Intragovernmental:

Fund balance with Treasury $ 1,337 841 $ 

Cash and other monetary assets 76 71 

Accounts receivable 112 - 

Inventory and related porperty 126 - 

Total non-entity assets 1,029 1,534 

Total entity assets 117,112 122,084 

Total assets $ 123,618 118,141 $ 

Non-entity assets include proceeds from the sale of timber payable to Treasury, and employer contributions and payroll taxes withheld for agencies serviced by the National Finance Center. 

Note 3. Fund Balance with Treasury 

FY 2003 FY 2002

Fund Balances:

 Trust Funds $ 370 519 $ 

 Revolving Funds 7,541 8,943

 Appropriated Funds 27,411 29,091

 Other Fund Types 1,009 1,212

Total 36,480 39,617

Status of Fund Balance with Treasury:

Unobligated Balance:

 Available 10,365 14,589

 Unavailable 10,544 12,411

Obligated Balance not yet Disbursed 20,448 15,307

Clearing Account Balances 691 1,272

Borrowing Authority not yet Converted to Fund Balance (5,568) (3,962)

Total $ 39,617 36,480 $ 

Other fund types include special, deposit, and clearing accounts. 

Note 4. Cash and Other Monetary Assets 

FY 2003 FY 2002

Cash $ 165 141 $ 

 

In fiscal 2003, cash includes funds held in escrow to pay property taxes and insurance for single-family 

housing borrowers of $76 million, funds to be transferred out of $30 million, loan repayment and certain 

other receipts of $21 million, and interest-bearing deposits of $14 million. 

In fiscal 2002, cash includes excess reserves from fee-for-service programs of $86 million and funds held 

in escrow to pay property taxes and insurance for single-family housing borrowers of $71 million.
USDA Performance and Accountability Report for FY 2003 

Consolidated Financial Statements 

153

Note 5. Investments 

Unamortized Market

FY 2003 Amortization Premium/ Investments, Value

Cost Method (Discount) Net Disclosure

Intragovernmental Securities:

Non-marketable:

Par value 42 $ 42 $ 

Market-based 3 Straight Line - 3 3 $ 

Total 45 45 3 

Other Securities:

AARC 15 - 15 15 

Total 15 $ 15 $ 15 $ 

Unamortized Market

FY 2002 Amortization Premium/ Investments, Value

Cost Method (Discount) Net Disclosure

Intragovernmental Securities:

Non-marketable:

Par value 63 $ - $ 63 $ 

Market-based 30 Straight Line 3 33 33 $ 

Total 93 3 96 33

Other Securities:

AARC 15 - 15 15 

Total 15 $ - $ 15 $ 15 $ 

Note 6. Accounts Receivable, Net

FY2003

Accounts 

Receivable, 

Gross

Allowance for

Uncollectible 

Accounts

Accounts 

Receivable, 

Net

Accounts Receivable 

Intragovernmental $ 189 855 $ 666 $ 

With the Public 1,986 231 1,755

Total $ 420 2,841 $ 2,421 $ 

FY 2002

Accounts 

Receivable, 

Gross

Allowance for

Uncollectible 

Accounts

Accounts 

Receivable, 

Net

Accounts Receivable 

Intragovernmental $ 1 243 $ 242 $ 

With the Public 2,137 271 1,866

Total $ 272 2,380 $ 2,108 $ 

In fiscal 2003, CCC recognized a receivable of $613 million from the Department of Transportation for 

current and prior years’ transportation costs in accordance with the Cargo Preference provisions of the 

Food Security Act. As these costs are subject to management determination, an allowance of $188 million was recognized.
USDA Performance and Accountability Report for FY 2003 

Consolidated Financial Statements 

154

Note 7. Direct Loans and Loan Guarantees, Non-Federal Borrowers 

Table 1. Total Loans Receivable and Related Foreclosed Property, Net 

FY 2003 Loans Present Value of Assets

Direct Loans Receivable, Interest Foreclosed Value Related to

Gross Receivable Property Allowance Direct Loans

Obligated Pre-1992

Foreign Loans 7,545 $ 75 $ - $ (4,045) $ 3,575 $ 

Farm Loans 3,375 200 36 (821) 2,790 

Home Loans 14,219 123 31 (5,801) 8,572 

Utility Loans 17,581 8 - (2,070) 15,519 

Community Loans 2,127 19 - (355) 1,791 

Business and Industry Loans 64 - - (30) 34 

Pre-1992 Total 44,911 425 67 (13,122) 32,281 

Obligated Post-1991

Foreign Loans 2,981 35 - (1,747) 1,269 

Farm Loans 4,741 129 6 (749) 4,127 

Home Loans 13,435 68 30 (1,980) 11,553 

Utility Loans 14,478 200 - (1,162) 13,516 

Community Loans 5,565 49 - (809) 4,805 

Business and Industry Loans 525 2 - (199) 328 

Post-1991 Total 41,725 483 36 (6,646) 35,598 

Total Direct Loan Program Receivables 86,636 908 103 (19,768) 67,879 

Defaulted Guarantee Loans

Pre-1992

Foreign Loans 4,943 55 - (2,203) 2,795 

Business and Industry Loans 5 1 - - 6 

Pre-1992 Total 4,948 56 - (2,203) 2,801 

Post-1991

Foreign Loans 1,800 28 - (1,161) 667 

Business and Industry Loans 189 2 - (10) 181 

Post-1991 Total 1,989 30 - (1,171) 848 

Total Defaulted Guarantee Loans 6,937 86 - (3,374) 3,649 

Loans Exempt from Credit Reform Act:

Commodity Loans 1,644 119 - (48) 1,715 

Other Foreign Receivables 353 - - (6) 347 

Total Loans Exempt 1,997 119 - (54) 2,062 

Total Loans Receivable and Related Foreclosed Property, Net 73,590 $ 
USDA Performance and Accountability Report for FY 2003 

Consolidated Financial Statements 

155

FY 2002 Loans Present Value of Assets

Direct Loans Receivable, Interest Foreclosed Value Related to

Gross Receivable Property Allowance Direct Loans

Obligated Pre-1992

Foreign Loans 7,852 $ 90 $ - $ (4,259) $ 3,683 $ 

Farm Loans 3,976 307 44 (456) 3,871 

Home Loans 14,957 108 39 (5,178) 9,925 

Utility Loans 20,093 50 - (1,874) 18,268 

Community Loans 2,821 30 - (22) 2,829 

Business and Industry Loans 49 - - (11) 38 

Pre-1992 Total 49,748 584 84 (11,801) 38,615

Obligated Post-1991

Foreign Loans 2,978 36 - (1,702) 1,312 

Farm Loans 4,588 109 4 (1,545) 3,157 

Home Loans 13,190 64 35 (2,171) 11,119 

Utility Loans 11,564 6 - (572) 10,998 

Community Loans 5,055 55 - (754) 4,356 

Business and Industry Loans 524 4 - (197) 332 

Post-1991 Total 37,900 274 40 (6,939) 31,274 

Total Direct Loan Program Receivables 87,648 858 123 (18,740) 69,889 

Defaulted Guarantee Loans

Pre-1992

Foreign Loans 5,171 28 - (2,566) 2,632 

Business and Industry Loans 12 - - (9) 3 

Pre-1992 Total 5,182 28 - (2,575) 2,635 

Post-1991

Foreign Loans 1,759 47 - (770) 1,036 

Home Loans 4 - - - 4 

Business and Industry Loans 180 - - (108) 72 

Post-1991 Total 1,943 47 - (878) 1,112 

Total Defaulted Guarantee Loans 7,125 75 - (3,453) 3,747 

Loans Exempt from Credit Reform Act:

Commodity Loans 1,729 - - (177) 1,552 

Other Foreign Receivables 364 - - (10) 354 

Total Loans Exempt 2,093 - - (187) 1,906 

Total Loans Receivable and Related Foreclosed Property, Net 75,543 $ 
USDA Performance and Accountability Report for FY 2003 

Consolidated Financial Statements 

156

Table 2. Schedule for Reconciling Subsidy Cost Allowance Balances (Post-1999) Direct Loans 

Beginning Balance, Changes, and Ending Balance FY 2003 FY 2002

Beginning balance of the subsidy cost allowance 7,047 $ 7,909 $ 

Add: Subsidy expense for direct loans disbursed during the year by component

Interest rate differential costs 112 383 

Default costs (net of recoveries) 234 143 

Fees and other collections (32) (77) 

Other subsidy costs 220 35 

Adjustments

Loan modifications 58 9 

Fees received 14 12 

Loans written off (163) (188) 

Subsidy allowance amortization (198) (454) 

Other (103) 197 

Ending balance of the subsidy cost allowance before reestimates 7,189 7,970 

Add or subtract subsidy reestimates by component:

Interest rate reestimate 81 20 

Technical/default reestimate (616) (943) 

Total of the above reestimate components (535) (923) 

Ending balance of the subsidy cost allowance 6,654 $ 7,047 $ 
USDA Performance and Accountability Report for FY 2003 

Consolidated Financial Statements 

157

Table 3. Direct Loan Subsidy Expense by Program and Component 

FY 2003

Interest Fees and Other Total Rate Technica

Direct Loan Programs Differential Defaults Collections Other Total Modifications Reestimates Reestimates 

P.L. 480, Title I 28 $ 19 $ - $ 3 $ 50 $ 58 $ (1) $ 45 $ 

Debt Reduction Fund - - - - - - - (83

 

Food for Progress - - - - - - - (81

 

Farm Storage Facility Loan Program - 1 - - 1 - - (8

 

Agriculture Credit Insurance Fund (28) 185 - (8) 149 - (53) (648

 

Rural Community Facilities Fund 18 2 - (1) 19 - 1 (9

 

Rural Housing Insurance Fund 11 23 (32) 231 233 - 4 (192

 

Rural Electrification Loans (19) 4 - (2) (17) - 94 359 

Rural Telephone Loans 1 - - - 1 - 6 30 

Rural Telephone Bank 1 - - - 1 - - (6

 

Rural Water and Waste Disposal Loans 85 1 - (3) 83 - 40 (37

 

Rural Business and Industry Loans - - - - - - (3) 10 Rural Development Loan Fund 12 - - - 12 - (6) 3 

Rural Economic Development Loans 3 - - - 3 - - (1

 

Total Subsidy Expense, Direct Loans 112 $ 235 $ (32) $ 220 $ 535 $ 58 $ 82 $ (618

$ 

FY 2002

Interest Fees and Other Total Rate Technica

Direct Loan Programs Differential Defaults Collections Other Total Modifications Reestimates Reestimates 

P.L. 480, Title I 37 $ 29 $ - $ 15 $ 80 $ - $ (138) $ (210

$ 

Debt Reduction Fund - - - - - 9 - (69

 

Food for Progress - - - - - - - (112

 

Farm Storage Facility Loan Program - 1 - - 1 - (1) (6

 

Apple Loan Program - - - - - - - 1 

Agriculture Credit Insurance Fund 10 88 (1) (26) 72 - (30) 41 Rural Community Facilities Fund 18 1 (1) - 18 - 3 (15

 

Rural Housing Insurance Fund 220 13 (75) 51 210 - (47) (423

 

Rural Electrification Loans (2) 2 - (2) (2) - 210 (117

 

Rural Telephone Loans 4 - - - 4 - 4 (6

 

Rural Telephone Bank 1 - - - 1 - 1 (3

 

Rural Water and Waste Disposal Loans 83 1 - (3) 80 - 22 (27

 

Rural Business and Industry Loans (6) 8 - - 2 - (3) 4 

Rural Development Loan Fund 16 - - - 16 - - (2

 

Rural Economic Development Loans 4 - - - 4 - - (1

 

Total Subsidy Expense, Direct Loans 383 $ 143 $ (77) $ 35 $ 485 $ 9 $ 20 $ (943

$ 

Subsidy Expense for New Direct Loans DisbursedSubsidy Expense for New Direct Loans Disbursed
USDA Performance and Accountability Report for FY 2003 

Consolidated Financial Statements 

158

Table 4. Total Amount of Direct Loans Disbursed (Post-1991) 

Direct Loans FY 2003 FY 2002

Farm and Foreign Agricultural Services Mission Area

P.L. 480, Title I 65 $ 122 $ 

Farm Storage Facility Loan Program 44 66 

Apple Loan Program - 1 

Agriculture Credit Insurance Fund 1,084 963 

Mission area total 1,193 1,153 

Rural Development Mission Area

Rural Community Facilities Fund 228 201 

Rural Housing Insurance Fund 1,163 1,207 

Distance Learning and Telemedicine Loans 44 40 

Rural Electrification Loans 3,007 2,080 

Rural Telephone Loans 256 329 

Rural Telephone Bank 56 60 

Rural Water and Waste Disposal Loans 754 643 

Rural Business and Industry Loans 2 36 

Rural Development Loan Fund 26 33 

Rural Economic Development Loans 11 17 

Mission area total 5,547 4,646 

Total Direct Loans Disbursed 6,740 $ 5,799 $ 
USDA Performance and Accountability Report for FY 2003 

Consolidated Financial Statements 

159

Table 5. Loan Guarantees Outstanding 

Pre - 1992 Post - 1991 Total Pre - 1992 

FY 2003 Outstanding Principal, Outstanding Principal, Outstanding Principal, Outstanding Principal, 

Face Value Face Value Face Value Guaranteed 

Guaranteed LoansFarm and Foreign Agricultural Services Mission Area

Agriculture Credit Insurance Fund $ 201 $ 10,090 $ 10,291 $ 178 $ Export Credit Guarantee Programs - 4,820 4,820 - Agricultural Resource Conservation Demonstration - 24 24 - Mission area total 14,934 201 15,135 178 

 

Rural Development Mission Area

Rural Community Facilities Fund - 373 373 - 

 

Rural Housing Insurance Fund 12 13,420 13,432 10 

 

Rural Electrification Loans 224 293 517 293 

 

Rural Water and Waste Disposal Loans - 29 29 - 

 

Rural Business and Industry Loans 51 4,032 4,083 39 

 

Rural Cooperative Development Fund 4 - 4 3 

 

Mission area total 18,078 360 18,438 345 

 

Total Guarantees Disbursed $ 33,012 561 $ 33,573 $ 523 $ 

$ 
USDA Performance and Accountability Report for FY 2003 

Consolidated Financial Statements 

160

Table 5. Loan Guarantees Outstanding 

Pre - 1992 Post - 1991 Total Pre - 1992 

FY 2002 Outstanding Principal, Outstanding Principal, Outstanding Principal, Outstanding Principal, 

Face Value Face Value Face Value Guaranteed 

Guaranteed LoansFarm and Foreign Agricultural Services Mission Area

Agriculture Credit Insurance Fund 271 $ 9,379 $ 9,650 $ 240 $ Export Credit Guarantee Programs - 4,917 4,917 - 

Mission area total 14,296 271 14,567 240 

Rural Development Mission Area

Rural Community Facilities Fund - 301 301 - Rural Housing Insurance Fund 16 13,602 13,618 14 

Rural Electrification Loans 199 317 516 317 

Rural Water and Waste Disposal Loans - 30 30 - 

 

Rural Business and Industry Loans - 3,884 3,884 - 

Rural Cooperative Development Fund 4 - 4 4 Rural Development Insurance Fund 80 - 80 57 

Mission area total 18,015 417 18,432 391 

Total Guarantees Disbursed $ 32,312 688 $ 33,000 $ 632 $ 
USDA Performance and Accountability Report for FY 2003 

Consolidated Financial Statements 

161

Table 6. Liability for Loan Guarantees (Present Value Method for Pre-1992 Guarantees) 

FY 2003 Liabilities for 

Losses on Pre1992 Guarantees 

Present Value

Liabilities for Loan 

Guarantees on 

Post-1991 

Guarantees 

Present Value

Total Liabilities for 

Loan Guarantees

Liability for Loan Guarantees

Farm and Foreign Agricultural Services Mission Area

Export Credit Guarantee Programs - $ 22 $ 22 $ 

Agriculture Credit Insurance Fund 4 130 134

Mission area total 4 152 156

Rural Development Mission Area

Rural Community Facilities Fund - 1 1 

Rural Housing Insurance Fund - 399 399 

Rural Business and Industry Loans 2 325 327 

Mission area total 725 2 727 

Total Liability for Loan Guarantees 6 $ 877 $ 883 $ 

FY 2002

Liabilities for 

Losses on Pre1992 Guarantees 

Present Value

Liabilities for Loan 

Guarantees on 

Post-1991 

Guarantees 

Present Value

Total Liabilities for

Loan Guarantees

Liability for Loan Guarantees

Farm and Foreign Agricultural Services Mission Area

Export Credit Guarantee Programs - $ 411 $ 411 $ 

Agriculture Credit Insurance Fund 13 144 157 

ARCD 2 - 2 

Mission area total 13 557 570 

Rural Development Mission Area

Rural Community Facilities Fund - 5 5 

Rural Housing Insurance Fund 3 327 330 

Rural Electrification Loans 23 - 23 

Rural Business and Industry Loans - 146 146 

Rural Development Insurance Fund 3 - 3 

Mission area total 30 477 507 

Total Liability for Loan Guarantees 43 $ 1,034 $ 1,077 $ 
USDA Performance and Accountability Report for FY 2003 

Consolidated Financial Statements 

162

Table 7. Schedule for Reconciling Loan Guarantee Liability 

Beginning Balance, Changes, and Ending Balance FY 2003 FY 2002

Beginning balance of the loan guarantee liability 1,034 $ 1,066 $ 

Add:Subsidy expense for guaranteed loans disbursed during the year by component

Interest rate differential costs 45 65 

Default costs (net of recoveries) 339 294 

Fees and other collections (141) (76) 

Adjustments

Fees received 96 102 

Interest supplements paid (47) (62) 

Claim payments to lenders (301) (204) 

Interest accumulation on the liability balance 48 17 

Other (115) 26 

Ending balance of the subsidy cost allowance before reestimates 958 1,229 

Add or subtract subsidy reestimates by component:

Interest rate reestimate 32 (392) 

Technical/default reestimate (114) 196 

Total of the above reestimate components (82) (195) 

Ending balance of the loan guarantee liability 876 $ 1,034 $ 
USDA Performance and Accountability Report for FY 2003 

Consolidated Financial Statements 

163

Table 8. Guarantee Loan Subsidy Expense by Program and Component 

FY 2003

Interest

Interest Fees and Other Total Rate Technical 

Guaranteed Loan Programs Supplement Defaults Collections Other Total Modifications Reestimates Reestimates 

Export Credit Guarantee Programs - $ 93 $ (8) $ - $ 85 $ - $ 4 $ (205) $ 

Farm Operating—Unsubsidized - 41 (9) - 32 - 2 (21) 

Farm Operating—Subsidized 39 14 (4) - 49 - (4) (14) 

Farm Ownership—Unsubsidized - 20 (11) - 9 - 4 (6) 

 

Rural Community Facilities - - (1) - (1) - - (2) 

 

Rural Housing Insurance Fund 6 129 (98) - 37 - 13 58 

Rural Business and Industry Loans - 42 (11) - 31 - 12 75 

Total Loan Guarantee Subsidy Expense 45 $ 339 $ (142) $ - $ 242 $ - $ 31 $ (115) $ 

FY 2002

Interest

Interest Fees and Other Total Rate Technical 

Guaranteed Loan Programs Supplement Defaults Collections Other Total Modifications Reestimates Reestimates 

Export Credit Guarantee Programs - $ 120 $ (10) $ - $ 110 $ - $ (588) $ 514 $ 

Farm Operating—unsubsidized - 46 (9) - 37 - 243 (268) 

Farm Operating—subsidized 47 20 - - 67 - 141 (131) 

Farm Ownership—unsubsidized - 14 (10) - 5 - (78) 64 

Rural Community Facilities - - - - - - (2) 6 

Rural Housing Insurance Fund 18 56 (38) - 37 - (45) (47) 

Rural Business and Industry Loans - 37 (9) - 28 - (75) 71 

 

Rural Business and Industry Loans - - - - - - 13 (12) 

 

Total Loan Guarantee Subsidy Expense 65 $ 294 $ (76) $ - $ 283 $ - $ (392) $ 196 $ 

Subsidy Expense for New Loan GuaranteesSubsidy Expense for New Loan Guarantees
USDA Performance and Accountability Report for FY 2003 

Consolidated Financial Statements 

164

Table 9. Guaranteed Loans Disbursed 

Principal, Face 

Value Disbursed

Principal, 

Guaranteed 

Disbursed

Principal, Face 

Value Disbursed

Principal, 

Guaranteed 

Disbursed

Guaranteed Loans

Farm and Foreign Agricultural Services Mission Area

Export Credit Guarantee Programs 2,770 $ 2,529 $ 3,340 $ 3,131 $ 

Agriculture Credit Insurance Fund 2,592 2,328 2,551 2,290 

Mission area total 5,362 4,857 5,891 5,421 

Rural Development Mission Area

Rural Community Facilities Fund 138 117 59 49 

Rural Housing Insurance Fund 2,992 2,693 2,450 2,205 

Rural Electrification Loans - - 54 54 

Rural Water and Waste Disposal Loans 3 2 9 7 

Rural Business and Industry Loans 654 513 839 658 

Mission area total 3,787 3,325 3,410 2,973 

Total Guaranteed Loans Disbursed 9,149 $ 8,182 $ 9,301 $ 8,394 $ 

FY 2003 FY 2002

Table 10. Administrative Expenses 

Direct Loan Programs FY 2003 FY 2002

P.L. 480, Title 1 $ 2 2 $ 

Agriculture Credit Insurance Fund 277 273 

Rural Development 178 256 

Total 452 535 

Guaranteed Loan Programs

Export Credit Guarantee Programs 4 4

Rural Development 131 155 

Total $ 135 159 $ 
USDA Performance and Accountability Report for FY 2003 

Consolidated Financial Statements 

165

Table 11. Subsidy Rates for Direct Loans (percentage) 

FY 2003

Interest 

Differential Defaults

Fees and Other

Collections Other Total

Direct Loan Programs

Farm Storage Facility Loan Program (0.88) 2.27 (0.11) - 1.28 

P.L. 480, Title 1 47.24 22.04 - 5.83 75.11 

Farm Operating (4.34) 20.36 - 1.23 17.25 

Farm Ownership (8.17) 27.53 - (7.75) 11.61 

Emergency Disaster 8.48 15.24 - (3.33) 20.39 

Indian Land Acquisition 7.79 8.02 - (6.86) 8.95 

BollWeevil Eradication (9.56) 8.35 - (1.49) (2.70) 

Community Facilities Loans 6.80 0.20 - (0.76) 6.24 

Modular Housing Loans 21.03 (0.10) - (3.01) 17.92 

 2.68 (12.90) - 29.59 19.37 

Section 504 Direct Housing Repair 28.98 2.27 - (0.23) 31.02 

Section 203 Credit Sales (SFH) (16.51) 1.17 - 5.76 (9.58) 

Section 514 Farm Labor Housing 48.64 0.07 - 0.31 49.02 

Section 515 Rural Rental Housing (13.18) 0.03 - 59.78 46.63 

Section 524 Housing Site Development (4.02) 3.92 - 1.19 1.09 

Section 523 Self-Help Housing Land 1.15 3.72 - (0.46) 4.41 

Section 209 Credit Sales (13.12) 0.03 - 59.77 46.68 

Electric Municipal 4.46 - - (0.43) 4.03 

FFB Electric (1.26) 0.04 - (0.60) (1.82) 

Direct Electric Hardship 5.84 - - (0.13) 5.71 

Telephone Treasury - 0.02 - 0.03 0.05 

FFB Telephone (1.09) 0.13 - (1.40) (2.36) 

Telephone Hardship 1.71 - - - 1.71 

Rural Telephone Bank 2.21 0.02 - (0.85) 1.38 

Direct Water and Waste Disposal 11.77 0.10 - (0.53) 11.34 

Intermediary Relending Program 48.32 - - (0.06) 48.26 

Rural Economic Development 22.46 0.05 - (1.15) 21.36 

Electric Treasury - 0.03 - (0.07) (0.04) 

Distance Learning and Telemedicine 0.41 - - (1.56) (1.15) 

Broadband - 5.21 - (0.05) 5.16 

Section 502 Direct Single Family Housing
USDA Performance and Accountability Report for FY 2003 

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166

Table 11. Subsidy Rates for Direct Loans (percentage) 

FY 2002

Interest 

Differential Defaults

Fees and Other

Collections Other Total

Direct Loan Programs

Farm Storage Facility Loan Program 0.30 2.24 (0.12) - 2.42 

P.L. 480, Title 1 46.07 30.82 - 4.84 81.73 

Farm Operating 0.05 12.43 - (3.55) 8.93 

Farm Ownership 2.04 4.13 - (3.54) 2.63 

Emergency Disaster 9.42 4.12 - (0.09) 13.45 

Indian Land Acquisition 5.95 - - (0.03) 5.92 

BollWeevil Eradication (4.42) 2.24 - - (2.18) 

Community Facilities Loans 4.53 1.18 - (0.28) 5.43 

Modular Housing Loans 17.94 0.03 (1.64) 1.35 17.68 

 1.31 13.20 (7.15) 5.80 13.16 

Section 504 Direct Housing Repair 29.96 2.30 (5.98) 5.85 32.13 

Section 203 Credit Sales (SFH) (20.20) 4.55 (10.51) 21.34 (4.82) 

Section 514 Farm Labor Housing 46.94 0.08 (2.51) 2.80 47.31 

Section 515 Rural Rental Housing 50.56 (0.03) (30.91) 22.70 42.32 

Section 524 Housing Site Development (1.75) 1.77 (9.64) 10.17 0.55 

Section 523 Self-Help Housing Land 3.54 1.03 (9.14) 9.65 5.08 

Section 209 Credit Sales 50.52 (0.02) (1.96) (6.37) 42.17 

Electric Municipal (0.15) 0.03 - 0.03 (0.09) 

FFB Electric (1.12) 0.03 - (0.04) (1.13) 

Direct Electric Hardship 2.92 0.03 - 0.03 2.98 

Telephone Treasury - 0.04 - 0.06 0.10 

FFB Telephone (0.92) 0.11 - (0.04) (0.85) 

Telephone Hardship 2.27 0.03 - 0.02 2.32 

Rural Telephone Bank 2.29 0.02 - (0.17) 2.14 

Direct Water and Waste Disposal 6.96 0.12 - (0.20) 6.88 

Direct Business and Industry Loans (30.79) 58.98 - 0.28 28.47 

Intermediary Relending Program 43.22 - - (0.01) 43.21 

Rural Economic Development 24.91 0.05 - (0.80) 24.16 

Electric Treasury (0.06) 0.03 - (0.01) (0.04) 

 0.01 - - (0.08) (0.07) 

Section 502 Direct Single Family Housing

Distance Learning and Telemedicine
USDA Performance and Accountability Report for FY 2003 

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Table 12. Subsidy Rates for Loan Guarantees (percentage) 

FY 2003 Interest Fees and Other

Differential Defaults Collections Other Total

Guaranteed Loan Programs

Export Credit Guarantee Program - 7.64 (0.68) - 6.96 

Farm Operating—Unsubsidized - 4.07 (0.90) - 3.17 

Farm Operating—Subsidized 9.31 3.38 (0.89) - 11.80 

Farm Ownership—Unsubsidized - 1.64 (0.89) - 0.75 

Rural Community Facilities Loans - 0.28 (0.82) - (0.54) 

Section 538 Multiple Family 8.22 - (3.72) - 4.50 

Section 502 Single Family - 2.72 (2.00) - 0.72 

NADBANK Loans - 6.15 (1.59) - 4.56 

Business and Industry Loans - 5.45 (1.48) - 3.97 

Electric - 0.08 - - 0.08 

Water and Waste Disposal Loans - - (0.81) - (0.81) 

Section 502 Single Family - Refinance - 0.68 (0.50) - 0.18 

FY 2002 Interest Fees and Other

Differential Defaults Collections Other Total

Guaranteed Loan Programs

Export Credit Guarantee Program 7.41 - (0.66) - 6.75 

Farm Operating—Unsubsidized - 4.41 (0.90) - 3.51 

Farm Operating—Subsidized 9.55 4.01 - - 13.56 

Farm Ownership—Unsubsidized - 1.34 (0.89) - 0.45 

Rural Community Facilities Loans - 0.12 (0.80) - (0.68) 

Section 502 Subsidy Repair - 3.28 (2.00) - 1.28 

Section 539 Multiple Family 8.82 2.24 (7.13) - 3.93 

Section 502 Single Family - 3.28 (2.00) - 1.28 

NADBANK Loans - 5.28 (1.60) - 3.68 

Business and Industry Loans - 5.22 (1.48) - 3.74 

Electric - 0.08 - - 0.08 

Water and Waste Disposal Loans - - (0.80) - (0.80) 
USDA Performance and Accountability Report for FY 2003 

Consolidated Financial Statements 

168

Direct Loans 

Direct loan obligation or loan guarantee commitments made pre-1992 and the resulting direct loans or 

loan guarantees are reported at net present value. 

Direct loan obligations or loan guarantee commitments made post-1991, and the resulting direct loan or 

loan guarantees, are governed by the Federal Credit Reform Act of 1990 as amended. The Act requires 

agencies to estimate the cost of direct loans and loan guarantees at present value for the budget. Additionally, the present value of the subsidy costs (i.e. interest rate differentials, interest subsidies, delinquencies and defaults, fee offsets and other cash flows) associated with direct loans and loan guarantees are 

recognized as a cost in the year the loan or loan guarantee is disbursed. The net present value of loans or 

defaulted guaranteed loans receivable at any point in time is the amount of the gross loan or defaulted 

guaranteed loans receivable less the present value of the subsidy at that time. 

The net present value of Loans Receivable and Related Foreclosed Property, Net is not necessarily representative of the proceeds that might be expected if these loans were sold on the open market. 

Loans Receivable and Related Foreclosed Property, Net at the end of fiscal 2003 was $73,590 million 

compared to $75,543 million at the end of fiscal 2002. Loans exempt from the Federal Credit Reform Act 

of 1990 represent $2,062 million of the total compared to $1,906 million in fiscal 2002. Table 1 illustrates 

the overall composition of the Department credit program balance sheet portfolio by mission area and 

credit program for fiscal 2003 and 2002. 

During the fiscal year the gross outstanding balance of the direct loans obligated post-1991 is adjusted by 

the value of the subsidy cost allowance held against those loans. Current year subsidy expense, modifications, and reestimates all contribute to the change of the subsidy cost allowance through the year. The 

subsidy cost allowance moved from $7,047 million to $6,654 million during fiscal 2003, a decrease of 

$393 million. Table 2 shows the reconciliation of subsidy cost allowance balances from fiscal 2002 to 

fiscal 2003. 

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 fiscal 2003 was $57 million compared to negative $429 million in fiscal 2002. Table 3 illustrates the breakdown of total subsidy expense for fiscal 2003 and 2002 by 

program. 

Direct loan volume increased from $5,799 million in fiscal 2002 to $6,740 million in fiscal 2003. 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. 
USDA Performance and Accountability Report for FY 2003 

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169

Guaranteed loans outstanding at the end of fiscal 2003 were $33,573 million in outstanding principal, and 

$29,885 million in outstanding principal guaranteed, compared to $33,000 and $29,359 million, respectively at the end of fiscal 2002. Table 5 shows the outstanding balances by credit program. 

During the fiscal year the value of the guaranteed loans is adjusted by the value of the loan guarantee liability held against those loans. Current year subsidy expense, modification, and reestimates all contribute 

to the change of the loan guarantee liability through the year. The loan guarantee liability is a combination 

of the liability for losses on pre-1992 guarantees and post-1991 guarantees. The total liability moved from 

$1,077 million to $883 million during fiscal 2003, a decrease of $194 million. The post-1991 liability 

moved from $1,034 million to $877 million, a decrease of $157 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 fiscal 2003 was $158 million compared to $88 

million in fiscal 2002. Table 8 illustrates the breakdown of total subsidy expense for fiscal 2003 and 2002 

by program. 

Guaranteed loan volume decreased from $9,301 million in fiscal 2002 to $9,149 million in fiscal 2003. 

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 through the RHS, the RBS, and the RUS. 

The Farm and Foreign Agricultural Services Mission Area 

The FFAS mission area helps keep America's farmers and ranchers in business as they face the uncertainties of weather and markets. FFAS delivers commodity, credit, conservation, disaster, and emergency 

assistance programs that help improve the strength and stability of the agricultural economy. FFAS contributes to the vitality of the farm sector with programs that encourage the expansion of export markets 

for U.S. agriculture. 

The 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. In addition, the agency helps established farmers who have suffered financial setbacks from natural disasters, or have limited resources to maintain profitable farming operations. 

FSA officials also provide borrowers with supervision and credit counseling. 

FSA's mission is to provide supervised credit. FSA works with each borrower to identify specific 

strengths and weaknesses in farm production and management, and provides alternatives to address 

weaknesses. FSA is able to provide certain loan servicing options to assist borrowers whose accounts are 

distressed or delinquent. These options include reamortization, restructuring, loan deferral, lowering interest rate, acceptance of easements, and debt write-downs. The eventual goal of FSA's farm credit 

programs is to graduate its borrowers to commercial credit. 

CCC's foreign programs provide economic stimulus to both the U.S. and foreign markets, while also giving humanitarian assistance to the most-needy people throughout the world. CCC offers both guarantee 
USDA Performance and Accountability Report for FY 2003 

Consolidated Financial Statements 

170

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 whose 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 Sales Manager Credit Program 

Supplier Credit Guarantee Program 

Facility Program Guarantee 

P.L. 480 Title 1 Program 

The Rural Development Mission Area 

Each year, RD programs create or preserve tens of thousands of rural jobs and provide or improve the 

quality of rural housing. To leverage the impact of its programs, RD is working with state, local and Indian tribal governments, as well as private and nonprofit organizations and user-owned cooperatives. 

Through its loan and grant programs, RHS provides affordable housing and essential community facilities 

to rural communities. RHS programs help finance new or improved housing for moderate, low, and very 

low-income families each year. RHS program also help rural communities to finance, construct, enlarge 

or improve fire stations, libraries, hospitals and medical clinics, industrial parks, and other community 

facilities. 

RBS' goal is to promote a dynamic business environment in rural America. RBS works in partnership 

with the private sector and community based organizations to provide financial assistance and business 

planning. It also provides technical assistance to rural businesses and cooperatives, conducts research into 

rural economic issues, and provides cooperative educational materials to the public. 

The RUS helps to improve the quality of life in rural America through a variety of loan programs for electric energy, telecommunications, and water and environmental projects. RUS programs leverage scarce 

Federal funds with private capital for investing in rural infrastructure, technology and development of 

human resources. 

RD agencies are able to provide certain loan servicing options to borrowers whose accounts are distressed 

or delinquent. These options include reamortization, restructuring, loan deferral, lowering interest rate, 

acceptance of easements, and debt write-downs. The choice of servicing options depends on the loan program and the individual borrower. 
USDA Performance and Accountability Report for FY 2003 

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171

Rural Development List of Programs 

Rural Housing Service Rural Business Service Rural Utilities Service 

Home Ownership Direct Loans 

Home Ownership Guaranteed Loans 

Home Improvement and Repair Direct Loans 

Home Ownership and Home Improvement and 

Repair Nonprogram Loans 

Rural Housing Site Direct Loans 

Farm Labor Housing Direct Loans 

Rural Rental and Rural Cooperative Housing 

Loans 

Rental Housing Guaranteed Loans 

Multi-family Housing–Nonprogram–Credit Sales 

Community Facilities Direct Loans 

Community Facilities Guaranteed Loans 

Business and Industry Direct Loans 

Business and Industry Guaranteed Loans 

Intermediary Relending Program Direct Loans 

Rural Economic Development Direct Loans 

Water and Environmental Direct Loans 

Water and Environmental Guaranteed Loans 

Electric Direct Loans 

Electric Guaranteed Loans 

Telecommunications Direct Loans 

Rural Telephone Bank 

Federal Financing Bank-Telecommunications 

Guaranteed 

Distance Learning and Telemedicine Direct 

Broadband Telecommunications Services 

Discussion of Administrative Expenses, Subsidy Costs and Subsidy Rates 

Administrative Expenses 

Consistent with the Federal Credit Reform Act of 1990 as amended, subsidy cash flows exclude direct 

Federal administrative expenses. Administrative expenses for fiscal 2003 and 2002 are shown in Table 

10. 

Reestimates, Default Analysis, and Subsidy Rates 

The Federal Credit Reform Act of 1990 as amended governs the proprietary and budgetary accounting 

treatment of direct and guaranteed loans. The long-term cost to the government for direct loans or loan 

guarantees is referred to as "subsidy cost." Under the Act, subsidy costs for loans obligated beginning in 

fiscal 1992 are recognized at the net present value of projected lifetime costs in the year the loan is disbursed. Subsidy costs are revalued annually. Components of subsidy include interest subsidies, defaults, 

fee offsets, and other cash flows. 

Based on sensitivity analysis conducted for each cohort or segment of a loan portfolio, the difference between the budgeted and actual interest for both borrower and Treasury remain the key components for the 

subsidy formulation and reestimate rates of many USDA direct programs. USDA uses the governmentwide 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. A revised default methodology developed by OMB was implemented in fiscal 2002. The revised methodology resulted in significantly lower estimated defaults and 

resulting allowance balances. 

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. 
USDA Performance and Accountability Report for FY 2003 

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172

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 fiscal 2003 and 2002 cohorts. These rates cannot be applied 

to the direct and guaranteed loans disbursed during the current reporting year to yield the subsidy expense. The subsidy expense for new loans reported in the current year could result from disbursements of 

loans from both current year cohorts and prior year cohorts. The subsidy expense reported in the current 

year also includes reestimates. 

As a result of new guidance provided by the credit reform Treasury certificate training class, the CCC 

chose to reflect interest on downward reestimates of $ 246 and $413 million in the Statement of Changes 

in Net Position as other financing sources for fiscal 2003 and 2002, 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, 2003 and 2002, foreclosed property consisted of 952 and 1,114 rural single-family 

housing dwellings, with an average holding period of 22 and 20 months, respectively. As of September 

30, 2003 and 2002, FSA-Farm Loan Program properties consist primarily of 169 and 253 farms, respectively. The average holding period for these properties in inventory for fiscal 2003 and 2002 was 62 and 

54 months, respectively. At the end of fiscal 2003 and 2002, there were 20,671 and 22,681 borrowers for 

which foreclosure proceedings were in process, 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. 

RD, FSA, and CCC calculate loan interest income, however, the recognition of revenue is deferred. Late 

interest is accrued on arrears. 

Loan Modifications 

The Debt Reduction Fund is used to account for CCC's "modified debt." Debt is considered to be modified if the original debt has been reduced or the interest rate of the agreement changed. In contrast, when 

debt is "rescheduled" only the date of payment is changed. Rescheduled debt is carried in the original 

fund until paid. All outstanding CCC modified debt is carried in the Debt Reduction Fund and is governed by the Federal Credit Reform Act of 1990 as amended. 

During fiscal 2003, two debts were modified. This resulted in a $22 and $32 million reduction in principal and interest with the remaining amount of debt transferred from CCC’s liquidating/financing fund to 

CCC’s Debt Reduction Fund. The discount rates used for calculating the modifications are not available 

at this time. 

During fiscal 2002, two debts were modified. This resulted in a $3 and $11 million reduction in principal 

with the remaining amount of debt transferred from CCC's liquidating fund to CCC's Debt Reduction 

Fund. The discount rate used for calculating the modification expense was 6.2971 and 5.4684 percent, 

respectively. 
USDA Performance and Accountability Report for FY 2003 

Consolidated Financial Statements 

173

Interest Credit 

Approximately $18,600 and $19,100 million of RHS unpaid loan principal as of September 30, 2003 and 

2002 were receiving interest credit, respectively. If those loans receiving interest credit had accrued interest at the full-unreduced rate, interest income would have been approximately $1,100 million higher for 

fiscal 2003 and 2002. 

Restructured Loans 

At the end of fiscal 2003 and 2002, the RD portfolio contained approximately 96 thousand and 104 thousand restructured loans with an outstanding unpaid principal balance of $5,900 and $6,200 million, 

respectively. 
USDA Performance and Accountability Report for FY 2003 

Consolidated Financial Statements 

174

Note 8. Inventory and Related Property, Net 

Inventories $ - 2 $ 

Operating Materials and Supplies:

Items held for Use - 25 

Commodities: Volume (in millions) Volume (in millions)

Corn (In Bushels):

On hand at the beginning of the year 18 33 22 45 

Acquired during the year 20 57 74 165 

Disposed of during the year

Sales (11) (31) (62) (136)

Donations (11) (31) (14) (39)

Other - 1 (2) (1)

On hand at the end of the year 16 29 18 33 

Wheat (In Bushels):

On hand at the beginning of the year 102 364 118 404 

Acquired during the year 84 392 105 371 

Disposed of during the year

Sales (65) (280) (69) (246)

Donations (39) (193) (52) (193)

Other (1) 7 - 28 

On hand at the end of the year 81 290 102 364 

Nonfat Dry Milk (In Pounds):

On hand at the beginning of the year 1,332 1,279 857 860 

Acquired during the year 634 512 626 563 

Disposed of during the year

Sales (269) (257) (16) (16)

Donations (253) (262) (121) (135)

Other (4) 22 (14) 6 

On hand at the end of the year 1,440 1,294 1,332 1,279 

Sugar (In Pounds):

On hand at the beginning of the year 514 101 1,505 329 

Acquired during the year - - 17 4 

Disposed of during the year

Sales (462) (92) (721) (176)

Donations - - (13) (3)

Other (52) (9) (274) (52)

On hand at the end of the year - - 514 101 

Tobacco (In Pounds):

On hand at the beginning of the year 225 599 225 599 

Acquired during the year - 1

Disposed of during the year - -

Sales - - - -

Donations - - - -

Other (129) (322) - -

On hand at the end of the year 96 278 225 599 

Other:

On hand at the beginning of the year 109 39 

Acquired during the year 4,023 4,496 

Disposed of during the year

Sales (3,804) (4,112)

Donations (244) (329)

Other 9 17 

On hand at the end of the year 93 110 

Allowance for losses (1,708) (1,763)

Total Commodities 276 723 

Total Inventory and Related Property, Net 278 $ 749 $ 

FY 2003 FY 2002
USDA Performance and Accountability Report for FY 2003 

Consolidated Financial Statements 

175

In fiscal 2003, the Departmental Working Capital Fund began recognizing inventory of supplies to be 

consumed in the production of goods for sale or in the provision of services for a fee. The inventory 

mainly consists of copier paper, toner, and other office supplies that are purchased in bulk. In fiscal 2003, 

the FS changed its method of accounting for operating material and supplies. Previously, FS had capitalized operating materials and supplies when purchased and recognized an expense when consumed in 

normal operations. Under the new accounting method, operating materials and supplies are expensed 

when purchased. 

In fiscal 2002, operating material and supplies consisted of tree seeds for a variety of tree species, tree 

seedlings (nursery stock) and Smoky Bear memorabilia. The tree seeds and seedlings are used for reforestation and the Smoky Bear memorabilia promotes forest fire prevention. 

Commodity inventory is restricted for the purpose of alleviating distress caused by natural disasters, providing emergency food assistance in developing countries, and providing price support and stabilization. 

Commodity donations and loan forfeitures are estimated to be $964 and $5 million in fiscal 2004, respectively. Commodity donations and loan forfeitures were estimated to be $548 and $69 million in fiscal 

2003, respectively. 

Note 9. General Property, Plant, and Equipment, Net 

FY 2003 Useful Net

Life Accumulated Book

Category (Years) Cost Depreciation Value

Land and Land Rights 77 $ - $ 77 $ 

Improvements to Land 10 - 50 4,872 2,375 2,497

Construction-in-Progress 320 - 320

Buildings, Improvements and Renovations 15 - 30 1,681 859 822

Other Structures and Facilities 15 - 50 1,516 1,048 468

Equipment 5 - 20 1,937 1,402 535

Assets Under Capital Lease 3 - 20 41 17 24

Leasehold Improvements 10 12 8 4

Internal-Use Software 5 - 8 264 130 134

Internal-Use Software in Development 32 - 32

Other General Property, Plant and Equipment 5 - 15 6 - 6

Total $ 5,839 10,758 $ 4,919 $ 

FY 2002 Useful Net

Life Accumulated Book

Category (Years) Cost Depreciation Value

Land and Land Rights 77 $ 2 $ 75 $ 

Improvements to Land 10-50 4,827 2,337 2,489 

Construction-in-Progress 102 - 102 

Buildings, Improvements and Renovations 15-30 1,841 839 1,002 

Other Structures and Facilities 15-50 1,614 1,004 610 

Equipment 5-20 1,921 1,276 644 

Leasehold Improvements 10 7 3 4 

Internal-Use Software 5-8 172 76 96 

Internal-Use Software in Development 13 1 12 

Other General Property, Plant and Equipment 5-15 6 - 6 

Total $ 5,538 10,578 $ 5,040 $ 
USDA Performance and Accountability Report for FY 2003 

Consolidated Financial Statements 

176

Note 10. Other Assets 

FY 2003 FY 2002

Intragovernmental:

Advances to Others $ 1 4 $ 

Prepayments 3 - 

Total Intragovernmental 7 1 

With the Public:

Advances to Others 207 243 

Prepayments 1 - 

Other Assets 37 41 

Total Other Asssets $ 285 252 $ 

In fiscal 2003 and 2002, other assets include investments of $35 million in trust for loan asset sales. 

Note 11. Liabilities Not Covered By Budgetary Resources 

FY 2003 FY 2002

Intragovernmental:

Other $ 351 346 $ 

Debt held by the public 11 - 

Federal employee and veterans' benefits 935 862 

Environmental and disposal liabilities 8 7 

Other 3,736 3,094 

Total liabilities not covered by budgetary resources 5,036 4,314 

Total liabilities covered by budgetary resources 110,710 108,384 

Total liabilities $ 112,698 115,746 $ 

In fiscal 2003 and 2002, other liabilities not covered by budgetary resources includes accrued rental payments under the Conservation Reserve Program (CRP) of $1,634 and $1,600 million, unfunded leave of 

$524 and $494 million, estimated losses on insurance claims of $1,400 and $670 million, and contract 

dispute claims payable to Treasury’s Judgment Fund of $192 and $189 million, respectively. 
USDA Performance and Accountability Report for FY 2003 

Consolidated Financial Statements 

177

Note 12. Debt 

FY 2003 Beginning Balance Net Borrowing Ending Balance

Agency Debt:

Held by the Public $ (4) 84 $ 80 $ 

Other Debt:

Debt to the Treasury 53,555 (115) 53,440

Debt to the Federal Financing Bank 22,379 321 22,700

Total Other Debt 75,934 206 76,140

Total Debt $ 202 76,018 $ 76,220 $ 

FY 2002 Beginning Balance Net Borrowing Ending Balance

Agency Debt:

Held by the Public $ (3) 87 $ 84 $ 

Other Debt:

Debt to the Treasury 55,608 (2,054) 53,554 

Debt to the Federal Financing Bank 25,221 (2,842) 22,379 

Total Other Debt (4,896) 80,829 75,933 

Total Debt $ (4,899) 80,916 $ 76,017 $ 

Note 13. Environmental and Disposal Liabilities 

The Department is subject to the Comprehensive Environmental Response, Compensation, and Liability 

Act, the Clean Water Act, and the Resource Conservation and Recovery Act for cleanup of hazardous 

waste. The FS and CCC estimates the liability for total cleanup costs for sites known to contain hazardous 

waste to be $8 and $13 million in fiscal 2003 and $7 and $15 million in fiscal 2002, respectively, based 

on actual cleanup costs at similar sites. These estimates will change as new sites are discovered, remedy 

standards change and new technology is introduced. 
USDA Performance and Accountability Report for FY 2003 

Consolidated Financial Statements 

178

Note 14. Other Liabilities 

FY 2003 Non-Current Current Total

Intragovernmental

Other Accrued Liabilities 16 $ 1,030 $ 1,046 $ 

Employer Contributions and Payroll Taxes - 26 26 

Unfunded FECA Liability 41 123 164 

Advances from Others 2 21 23 

Liability for Deposit Funds, Clearing Accounts 1 186 187 

Resources Payable to Treasury - 16,981 16,981 

Custodial Liability 41 10 51 

Other Liabilities 1 1,463 1,464 

Total Intragovernmental 102 19,840 19,942 

With the Public

Other Accrued Liabilities 6 5,790 5,796 

Accrued Funded Payroll and Leave (2) 34 32 

Employer Contributions and Payroll Taxes Payable 9 - 9 

Unfunded Leave 29 495 524 

Other Unfunded Employment Related Liability 611 747 1,358 

Advances from Others 7 30 37 

Deferred Credits - 275 275 

Liability for Deposit Funds, Clearing Accounts 24 975 999 

Contingent Liabilities 9 9 18 

Capital Lease Liability - 23 23 

Accounts Payable from Canceled Appropriations 5 - 5 

Custodial Liability - 96 96 

Other Liabilities 1,327 3,361 4,688 

Total Other Liabilities 2,127 $ 31,675 $ 33,802 $ 
USDA Performance and Accountability Report for FY 2003 

Consolidated Financial Statements 

179

Note 14. Other Liabilities 

FY 2002 Non-Current Current Total

Intragovernmental

Contract Holdbacks

Other Accrued Liabilities 189 $ 189 $ 378 $ 

Employer Contributions and Payroll Taxes - 16 16 

Unfunded FECA Liability 38 120 158 

Advances from Others 21 28 49 

Liability for Deposit Funds, Clearing Accounts - 1,018 1,018 

Liability for Subsidy Related to Undisbursed Loans - 990 990 

Resources Payable to Treasury - 18,598 18,598 

Custodial Liability 31 23 55 

Other Liabilities - 130 130 

Total Intragovernmental 280 21,112 21,393 

With the Public

Contract Holdbacks

Other Accrued Liabilities 2 2,824 2,826 

Accrued Funded Payroll and Leave - 25 25 

Other Post-Employment Benefits Due and Payable - 8 8 

Benefit Premiums Payable to Carriers - 36 36 

Unfunded Leave 19 475 494 

Other Unfunded Employment Related Liability 572 52 623 

Advances from Others (21) 35 14 

Deferred Credits - 42 42 

Liability for Deposit Funds, Clearing Accounts 31 1,440 1,471 

Contingent Liabilities 37 7 44 

Custodial Liability - 225 225 

Other Liabilities 22 5,013 5,034 

Total Other Liabilities 943 $ 31,294 $ 32,237 $ 

In fiscal 2003, other liabilities include estimated losses on insurance claims of $2,803 million, stock payable to RTB borrowers of $1,309 million, amounts payable to Treasury’s General Fund due to downward 

reestimates of $1,454 million, premium subsidy deficiency reserve of $342 million, and underwriting 

gains due companies of $167 million. 

In fiscal 2002, other liabilities include estimated losses on insurance claims of $2,865 million and stock 

payable to RTB borrowers of $1,343 million. 
USDA Performance and Accountability Report for FY 2003 

Consolidated Financial Statements 

180

Note 15. Leases 

FY 2003

Capital Leases:

Summary of Assets Under Capital Leases

Land and Building 41 $ 

Accumulated Amortization 17

Future Payments Due:

Land & Buildings Totals

Fiscal Year

2004 11 11

2005 11 11

2006 11 11

2007 11 11

2008 10 10

After 5 Years 98 98

Total Future Lease Payments 152 152

Less: Imputed Interest 41 41

Less: Executory Costs 24 24

Net Capital Lease Liability 87 87

Lease liabilities covered by budgetary resources 87

Operating Leases:

Future Payments Due:

Fiscal Year Land & Buildings

Machinery & 

Equipment Totals

2004 85 1 86

2005 74 1 75

2006 67 - 67

2007 61 - 61

2008 53 - 53

After 5 Years 331 - 331

Total Future Lease Payments $ 2 671 $ 673 $ 

FY 2002

Operating Leases:

Future Payments Due:

Fiscal Year Land & Buildings

Machinery & 

Equipment Totals

2003 71 $ 1 $ 72 $ 

2004 65 1 66 

2005 56 - 56 

2006 58 - 58 

2007 51 - 51 

After 5 Years 239 - 239 

Total Future Lease Payments $ 2 540 $ 542 $ 
USDA Performance and Accountability Report for FY 2003 

Consolidated Financial Statements 

181

Note 16. Commitments and Contingencies 

The Department is subject to various claims and contingencies related to lawsuits as well as commitments 

under contractual and other commercial obligations. 

For cases in which payment has been deemed probable and for which the amount of potential liability has 

been estimated, $19 and $38 million has been accrued in the financial statements as of September 30, 

2003 and 2002, respectively. 

No amounts have been accrued in the financial statements for claims where the amount or probability of 

judgment is uncertain. The Department’s potential liability for these claims is $211 and $1,727 million as 

of September 30, 2003 and 2002, respectively. 

In fiscal 2003 and 2002, commitments under contractual and other commercial obligations were estimated 

to be $52,000 million, primarily consisting of $20,000 million in rental payments under the CRP, $14,000 

and $15,000 million in undelivered orders, $15,000 and $14,000 million in direct loans, and $3,000 million in loan guarantees, respectively. 

RD has determined that no adequate funds were accrued to address future maintenance costs for the multiple family housing portfolio for 2003. For the next 5 years, approximately 4,250 properties and 85,000 

apartment units will necessitate general modernization and costs are expected in the hundreds of millions 

of dollars. 

In fiscal 2003, one of the FCIC’s reinsured companies, American Growers Insurance Company (AGIC) 

was placed under an order of supervision by the Nebraska Department of Insurance. The FCIC is working with the Nebraska Department of Insurance and AGIC management to ensure that all outstanding 

policy claims will be paid and service to producers will continue. Approximately $580 million of the estimated $3,000 million losses on insurance claims for the 2002 crop year were related to business written 

by AGIC. Additional costs may be incurred by FCIC for other administrative costs of AGIC, however 

these costs are not quantifiable at this time. 
USDA Performance and Accountability Report for FY 2003 

Consolidated Financial Statements 

182

Note 17. Suborganization Program Costs/Program Costs by Segment 

FY 2003 FNCS FFAS NRE RD REE MRP FSIS DO

Program Costs (Notes 17, 18, & 19):

Intragovernmental Gross Cost 118 $ 1,193 $ 1,268 $ 3,409 $ 246 $ 1,787 $ 221 $ 2

$ 

Less: Intragovernmental Earned Revenues 2 419 371 322 39 16 3 3Intragovernmental Net Costs 116 774 897 3,087 207 1,771 218 Gross Costs With the Public

Grants 40,537 19,017 848 1,530 1,055 71 41 Loan Cost Subsidies (1,633) 855 Indemnities - 3,768 12 8 1 59 - Commodity Program Costs 798 5,770 Stewardship Land Acquisition 48 191 Other 161 2,483 5,597 2,257 1,348 1,253 697 6

Less: Earned Revenues from the Public 56 5,572 504 3,998 29 516 108 Net Costs with the Public 41,441 23,881 6,144 652 2,373 866 630 5Net Cost of Operations $ 24,655 41,558 $ 7,041 $ 3,739 $ 2,580 $ 2,638 $ 848 $ 5

$ 

FY 2002 FNCS FFAS NRE RD REE MRP FSIS DO

Program Costs :

Intragovernmental Gross Costs 910 $ 1,286 $ 1,004 $ 3,558 $ 318 $ 1,118 $ $ 2

196 $ 

Less: Intragovernmental Earned Revenue 1 370 299 297 57 7 2 3Intragovernmental Net Costs 909 916 704 3,261 261 1,111 193 (Gross Costs With the Public : -- 

Grants 36,036 12,378 678 1,443 974 43 43 

Loan Cost Subsidies - (620) - (373) - - - 

Indemnities 4,115 12 - 37 

Commodity Program Costs 594 5,340 - - - - 

Stewardship Land Acquisition - 105 108 - - - - 

Other 187 2,891 5,639 3,077 1,137 962 643 5

Less: Earned Revenues from the Public 104 4,794 397 4,047 50 535 101 Net Costs with the Public 36,714 19,414 6,038 99 2,061 508 585 5Net Cost of Operations 37,623 $ 20,330 $ 6,743 $ 3,360 $ 2,322 $ 1,618 $ $ 4

779 $ 
USDA Performance and Accountability Report for FY 2003 

Consolidated Financial Statements 

183

Note 17. Suborganization Program Costs/Program Costs by Segment Food, Nutrition and Consumer Service 

FY 2003 Child Nutrition Food Stamp Food Donations Women, Infants, and Children 

Program Costs :

Intragovernmental Gross Costs $ 21 5 $ 91 $ 1 $ 

$ 

Less: Intragovernmental Earned Revenue - - 1 - Intragovernmental Net Costs 5 21 90 1 Gross Costs With the Public :

Grants 10,375 25,431 85 4,553 Commodity Program Costs 534 152 45 - Other 17 25 117 1 

Less: Earned Revenues from the Public - 55 - - Net Costs with the Public 10,926 25,553 247 4,554 Net Cost of Operations $ 25,574 10,931 $ 337 $ 4,555 $ 

$ 

FY 2002 Child Nutrition Food Stamp Food Donations Women, Infants, and Children 

Program Costs :

Intragovernmental Gross Costs $ 56 23 $ 822 $ 9 $ 

$ 

Less: Intragovernmental Earned Revenue 1 Intragovernmental Net Costs 22 55 822 9 Gross Costs With the Public :

Grants 9,698 21,662 169 4,415 

Commodity Program Costs 367 91 56 Other 52 120 1 14 

Less: Earned Revenues from the Public 6 78 - 15 Net Costs with the Public 10,111 21,796 225 4,414 Net Cost of Operations $ 21,851 10,133 $ 1,047 $ 4,422 $ 

$ 
USDA Performance and Accountability Report for FY 2003 

Consolidated Financial Statements 

184

Note 17. Suborganization Program Costs/Program Costs by Segment Farm and Foreign Agricultural Services 

FY 2003 Commodity 

Operations

Income 

Support

Conservation 

Programs

Foreign 

Programs

Farm Loan 

Programs Crop Insurance Other

Program Costs :

Intragovernmental Gross Costs 48 $ 926 $ 201 $ 171 $ 635 $ 49 $ 479 $ 

Less: Intragovernmental Earned Revenue 7 8 - 99 221 - 481 Intragovernmental Net Costs 41 918 201 72 414 49 (2) Gross Costs With the Public :

Grants - 16,123 1,984 695 3 - 211 Loan Cost Subsidies - (7) - (1,121) (505) - - Indemnities - - - - - 3,768 - Commodity Program Costs 5,770 - - - - - - Stewardship Land Acquisition - - 48 - - - - Other (55) 83 (7) (365) 773 844 1,210 

Less: Earned Revenues from the Public 3,212 102 (1) 491 659 1,072 36 Net Costs with the Public 2,503 16,097 2,026 (1,282) (388) 3,540 1,385 Net Cost of Operations 2,544 $ 17,015 $ 2,227 $ (1,210) $ 26 $ 3,589 $ 1,383 $ 

FY 2002 Commodity 

Operations

Income 

Support

Conservation 

Programs

Foreign 

Programs

Farm Loan 

Programs Crop Insurance Other

Program Costs :

Intragovernmental Gross Costs 69 $ 807 $ 190 $ 1,279 $ 397 $ 61 $ (675) $ 

Less: Intragovernmental Earned Revenue 528 11 - 140 175 - (389) Intragovernmental Net Costs (459) 796 190 1,139 222 61 (286) Gross Costs With the Public :

Grants - 9,669 2,075 522 3 - 109 Loan Cost Subsidies - (2) - (552) (67) - - Indemnities - - - - - 4,115 Commodity Program Costs 5,340 - - - - - - Stewardship Land Acquisition - 105 - - - - Other 356 776 (3) (72) 140 710 984 

Less: Earned Revenues from the Public 2,098 87 (1) 572 601 1,419 18 Net Costs with the Public 3,598 10,356 2,178 (673) (525) 3,405 1,075 Net Cost of Operations 3,139 $ 11,153 $ 2,368 $ 466 $ (302) $ 3,466 $ 789 $ 
USDA Performance and Accountability Report for FY 2003 

Consolidated Financial Statements 

185

Note 17. Suborganization Program Costs/Program Costs by Segment Natural Resources and Environment 

FY 2003

National 

Forests and 

Grasslands

Forest 

Research

State and 

Private 

Forestry

Wildland Fire 

Management

Working 

Capital Fund

Natural 

Resource

Conservat

Program Costs :

Intragovernmental Gross Costs 843 $ 24 $ 13 $ 210 $ 22 $ 3

$ 

Less: Intragovernmental Earned Revenue 145 48 9 128 158 

 

Intragovernmental Net Costs 698 (24) 4 82 (136) 2

 

Gross Costs With the Public :

Grants 6 421 237 7 - 

 

Indemnities - 10 - 1 - 

 

Stewardship Land Acquisition 191 - - - - 

 

Other 279 1,988 139 1,734 344 1,

 

Less: Earned Revenues from the Public 306 28 2 87 67 

 

Net Costs with the Public 2,304 257 374 1,655 277 1,2

 

Net Cost of Operations 3,002 $ 233 $ 378 $ 1,737 $ 141 $ 1,5

$ 

FY 2002

National 

Forests and 

Grasslands

Forest 

Research

State and 

Private 

Forestry

Wildland Fire 

Management

Working 

Capital Fund

Natural 

Resource

Conservat

Program Costs :

Intragovernmental Gross Costs 484 $ 15 $ 13 $ 386 $ (219) $ 

$ 

Less: Intragovernmental Earned Revenue 135 20 6 10 - Intragovernmental Net Costs 350 (5) 8 376 (219) Gross Costs With the Public :

Grants 376 4 217 10 Indemnities 10 1 Stewardship Land Acquisition 108 - - Other 2,344 231 55 1,790 255 9

Less: Earned Revenues from the Public 313 3 60 - Net Costs with the Public 2,525 232 272 1,741 255 1,0Net Cost of Operations $ 227 2,875 $ 279 $ 2,117 $ 35 $ 1

$ 
USDA Performance and Accountability Report for FY 2003 

Consolidated Financial Statements 

186

Note 17. Suborganization Program Costs/Program Costs by Segment Rural Development 

FY 2003 Mortgage Credit Housing Assistance Area and Regional Development Energy Sup

Conservatio

Program Costs :

Intragovernmental Gross Costs $ 13 1,028 $ 644 $ 1,72

$ 

Less: Intragovernmental Earned Revenue 1 101 142 7

 

Intragovernmental Net Costs 12 927 502 1,64

 

Gross Costs With the Public :

Grants 793 1 732 

 

Loan Cost Subsidies 2 153 226 47

 

Indemnities - 5 2 

 

Other 27 1,217 601 41

 

Less: Earned Revenues from the Public - 1,482 607 1,90

 

Net Costs with the Public 822 (106) 954 (1,02

 

Net Cost of Operations $ 834 821 $ 1,456 $ 62

$ 

FY 2002 Mortgage Credit Housing Assistance Area and Regional Development Energy Sup

Conservatio

Program Costs :

Intragovernmental Gross Costs $ 13 1,172 $ 730 $ 1,6

$ 

Less: Intragovernmental Earned Revenue 118 113 6Intragovernmental Net Costs 1,054 12 617 1,57Gross Costs With the Public :

Grants 2 728 710 Loan Cost Subsidies (486) 2 51 5Other 3,458 23 (668) 26

Less: Earned Revenues from the Public 1,635 - 683 1,73Net Costs with the Public 1,340 753 (590) (1,40Net Cost of Operations $ 766 2,394 $ 26 $ 1

$ 
USDA Performance and Accountability Report for FY 2003 

Consolidated Financial Statements 

187

Note 17. Suborganization Program Costs/Program Costs by Segment Research, Education and Economics 

FY 2003 Agricultural Research Economic Research National Agricultural Statistics Cooperative State Research Education and Extension Intra-M

Elim

Program Costs :

Intragovernmental Gross Costs $ 31 175 $ 49 $ 47 $ 

$ 

Less: Intragovernmental Earned Revenue 3 71 13 

10 

Intragovernmental Net Costs 2 104 36 8 37 

Gross Costs With the Public :

Grants 2 30 - 

1,023 

Indemnities - 1 - 

- 

Other 51 1,105 115 

77 

Less: Earned Revenues from the Public (1) 13 3 

15 

Net Costs with the Public 54 1,123 112 1,085 Net Cost of Operations $ 82 1,227 $ 148 $ 1,122 $ 

$ 

FY 2002 Agricultural Research Economic Research National Agricultural Statistics Cooperative State Research Education and Extension Intra-Mi

Elim

rogram Costs :

Intragovernmental Gross Costs $ 230 24 $ 40 $ $ 39 

$ 

Less: Intragovernmental Earned Revenue 34 3 7 28 

Intragovernmental Net Costs 196 21 33 10 Gross Costs With the Public :

Grants 17 2 - 954 

Other 708 55 92 282 

Less: Earned Revenues from the Public 23 1 5 20 

Net Costs with the Public 703 56 87 1,215 Net Cost of Operations $ 899 78 $ 120 $ $ 1,225 

$ 
USDA Performance and Accountability Report for FY 2003 

Consolidated Financial Statements 

188

Note 17. Suborganization Program Costs/Program Costs by Segment Marketing and Regulatory Programs 

FY 2003 Agricultural Marketing Animal and Plant Health Inspection Grain Inspection

Packers a

Stockyard

Program Costs :

Intragovernmental Gross Costs $ 242 1,534 $ 

$ 

Less: Intragovernmental Earned Revenue 18 6 

 

Intragovernmental Net Costs 224 1,528 

 

Gross Costs With the Public :

Grants 67 4 

 

Indemnities 59 - 

 

Other 966 241 

 

Less: Earned Revenues from the Public 307 177 

 

Net Costs with the Public 785 68 

 

Net Cost of Operations $ 1,009 1,596 $ 

$ 

FY 2002 Agricultural Marketing Animal and Plant Health Inspection Grain Inspection

Packers a

Stockyard

Program Costs :

Intragovernmental Gross Costs $ 854242 $ 

$ 

Less: Intragovernmental Earned Revenue (7) 22 

Intragovernmental Net Costs 860 220 

Gross Costs With the Public : 

Grants 2 41 Indemnities 37 Other 119 788 

Less: Earned Revenues from the Public 188 315 

Net Costs with the Public (67) 551 Net Cost of Operations $ 793771 $ 

$ 
USDA Performance and Accountability Report for FY 2003 

Consolidated Financial Statements 

189

Note 18. Gross Cost and Earned Revenue by Budget Functional Classification 

FY 2003

Budget Functional Classification Gross Cost Earned Revenue Net Cost

150 International Affairs (159) $ 199 $ (358) $ 

270 Energy 2,610 1,987 623

300 Natural Resources and Environment 7,308 785 6,523

350 Agriculture 76,784 6,384 70,400

370 Commerce and Housing Credit 2,404 1,583 821

450 Community and Regional Development 2,243 750 1,493

550 Health 954 107 847

600 Income Security 2,326 1 2,325

800 General Government 608 91 517

Total 95,078 11,887 83,191

Intragovernmental Total Cost and Earned Revenue by Budget Functional Classification:

Budget Functional Classification Gross Cost Earned Revenue Net Cost

270 Energy 1,724 79 1,645

300 Natural Resources and Environment 1,275 367 908

350 Agriculture 1,334 389 945

370 Commerce and Housing Credit 1,028 101 927

450 Community and Regional Development 646 142 504

550 Health 221 3 218

600 Income Security 1,479 2 1,477

800 General Government - 6 (6)

Total $ 1,089 7,707 $ 6,618 $ 

FY 2002

Budget Functional Classification Gross Cost Earned Revenue Net Cost

150 International Affairs 1,026 $ 229 $ 797 $ 

270 Energy 1,967 1,795 172 

300 Natural Resources and Environment 6,948 723 6,225 

350 Agriculture 66,844 5,635 61,210 

370 Commerce and Housing Credit 4,158 1,765 2,394 

450 Community and Regional Development 855 796 59 

550 Health 882 103 779 

600 Income Security 682 1 681 

800 General Government 500 (23) 523 

Total $ 83,862 11,023 $ 72,839 $ 

Intragovernmental Total Cost and Earned Revenue by Budget Functional Classification:

Budget Functional Classification Gross Cost Earned Revenue Net Cost

150 International Affairs 508 $ - $ 508 $ 

270 Energy 1,643 65 1,578 

300 Natural Resources and Environment 1,013 303 709 

350 Agriculture 1,847 378 1,468 

370 Commerce and Housing Credit 1,173 119 1,054 

450 Community and Regional Development 732 113 619 

550 Health 195 2 193 

600 Income Security 785 2 783 

Total $ 983 7,897 $ 6,914 $ 
USDA Performance and Accountability Report for FY 2003 

Consolidated Financial Statements 

190

Note 19. Prior Period Adjustments

Restatements 

In fiscal 2003, FS corrected its fiscal 2002 financial statements to align budgetary and proprietary account 

relationships and correct posting errors in the Wildland Fire Management fund, the Knutson-Vandenberg 

fund and other funds; account for budgetary resources received by trust, special, deposit, and clearing 

funds that had previously been accounted for as General funds; record revenue from the National Reservation System and Map sales that had been recorded as a liability as of September 30, 2002; and record 

liabilities that had been incorrectly recognized as reductions of operating costs during the year ended September 30, 2002. Correction of these errors increased the beginning balance of Cumulative Results of 

Operations by $883 and $1,027 million and decreased the beginning balance of Unexpended Appropriations by $876 and $677 million in fiscal 2003 and 2002, respectively. 

In addition, FS recorded $18 million to the Balance Sheet for PP&E received but not accrued as of September 30, 2002; recorded a prior year $110 million expenditure transfer to the Wildland Fire 

Management fund and the subsequent payback during fiscal 2002 on the Statement of Changes in Net 

Position; corrected $23 million of errors in recording obligations for the Wildland Fire Management fund 

and adjusted offsetting receipts by approximately $413 million to reflect only distributed offsetting receipts on the Statement of Budgetary Resources, and excluded certain funds received from the 

Department of Labor-Job Corps that had previously been included in the Statement of Financing. 

 

In fiscal 2002, FCIC changed its method of accounting for indemnities. Previously, FCIC had recognized 

subsidy expense when the risk was underwritten. Under the new accounting method, FCIC recognizes 

subsidy expense when indemnities are paid. The effect of this change was to decrease the beginning balance of the Cumulative Results of Operations and increase the beginning balance of Unexpended 

Appropriations by $300 and by $318 million in fiscal 2003 and 2002, respectively. 

ARS restated PP&E as of September 30, 2002 to properly capitalize construction in progress and certain 

other real property. Correction of these errors increased the beginning balance of the Cumulative Results 

of Operations by $159 million in fiscal 2003. 

Reclassifications 

Certain reclassifications were made to conform to the current year presentation as follows: 

FS increased Appropriations Received and decreased Other Adjustments by $3,432 million in the Statement of Changes in Net Position. 

CCC decreased Grants and Other by $243 and $284 million respectively and increased Commodity Program Costs by $527 million. RMA increased Indemnities and decreased Earned Revenue from the Public 

by $220 million in the Statement of Net Cost. 

In the Statement of Financing, RD increased Components Requiring or Generating Resources in Future 

Periods by $3,290 and decreased the Total Resources Used to Finance the Net Cost of Operations by 

$3,157 million and the Total Components not Requiring or Generating Resources by $133 million, respectively. 
USDA Performance and Accountability Report for FY 2003 

Consolidated Financial Statements 

191

Note 20. Apportionment Categories of Obligations Incurred 

FY 2003 Direct Reimbursable Total

Category A $ 930 54,857 $ 55,787 $ 

Category B 28,096 35,810 63,906

Exempt from Apportionment 1,396 18 1,414

Total Obligations Incurred 84,349 $ 36,758 $ 121,107 $ 

FY 2002 Direct Reimbursable Total

Category A $ 672 32,955 $ 33,627 $ 

Category B 43,847 28,848 72,695 

Exempt from Apportionment 173 24 197 

Total Obligations Incurred 76,975 $ 29,544 $ 106,519 $ 

Note 21. Available Borrowing Authority, End of Period 

Available borrowing authority at September 30, 2003 and 2002 was $27,133 and $25,631 million, respectively. 

Note 22. Terms of Borrowing Authority Used 

The Secretary of Agriculture has the authority to make and issue notes to the Secretary of Treasury for the 

purpose of discharging obligations for RD’s insurance funds and CCC’s nonreimbursed realized losses 

and debt related to foreign assistance programs. The permanent indefinite borrowing authority includes 

both interest bearing and non–interest notes. These notes are drawn upon daily when disbursements exceed deposits. Notes payable under the permanent indefinite borrowing authority have a term of one year. 

On January 1 of each year, USDA refinances its outstanding borrowings, including accrued interest, at the 

January borrowing rate. 

In addition, USDA has permanent indefinite borrowing authority for the foreign assistance and export 

credit programs to finance disbursements on post-credit reform, direct credit obligations, and credit guarantees. In accordance with the Federal Credit Reform Act of 1990 as amended, USDA borrows from 

Treasury on October 1, for the entire fiscal year, based on annual estimates of the difference between the 

amount appropriated (subsidy) and the amount to be disbursed to the borrower. Repayment under this 

agreement may be, in whole or in part, prior to maturity by paying the principal amount of the borrowings 

plus accrued interest to the date of repayment. Interest is paid on these borrowings based on weighted average interest rates for the cohort, to which the borrowings are associated. Interest is earned on the daily 

balance of uninvested funds in the credit reform financing funds maintained at Treasury. The interest income is used to reduce interest expense on the underlying borrowings. 

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. 
USDA Performance and Accountability Report for FY 2003 

Consolidated Financial Statements 

192

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 23. Adjustments to Beginning Balance of Budgetary Resources 

Obligated Unobligated Obligated Unobligated

Beginning balances 33,300 $ 23,801 $ 31,102 $ 26,294 $ 

Adjustments (327) 90 (1,126) 942

Beginning balances, as adjusted 32,973 $ 23,891 $ 29,976 $ 27,236 $ 

FY 2003 FY 2002

In fiscal 2003, FNS corrected errors in amounts previously reported. The effect of these corrections decreased obligated balances $532 and $460 million and increased unobligated balances $460 million in 

fiscal 2003 and 2002, respectively. 

In fiscal 2003, FS corrected errors in amounts previously reported. The effect of these corrections increased obligated balances $204 million and decreased unobligated balances $370 million. In fiscal 2002, 

unobligated balances decreased $62 million. 

In fiscal 2002, FCIC changed its method of accounting for indemnities. Previously, FCIC had recognized 

expended appropriations when the risk was underwritten. Under the new accounting method, FCIC recognizes expended appropriations when indemnities are paid. The effect of this change was to decrease 

obligated balances and increase unobligated balances $708 million. 

In fiscal 2002, the Department changed its method of accounting for allocations of appropriation transfers. Previously, the Department reported activity in its Statement of Budgetary Resources related to 

allocations received from other Federal agencies. Under the new accounting method, the Department excludes the appropriation and related budgetary activity in its Statement of Budgetary Resources. The 

effect of this change was to decrease obligated and unobligated balances $30 million and $111 million, 

respectively. 

Other adjustments for correction of errors increased obligated balances $72 million and decreased unobligated balances $53 million in fiscal 2002. 
USDA Performance and Accountability Report for FY 2003 

Consolidated Financial Statements 

193

Note 24. Permanent Indefinite Appropriations 

USDA has permanent indefinite appropriations available to fund 1) subsidy costs incurred under credit 

reform programs, 2) certain costs of the crop insurance program, and 3) certain costs associated with FS 

programs. 

The permanent indefinite appropriations for credit reform are mainly available to finance any disbursements incurred under the liquidating accounts. These appropriations become available pursuant to 

standing provisions of law without further action by Congress after transmittal of the Budget for the 

year involved. They are treated as permanent the first year they become available, as well as in succeeding years. However, they are not stated as specific amounts but are determined by specified variable 

factors, such as “cash needs” for liquidating accounts, and information about the actual performance of a 

cohort or estimated changes in future cash flows of the cohort in the program accounts. 

The permanent indefinite appropriation for the crop insurance program is used to cover premium subsidy, 

delivery expenses, losses in excess of premiums and research and delivery costs. 

The permanent indefinite appropriation for FS programs are used to fund 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 25. Legal Arrangements Affecting Use of Unobligated Balances 

Unobligated budget authority is the difference between the obligated balance and the total unexpended 

balance. It represents that portion of the unexpended balance unencumbered by recorded obligations. 

Appropriations are provided on an annual, multi-year, and no-year basis. An appropriation expires on the 

last day of its period of availability and is no longer available for new obligations. Unobligated balances 

retain their fiscal-year identity in an expired account for an additional five fiscal years. The unobligated 

balance remains available to make legitimate obligation adjustments, i.e., to record previously unrecorded obligations and to make upward adjustments in previously underestimated obligations for five 

years. At the end of the fifth year the authority is canceled. Thereafter, the authority is not available for 

any purpose. 

Any information about legal arrangements affecting the use of the unobligated balance of budget authority is specifically stated by program and fiscal year in the appropriation language or in the alternative 

provisions section at the end of the appropriations act. 
USDA Performance and Accountability Report for FY 2003 

Consolidated Financial Statements 

194

Note 26. Differences Between the Statement of Budgetary Resources and 

the Budget of the United States Government 

The differences between the fiscal 2002 Statement of Budgetary Resources and the fiscal 2002 actual 

numbers presented in the fiscal 2004 Budget of the United States Government (Budget) are summarized 

above. 

The Budget excludes expired accounts that are no longer available for new obligations. Audit adjustments were made subsequent to the Budget submission. The Budget includes a portion of the 

Agricultural Quarantine Inspection user fees appropriated whereas the Statement of Budgetary Resources 

reflects the total of user fees collected. The Budget reflects transfers to the Department of Homeland Security for comparability even though the transfers did not occur until fiscal 2003. Unavailable collections 

for the Native American Institution Endowment Fund were included as budgetary resources in the Statement of Budgetary Resources. The Budget includes the Milk Market Orders Assessment Fund since 

employees of the Milk Market Administrators participate in the Federal retirement system, though these 

funds are not available for use by the Department. Actual reimbursable authority from offsetting collections earned from the Food Stamp Program varied from estimates made at the time the Budget was 

submitted. The 2002 Farm Bill repealed the Fund for Rural America that is excluded from the Statement 

of Budgetary Resources. Other items mainly consist of balances in suspense accounts that are excluded 

from the Budget. 

A comparison between the fiscal 2003 Statement of Budgetary Resources and the fiscal 2003 actual numbers presented in the fiscal 2005 Budget cannot be performed as the fiscal 2005 Budget is not yet 

available. The fiscal 2005 Budget is expected to be published in February 2004 and will be available 

from the Government Printing Office. 

Budgetary 

Resources Outlays

Combined Statement of Budgetary Resources 130,410 $ 72,206 $ 

Reconciling Items:

Expired accounts (104) (12,246) 

Audit adjustments - (635) 

Agricultural Quarantine Inspection user fees (185) (171) 

Department of Homeland Secuirty transfers (44) (11) 

Native American Institution Endowment Fund (32) - 

Milk Market Orders Assessment Fund 81 - 

Food Stamp Program - 28 

Fund for Rural America 11 - 

Other 9 40 

Budget of the United States Government 117,417 $ 71,940 $ 

FY 2002
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Note 27. Relationship Between Liabilities Not Covered by Budgetary Resources on the Balance Sheet and the Change in Components Requiring or 

Generating Resources in Future Periods 

FY 2003 FY 2002

Current year liabilities not covered by budgetary resources, 5,036 4,314 $ 

as disclosed in Note 11

Prior year liabilities not covered by budgetary resources (4,314) (3,158)

Increase (Decrease) in liabilities not covered by budgetary resources 722 1,156

Upward/Downward Reestimates of Credit Subsidy Expense (315) (260)

Decrease in Exchange Revenue Receivable from the Public 597 125

Other 2,160 204

Components requiring or generating resources in future periods,

as reported on the Statement of Financing 3,164 1,225 $ 

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 above for the portion of liabilities not covered 

by budgetary resources. 

Note 28. Description of Transfers that Appear as a Reconciling Item on the 

Statement of Financing 

Allocation transfers that appear as reconciling items on the Statement of Financing include funds received 

from the Department of Labor for training underemployed youths; the Department of Transportation for 

maintenance and upkeep of federal highways traversing National Forest System lands; the Appalachian 

Regional Commission and Economic Development Administration for accounting services; and funds 

transferred to the Agency for International Development for transportation in connection with foreign 

commodity donations. 
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Note 29. Incidental Custodial Collections 

FY 2003 FY 2002

Revenue Activity:

Sources of Collections:

Miscellaneous $ 256 126 $ 

Total Cash Collections 126 256 

Accrual Adjustments (13) 11 

Total Custodial Revenue 113 267 

Disposition of Collections:

Transferred to Others:

Treasury (10) (240)

States and Counties (22) - 

Increase in Amounts Yet to be Transferred (80) (27)

Retained by the Reporting Entity (1) - 

Net Custodial Activity $ - - $ 

The majority of custodial collections represent National Forest Fund receipts from the sale of timber and 

other forest products. The balance represents miscellaneous general fund receipts such as collections on 

accounts receivable related to canceled year appropriations, civil monetary penalties and interest, and 

commercial fines and penalties. Custodial collection activities are considered immaterial and incidental to 

the mission of the Department. 
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REQUIRED SUPPLEMENTARY STEWARDSHIP INFORMATION 

USDA has stewardship responsibility for certain resources entrusted to it that do not meet the criteria for 

recognition in the financial statements. Information about these resources is important to understanding 

USDA’s mission, operations, and financial condition at the date of the financial statements and in subsequent periods. Costs of these stewardship-type resources are treated as expenses in the financial 

statements in the year the costs are incurred. However, these costs and resultant resources are intended to 

provide long-term benefits to the public and are included as required supplementary stewardship reporting 

to highlight their long-term benefit nature and to demonstrate accountability over them. 

Stewardship resources are categorized into two major groups as follows: 

Stewardship Property, Plant and Equipment 

Stewardship PP&E consists of assets whose physical properties resemble those of general PP&E that 

are traditionally capitalized in financial statements. However, due to the nature of these assets, (1) 

valuation would be difficult and (2) matching costs with specific periods would not be meaningful. 

Stewardship PP&E includes heritage assets and stewardship land. 

Stewardship Investments 

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

the nation but are not physical assets owned by the Federal Government. Such investments are measured 

in terms of expenses incurred for non-federal physical property, human capital, and research and development. 

Heritage Assets 

Category FY 2002 Sites Condition

Total Heritage Assets 308,431 Poor-Fair

Eligible for the National Register of Historic Places 51,630 Poor-Fair

Listed on the National Register 2,834 Fair

Sites with structures listed on the National Register 1,083 Poor-Fair

National Historic Landmarks 17 Fair

The FS estimates that over 300 thousand heritage assets are on land that it manages. This information was 

estimated from the nine FS regions and annual Department of the Interior Report to Congress. Some of 

these assets are listed on the National Register of Historic Places and some are designated as National 

Historic Landmarks. The number of sites for fiscal 2003 was not available at time of publication. Heritage assets include the following: 

Historic Structures 

Constructed works consciously created to serve some human purpose. They include buildings, monuments, logging and mining camps, and ruins. 
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National Historic Landmarks 

Includes sites, buildings, or structures that possess exceptional value in commemorating or illustrating the 

history of the United States, and exceptional value or quality in illustrating and interpreting the heritage of 

the United States. The Secretary of the Interior is the official designator of National Historic Landmarks. 

National Register of Historic Places 

Includes properties, buildings, and structures that are significant in U.S. history, architecture, and archaeology, and the cultural foundation of the Nation. 

Eligible for the National Register 

Those sites formally determined as eligible for the National Register through the Keeper of the National 

Register or documented by consultation with State Historic Preservation Offices. 

 
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Stewardship Land 

Description FY 2003 Balance Additions (+) Withdrawals (-) FY 2002 Balance

National Forest System Land (In acres):

National Forests 143,843,276 46,593 - 143,796,683 

Wilderness Areas 34,828,502 39,194 - 34,789,308 

Primitive Areas 173,762 - - 173,762 

Wild and Scenic River Areas 947,999 1,621 - 946,378 

Recreation Areas 2,911,239 875 - 2,910,364 

Scenic–Research Areas 137,072 1,257 - 135,815 

Game Refuges and Wildlife Preserve Areas 1,198,099 - - 1,198,099 

Monument Areas 3,833,941 - (6,641) 3,840,582 

National Grasslands 3,839,167 2,590 - 3,836,577 

Purchase Units 359,351 2,298 - 357,053 

Land Utilization Projects 1,876 - - 1,876 

Other Areas 450,401 - (860) 451,261 

Total National Forest System Land 192,524,685 94,428 (7,501) 192,437,758 

Conservation Easements (In acres):

Commodity Credit Corporation

Wetlands Reserve Program 1,099,335 127,655 - 971,680 

Natural Resources Conservation Service

Emergency Wetlands Reserve Program 92,159 - - 92,159 

Emergency Watershed Protection Program 94,099 6,079 - 88,020 

Total Conservation Easements 1,285,593 133,734 - 1,151,859 

Description FY 2002 Balance Additions (+) Withdrawals (-) FY 2001 Balance

National Forest System Land (In acres):

National Forests 143,796,683 - (52,114) 143,848,797 

Wilderness Areas 34,789,308 - (23,349) 34,812,657 

Primitive Areas 173,762 - - 173,762 

Wild and Scenic River Areas 946,378 1,223 - 945,155 

Recreation Areas 2,910,364 - - 2,910,364 

Scenic–Research Areas 135,815 - - 135,815 

Game Refuges and Wildlife Preserve Areas 1,198,099 31,725 - 1,166,374 

Monument Areas 3,840,582 - - 3,840,582 

National Grasslands 3,836,577 10 - 3,836,567 

Purchase Units 357,053 6,452 - 350,601 

Land Utilization Projects 1,876 - - 1,876 

Other Areas 451,261 89,716 - 361,545 

Total National Forest System Land 192,437,758 129,126 (75,463) 192,384,095 

Conservation Easements (In acres):

Commodity Credit Corporation

Wetlands Reserve Program 971,680 342,615 - 629,065 

Natural Resources Conservation Service

Emergency Wetlands Reserve Program 92,159 - - 92,159 

Emergency Watershed Protection Program 88,020 - - 88,020 

Total Conservation Easements 1,151,859 342,615 - 809,244 
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National Forest System 

The FS manages over 192 million acres of public land, the majority of which is classified as stewardship 

land. Stewardship land is valued for its environmental resources, recreational and scenic value, cultural 

and paleontological resources, vast open spaces, and resource commodities and revenue provided to the 

Federal government, states and counties. The National Forest System (NFS) is comprised of the following: 

National Forests 

A unit formerly established and permanently set-aside and reserved for National Forest purposes. The 

following categories of NFS lands have been set-aside for specific purposes in designated areas: 

• Wilderness Areas: Areas designated by Congress as part of the National Wilderness Preservation System. 

• Primitive Areas: Areas designated by the Chief of the Forest Service as primitive areas. They are administered in the same manner as wilderness areas, pending studies to determine sustainability as a 

component of the National Wilderness Preservation System. 

• Wild and Scenic River Areas: Areas designated by Congress as part of the National Wild and Scenic 

River System. 

• Recreation Areas: Areas established by Congress for the purpose of assuring and implementing the 

protection and management of public outdoor recreation opportunities. 

• Scenic-Research Areas: Areas established by Congress to provide use and enjoyment of certain ocean 

headlands and to insure protection and encourage the study of the areas for research and scientific 

purposes. 

• Game Refuges and Wildlife Preserve Areas: Areas designated by Presidential Proclamation or by 

Congress for the protection of wildlife. 

• Monument Areas: Areas including historic landmarks, historic and prehistoric structures, and other 

objects for historic or scientific interest, declared by Presidential Proclamation or by Congress. 

National Grasslands 

A unit designated by the Secretary of Agriculture and permanently held by the USDA under Title III of 

the Bankhead-Jones Tenent Act. 

Purchase Units 

A unit of land designated by the Secretary of Agriculture or previously approved by the National Forest 

Reservation Commission for purposes of Weeks Law acquisition. The law authorizes the federal government to purchase lands for stream-flow protection, and maintain the acquired lands as national forests. 

Land Utilization Projects 

A unit reserved and dedicated by the Secretary of Agriculture for forest and range research and experimentation. 

Other Areas 

Areas administered by the FS that are not included in one of the above groups. 
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Condition of NFS Lands 

The FS monitors the condition of NFS lands based on information compiled by two national inventory 

and monitoring programs. Annual inventories of forest status and trends are conducted by the Forest Inventory and Analysis program in 48 States covering 70 percent of the forested lands of the U.S. The 

Forest Health Monitoring program is active in 50 states providing surveys and evaluations of forest health 

conditions and trends. While most of the 149 million acres of forestland on NFS lands continue to produce valuable benefits (i.e. clean air, clean water, habitat for wildlife, and products for human use), 

significant portions are at risk to pest outbreaks and/or catastrophic fires. 

About 33 million acres of NFS forestland are at risk to future mortality from insects and diseases (based 

on the current Insect and Disease Risk Map). Nearly 73 million acres of NFS forestland are prone to 

catastrophic fire based on current condition and departure from historic fire regimes (Fire Regimes 1&2 

and Condition Classes 2&3). Based on these two maps, approximately 9.5 million acres are at risk to both 

pest caused mortality and fire. Invasive species of insects, diseases and plants continue to impact our native ecosystems by causing mortality to, or displacement of native vegetation. The National Fire Plan has 

enhanced our efforts to prevent and suppress future fires adequately and restore acres that are at risk. Risk 

to fires was reduced by fuel hazard treatments on 1.4 million acres of NFS lands in fiscal 2003. Insect and 

disease prevention and suppression treatments were completed on 1.5 million acres of NFS lands in fiscal 

2003. 

At the time of submission of this information the net change values include the net effects of FS land 

transactions, except for the Southwestern region. Land that is needed to protect critical wildlife habitat, 

cultural and historic values, support the purposes of congressional designation, and satisfy recreation 

and conservation purposes is acquired through purchase or exchange. 

Conservation Easements 

Wetlands Reserve Program 

The Wetlands Reserve Program (WRP) is a voluntary program established to restore, protect, and enhance wetlands on agricultural land. Participants in the program may sell a conservation easement or enter 

into a cost-share restoration agreement with CCC/NRCS in order to restore and protect wetlands. The 

landowner voluntarily limits the future use of the land, yet retains private ownership. The program provides many benefits for the entire community, such as better water quality, enhanced habitat for wildlife, 

reduced soil erosion, reduced flooding, and better water supply. 

To be eligible for WRP, land must be restorable and suitable for wildlife benefits. Once land is enrolled in 

the program, the landowner continues to control access to the land—and may lease the land—for hunting, 

fishing, and other undeveloped recreational activities. Once enrolled, the land is monitored to ensure 

compliance with program requirements. At any time, a landowner may request the evaluation of additional activities (such as cutting hay, grazing livestock, or harvesting wood products) to determine if there 

are other compatible uses for the site. Compatible uses are allowed if it is fully consistent with the protection and enhancement of the wetland. The condition of the land is immaterial as long as the easement on 

the land meets the eligibility requirements of the program. 

CCC/NRCS records an expense for the acquisition cost of purchasing easements plus any additional costs 

such as closing transactions, survey, and restoration costs. Easements can be either permanent or 30-year 

duration. In exchange for establishing a permanent easement, the landowner receives payment up to the 

agricultural value of the land and 100 percent of the restoration costs for restoring the wetlands. The 30-
USDA Performance and Accountability Report for FY 2003 

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year easement payment is 75 percent of what would be provided for a permanent easement on the same 

site and 75 percent of the restoration cost. 

Withdrawals from the program are rare. The Secretary of Agriculture has the authority to terminate contracts, with agreement from the landowner, after an assessment of the effect on public interest, and 

following a 90-day notification period of the House and Senate agriculture committees. 

In fiscal 2002, funding responsibility for WRP returned to NRCS; however, CCC remains responsible for 

easements using funding prior to the signing of the 2002 Farm Bill. Additionally, CCC acres acquired 

during fiscal 2003 were purchased with CCC funds, as in the past. 

Emergency Wetlands Reserve Program 

The Emergency Wetlands Reserve Program (EWRP) administered by NRCS was established as part of 

the emergency restoration package following the flooding of the Mississippi River and its tributaries in 

1993. EWRP provides landowners an alternative to restoring agricultural production lands that previously 

were wetlands. The program is patterned after the WRP. Participants in the program sell a conservation 

easement to USDA in order to restore and protect wetlands. The landowner voluntarily limits the future 

use of the land, yet retains private ownership. 

To be eligible, the land must have been damaged by a natural disaster and be restorable as a wetland. 

Once the land is enrolled in the program, the landowner continues to control access to the land. The land 

is monitored to ensure that the wetland is in compliance with contract requirements, including compatible 

uses, such as recreational activities or grazing livestock. 

Easements purchased under this program meet the definition of stewardship land. NRCS records an expense for the acquisition cost of purchasing easements plus any additional costs such as closing, survey, 

and restoration costs. Easements purchased under EWRP are permanent in duration. In exchange for establishing a permanent easement, the landowner receives payment based on agricultural value of the land, 

a geographic land payment cap, or the landowner offer. Easement values are assessed on pre-disaster conditions. The landowner may receive up to 100 percent of restoring the wetland. There are no provisions in 

the easement to terminate the purchase. 

Emergency Watershed Protection Program

The Emergency Watershed Protection Program (EWP) Floodplain Easements is administered by NRCS. 

A floodplain easement is purchased on flood prone lands to provide a more permanent solution to repetitive disaster assistance payments and achieve greater environmental benefits where the situation warrants 

when the affected landowner is willing to participate in the easement approach. The easement is to restore, protect, manage, maintain, and enhance the functions of wetlands, riparian areas, conservation 

buffer strips, and other lands. 

Easements purchased under this program meet the definition of stewardship land. NRCS records an expense for the acquisition cost of purchasing easements plus any additional costs such as closing, survey, 

and restoration costs. Easements purchased under EWP are permanent in duration. In exchange for establishing a permanent easement, the landowner receives payment based on agricultural value of the land, a 

geographic land payment cap, or the landowner offer. Easement values are assessed on pre-disaster conditions. The landowner may receive up to 100 percent of the installation and maintenance of land 

treatment measures deemed necessary and desirable to effectively achieve the purposes of the easement. 

The easements provide permanent restoration of the natural floodplain hydrology as an alternative to traditional attempts to restore damaged levees, lands, and structures. There are no provisions in the easement 

to terminate the purchase. 
USDA Performance and Accountability Report for FY 2003 

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Stewardship Investments 

(in millions) 

FY 2003 FY 2002 FY 2001 FY 2000

Program Expense Expense Expense Expense

Non-Federal Physical Property:

Food and Nutrition Service

Food Stamp Program 39 $ - $ 41 $ 28 $ 

Special Supplemental Nutrition Program 16 - 18 29 

Cooperative State Research, Education, and Extension Service

Extension 1890 Facilities Program 15 14 12 12 

Total Non-Federal Property 70 $ 14 $ 71 $ 69 $ 

Human Capital:

Cooperative State Research, Education, and Extension Service

Higher Education and Extension Programs 511 $ 532 $ 479 $ 466 $ 

Food and Nutrition Service

Food Stamp Program 99 - 57 156 

Forest Service

Job Corps Program 118 104 101 94 

Agricultural Research Service

National Agricultural Library 21 20 21 19 

Risk Management Agency

Risk Management Education 4 - - 1 

Total Human Capital 753 $ 656 $ 658 $ 736 $ 

Research and Development:

Agricultural Research Service

Plant Sciences 394 $ 384 $ 324 $ 296 $ 

Commodity Conversion and Delivery 185 182 194 172 

Animal Sciences 194 102 146 133 

Soil, Water, and Air Sciences 110 100 98 89 

Human Nutrition 78 80 77 72 

Integration of Agricultural Systems 43 40 34 31 

Collaborative Research Program 6 11 11 - 

Cooperative State Research, Education, and Extension Service

Land-grant University System 601 542 495 476 

Forest Service

Natural Resource Management 233 227 200 255 

Economic Research Service

Economic and Social Science 69 67 66 64 

National Agricultural Statistics Service

Statistical 5 5 4 4 

Total Research and Development 1,918 $ 1,740 $ 1,649 $ 1,592 $ 

Non-Federal Physical Property 

Food and Nutrition Service 

FNS’ nonfederal physical property consists of computer systems and other equipment obtained by the 

State and local governments for the purpose of administering the Food Stamp Program. The total Food 

Stamp Program Expense for ADP Equipment & Systems has been reported as of the date of FNS’ finan-
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cial statements. FNS’ nonfederal physical property also consists of computer systems and other equipment obtained by the State and local governments for the purpose of administering the Special 

Supplemental Nutrition Program for Women, Infants and Children. 

Cooperative State Research, Education and Extension Service 

The Extension 1890 facilities program supports the renovation of existing buildings and the construction 

of new facilities that permit faculty, students, and communities to benefit fully from the partnership between USDA and the historically African-American land-grant universities. 

Human Capital 

Cooperative State Research, Education and Extension Service 

The Higher Education programs include graduate fellowship grants, competitive challenge grants, Secondary/2-year Post Secondary grants, Hispanic serving institutions education grants, a multicultural scholars 

program, a Native American institutions program, a Native American institutions endowment fund, an 

Alaska Native Serving and Native Hawaiian Serving institutions program, 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 landgrant 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 for 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 769,535 work registrants subject to the 3-month Food Stamp Program participant limit and 503,200 work registrants not subject to the limit in either job-search, job-training, jobworkfare, education, or work experience. 

Forest Service 

In partnership with the U.S. Department of Labor (DOL), the FS operates 18 Job Corps Civilian Conservation Centers. Job Corps is the only Federal residential employment and education training program for 

economically challenged young people, ages 16-24. The purpose of the program is to provide young 

adults with the skills necessary to become employable, independent, and productive citizens. Job Corps is 

funded from DOL annually on a program year beginning on July 1 and ending on June 30 of each year. 

During fiscal 2003 (July 1st to June 30th), there were 8,277 participants with 3,291 placements. The average starting hourly wage for FS Job Corps students was $8.52, which is 50 cents above the DOL national 

average rate. Approximately, 1,931 women students received training in nontraditional vocations. There 

were 1,075 students enrolled in the GED program, 431 students enrolled in High School programs, and 62 

ex-Job Corps students working at 18 Centers. Over 2,000 Job Corps students and 300 staff assisted the 

agency in its fire fighting efforts. The students also accomplished conservation work on National Forest 
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lands appraised at $14.6 million. All the Job Corps Centers were studied under the A-76 Streamlined 

Competitive Sourcing process. All 18 centers won the competition and the center operations will remain 

in house. 

Established in 1964, Job Corps has trained and educated about 227,000 young men and women. The program is administered in a structured, coeducational, and residential environment that provides education, 

vocational and life-skills training, counseling, medical care, work experience, placement assistance and 

follow-up, recreational opportunities, and biweekly monetary stipends. Job corps students can choose 

from a wide variety of careers such as urban forestry, heavy equipment operations and maintenance, business clerical, carpentry, culinary arts, painting, cement and brick masonry, welding, auto mechanics, 

health services, building and apartment maintenances, warehousing, and plastering. 

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 1996 Act, the FCIC has formed new partnerships with 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 RME Summit that raised awareness of the tools and resources needed by farmers and ranchers to manage their risks. RMA has built on this foundation during fiscal year 2003 by expanding State 

and Regional education partnerships; encouraging the development of information and technology decision aids; supporting the National Future Farmers of America foundation with an annual essay contest; 

facilitating local training workshops; and supporting cooperative agreements with educational and outreach organizations. 

One of the directives of Agricultural Risk Protection Act is to expedite 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.
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Research and Development 

Agricultural Research Service 

ARS is the principal in-house research agency of USDA. Its mission is to conduct research to develop the 

following program activities: 

Plant Sciences

The research emphasis is on increasing the productivity and quality of crop plants, and improving the 

competitiveness of agricultural products in domestic and world markets. The research involves developing improved production practices, and methods for reducing crop losses caused by weeds, diseases, 

insects, and other pests. The research also includes broadening the germplasm resources of plants and 

beneficial organisms to ensure genetic diversity for improving productivity. 

Commodity Conversion and Delivery

The research program focuses on maximizing the use of agricultural products in domestic and international markets. New agricultural products and processes are developed along with technologies for 

reducing or eliminating post harvest losses caused by pests, spoilage, and physical and environmental 

damage. Also, research is conducted on food safety to reduce pathogens, naturally-occurring toxicants, 

mycotoxins, and chemical residues in the food supply. 

Animal Sciences

The research program places primary emphasis on increasing the productivity of animals and the quality 

of animal products. The research involves increasing the genetic capacity of animals for production, improving the efficiency of reproduction, improving animal nutrition and feed efficiency, and controlling or 

preventing losses from pathogens, diseases, parasites and insect pests. Additionally, the research includes 

the development of systems and technologies to better manage and utilize animal wastes. 

Soil, Water, and Air Sciences

The research program is directed to managing and conserving the nation’s soil, water, and air resources to 

maintain a stable and productive agriculture. The research focuses on developing technologies and systems to conserve water and protect its quality, enhance soil quality and reduce erosion, and improve air 

quality. The effects of global change are also researched. 

Human Nutrition

The research program emphasis is on promoting optimum human health and well-being through improved 

nutrition. Research is directed to defining the nutrient requirements of humans at all stages of the life cycle. The research also focuses on determining the nutrient content of agricultural products and processed 

foods consumed, and establishing the bioavailability of their nutrients. 

Integration of Agricultural Systems

The research integrates scientific knowledge of agricultural production, processing, and marketing into 

systems that optimize resources management and facilitate the transfer of technology to users. 
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Collaborative Research Program

Funds from the U.S. Agency for International Development allow USDA to provide short-term scientific 

exchanges with the new independent states of the former Soviet Union to develop market-based agricultural 

systems necessary to meet the food needs of their populations and develop and strengthen trade linkages 

between their countries and related agribusiness and agricultural enterprise in the United States. 

The NAL also provides support to ARS’ research programs. 

Cooperative State Research, Education, and Extension Service Program 

CSREES participates in a nationwide land-grant university system of agriculture related research and 

program planning and coordination between State institutions and USDA. It assists in maintaining cooperation among the State institutions, and between the State institutions and their Federal research partners. 

CSREES administers grants and formula payments to State institutions to supplement State and local 

funding for agriculture research. 

Forest Service 

FS research and development provides reliable science based information that is incorporated into natural 

resource decision-making. Efforts consist of developing new technology, and then adapting and transferring this technology to facilitate more effective resource management. Some major research areas include: 

• Vegetation Management and Protection; 

• Wildlife, Fish, Watershed, and Air; 

• Resource Valuation and Use Research; and 

• Forest Resources Inventory and Monitoring. 

Research staff is involved in all areas of the FS supporting agency goals by providing more efficient and 

effective methods where applicable. 

A representative summary of accomplishments include: 

• Estimated 316 new interagency agreements and contracts; 

• Estimated 221 interagency agreements and contracts continued; 

• Estimated 1,326 articles published in journals; 

• Estimated 1,829 articles published in all other publications; 

• Six patents granted; and 

• Eighteen rights to inventions established. 

Economic Research Service 

ERS provides economic and other social science research and analysis for public and private decisions on 

agriculture, food, natural resources, and rural America. Research results and economic indicators on these 

important issues are fully disseminated through published and electronic reports and articles; special staff 

analyses, briefings, presentations, and papers; databases; and individual contacts. ERS’ objective information and analysis helps public and private decision makers attain the goals that promote agricultural 

competitiveness, food safety and security, a well-nourished population, environmental quality, and a sustainable rural economy. 
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National Agricultural Statistics Service 

Statistical research and service is conducted to improve the statistical methods and related technologies used 

in developing U.S. agricultural statistics. The highest priority of the research agenda is to aid the NASS estimation program through development of better estimators at lower cost and with less respondent burden. 

This means greater efficiency in sampling and data collection coupled with higher quality data upon which 

to base the official estimates. In addition, new products for data users are being developed with the use of 

technologies such as remote sensing and geographic information systems. Continued service to users will be 

increasingly dependent upon methodological and technological efficiencies. 
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REQUIRED SUPPLEMENTARY INFORMATION Statement of Budgetary Resources 

FY 2003 FNCS FSIS MRP NRE REE D

Budgetary

NonBudgetary 

Credit 

Program 

Financing 

Accounts

Budgetary

NonBudgetary 

Credit 

Program 

Financing 

Accounts

Budgetary Budgetary Budgetary Budgetary Budgetary Bud

Budgetary Resources:

Budget Authority:

Appropriations Received 25,338 $ 3,545 $ 37,148 $ 764 $ 7,074 $ 6,873 $ 2,667 $ 

$ 

Borrowing Authority (Note 21 & 22) 49,343 2,881 $ - 7,376 $ - - - - - 

Net Transfers (2,091) - 82 - 4,819 - (4,299) 1,326 (30) 

Unobligated Balances:

Beginning of Period (Note 26) 2,477 4,188 1,487 1,076 12,216 58 626 1,010 562 

Net Transfers, Actual (315) - - - - - - (116) (9) 

Spending Authority From Offsetting Collections:

Earned

Collected 16,248 3,250 6,382 4,471 102 107 170 784 112 

Receivable from Federal Sources 1,467 58 69 4 - 1 (8) 82 (18) 

Advance Received 292 - - - - - (1) (1) (1) 

Without Advance from Federal Sources 8 2 - 48 - - - (50) 18 

Subtotal 18,009 3,316 6,451 4,523 101 107 162 816 110 

Recoveries of Prior Year Obligations 1,416 91 193 346 470 80 282 354 978 

Permanently not Available (48,413) (2,408) (4,101) (1,866) (4,572) (6) (14) (34) (25) 

Total Budgetary Resources 45,764 $ 8,068 $ 7,657 $ 11,455 $ 50,182 $ 1,003 $ 3,831 $ 10,229 $ 4,253 $ 

$ 

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FY 2003 FNCS FSIS MRP NRE REE D

Budgetary

NonBudgetary 

Credit 

Program 

Financing 

Accounts

Budgetary

NonBudgetary 

Credit 

Program 

Financing 

Accounts

Budgetary Budgetary Budgetary Budgetary Budgetary Bud

Status of Budgetary Resources:

Obligations Incurred (Note 20):

Direct 7,832 $ 3,658 $ 4,872 $ 10,064 $ 42,044 $ 836 $ 3,053 $ 7,971 $ 3,427 $ 

$ 

Reimbursable 34,504 - 487 - 61 102 195 769 158 Subtotal 42,336 3,658 5,359 10,064 42,105 938 3,248 8,740 3,585 

Unobligated Balance:

Apportioned 2,738 4,300 317 1,043 760 25 317 964 564 

Exempt from Apportionment 11 1 - - - 1 246 35 32 

Other Available 9 - - - - - - - - 

 

Unobligated Balance not Available 670 109 1,981 348 7,317 39 20 490 72 

Total Status of Budgetary Resources 45,764 8,068 7,657 11,455 50,182 1,003 3,831 10,229 4,253 

Relationship of Obligations to Outlays:

Obligated Balance, Net, Beginning of Period 5,937 604 6,774 13,158 2,354 73 325 2,150 1,494 

Accounts Receivable (2,091) (166) (94) (4) - (24) (50) (273) (50) 

Unfilled Customer Orders from Federal So (8) (18) - (714) - - - (106) (96) 

Undelivered Orders 2,552 247 6,599 15,105 435 91 478 2,107 1,669 

Accounts Payable 5,879 419 411 2 2,360 21 67 979 59 

Outlays:

Disbursements 39,056 3,623 4,954 8,434 41,194 842 2,804 7,796 2,519 

Collections (16,541) (3,250) (6,382) (4,471) (102) (107) (169) (783) (110) 

Subtotal 22,515 373 (1,428) 3,963 41,092 735 2,635 7,013 2,409 

Less: Offsetting Receipts 351 1,293 790 - - 1 5 405 

- 

Net Outlays $ (920) 22,164 $ (2,218) $ 3,963 $ 41,092 $ 734 $ 2,630 $ 6,608 $ 2,409 $ 

$ 

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FY 2002 FNCS FSIS MRP NRE REE D

Budgetary

NonBudgetary 

Credit 

Program 

Financing 

Accounts

Budgetary

NonBudgetary 

Credit 

Program 

Financing 

Accounts

Budgetary Budgetary Budgetary Budgetary Budgetary Bud

Budgetary Resources:

Budget authority:

Appropriations received 30,037 $ - $ 4,618 $ - $ 32,806 $ 734 $ 7,260 $ 6,132 $ 2,511 $ 

$ 

Borrowing authority 34,054 1,586 1 8,103 - - - - - Net transfers (3,501) - 588 - 5,173 - (5,046) 580 15 Beginning of period 5,443 1,728 1,159 612 16,001 45 488 1,303 338 Net transfers, actual (7) - - - 20 - 2 (73) - 

Spending authority from offsetting collections: 

Earned 

Collected 13,762 3,548 5,877 3,634 143 101 162 1,299 81 Receivable from Federal sources (479) (68) (12) (694) - 2 17 (216) 12 Advance received 209 - - - (15) - - (48) 2 Without advance from Federal sources (3) (2) - 666 - - 26 10 

Subtotal 13,489 3,478 5,866 3,606 128 103 179 1,061 105 

Recoveries of prior year obligations 472 78 268 210 712 73 176 125 778 Permanently not available (42,135) (597) (5,290) (1,296) (4,931) (1) (10) (22) (15) 

Total Budgetary Resources (Note ) 37,852 $ 6,273 $ 7,210 $ 11,236 $ 49,910 $ 954 $ 3,050 $ 9,106 $ 3,732 $ 

$ 

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FY 2002 FNCS FSIS MRP NRE REE D

Budgetary

NonBudgetary 

Credit 

Program 

Financing 

Accounts

Budgetary

NonBudgetary 

Credit 

Program 

Financing 

Accounts

Budgetary Budgetary Budgetary Budgetary Budgetary Bud

Status of Budgetary Resources:

Obligations incurred (Note ):

Direct 8,419 $ 2,085 $ 5,242 $ 10,160 $ 37,614 $ 795 $ 2,006 $ 7,113 $ 3,021 $ 

$ 

Reimbursable 26,956 - 481 - 79 102 418 983 149 

Subtotal 35,375 2,085 5,723 10,160 37,693 897 2,424 8,096 3,170 

Unobligated balance

Apportioned 1,834 3,978 207 274 517 43 432 823 409 

Exempt from apportionment 42 - - - 1 172 10 56 

Other available 299 - - - - - - - - 

Unobligated balance not available 301 210 1,279 802 11,699 13 21 177 97 

Total Status of Budgetary Resources 37,852 6,273 7,210 11,236 49,910 954 3,050 9,106 3,732 

Relationship of Obligations to Outlays:

Obligated balance, net, beginning of period 5,890 580 6,729 10,232 2,598 73 360 1,968 1,464 

Accounts receivable (654) (107) (24) - - (23) (58) (156) (68) 

(6) (10) - (666) - - - (156) (77) 

Undelivered orders 4,041 284 6,360 13,823 340 80 265 1,715 1,584 

Accounts payable 2,556 437 438 - 2,014 17 118 746 56 

Outlays:

Disbursements 35,339 2,053 5,422 7,053 37,226 821 2,296 7,979 2,340 

Collections (13,972) (3,548) (5,877) (3,634) (128) (101) (162) (1,251) (83) 

Subtotal 21,368 (1,495) (455) 3,418 37,098 720 2,134 6,728 2,258 

Less: Offsetting Receipts 57 130 356 - - 1 10 439 - 

Net Outlays 21,311 $ (1,625) $ (811) $ 3,418 $ $ 720 37,098 $ $ 6,289 2,124 $ 2,257 $ 

$ 

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Unfilled customer orders from Federal sources
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Deferred Maintenance 

FY 2003

Cost to Return 

to Acceptable 

Condition

Cost of Critical 

Maintenance

Cost of Noncritical 

Maintenance

Asset Class

Forest Service

Roads, Bridges, and Major Culverts 3,851 $ 696 $ 3,155 $ 

Buildings 421 128 293

Developed Recreation Sites 189 55 134

Dams 29 10 19

Range Structures 490 490 - 

Wildlife, Fish, and Threatened and Endangered Species Structures 5 3 2

Trails 120 42 78

Heritage Assets 83 45 38

Total Forest Service $ 1,469 5,188 $ 3,719 $ 

FY 2002

Cost to Return 

to Acceptable 

Condition

Cost of Critical 

Maintenance

Cost of Noncritical 

Maintenance

Asset Class

Forest Service

Roads, Bridges, and Major Culverts 4,955 $ 1,161 $ 3,794 $ 

Buildings 189 518 329 

Developed Recreation Sites 291 99 192 

Dams 9 30 21 

Range Structures 491 491 - 

Wildlife, Fish, and Threatened and Endangered Species Structures 4 3 1 

Trails 51 138 87 

Heritage Assets 42 73 31 

Total Forest Service $ 2,047 6,501 $ 4,454 $ 

Deferred maintenance is maintenance that was scheduled to be performed and delayed until a future period. Deferred maintenance represents a cost that the government has elected not to fund and, therefore, 

the costs are not reflected in the financial statements. Maintenance is defined to include preventative 

maintenance, normal repairs, replacement of parts and structural components, and other activities needed 

to preserve the asset so that it continues to provide acceptable service and achieve its expected life. It excludes activities aimed at expanding the capacity of an asset or otherwise upgrading it to service needs 

different from, or significantly greater than, those originally intended. Deferred maintenance is reported 

for general PP&E, stewardship assets, and heritage assets. It is also reported separately for critical and 

non-critical amounts of maintenance needed to return each class of asset to its acceptable operating condition. 

The FS uses condition surveys to estimate deferred maintenance on all major classes of PP&E. There is 

no deferred maintenance for fleet vehicles and computers that are managed through the Agency’s working 

capital fund. Each fleet vehicle is maintained according to schedule. The cost of maintaining the remaining classes of equipment is expensed. 

Condition of Administrative Facilities 

The condition of administrative facilities ranges from poor to good. Approximately half of these buildings 

are obsolete or in poor condition needing major repair or renovation. Approximately one fourth is in fair 

condition and the remaining is in good condition. 
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Condition of Dams 

The overall condition of dams is below acceptable. The condition of dams is acceptable when current design standards are met and no deficiencies that threaten the safety of the structure or public are detected. 

Condition of General Property, Plant and Equipment

The standards for acceptable operating condition for various classes of general PP&E, stewardship and 

heritage assets are: 

Buildings 

Comply with the National Life Safety Code, the Forest Service Health and Safety Handbook, and the Occupational Safety Health Administration as determined by condition surveys. 

Roads and Bridges 

Conditions of the National Forest System Road system are measured by various standards that include 

applicable regulations for the Highway Safety Act developed by the Federal Highway Administration, 

best management practices for road construction and maintenance developed by the Environmental Protection Agency and the states to implement the non-point source provisions of the Clean Water Act, road 

management objectives developed through the forest planning process prescribed by the National Forest 

Management Act, and the requirements of Forest Service Manuals and Handbooks. 

Developed Recreation Sites 

This category includes campgrounds, trailheads, trails, wastewater facilities, interpretive facilities, and 

visitor centers. All developed sites are managed in accordance with Federal laws and regulations (CFR 

36). Detailed management guidelines are contained in the Forest Service Manual (FSM 2330, Publicly 

Managed Recreation Opportunities) and regional and forest level user guides. Standards of quality for 

developed recreation sites were developed under the meaningful measures system and established for the 

following categories: health and cleanliness, settings, safety and security, responsiveness, and the condition of facility. 

Range Structures 

The condition assessment is based on: 1) a determination by knowledgeable range specialists or other district personnel that the structure performs as intended, and 2) a determination through the use of a 

protocol system to assess conditions based on age. A long-range methodology is used to gather this data. 

Dams 

Managed according to Forest Service Manual 7500, Water Storage and Transmission, and Forest Service 

Handbook 7509.11, Dams Management as determined by condition surveys.

Wildlife, Fish and Threatened and Endangered Species Structures

Field biologists at the forest used their professional judgment to determine deferred maintenance. Deferred maintenance was considered as upkeep that had not occurred on a regular basis. The amount was 

considered critical if resource damage or species endangerment would likely occur if maintenance was 

deferred much longer. 
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215

Trails

Trails are managed according to Federal law and regulations (CFR 36). More specific direction is contained in the Forest Service Manual (FSM 2350, Trail, River, and Similar Recreation Opportunities) and 

the Forest Service Trails Management Handbook (FSH 2309.18). 

Heritage Assets

These assets include archaeological sites that require determinations of National Register of Historic 

Places status, National Historic Landmarks, and significant historic properties. Some heritage assets may 

have historical significance, but their primary function within the agency is as visitation or recreation sites 

and, therefore, may not fall under the management responsibility of the heritage program. 
USDA Performance and Accountability Report for FY 2003 

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216

Intragovernmental Amounts 

Assets 

FY 2003

Fund Balance with 

Treasury Investments

Accounts 

Receivable Other

Trading Partner (Code)

Unknown (00) - $ 4 $ 67 $ 5 $ 

Department of Interior (14) - - 9 - 

Department of Justice (15) - - 1 - 

Department of Labor (16) - - 4 - 

Department of the Navy (17) - - 1 - 

U.S. Postal Service (18) - - 1 3 

Department of State (19) 36,480 - (1) - 

Department of the Treasury (20) - 41 67 - 

Department of the Army (21) - - 7 - 

Office of Personnel Management (24) - - 1 - 

General Services Administration (47) - - 6 - 

Federal Deposit Insurance Corporation (51) - - 1 - 

Federal Emergency Management Agency (58) - - 7 - 

Department of Transportation (69) - - 428 (1) 

Agency for International Development (72) - - 33 - 

Department of Health and Human Services (75) - - 13 - 

Department of Energy (89) - - 3 - 

U.S. Army Corps of Engineers (96) - - 1 - 

Office of the Secretary of Defense-Defense Agencies (97) - - 10 - 

Treasury General Fund (99) - - 7 - 

Total Assets 36,480 $ 45 $ 666 $ 7 $ 

FY 2002

Fund Balance with 

Treasury Investments

Accounts 

Receivable Other

Trading Partner (Code)

Unknown (00) - $ 5 $ 169 $ 2 $ 

Department of Interior (14) - - 4 - 

Department of Justice (15) - - 1 - 

Department of Labor (16) - - 7 - 

Department of State (19) - - 1 - 

Department of the Treasury (20) 39,617 91 13 - 

Department of the Army (21) - - 7 - 

Office of Personnel Management (24) - - 2 - 

General Services Administration (47) - - 7 - 

Department of the Air Force (57) - - 1 - 

Environmental Protection Agency (68) - - 3 - 

Department of Transportation (69) - - 1 (1)

Department of Health and Human Services (75) - - 5 - 

National Aeronautics and Space Administration (80) - - 1 - 

Department of Energy (89) - - 17 - 

U.S. Army Corps of Engineers (96) - - 1 - 

Office of the Secretary of Defense-Defense Agencies (9 - - 3 - 

Total Assets 39,617 $ 96 $ 242 $ 1 $ 
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217

Liabilities

FY 2003 Accounts Payable Debt

Resources 

Payable to 

Treasury Other

Trading Partner (Code)

Unknown (00) 4 $ - $ - $ 313 $ 

Government Printing Office (04) - - - (2)

Department of Commerce (13) - - - 2

Department of Interior (14) - - - 17

Department of Justice (15) - - - 24

Department of Labor (16) - - - 186

Department of the Navy (17) - - - (1)

Department of State (19) - - - (4)

Department of the Treasury (20) - 76,140 - 242

Department of the Army (21) - - - 4

Office of Personnel Management (24) - - - 28

General Services Administration (47) - - - 22

Federal Emergency Management Agency (58) - - - 1

Agency for International Development (72) 1,202 - - 4

U.S. Army Corps of Engineers (96) - - - (100)

Office of the Secretary of Defense-Defense Agencies (9 - - - 1

Treasury General Fund (99) - - 16,981 2,224

Total Liabilities 1,206 $ 76,140 $ 16,981 $ 2,961 $ 

FY 2002 Accounts Payable Debt

Resources 

Payable to 

Treasury Other

Trading Partner (Code)

Unknown (00) (17) $ - $ - $ 212 $ 

Department of Commerce (13) - - - 1 

Department of Interior (14) - - - 68 

Department of Justice (15) - - - 8 

Department of Labor (16) - - - 94 

Department of the Navy (17) - - - (1)

Department of State (19) - - - (4)

Department of the Treasury (20) 47 75,933 - 1,063 

Department of the Army (21) - - - 1 

Office of Personnel Management (24) - - - 20 

General Services Administration (47) - - - 11 

Department of Transportation (69) - - - 7 

Agency for International Development (72) 541 - - 4 

Department of Health and Human Services (75) - - - 1 

National Aeronautics and Space Administration (80) - - - (1)

Department of Energy (89) - - - 5 

U.S. Army Corps of Engineers (96) 1 - - (66)

Treasury General Fund (99) - - 18,598 1,372 

Total Liabilities 572 $ 75,933 $ 18,598 $ 2,795 $ 
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Earned Revenue, Federal 

FY 2003 FY 2002

Earned Revenue 

Federal

Earned Revenue 

Federal

Earned Revenue Federal:

Trading Partner (Code)

Unknown (00) $ 97 14 $ 

Library of Congress (03) 1 1 

General Accounting Office (05) 1 1 

Executive Office of the President (11) 1 - 

Department of Commerce (13) 6 5 

Department of Interior (14) 80 47 

Department of Justice (15) 16 15 

Department of Labor (16) 27 57 

Department of the Navy (17) 2 - 

U.S. Postal Service (18) 1 1 

Department of State (19) 4 2 

Department of the Treasury (20) 658 567 

Department of the Army (21) 19 17 

Office of Personnel Management (24) 2 5 

Smithsonian Institution (33) 1 1 

Department of Veterans Affairs (36) 1 - 

Appalachian Regional Commission (46) - 11 

General Services Administration (47) 53 73 

Federal Deposit Insurance Corporation (51) 2 1 

Department of the Air Force (57) (4) 2 

Federal Emergency Management Agency (58) 114 (5)

Environmental Protection Agency (68) 7 12 

Department of Transportation (69) 20 16 

Agency for International Development (72) 9 8 

Small Business Administration (73) 1 -

Department of Health and Human Services (75) 5 8 

National Aeronautics and Space Administration (80) 2 2 

Department of Housing and Urban Development (86) 2 2 

Department of Energy (89) 17 - 

Selective Service System (90) 25 -

U.S. Army Corps of Engineers (96) 15 7 

Office of the Secretary of Defense-Defense Agencies (97) 13 6 

Total Earned Revenue Federal $ 983 1,089 $ 

Cost to Generate Earned Revenue Federal: 

FY 2003 FY 2002

Functional Classification

 350 Agriculture $ 440 630 $ 

Total Cost to Generate Revenue $ 440 630 $ 

Federal and Non-Federal
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Cost, Federal 

FY 2003 FY 2002

Cost Federal Cost Federal

Trading Partner (Code)

Unknown (00) $ 2,007 1,474 $ 

Library of Congress (03) 1 1 

Government Printing Office (04) 17 12 

General Accounting Office (05) 1 -

Department of Commerce (13) 21 11 

Department of Interior (14) 109 73 

Department of Justice (15) 15 26 

Department of Labor (16) 153 67 

Department of the Navy (17) 7 6 

U.S. Postal Service (18) 19 17 

Department of State (19) 36 18 

Department of the Treasury (20) 3,927 4,129 

Department of the Army (21) 7 2 

Office of Personnel Management (24) 1,502 1,343 

Social Security Administration (28) 10 8 

Department of Veterans Affairs (36) 1 1 

General Services Administration (47) 378 138 

Office of Special Counsel (62) 1 -

Tennessee Valley Authority (64) 1 - 

Environmental Protection Agency (68) 1 1 

Department of Transportation (69) 11 - 

Department of Homeland Security (70) -39 - 

Department of Health and Human Services (75) 24 11 

National Aeronautics and Space Administration (80) 6 3 

Department of Energy (89) 7 13 

Department of Education (91) 1 - 

Federal Mediation and Conciliation Service (93) 1 - 

Independent Agencies (95) 1 2 

U.S. Army Corps of Engineers (96) 8 3 

Office of the Secretary of Defense-Defense Agencies (97) 5 4 

Treasury General Fund (99) 3 - 

Total Cost Federal $ 7,897 7,707 $ 

Non-exchange Revenue Federal 

Transfers-In Transfers-Out Transfers-In Transfers-Out

Trading Partner (Code)

Unknown (00) 2,189 $ (1,843) $ 1,751 $ (243) $ 

Department of Commerce (13) 3 - - - 

Department of Interior (14) - - - (200)

Department of Labor (16) 108 - - - 

Department of State (19) 6 - - - 

Department of the Treasury (20) - - 2,619 (3,101)

Appalachian Regional Commission (46) 16 - - - 

Department of Homeland Security (70) - (151) - - 

Agency for International Development (72) - (1,196) - (611)

Department of Health and Human Services (75) 58 - - - 

Treasury General Fund (99) 6,954 (4,592) - (1,945)

Total Non-exchange Revenue Federal 9,334 $ (7,782) $ 4,370 $ (6,100) $ 

FY 2003 FY 2002
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Segment Information 

The Departmental Working Capital Fund and the FS Working Capital Fund are not separately reported in 

the consolidated financial statements. The following information summarizes the working capital funds’ 

financial condition and results of operations as of and for the fiscal years ending September 30, 2003, and 

2002. 

FY 2003 Departmental Forest Service Total

Working Capital Working Capital Working Capital

Fund Fund Funds

Condensed Information

Fund Balance $ 134 86 $ 220 $ 

Accounts Receivable 17 1 18

Property, Plant, and Equipment 47 275 322

Other Assets 404

Total Assets 154 410 564

Liabilities and Net Position

Accounts Payable 213

Other Liabilities 55 34 89

Unexpended Appropriations 44 0 44

Cumulative Results of Operations 53 375 428

Total Liabilities and Net Position 154 410 564

FY 2003 Excess of

Cost of Goods Related Costs Over

and Services Exchange Exchange

Provided Revenue Revenue

Product or Business Line

Departmental Working Capital Fund:

Finance and Management 222 203 19

Communications 660

Information Technology 89 87 2

Administration 33 28 5

Executive Secretariat 2 2 0

Total Departmental Working Capital Fund 352 326 26

Forest Service Working Capital Fund:

Other 369 224 145

Total Working Capital Funds 721 $ 550 $ 171 $ 
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221

FY 2002 Departmental Forest Service Total

Working Capital Working Capital Working Capital

Fund Fund Funds

Condensed Information

Fund Balance $ 108 74 $ 182 $ 

Accounts Receivable 28 1 29 

Property, Plant, and Equipment 50 338 388 

Other Assets 22 3 25 

Total Assets 469 155 624 

Liabilities and Net Position

Accounts Payable 17 3 20 

Other Liabilities 26 52 78 

Unexpended Appropriations 26 - 26 

Cumulative Results of Operations 74 426 500 

Total Liabilities and Net Position 155 $ 469 $ 624 $ 

FY 2002 Excess of

Cost of Goods Related Costs Over

and Services Exchange Exchange

Provided Revenue Revenue

Product or Business Line

Departmental Working Capital Fund:

Finance and Management 185 $ 204 $ (19) $ 

Communications 5 5 - 

Information Technology 74 81 (7) 

Administration 29 26 (3) 

Executive Secretariat 2 2 - 

Total Departmental Working Capital Fund 292 321 (29) 

Forest Service Working Capital Fund:

Other 218 253 35 

Total Working Capital Funds 545 $ 539 $ 6 $ 
USDA Performance and Accountability Report for FY 2003 

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Departmental Working Capital Fund 

Services provided by the Departmental Working Capital include the following: 

• Administrative and Supply Services; 

• Video, Teleconferencing, Graphic and Exhibit Services; 

• Payroll, Accounting and Administrative Services and Thrift Saving Plan Support; 

• ADP Services, Application Development, and Telecommunications Services; and 

• Executive correspondence control and tracking. 

Major customers of the fund are the FS and the Thrift Investment Board. 

Forest Service Working Capital Fund 

Services provided by the FS Working Capital Fund include the following: 

• Fleet services, rental, and maintenance; 

• Aircraft services, operation, and maintenance; 

• Supply services; and 

• Computer services. 

Major customers of the fund are FS units. 
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V. REPORT OF THE OFFICE OF INSPECTOR 

GENERAL AND MANAGEMENT’S RESPONSE 
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Appendices 

256

APPENDICES 
USDA Performance and Accountability Report for FY 2003 

Appendix A – Management Challenges 

257

APPENDIX A – MANAGEMENT CHALLENGES 

INSPECTOR GENERAL’S STATEMENT 
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Appendix A -- Report of the Office of Inspector General and Management’s Response 

264
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265

MANAGEMENT’S RESPONSE TO THE OIG REPORT ON MAJOR 

USDA MANAGEMENT CHALLENGES (SEPTEMBER 2003) 

USDA has made many significant accomplishments to address weaknesses identified by the Office of 

Inspector General (OIG) during FY 2002. In some instances, the challenges identified in the prior OIG 

report remained a challenge for the Department during FY 2003. USDA is working with other Federal 

Government departments, Congress and the General Accounting Office to eliminate or reduce the risk 

associated with each challenge. The following are management responses to challenges identified by 

USDA’s OIG during FY 2003. Each challenge is followed by management’s accomplishments and 

planned actions to address each issue. Additional accomplishments are listed in the next section of this 

report. 

Department-wide Challenges 

1. Homeland Security Considerations Should be Incorporated Into Program Design and Implementation 

Management’s Response:

One of the most important steps taken to secure American agricultural production and the food 

supply was the “Select Agents Rule” mandated by the Agriculture Bioterrorism Protection Act of 

2002. USDA and the U.S. Department of Health and Human Services (HHS) issued complementary regulations that established new safeguards for the possession, use and transfer of certain 

toxins and biological agents. These safeguards reduce the chance of terrorists acquiring dangerous pathogens and toxins. 

USDA has begun a pilot version of a National Animal Health Laboratory Network (NAHLN). 

NAHLN is a network of Federal and State resources intended to enable a rapid and sufficient response to animal-health emergencies, including foot and mouth disease and other exotic animal 

diseases. It reconfigures the Nation’s animal-health diagnostic services by positioning the National Veterinary Services Laboratories in Ames, Iowa, to be the lead animal-health laboratory. 

NAHLN also allows certain State-operated laboratories and some universities to cooperate in exotic animal-disease surveillance and related services. Such an arrangement enhances the Nation’s 

animal-health diagnostic services, speeds response efforts should an exotic animal disease be detected in the U.S. and lends greater credibility to the Department’s animal-health export certifications. A similar effort is underway to build a laboratory network for plants. 

USDA has developed guidance documents for distribution to farmers and ranchers to advise 

them on how to secure their operations. Information was posted on the USDA Web site and distributed through the Department’s Extension system to reach constituents throughout the Nation. 

The Department conducted vulnerability assessments for domestic and imported food, and threat 

assessments to ensure the security of food. The assessments also addressed food purchased by 

USDA for Federal feeding programs, shipping procedures and storage. 

Two of USDA’s highest homeland security priorities are the improvement of communication 

channels between the Department and the intelligence community, and the development of a 

more sophisticated way of communicating sensitive information to the private sector. Thus, when 

there are incidents, warnings or threats, the private sector can assist the Department in preventing 

or mitigating a problem. USDA is working with the Department of Homeland Security (DHS) to 
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coordinate its communications programs to better protect agricultural production and the food 

supply. One such joint effort is the DHS-USDA-HHS project to organize the food and agriculture 

sectors. An organized sector can provide assistance to the industry by suggesting guidelines and 

best practices, and providing a means for sharing information. 

2. Increased Oversight and Monitoring of Food Safety Inspection Systems 

Are Needed to Meet HACCP’s Goals 

Management’s Response: 

The Food Safety and Inspection Service will: 

• Update Directive 10010.1 “Microbiological Testing Program For Escheria Coli 0157:H7” to 

provide direction in the collection and processing of traceback samples; 

• Update Directive 6420.1 “Livestock Post-Moretum Inspection Activities-Enforcing the Zero 

Tolerances for Fecal Material, Ingesta and Milk” with explicit instructions for handling and 

re-inspecting contaminated carcasses; 

• Implement revised Listeria monocytogenes rule for Ready-to-Eat products; 

• Update industry guidance on planning for recalls; and 

• Conduct baseline studies to determine the nationwide levels of various pathogenic microorganisms in raw meat and poultry. 

3. Risk Must be Examined and Improper Payments Minimized Within USDA 

– Emerging Issue 

Management’s Response: 

On August 11, 2003, the Department’s Chief Financial Officer issued a policy memorandum to 

all USDA agencies. The memorandum provided instructions for implementing program reviews 

to identify erroneous payments. USDA’s component agencies will develop statistically valid estimates for all programs identified as susceptible to significant erroneous payments. They also 

will implement an action plan to reduce erroneous payments. Additionally, agencies will report 

erroneous payment estimates and reduction goals to the President and Congress in USDA’s Performance and Accountability Report beginning in FY 2004 and annually thereafter. 

Specific erroneous payment reduction initiatives are included in the Management Discussion and 

Analysis section and Appendix B of this report. 

4. Financial Management – Improvement Made but Additional Actions Still 

Needed 

Management’s Response: 

In FY 2003, USDA received a clean opinion on five stand-alone audits and the FY 2002 Consolidated Financial Statements. USDA has provided timely and accurate quarterly financial 

statements to the Office of Management and Budget, which met the accelerated time frames for 

financial statements. The Department completed implementation and conversion of all USDA 

agencies to a standard and compliant administrative financial-management system. USDA is using data warehousing technology to provide consolidated reporting to meet the integrated 

financial system requirements at USDA for both administrative and program data. 
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The Office of the Chief Financial Officer will establish effective funds control and work with 

USDA agencies to prevent Anti-Deficiency Act violations. Key performance standards have been 

established for accounting operations. These standards are monitored against actual performance 

regularly. The Department will obtain a clean audit opinion for all agencies and USDA on a consolidated basis in FY 2004 and beyond. USDA will continue successful completion of the feeder 

system renovation initiative and implementation of the new Integrated Acquisition System and 

Corporate Property Automated Information System. 

5. Information Technology Security – Much Accomplished, More Needed 

Management’s Response: 

During FY 2004, the USDA’s Office of the Chief Information Officer (OCIO) will receive copies 

of the agencies’ scan reports monthly to monitor their system/network vulnerabilities. OCIO 

plans to continue to expand and improve the Department’s Intrusion Detection System, conduct 

annual Federal Information Security Management Act (FISMA) self-assessments and develop 

plans of action for any weaknesses found. To secure sensitive data and improve contingency 

planning, configuration management and physical security, OCIO will certify and accredit 

USDA’s major systems. To comply with Federal Security guidance, the OCIO will engage the 

Department of Homeland Security to conduct a project review. USDA will continue to assess its 

risk to critical information-technology systems by engaging contractors to perform independent 

risk assessments and annual FISMA self-assessments. The OCIO will issue policy for background checks of information-technology personnel. 

6. Controls Over Germplasm Storage Material and Genetically Engineered 

Organism Field Testing Are Critical to U.S. Markets – Emerging Issue 

Management’s Response: 

There are 450,000 samples managed by the National Plant Germplasm System (NPGS) maintained in relatively small quantities (i.e., individual small envelopes and bags) in genebanks. 

These small quantities help conserve crop genetic diversity and encourage the use of that diversity by crop researchers and breeders. These samples are distributed for research and educational 

purposes to researchers, breeders and other requesters in “research quantities.” These quantities 

generally are about 100 seeds, or significantly fewer cuttings or roots per sample. These materials 

are for the most part specialized research tools like special genetic lines. The materials also could 

be noncommercial materials like traditional farmers’ varieties. Both primarily are useful to only 

scientists or breeders. A small proportion also may be legal vouchers of commercial, elite lines. 

These lines are maintained (but generally not distributed) in the high-security National Center for 

Genetic Resource Preservation in Fort Collins, Colorado, at the request of USDA’s Agricultural 

Marketing Service’s Plant Variety Protection Office. Germplasm in the NPGS is disseminated in 

completely different distribution channels than commercial seeds for planting or bulk commodity 

grain shipments. The recipients of NPGS germplasm generally maintain them as research tools 

separate from any commercial materials that would enter the marketplace. 

Associated with these samples are identification information and descriptive evaluation data. 

This data are maintained in an extensive on-line database known as the Germplasm Resource Information Network (GRIN). While the amount of information associated with each sample is 

highly variable, it generally is extensive for advanced genetic stocks or elite germplasm maintained as legal vouchers. The less-than-10 percent of total NPGS inventory samples that usually 

are genetically-engineered generally belong to the preceding categories. Because many of these 

are legal vouchers, an even smaller percentage of the total is distributed to requesters. Since de-
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tailed information, which could include pedigrees, accompanies the material, a knowledgeable 

requestor and germplasm curator can determine whether or not the materials are geneticallyengineered. All distributions of NPGS germplasm, whether genetically engineered or not, are 

tracked by the GRIN database. Thus, the information is readily retrievable. Additionally, genetically engineered materials that are research tools are distributed only to requesters who hold valid 

USDA Animal and Plant Health Inspection Service permits. These permits authorize them to 

maintain and conduct experiments with that material. 

7. Civil Rights Complaints Processing Still a Concern at USDA 

Management’s Response:

Four initiatives have been proposed to address concerns about complaint processing:

• Complaint Inventory Reduction (Program and Employment). This initiative will reduce 

the total number of open complaints and implement significant institutional changes to prevent excess inventories in the future. The strategy supporting this initiative relies on the 

estimation of and planning for incoming complaints. It also depends on the aggressive use of 

Alternative Dispute Resolution (ADR) techniques, when appropriate, in an attempt to resolve 

complaints at the informal stage. 

• Increasing Informal Equal Employment Opportunity Complaint Resolution Rates. This 

initiative expands the use of ADR, when appropriate, as an integral part of USDA’s informal 

equal-employment opportunity complaint-resolution process. Interim policy guidance is expected to be issued by December 1, 2003, with implementation commencing January 1, 2004. 

Agencies will begin reporting the impact of this initiative by February 15, 2004. A final policy reflecting the results of the initiative will be issued March 1, 2004. 

• Prevention of Program Complaints. The Office of Civil Rights plans to develop, implement and evaluate a proactive approach to prevent program-delivery complaints. This 

initiative ensures that all USDA customers, particularly those who are socially and economically disadvantaged, receive timely and meaningful technical assistance regarding program 

benefits and application requirements. The Department will conduct a series of hands-on 

technical assistance and training workshops conducted throughout FY 2004. This initiative 

began in October 2003, with the forming of an implementation team. The evaluation phase of 

this initiative ends September 30, 2004. 

• Prevention of Equal Employment Opportunity Complaints. This initiative will reduce the 

number of complaints filed annually by employees and job applicants. The goal is to enhance 

USDA’s image as an “employer of choice.” The Department also wants to reduce the complaints inventory to a more manageable level. USDA will assess the work force, identifying 

actual and perceived barriers to equal-employment opportunities. It also will recommend 

management actions to alleviate, mitigate and preclude management actions that impact adversely or generate a negative image of USDA as an equal-opportunity employer. 

Implementation of this initiative began in October 2003, with the formation of an implementation team. The evaluation phase of this initiative begins April 5, 2004, and ends June 30, 

2004.
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8. Research Misconduct Policy Not Consistently Implemented – Emerging 

Issue 

Management’s Response: 

In December 2000, the President’s Office of Science and Technology Policy (OSTP) issued a 

Federal policy to establish uniformity among agency definitions and treatment of research misconduct. Implementation of the Federal policy was delegated to each USDA agency. USDA’s 

Agricultural Research Service (ARS) worked closely with OSTP in developing the Federal policy. The policy was patterned after the Agency’s written policies and procedures, which have 

been in place for more than 10 years. On June 10, 2003, ARS updates Research Misconduct Policies and Procedures maintaining the agency’s compliance with the Federal policy. 

9. USDA Faces Major Challenges in Implementing the 2002 Farm Bill and 

Disaster Assistance Legislation 

Management’s Response: 

To help ensure efficient and effective program performance and management, USDA’s Farm 

Service Agency (FSA) has: 

• Provided queries and procedures to State and county offices in August 2003. The offices then 

conducted spot checks of production evidence when Direct Counter-Cyclical Payment (DCP) 

yields were established based on actual yields; 

• Instituted daily reports to monitor progress of DCP enrollments in counties; 

• Evaluated the accuracy of certifications of Average Adjusted Gross Income certificates as 

part of payment-limitation eligibility end-of-year reviews; 

• Posted critical program information and deadlines on USDA and FSA Web sites; 

• Made program fact sheets available online and at county offices; and 

• Developed queries to calculate the quality of 2001/2002 Crop Disaster Program for peanuts 

and cotton. 

USDA planned actions include: 

• Developing FSA Handbook 4-RM. This handbook deals with Federal Crop Insurance Corporation program integrity. It is being amended to require FSA State and county offices to notify 

and provide information to the Risk Management Agency (RMA) dealing with concerns 

raised through both internal and external audits. The procedure will instruct State and county 

FSA offices to provide details of case-specific information or overall program administration 

concerns, as applicable, to the Regional RMA Compliance Office; and 

• Generating letters to producers who have not filed acreage reports of all cropland on the farm 

as required by the Farm Security and Rural Investment Act of 2002. 

RMA has issued procedures and instructions outlining how problems found in internal reviews 

and audits are to be communicated to FSA. 

10. Integrity of the Federal Crop Insurance Programs Policyholders’ Database Must be Strengthened 

Management’s Response: 

RMA control processes and oversight responsibilities of insurance providers are outlined in Manual-14, Guidelines and Expectation for the Delivery of the Federal Crop Insurance Program, 
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FCIC-14010. Manual-14, issued in September 1997, needs to be updated to incorporate changes 

required by the passage of the Agricultural Risk Protection Act. RMA recognizes the need for a 

more efficient and effective process. Thus, it has contracted to update Manual-14. The contract is 

for the development of a quality-assurance and performance-measurement system for evaluating 

an insurance provider’s effectiveness of program delivery. The system will include a system of 

sanctions and incentives. 

RMA has implemented the majority of provisions relative to Agricultural Risk Protection Act. 

The remaining major initiatives include Renegotiating the Standard Reinsurance Agreement 

(SRA) and Reconciling Producer Information. RMA expects to complete SRA renegotiation by 

July 2004. The Deputy Undersecretary for Farm and Foreign Agricultural Services, and the RMA 

and FSA Administrators have established a cross-functional team to implement a Common Information System (CIS). CIS will eliminate the need for producers to report the same information 

to FSA and reinsured companies. This will create efficiencies for producers, the agencies and reinsured companies. It also will reduce the need for data reconciliation. CIS will begin as a pilot in 

2004 in selected areas where the common land unit has been certified by FSA. 

11. Strong Internal Control Structure is Critical to the Delivery of Forest Service Programs 

Management’s Response: 

The Forest Service (FS) is implementing a two-step process. This process involves conducting 

agency risk assessments to evaluate high-risk processes within FS and reaffirming the agency’s 

internal review process. The key milestones include: 

• Conducting an agency risk assessment by June 2004; 

• Issuing new policy and procedures by September 2005; 

• Conducting a minimum of two “Chief Reviews” annually; 

• Conducting Financial Compliance and Internal Control reviews based on the agency’s highest 

priorities annually; 

• Conducting program/activity reviews annually; and 

• Conducting acquisition internal control reviews annually. 

Additional planned actions include: 

• Publishing final policies and procedures; 

• Implementing a four-year review cycle that will cover all regions/stations; 

• Participating in a requirements session for an automated solution for Grants & Agreement administration and accounting; 

• Monitoring all planned actions in the Administrative Control Plan; 

• Finalizing a partnership guide for communities, non-Governmental organizations and others 

who want to partner with the agency; 

• Developing an assessment tool for the field units to assist them in determining if they have 

the necessary resources, personnel and skills to enter into partnerships; 

• Implementing requirements for line officer/manager certification of reported accomplishments; 

• Reviewing a representative sample of rehabilitation and restoration projects that regions select for National Fire Plan (NFP) funding to ensure they meet the project selection criteria; 
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• Reviewing and clarifying direction regarding NFP; 

• Continuing to implement the Performance and Accountability System; 

• Creating a system design; 

• Beginning alignment and integration with other key systems; and 

• Implementing the new system. 

12. Improvements and Safeguards Needed for Rural Multi-Family Housing 

Program 

Management’s Response: 

During FY 2004, the Rural Housing Service (RHS) plans to perform a comprehensive property 

assessment to determine the condition of its portfolio. The assessment is designed, at the very 

least, to determine the property’s financial health, decide whether to continue rental housing and 

analyze prepayment potential. It also will assess future capital reserves and analyze prepayment 

incentive costs to retain properties/use restrictions. USDA created a Multifamily Advisory Group 

to oversee the completion of the property assessment. 

OIG recommended that RHS clarify its performance measure. Thus, the current performance 

measure is reported as “number of units selected for funding” rather than “units built.” This clarification took effect with the March 2003 publishing of the FY 2002 Annual Performance Report. 

To enhance the proficiency of forecasting rental assistance needs and budget requests, Rural Development has taken steps to improve the rental assistance projections through a number of 

initiatives, including: 

• Reviewing all of more than 17,000 contracts for consistency in contract language to determine if funds must continue with the contract until fully disbursed; 

• Automatically computing rental assistance based on a five-year term with a fixed number of 

renewal units; 

• Participating in the development of the forecasting model to infuse new ideas for how rentalassistance funding needs should be projected; 

• Working with the General Accounting Office in its review of unliquidated obligations; and 

• Publishing of Proposed Rule 3560, to assist in developing efficiency and consistency in 

administering rental assistance from state to state. 

 One of several innovations that USDA has undertaken in its Multi-Family Housing Program is 

the collaboration between Rural Development and States. This partnership offers a wage and 

benefit matching program to detect unreported and underreported income. The Department 

sought Memoranda of Understanding between USDA and those States offering the wage-matching program. 

The Office of Rental Housing Preservation in the Portfolio Management Division continues to 

pursue opportunities for leveraging the limited amount of financial resources available to retain 

properties in the portfolio. Incentives offered to owners to continue in the Section 515 program 

include: 

• Providing an equity loan; 

• Increasing rental assistance; 

• Increasing return on investment; 
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• Releasing excess reserve funds; and 

• Reducing loan interest rates through an interest credit provision. 

Multi-Family Housing is developing operating manuals for each of its discrete processes. The 

manuals will cover rental-assistance allocation and processing, prepayment and preservation 

management, and inventory property disposition. Servicing goals have been established for each 

State office. Through technology and regular reporting, the Portfolio Management Division is 

monitoring activities related to the portfolio. Information technology systems have improved over 

the last year. Reporting systems from the portfolio properties directly to the Financial Management Division will ensure that subsidy-voucher requests are verified and processed 

independently. 

The development and implementation of a Web-based subsidy voucher computer program, and 

the Management Interface Connectivity Network, will enable property owners and managers to 

input subsidy voucher requests online. The Network also will allow them to link directly to 

USDA’s financial-management center in St. Louis, Missouri. The computerized system will 

eliminate most manual entries and insert additional internal controls by providing an automatic 

payment-validation process. 
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273

STATUS OF FY 2002 MAJOR MANAGEMENT CHALLENGES AND PROGRA

Challenges and Program 

Risk Accomplishments for the Period October 1, 2002 - September, 30, 2003 (and Planned Actions, if 

Biosecurity and Biosafety controls at USDA-funded laboratories (APHIS)Minimal or no guidance involving biosecurity at USDA funded laboratories (OIG) 

• Provided guidance by communicating the "disease status" change for Canada from non-affected to "BSE-affected

Homeland Security, Customs and Border Protection personnel. The Center for Veterinary Biologics and the Natio

Laboratories continued to answer inquiries from interested parties. Information provided includes documentation ospection processes as well as instruction in bio-agent security. 

• Published Departmental Manuals on USDA Security Policies and Procedures for Biosafety Level 3 (BSL-3) Facilit

and Technical Facilities (excluding BSL–3 facilities). 

• Conducted two risk assessments and developed corrective-action plans based on the results. The plans include: 

consequence pathogen laboratories; identification of a threat list of pathogens of concern consisting of agents with 

continued requirements for background and security checks of personnel who need access to biological agents; u

laboratories; and appropriate containment, storage and handling of the biological agents. 

There will be no further reporting on this challenge. 

Protection against Importing Animal Diseases(APHIS, FSIS)* • Coordination and timeliness of providing 

guidance to protect against the possible introduction of foot and mouth disease (GAO and OIG) 

• Preventing entry of contaminated food products 

into the United States (GAO and OIG) 

• Transferred APHIS’ Agriculture Quarantine Inspectors to the newly created Department of Homeland Security, Cu

to create a consolidated border inspection agency. Agreements on (1) Cooperation & Reciprocity, (2) Regulatory ration of Functions all have been signed. 

• APHIS and the Department of Homeland Security have clarified roles and designated functions, areas of respons

coordination responsibilities concerning agricultural inspections. 

• APHIS will continue to perform risk analyses and investigate activities to identify problems that present a viable th

ture. 

Source: GAO REPORT entitled “Major Management Challenges and Program Risks”:GAO-03-96 (January 2003) OIG Major USDA Management Challenges (November 8, 2002) The following table provides FY 2003 accomplishments by USDA agencies on major management challenges identified by the above sources. There wil

challenges not repeated in the Office of Inspector General’s (OIG) September 2003 report. An asterisk (*) beside the challenge title indicates that this is a prior year management challenge that is repeated or consolidated into a Department-wide 

Management Challenges Report dated September 2003. Future plans for these challenges are included in the previous section.
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Challenges and Program 

Risk Accomplishments for the Period October 1, 2002 - September, 30, 2003 (and Planned Actions, if 

Security of Biological Agents at USDA Laboratories (Homeland Security Staff) • Lack of department level 

policies to manage and secure facilities (GAO and OIG) 

Security of Biological Agents at USDA Laboratories (Continued) • Inaccurate recording of 

inventory (GAO) 

• Lack of centralized and 

consolidated databases (GAO) 

• No alarm systems, security fences and 

surveillance cameras (GAO) 

• Lack of controlled access 

to biological agents by unauthorized personnel (GAO and OIG) 

• Published Departmental Manuals on USDA Security Policies and Procedures for Biosafety Level 3 (BSL-3) Facilit

Technical Facilities (excluding BSL–3 facilities). 

• Established a National Pathogen Inventory for all ARS, FSIS and AMS pathogens. Data were entered and validat

April and May 2003. 

• Completed security assessments on all non-BSL-3 ARS Laboratories and Research facilities. • Began physical security upgrades as funding permitted and based on order of priority of BSL-3, Select Agent BSL

other laboratories and technical facilities. 

• Addressed access to biological agents in Departmental manuals and various other USDA guidance. Systems are 

assessments on all BSL-3 positions (Government and non-Government) with appropriate background investigatio

tice has been drafted to permit similar risk determinations and background investigations for non-USDA personne

• Validated the National Pathogen Inventory is validated annually. BSL-3 facility inventories are updated every mon

tories are updated quarterly. 

Resolving Discrimination Complaints (Civil Rights) * 

Untimely processing of discrimination complaints (GAO and OIG) 

• Created a sub-cabinet-level position to oversee civil rights issues. • Conducted a post-OIG audit inspection of Equal Employment Opportunity complaint files and submitted a report o

plete file review is planned. 

• Developed final Standard Operating Procedures (SOP) for conducting agency civil rights evaluations in March 200• In cooperation with OIG, the Office of Civil Rights proposed changes to the Delegations of Authority for the Assist

found at 7 CFR Part 2. These proposed changes address the negotiation of settlement agreements in program disinclude the vetting of settlement agreements by OIG. The revised delegations should be completed by January 20
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Challenges and Program 

Risk Accomplishments for the Period October 1, 2002 - September, 30, 2003 (and Planned Actions, if 

Food Assistance Programs

(FNS) 

• Ineligible recipients (OIG 

and GAO) 

• Trafficking by authorized 

and unauthorized retailers (OIG and GAO) 

• Implementation of the 

Electronic Benefits Transfer (EBT) system (OIG and GAO) 

• Created a national team of experts to monitor and evaluate payment-accuracy progress, analyze error-rate data a

payment-accuracy best practices and program-improvement strategies. 

• Announced FY 2002 Error Rates. • Continued to exchange best practice information through the State Exchange Program and Extranet site. • Co-sponsored, with the California State Agency, seminars for California county welfare office personnel on variou

racy. 

• Established and updated performance tiers for States (based on error-rate performance) to support effective and 

technical assistance. 

• Conducted quarterly national payment accuracy work group meetings to facilitate the dissemination and use of er• Co-hosted and played a major role in a Midwest annual error reduction seminar (Big Ten Conference). • Met with California officials to discuss strategy for FY 2004 error-reduction seminars. • Implemented the Watch List Computer system, which strengthened FNS’ ability to account for manage critical com

cerning retailers. 

• Developed new standardized training material to assist retailers in complying with program requirements. • Operated EBT systems in 52 of 53 States and U.S. Territories have an operational EBT system. Forty-nine States 

National School Lunch and School Breakfast Programs

(FNS) * Eligibility determination and verification process (OIG) 

• Received comments on proposed regulatory changes to improve State and local reporting on certification accurac

tember 2003. 

• Completed fieldwork and data-gathering activities for two studies for: 1) Fifteen large school districts and the curre

2) verification outcomes from 21 school food authorities involved in testing new procedures. Reports on these stud

• Proposed approaches to reduce certification errors through the Child Nutrition Program legislative reauthorization 

Management and Program Delivery Issues (FS) * 

• Lack of an adequate 

internal control system to ensure compliance at field units (OIG) 

• Improper administration 

of grants to State and nonprofit organizations (OIG) 

• Inefficient controls over 

the environmental-analyses process for timber sales (OIG) 

• Development of policies 

for partnerships with private parties (OIG) 

Lack of appropriate goals and objectives and accurate performance measures (OIG) 

• Reviewed three regions to ensure compliance with agency policy and direction issued in the Quality Assurance D

2003-7). 

• Made presentations on partnership issues to Grants and Agreements Specialists at the National Grants and Agree• Scheduled three quality assurance reviews to focus on internal controls. • Implemented proper controls to ensure program integrity, program planning and accountability. Developed a new 

nal review process to produce more effective results. The process was piloted in Region 3 and the Northeastern A

• Established (through an agreement between the FS and the National Forest Foundation) the Partnership Resourc

tains the latest information on partnerships and authorities and instruments available to FS and partners to achiev

• Proposed legislation as part of the FY 2004 budget to clarify and expand partnership authorities. • Drafted FS Handbooks and Manuals for standard review procedures of environmental assessments and for imple

ronmental Policy Act (NEPA). 

• Completed review of 52 sales Nationwide. Each region has prepared a NEPA improvement plan and implemented 

ess. 

• Linked annual performance goals and objectives to the annual budget. Finalized a set outcome based performanc

the FY 2005 budget formulation process. 
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Challenges and Program 

Risk Accomplishments for the Period October 1, 2002 - September, 30, 2003 (and Planned Actions, if 

National Fire Plan (FS) * 

Waste and misuse of project funds (OIG) 

• Used improved performance measures identified in the 10-year plan for FY 2004 with FY 2003 as a baseline for n• Established project criteria for Rehabilitation & Restoration projects. All costs now are included in the fire model. 

Improving Performance and Accountability at the Forest Service (FS) 

• Accountability of funds 

expended (GAO) 

• Lack of good performance measures and 

linkage to the budget (GAO) 

• Coordination with other 

federal agencies (GAO) 

• Refined agency output measures and developed linkages to the output measures in the strategic plan for develop

and inclusion in the Agency Performance and Accountability System. 

• Implemented a new work-planning system that will be used in current-year work planning with consistent work act• Developed the budget using the Budget Formulation and Execution System (BFES). The budget is tied to specific 

each BFES activity and is linked to strategic objectives and priority areas. 

Grant and Agreement Administration (FS) * 

• Grants not used for purposes intended (OIG) • Federal funds not 

matched with required private funding (OIG) 

• Unauthorized expenditures paid with Federal 

funds (OIG) 

• Conformance with the 

Federal Grants and Cooperative Agreements Act or to the Office of Management and Budget and departmental regulations (OIG) 

• Mismanagement of accounting records (OIG) 

• Issued national bulletins to clarify FFIS Project Cost Accounting (PCAS) procedures and to require use of PCAS f

These bulletins improved internal controls over grants. 

• Completed a financial- and acquisition-management review for Region 3, which covered grant administration issu

four-year review cycle that will encompass all regions and stations. 
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Challenges and Program 

Risk Accomplishments for the Period October 1, 2002 - September, 30, 2003 (and Planned Actions, if 

Security of Aircraft (FS) 

• Lack of security standards (GAO) • Lack of security on air 

bases (GAO) 

• Lack of risk assessments 

to identify threats and misuse of aircraft by terrorists (GAO and OIG) 

• Conducted consultation and coordination with the Transportation Security Administration regarding aviation secur• Issued a firefighter travel-safety alert that addressed security screening and travel requirements. • Initiated development of aviation security technology review and assessment procedures. Additionally, continued 

books and manuals to implement changes related to aviation security. 

• Developed National Aviation Security Policy that contains security standards for all aviation facilities and links age

Homeland Security Advisory System. 

• Developed contingency plans to implement needed security improvements at the highest priority facilities. • At each region, developed security procedures to respond to changes in the Homeland Security Advisory System • Reclassified all pilot positions, both Government and contract, from "Low Risk" to "Moderate Risk Public Trust" po

background-check level. 

• Developed an evaluation protocol at the Missoula Technology Development Center for security technology with ai

enable the use of new technologies to enhance security. 

• Finalized the National Aviation Security Policy to include a formal methodology requiring all regions to conduct ris

ments for all aircraft. It also requires semi-annual reviews of these assessments. 

Farm Security and Rural Investment Act of 2002

(FSA) * 

• Ensure program integrity 

(OIG) 

• Strengthen monitoring 

and oversight activities (OIG) 

• Resources for farm and 

conservation programs (OIG) 

• Established program compliance activities, National Internal Reviews of farm loan programs and the County Oper

(CORP) to monitor program delivery and program management. 

• As of September 15, 2003, FSA completed 1,040 CORP target reviews, which examined specific program or adm

comprehensive CORP reviews, which examined the majority of program and administrative operations in the coun
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278

Challenges and Program 

Risk Accomplishments for the Period October 1, 2002 - September, 30, 2003 (and Planned Actions, if 

Food Safety (FSIS) * 

• Inspection and re-inspection of imported foods 

(GAO and OIG) 

• Ineffective implementation and enforcement of 

the Hazard Analysis and Critical Control Point (GAO and OIG) 

• Updated the Import Inspection Manual with guidelines on "Automated Import Information System (AIIS) Contingen• Migrated the following information systems: LSFS/MARCIS, LEARN, and AIIS to the mainframe system, SYBASE 

gration increases performance and decreases the response time between systems. 

• Updated time requirements and management control processes for reviewing and processing certification informa• Completed Food Safety and Systems Correlation reviews for 10 districts. • Revised Directive 5000.1, which provides specific guidance to FSIS field personnel on properly verifying an estab

the pathogen reduction, sanitation and HACCP regulations. 

• Initiated Food Safety Regulatory Essentials (FSRE) training. Eight-hundred employees completed this training. • Updated, issued and implemented procedures for annual re-certification of international meat and poultry establis• Implemented new procedures to verify that data exchanges between the Laboratory Sample Flow System, the Mi

Computer Information System database and AIIS-3 are performed successfully. 

• Issued revised Directive 7335.1, Use of Sample Seals for Laboratory Samples and Other Applications, which prov

the inspectors on proper sample sealing procedures. 

• Issued Notice 55-02, Use of Microbial Pathogen Computer Modeling in HACCP Plans. • Issued Federal Register Notice 62325, E. coli 0157:H7 Contamination of Beef Products, to direct establishments t

plans. 

• Established a Food Safety Risk Assessment Committee to enhance coordination and communication among USD

conducting risk assessments. 

• Established a Technology Office to review new technologies that companies employ to ensure the usage is consis

and will not adversely affect product safety, inspection procedures, or the safety of FSIS inspectors. 

• Established new regional training centers to bring comprehensive workforce training programs to the Agency’s fie• Reissued Directive 7160.3 Revision 1 – Advanced Meat Recovery Using Beef Vertebral Raw Materials, to define 

low-up actions available to the Agency when product from the Advanced Meat Recovery (AMR) system contains s

• Conducted a public meeting on pre-harvest food safety issues to support publishing a best management practices 

food producers reduce foodborne pathogens in beef cattle. 

Information Security (OCIO)* 

• Agencies networks and 

systems are vulnerable to intrusion (GAO) 

• Sensitive data not protected (GAO and OIG) • Inappropriate security 

training (GAO) 

• Lack of contingency 

plans, physical security of facilities, and configuration management (GAO) 

• Developed risk assessment tools for a wide range of platforms and operating systems. OCIO developed 12 check

as mainframes, AS/400's, Personal Electronic Devises and operating systems, such as Window 2000, Window XP 

• Provided scanning tools and training to assist agencies to identify security weaknesses. More than 150 licenses h

USDA agencies that are required to perform monthly scans and submit resulting reports. 

• Awarded 24 contracts for program and system assessments and awarded several contracts for security plans. • Developed guidance regarding Encryption Sensitive but Unclassified Information, Annual Security Plans, and iden

sensitive information. 

• Site-assessment teams conducted on-site risk assessments at several key USDA computer facilities. • In conjunction with NFC and NITC, selected a Configuration Management (CM) tool for managing mainframe env

a work group to establish a CM as a Department-wide program, established a CM tool section and configuration c

• Issued a Security Features User Guide. • Issued Telework and Remote Access guidance. 
USDA Performance and Accountability Report for FY 2003 

Appendix A – Status of FY 2002 Major Management Challenges and Program Risks

279

Challenges and Program 

Risk Accomplishments for the Period October 1, 2002 - September, 30, 2003 (and Planned Actions, if 

Information Security (Continued) • Provided scanning tools to monitor networks to all agencies. • Implemented Department-wide contract through which agencies can purchase security patch management tools. 

• Held training for use and management of security patch management tools on June 12-13, 2003. • Awarded contract to populate USDA Security Architecture with tested and approved products. • Operated Department-wide Intrusion Detection System. Developed and operated a 24 x 7 capability that monitors 

network system. New sensors, signatures and IDS tools were added and upgraded throughout the year. 

• Issued guidance for planning Computer Security Awareness and Training. • Issued guidance to provide survey of Security Awareness vendors and products. • Awarded contract to provide support for development of Department-wide Security Awareness and Training Progr

five computer security awareness training courses from the Presidential eLearning Initiative’s GoLearn Project. 

• Conducted Certification and Accreditation Training and issued guidance to USDA component agencies. • Awarded contract for support of Disaster Recovery and Business Resumption Planning activities. • Issued guidance regarding Disaster Recovery and Business Resumption Plans. • With participation from the Office of Management and Budget, conducted a USDA Disaster Recovery and Busines

ing. 

• Conducted pilot of Disaster Recovery and Business Resumption software. • Issued guidance to establish a Trusted Facility Manual. • Developed and tested disaster recovery plans for 12 major USDA systems. • Issued and drafted a number of information technology security-related policies, including: (1) mainframe security

security plan guidance, (4) security requirements for the use of private Internet access providers, (5) user ID and p

privacy policy on the use of customer information (i.e. cookies) and (7) server and firewall security, use of network 

physical security standards and use of configuration management. 

Information Resource Management (OCIO)* 

• Noncompliance with 

OMB Circular A-130 and Presidential Decision Directive 63 (OIG) 

• Inadequate physical and 

logical access controls to verify authorized users (OIG) 

• Incomplete program risk 

assessment of systems and plans to eliminate or mitigate risks (OIG) 

Inadequate oversight of security clearances and In-

• Received final draft of IT Certification and Accreditation Methodology developed to prepare agencies to certify sys

with OMB guidance. 

• Received agencies’ annual security plans according to OCIO guidance for security plans that comply with OMB gu• Worked with contractors to perform independent risk assessments of systems and programs. • Issued a follow-up contract for the support of Federal Information Security Management Act Action Plan process. • Submitted quarterly Government Information Security Reform Act security status report to OMB. • Developed security checklists for Novell and Windows EP operating systems. • Issued Risk Assessment Methodology guidance. • Conducted security self-assessments for FY 2003 Federal Information Security Act, and developed plans of action• Established department-wide policy guidance based on related guidance developed by OMB and NIST. Guidance 

gency Planning Guidance, Security Planning Guidance, Capital Planning Guide for Security, IT Certification and A

Assessment Methodology Guide. 
USDA Performance and Accountability Report for FY 2003 

Appendix A – Status of FY 2002 Major Management Challenges and Program Risks

280

Challenges and Program 

Risk Accomplishments for the Period October 1, 2002 - September, 30, 2003 (and Planned Actions, if 

formation Resource Management (OCIO)*( 

Cont.) 

• background checks for 

contractors (OIG) 

• Awarded more than 35 contracts through an OCIO blanket purchase agreement that provides for independent risk 

technology systems within USDA. These contracts have resulted in detailed risk assessments of dozens of individ

• Completed the third annual assessment of USDA’s Information Technology Security Program required by the Gov

Security Reform Act and the Federal Information Security Management Act. Currently, OCIO is tracking 264 indivand more than 4,000 action items designed to address them. 

Business and Industry Loan-making and Servicing Procedures (RBS) 

Loan-making and servicing procedures not properly administered by some State and field office program staff (OIG) 

• Entered into contract and began work with the Farm Credit Administration (FCA) to evaluate the safety and sound

Guaranteed Loan Program and assure compliance with applicable laws and RBS regulations. 

• Completed three Business Programs Assessment Reviews and initiated several Business & Industry managemen

provide training to USDA’s RBS staff in the examination process. 

There will be no further reporting on this challenge. 

Waivers of Internal Controls

(RBS) Granting improper and undocumented waivers to business and industry loan regulations (OIG) 

• Established internal instructions regarding the waiver of loan regulation processes. • Continued rewrite of the servicing and processing regulations to define agency/lender responsibilities. 

There will be no further reporting on this challenge. 

Federal Crop Insurance

(RMA)* 

• Implementation of the 

Agricultural Risk Protection Act (OIG) 

• Oversight by insurance 

companies and the Risk Management Agency (OIG) 

• Continued to initiate contracts and partnership agreements for new products mandated by the Agricultural Risk Pr• Continued to work with contractors on the development of a more effective quality control review process. 
USDA Performance and Accountability Report for FY 2003 

Appendix A – Status of FY 2002 Major Management Challenges and Program Risks

281

Challenges and Program 

Risk Accomplishments for the Period October 1, 2002 - September, 30, 2003 (and Planned Actions, if 

Rural Rental Housing (RRH) Portfolio Management (RHS)* Maintain current portfolio in good repair to ensure safe, decent and affordable housing for rural Americans (OIG) 

Published Proposed Rule June 2003 to completely restructure loan and grant programs, improve the ability to ensure p

provide decent, safe and sanitary rental and farm labor housing. Nearly 3,000 comments were received. The estimated 

is June 2004. 

Guaranteed RRH Program

(RHS)* Implement sufficient controls to ensure accurate reporting of units built (OIG) 

Revised performance and results reported under the section 538 guaranteed rental program to clarify that units reporte

have been obligated to build new construction projects and the resulting units. 

RRH Rental Assistance

(RHS)* Development of plans for increased funding requirements (OIG) 

Requested additional funding needed for the Rental Assistance program in FY 2004. Began development of a rental as

that will calculate renewal needs. 

RRH Projects Leaving the Program (RHS)* 

Monitor incentive payments and ensure project owners continue to meet the conditions of the incentive payment (OIG) 

• Improved preservation administration by implementing preservation incentive underwriting, thereby ensuring that • Enhanced the tracking systems to determine the status of prepayments. • Implemented additional tracking systems for loans entering into the prepayment process. Improved the Agency’s 

of loans proposing prepayment and those that have been prepaid. Improved agency’s ability to plan and impleme

RRH Unallowable and Excessive Expenses Charged to RRH Projects (RHS)* 

Monitor implementation of new regulation to address consistency and better controls for the RRH program and open OIG audit recommendations (OIG) 

Under current agency procedures, identified unallowable and excessive expenses; made restitution. Referred cases to 

and OIG for action. 
USDA Performance and Accountability Report for FY 2003 

Appendix A – Status of FY 2002 Major Management Challenges and Program Risks

282

Challenges and Program 

Risk Accomplishments for the Period October 1, 2002 - September, 30, 2003 (and Planned Actions, if 

Improving the Delivery of Services to Farmers (NRCS, 

FSA, RD) 

• Lack of fully integrated 

program applications (GAO) 

• Lack of adequate staffing 

at the service centers to meet farmers' needs (GAO) 

• Streamlined and improved the efficiency of servicing activities for its Direct Homeownership Program through the 

ized Servicing Center in 1996. 

• Worked with the Farm Service Agency (FSA) to explore how the agency also may benefit through centralization e

of Rural Development's Centralized Servicing Center. 

• Rural Development's Centralized Servicing Center hosted a visit from Farm Credit - Canada. Farm Credit - Cana

servicing activities and purchase a state-of-the-art servicing system like the one used by Rural Development. Rura

and Foreign Services are working to develop a plan on how the Agencies can further enhance program delivery. 

will be sent to the Deputy Secretary. 

• Made progress toward establishing a “common computing environment” within the department that is assisting Se

complying with congressionally mandated E-Government goals. All three USDA Service Center Agencies (FSA, N

trained and certified in accessing and using the system. 

• Implemented the “Common Customer” computer database known as the Service Center Information Managemen• Worked to deploy an operational nationwide FSA Geographic Information System. This system is particularly impo

of FSA’s business data is geospatial in nature or referenced to a geographical location such as land records, field 

soil types. This critical component of the implementation is the digitization of farm field boundaries called Commo

has completed implementation in more than 900 counties and put in place a plan to accelerate CLU completion ac

• Continued efforts to deploy modernized Web-based application software to support FSA needs. • Established the USDA Real Estate for Sale Web site. This site allows the public to search in their local counties fo

are being sold by the government. The site also advertises properties that will be offered at foreclosure sale by the 

be accessed from either the FSA or Rural Development home pages or the Firstgov.gov mail portal. 

• Staffed FSA‘s Federal and county offices to the maximum extent based on current appropriated funding levels. Co

and resources to support workload and workforce imbalances impacting program delivery on a case-by-case basi

• Began implementing the Technical Service Provider provisions of the Farm Bill. NRCS has developed final and in

Service Providers. An automated Technical Service Provider registry system is operating with over 700 Technical 

certified. Technical Service Providers are individuals, private groups, local Government employees and State Gov

USDA's Ability to Account for Its Financial Activities

(OCFO)* Inability to assure that the consolidated financial statements are reliable and presented in accordance with generally accepted accounting principles (GAO and OIG) 

• Received an unqualified audit opinion on five USDA stand-alone audits and on the FY 2002 Consolidated Financi• Produced timely and accurate quarterly financial statements to OMB to meet accelerated timeframes for reporting• Completed departmental implementation of a standard and compliant administrative financial system. • Began using data warehousing technology to provide consolidated reporting to meet integrated financial system re

istrative and program data. 

• Completed a draft of the new Debt Collection Regulations which contain provisions for the optional DCIA tool of a

ment, and published proposed rule 7 CFR Part 3, Debt Management, in the Federal Register with a 60- day comm
USDA Performance and Accountability Report for FY 2003 

Appendix B – Erroneous Payment Details 

283

APPENDIX B – ERRONEOUS PAYMENT DETAILS 

Food Stamp Program

 

The Food and Nutrition Service (FNS) has pioneered efforts to monitor and reduce improper payments 

under the Food Stamp Program (FSP). Thus, the payment-error rate dropped from 8.91 percent in 2000 

to 8.26 percent in 2002. This decrease saved taxpayers millions of dollars. Targets have been established to reduce the error rate to 7.8 percent in 2004 and in future years. FSP’s quality-control system 

measures the accuracy of household certifications based on a statistically valid process initially established in 1970. The system is mandated by the Food Stamp Act and further defined in program 

regulations and agency guidance. Agency procedures are established in three handbooks: Sampling 

Methodology, Review Procedures and Federal Validation Reviews. 

As part of the quality-control process, States conduct reviews on a sample of cases from all participants, and for those denied participation or terminated from the program. States report the findings of 

the reviews to FNS. FNS then conducts validation reviews to establish the accuracy of the State-reported information based on a regression process. This well-designed and controlled process yields 

quality data with a high confidence level for accuracy. These official error rates are used to assess penalties against States with high rates and award incentives to those with low rates. 

As required by FSP regulations, State agencies analyze data to develop corrective-action plans to reduce or eliminate program errors. A State must develop a quality-control action plan to address the 

causes of errors detected. Some errors occur when the State’s combined payment-error rate is above the 

threshold for enhanced funding. Others occur when a State’s negative-case error rate is more than 

1 percent. Action also is required when underpayments result from State agency rules, practices or procedures. Most States have developed action plans to address error rates based on their FY 2002 qualitycontrol data. 

FNS regional offices and States work together to develop effective strategies designed to reduce payment errors. Regional offices provide such technical assistance to States 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. 

Exhibit 95: Food Stamp Program Estimates 

Section 1a. - Program-wide Estimates (Dollars in Millions)1

FY Actuals FY Targets 

2000 2001 2002 2003 2004 2005 2006 Food Stamp 

Program

Dollars Rate Dollars Rate Dollars Rate Rate Rate Rate Rate 

Total Payments $14,989 $15,535 $18,244 

Underpayments $360 2.40% $340 

2 19%

 $384 

2 10%

TBD2 1.97% 1.97% 1.97% 

Overpayments $975 6.51% $1,005 6.47% $1,123 6.16% TBD2 5.83% 5.83% 5.83% 

Total Erroneous 

Payments $1,335 8.91% $1,345 8.66% $1,507 8.26% TBD2 7.80% 7.80% 7.80% 

1

Confidence level is 95 percent. Confidence interval is +/- .35. Data are based upon statistical sampling of the universe of payments. 2

The data will be available in June 2004. 
USDA Performance and Accountability Report for FY 2003 

Appendix B – Erroneous Payment Details 

284

FNS also administers a State Exchange Program to provide funding to States for travel to obtain, observe and share information on best practices and effective techniques to reduce payment errors. 

Coalitions have been formed among States to promote partnerships to address mutual concerns and develop effective corrective-action plans. 

A claims-collection process to recover overpayments also is an important mechanism for addressing 

erroneous payments. While States are provided some flexibility in claims operation, Federal regulations 

require them to pursue a claim if an overpayment is discovered during a quality-control review. 

FNS will continue to build upon and refine its erroneous-payments reduction activities. While the Farm 

Security and Rural Investment Act of 2002 authorized several policy options that, if fully adopted by 

States, could result in lower error rates, it also weakened the penalties for high error rates and reduced 

the incentives for low error rates. These changes took effect in FY 2003. Food-stamp caseloads are rising in every State even though States are facing significant budget deficits. States may not be able to 

sustain high quality customer service. This deficiency may cause higher error rates. It is not clear how 

these factors will influence future payment-error rates. 

National School Lunch Program/School Breakfast Program (NSLP/SBP)

Exhibit 96: National School Lunch & Breakfast Program Estimates

Section 1a. - Program-wide Estimates (Dollars in Millions) 

FY Actuals FY Targets 

2000 2001 2002 2003 2004 2005 2006 

National 

School Lunch 

& Breakfast 

Programs Dollars Rate Dollars Rate Dollars Rate Rate Rate Rate Rate 

Total Payments $ 6,887 $7,062 $7,617 

Underpayments N/A N/A N/A N/A N/A N/A N/A 

Overpayments N/A N/A N/A N/A N/A N/A N/A 

Total Erroneous Payments N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 

National School Lunch Program/School Breakfast Program (NSLP/SBP) erroneous payments occur when 

recipients misreport information in their application and are approved for free or reduced-price meals, or 

otherwise mistakenly approved (certification error) and then receive the meals. Errors also may occur 

when schools and school-food authorities (SFAs) submit inaccurate claims for meals that neither were 

served or nor met program requirements (counting and claiming error). 

Certification error and counting and claiming errors balance the need for timely performance data with 

the cost and burden of expanded and more-frequent measurements. An expanded measurement system 

would increase the burden on schools, school districts and State agencies significantly. Given the limited 

staff resources available to schools, such new burdens could undermine their educational mission. 

Certification Error

While there has been a growing discrepancy between the number of children certified for free meals and 

the estimates of those eligible, errors in school certification do not result in a loss to the Federal program. 

The loss only occurs when ineligible students actually receive meals. FNS has no data available to show 

how often those eligible for free meals actually receive them. 

All SFAs must verify household eligibility for free and reduced-price meals. They base their findings on a 

3-percent sample of the free and reduced-price applications approved annually. School authorities also 
USDA Performance and Accountability Report for FY 2003 

Appendix B – Erroneous Payment Details 

285

may select a smaller sample by focused selection. FNS recently has published regulatory changes to require school districts to report verification results and pursue corrective action for identified errors. The 

agency plans to use this data to analyze the results of the certification process. Its goal is to improve the 

system. FNS also is preparing to conduct a nationally representative study of the level of NSLP payment 

error. 

To address certification error, FNS currently is working with State and local program operators to improve accuracy and prevent errors within the context of current program regulations. Additionally, the 

Administration has recommended a balanced approach to statutory change via Child Nutrition reauthorization. This approach includes a range of program improvements to safeguard access while addressing 

such NSLP integrity issues as: 

• Requiring direct certification for free meals through FSP to improve certification accuracy over paper applications while increasing access for the lowest-income families and reducing the 

application and verification burden for families and schools; 

• Permitting households to submit a single application covering all children attending school and provide for yearlong certifications. These improvements reduce certification and verification burden 

while reducing potential for error; 

• Enhancing verification of paper-based applications by drawing verification samples early in the 

school year, expanding the verification sample, and including both a random sample and one focused on error-prone applications in each school; 

• Minimizing barriers for eligible children who wish to remain in the program by requiring a robust, 

consistent effort in every State to inquire those who do not respond to verification requests. The 

program would include a minimum of three contacts in writing and by phone; and 

• Initiating a series of comprehensive demonstration projects to test alternative mechanisms for certifying and verifying applicant information. This plan would include wage-data matching that 

identifies eligible and ineligible households, and a nationally representative study of overcertification error and the number of dollars lost to program error. 

Counting and Claiming Error 

The Coordinated Review Effort (CRE) is a system of Federal and State review of school-district meal 

programs. CRE is designed to evaluate district compliance with meal service and claiming requirements, 

and provide technical assistance to improve program management. More than $4 million in coordinated 

review funds is spent annually for the Federal review of school counting and claiming procedures, and 

compliance with meal requirements. While the system does not produce statistically valid National estimates, available CRE data indicate no major program weaknesses in meeting program requirements in 

these areas. 

Special Supplemental Nutrition Program for Women, Infants and Children 

Currently, FNS has no data available to estimate the rate of erroneous payments under the Special Supplemental Nutrition Program for Women, Infants and Children (WIC). WIC erroneous payments occur 

when: 

• Ineligible persons receive benefits; 

• Food is redeemed at excess prices; or 

• Food is redeemed for unauthorized items or items not received by participants. 

FNS periodically develops estimates of these types of errors. Recent studies show that WIC participant 

and vendor errors have remained fairly stable despite major program growth from 1988 to 1998. FNS has 

been working aggressively to improve program integrity. Since late 1998, WIC applicants with limited 

exceptions have been required to document their income and residency, and be physically present. In December 2000, FNS published a final rule on food-delivery systems that strengthen vendor management. 
USDA Performance and Accountability Report for FY 2003 

Appendix B – Erroneous Payment Details 

286

These systems established vendor-selection criteria, vendor-training requirements, high-risk vendor identification criteria and such vendor-monitoring requirements as compliance investigations. 

Exhibit 97: WIC Estimates

Section 1a. - Program-wide Estimates (Dollars in Millions) 

FY Actuals FY Targets 

WIC Program 2000 2001 2002 2003 2004 2005 2006 

Dollars Rate Dollars Rate Dollars Rate Rate Rate Rate Rate 

Total Payments $ 3,981 $ 4,150 $4,462 

Underpayments N/A N/A N/A N/A N/A N/A N/A 

Overpayments N/A N/A N/A N/A N/A N/A N/A 

Total Erroneous 

Payments N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 

While FNS currently has no data available to estimate the rate of erroneous payments under WIC, it has 

conducted studies in an attempt to develop estimates relating to these types of errors: 

• Participant error: The WIC Income Verification Study, 1988 found that 5.7 percent of program participants were income ineligible. The National Survey of WIC Participants, 1998, yielded an estimate of 

4.5 percent. While both estimates only considered income eligibility, nutritional risk also is required 

to be eligible for WIC. Nutritional risk criteria cover a range of conditions and behaviors that would 

be difficult to verify; and 

• Vendor error: The WIC Vendor Management Study, 1998 estimated that vendor overcharges represent 

0.9-1.6 percent of total program payments. Undercharges are estimated at 0.4-0.6 percent. These rates 

are very similar to those found in a 1988 study. 

FNS has been exploring WIC electronic benefit transfer (EBT) systems to provide greater efficiency and 

integrity in food-benefit delivery. Currently, there are 12 States pilot testing EBT systems. These systems 

require personal identification number entry prior to retail transactions. They also verify WIC-authorized 

foods by Universal Product Codes (UPC). A UPC is a combination of a number and bar code that identifies an individual consumer product. Thus, participant and vendor error is minimized. 

Commodity Loan Program 

The Commodity Credit Corporation (CCC) Commodity Loan Program error rate has increased from 0.08 

percent in 2001 to 1.54 percent in 2003. Targets have been established to reduce the rate to 1.40 percent 

in 2004 and 1 percent in future years. Currently, erroneous payments are measured by evaluating the program’s accounts receivable. CCC is participating in a new Geospatial Information System to obtain morecurrent information about commodities being planted on farms. This data will provide the county Farm 

Service Agency offices with more options for validating the acreage and planting information provided by 

producers. This plan will help determine if a payment error occurred. The system has not been fully implemented. 
USDA Performance and Accountability Report for FY 2003 

Appendix B – Erroneous Payment Details 

287

Lack of funding for initiatives to track and report on payment-error rates has hampered efforts to reduce 

or prevent erroneous payments. To date, CCC has not begun any new initiatives to reduce erroneous 

payments. 

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. 

Exhibit 98: Commodity Loan Program Estimates

Section 1a. - Program-wide Estimates (Dollars in Millions)1

FY Actuals FY Targets 

Commodity Loan 2001 2002 2003 2004 2005 2006 

Program Dollars Rate Dollars Rate Dollars Rate Rate Rate Rate 

Total Payments $8,267 100% $10,132 100% $9,894 100% 100% 100% 100% 

Underpayments N/A N/A N/A N/A N/A N/A N/A ** ** 

Overpayments 6.6 .08% 1 .01% 153 1.54% 1.40% 1.25% 1.10% 

Total Erroneous 

Payments 6.6 .08% $1 .01% $153 1.54% 1.40% 1.25% 1.10% 

1

FY 2003 data is actual data through June 30, 2003. Changes to reporting systems will allow for the tracking of overpayments by FY 

2003. The amounts shown are actual amounts or best estimates for future rates. There is no statistical sampling process currently 

used to develop this report. The current method of measuring the rate of erroneous payments for Commodity Credit Corporation 

(CCC)-issued commodity loans is by evaluating the accounts receivables. CCC also changed the way information is provided from a

crop-year basis to a fiscal-year basis. These accounts receivables show the crop years that would have been disbursed during the 

current fiscal year. The amounts shown are a reliable indicator of the quality of disbursements made for the commodity-loan program.
USDA Performance and Accountability Report for FY 2003 

Appendix C -- Exhibits 

288

APPENDIX C – EXHIBITS 

Exhibit 1: Organization Chart...................................................................................................................................... 3

Exhibit 2: FY 2003 USDA Program Obligations Dedicated to Strategic Goals.......................................................... 7

Exhibit 3: FY 2003 USDA Staff Years Dedicated to Strategic Goals ......................................................................... 8

Exhibit 4: Resources Dedicated to Enhancing Economic Opportunities................................................................... 18

Exhibit 5: Resources Dedicated to Expanding International Marketing Opportunities ............................................. 18

Exhibit 6: Increasing U.S. Marketing Opportunities ................................................................................................. 21

Exhibit 7: Trade Policy Successes In FY 2003 Preserve $2 Billion Worth of U.S. Exports ..................................... 21

Exhibit 8: Expand and Retain Market Access ........................................................................................................... 22

Exhibit 9: Increasing U.S. Market Opportunity......................................................................................................... 23

Exhibit 10: Resources Dedicated to Support International Economic Development and 

Trade Capacity Building.......................................................................................................................... 25

Exhibit 11: Promoting Assistance on International Economic Development............................................................. 26

Exhibit 12: Steadily Increasing Efforts To Assist Developing Countries Expand Economic Development and 

Trade Capacity ........................................................................................................................................ 26

Exhibit 13: Increase Foreign Food Assistance............................................................................................................ 27

Exhibit 14: Food For Education Program................................................................................................................... 27

Exhibit 15: Resources Dedicated to Develop Alternative Markets for Agriculture Products and Activities.............. 29

Exhibit 16: Increase the Use of Bioenergy and Biobased Products............................................................................ 30

Exhibit 17: Bioenergy and Biobased Products Performance ...................................................................................... 31

Exhibit 18: Resources Dedicated to Provide Risk Management and Financial Tools to Farmers and Ranchers........ 33

Exhibit 19: Expand Use of Risk Management Tools.................................................................................................. 35

Exhibit 20: Trends in the Use of Risk Management Tools......................................................................................... 35

Exhibit 21: Improve Loan Processing Efficiency and Fiscal Soundness of the Direct Loan Portfolio....................... 37

Exhibit 22: Farm Loan Trends.................................................................................................................................... 37

Exhibit 23: Provide Income Assistance ...................................................................................................................... 38

Exhibit 24: Expand Customer Access to Services ...................................................................................................... 40

Exhibit 25: Trends in Customer Access to Services ................................................................................................... 40

Exhibit 26: Resources Dedicated to Support and Improve Rural America................................................................. 42

Exhibit 27: Resources Dedicated to Expand Economic Opportunities through USDA Financing of Businesses ...... 42

Exhibit 28: Strengthen Rural Businesses.................................................................................................................... 44

Exhibit 29: Estimated Jobs Created or Saved ............................................................................................................. 44

Exhibit 30: Trends in Expanding Economic Opportunities ........................................................................................ 45

Exhibit 31: Improve Telecommunication Services in Rural America ........................................................................ 46

Exhibit 32: Improving Broadband Communications .................................................................................................. 46

Exhibit 33: Resources Dedicated to Improving the Quality of Life............................................................................ 48

Exhibit 34: Improving Rural Quality of Life.............................................................................................................. 49

Exhibit 35: Trends in Homeownership and Community Facilities............................................................................. 49

Exhibit 36: Homeownership Assistance ..................................................................................................................... 50

Exhibit 37: Resources Dedicated to Protect and Secure the Nation’s Food Supply ................................................... 53

Exhibit 38: Resources Dedicated to Reduce Pest and Disease Outbreaks .................................................................. 53

Exhibit 39: Conduct Risk Assessments ...................................................................................................................... 56

Exhibit 40: Number of Risk Assessments Initiated and Completed ........................................................................... 56

Exhibit 41: Enhance Industry Compliance for Salmonella......................................................................................... 57

Exhibit 42: Trends in Industry Compliance for Salmonella ....................................................................................... 58

Exhibit 43: Enhance Industry Compliance for Listeria Monocytogenes .................................................................... 59

Exhibit 44: Trends in Industry Compliance for Listeria Monocytogenes................................................................... 59

Exhibit 45: Develop Systems for Detecting Foodborne Pathogens and Chemical Contaminants .............................. 59

Exhibit 46: Expand Approaches for Detecting Foodborne Pathogens and Chemical Contaminants.......................... 60

Exhibit 47: Resources Dedicated to Reduce Pest and Disease Outbreaks .................................................................. 61

Exhibit 48: Strengthen the Effectiveness of Pest and Disease Surveillance and Detection Systems.......................... 65

Exhibit 49: Strengthen the Effectiveness of Pest and Disease Detection and Management Systems......................... 65

Exhibit 50: Increase the Number of States and Territories Meeting Standards .......................................................... 67

Exhibit 51: Actual Number of States and Territories Meeting Standards................................................................... 67
USDA Performance and Accountability Report for FY 2003 

Appendix C -- Exhibits 

289

Exhibit 52: Ensure States Provide Animal Diagnostic Services..................................................................................68

Exhibit 53: Increase in States that Provide Animal Diagnostic Services ....................................................................68

Exhibit 54: Ensure the Capabilities of Plant and Diagnostic Laboratories are Improved............................................69

Exhibit 55: Improve the Capabilities of Plant Diagnostic Laboratories ......................................................................69

Exhibit 56: Report of Actual Variety and Germplasm Releases .................................................................................70

Exhibit 57: Variety and Germplasm Releases with Enhanced Resistance to Pests and Diseases................................70

Exhibit 58: Resources Dedicated to Improve the Nation’s Nutrition and Health........................................................73

Exhibit 59: Resources Dedicated to Improve Access to Nutritious Food....................................................................73

Exhibit 60: Improve Nutrition .....................................................................................................................................74

Exhibit 61: Trends in Improving Nutrition..................................................................................................................75

Exhibit 62: Resources Dedicated to Promote Healthier Eating Habits and Lifestyles ................................................77

Exhibit 63: Improve America’s Diet ...........................................................................................................................78

Exhibit 64: Trends in Improving America’s Diet........................................................................................................79

Exhibit 65: Resources Dedicated to Improve Food Program Management and Customer Service.............................81

Exhibit 66: Increase Efficiency in Food Management ................................................................................................82

Exhibit 67: Trends in Increasing Efficiency in Food Management.............................................................................82

Exhibit 68: Resources Dedicated to Protect the Nation’s Natural Resource Base and Environment ..........................85

Exhibit 69: Resources Dedicated to Implementing the Healthy Forest Initiatives and Other Actions ........................86

Exhibit 70: Reduce Risk of Catastrophic Fire .............................................................................................................88

Exhibit 71: Trends in Reducing Risk of Catastrophic Fire..........................................................................................88

Exhibit 72: Maintain Rangeland Allotments ...............................................................................................................90

Exhibit 73: Administering Livestock Grazing Allotments ..........................................................................................90

Exhibit 74: Cleanup USDA-Managed Lands ..............................................................................................................91

Exhibit 75: Cleanup Program Performance.................................................................................................................92

Exhibit 76: Resources Dedicated to Improve Management of Private Lands .............................................................93

Exhibit 77: Maintain Productive Health of Land.........................................................................................................96

Exhibit 78: Trends in Land Management ....................................................................................................................96

Exhibit 79: Ensure Clean and Abundant Water Supplies ............................................................................................99

Exhibit 80: Trends in Water Resources Protection....................................................................................................100

Exhibit 81: Improve Wildlife Habitats ......................................................................................................................103

Exhibit 82: Trends in Enhancement of Wetlands and Wildlife Habitat.....................................................................103

Exhibit 83: Audit Follow-Up Definitions..................................................................................................................129

Exhibit 84: Decrease in Total Resolved Audit Inventory..........................................................................................129

Exhibit 85: Increase in Reportable Audits.................................................................................................................129

Exhibit 86: Inventory of Audits With Disallowed Costs...........................................................................................130

Exhibit 87: Inventory of Audits With Funds to be Put to Better Use ........................................................................130

Exhibit 88: Distribution of Adjustments to Disallowed Costs...................................................................................130

Exhibit 89: Distribution of Audits, Disallowed Costs and FTBU by USDA Agency ...............................................131

Exhibit 90: Audits One Year or More Past the Management Decision Date and Behind Schedule..........................132

Exhibit 91: Material Deficiencies Decline ................................................................................................................137

Exhibit 92: Summary of Outstanding Material Deficiencies and Estimated Completion Dates ...............................138

Exhibit 93: Material Deficiencies Aging Analysis....................................................................................................139

Exhibit 94: Material Deficiencies Corrected or No Longer Material ........................................................................139

Exhibit 95: Food Stamp Program Estimates..............................................................................................................283

Exhibit 96: National School Lunch & Breakfast Program Estimates........................................................................284

Exhibit 97: WIC Estimates........................................................................................................................................286

Exhibit 98: Commodity Loan Program Estimates.....................................................................................................287
USDA Performance and Accountability Report for FY 2003 

Appendix D -- Acronyms 

290

APPENDIX D – ACRONYMS 

AAVLD American Association of Veterinary Laboratory Diagnostics 

ADP Automated Data Processing 

ADR Alternative Dispute Resolution 

AGIC American Growers Insurance Company 

AIIS Automated Import Information System 

AMS Agricultural Marketing Service 

APHIS Animal and Plant Health Inspection Service 

ARMS Agricultural Resource Management Survey 

ARS Agricultural Research Service 

B&I The Business and Industry Guaranteed Loan Program 

BFES Budget Formation and Execution System 

BMP Best Management Practices 

BSE Bovine Spongiform Encephalopathy 

CACFP Child and Adult Care Food Program 

CAPS Cooperative Agricultural Pests Survey 

CBA Cost-Benefit Analysis 

CBO Certificates of Beneficial Ownership 

CCC Commodity Credit Corporation 

CDC Centers for Disease Control and Prevention 

CERCLA Comprehensive Environmental Response, Compensation and Liability Act 

CIS Common Information System 

CLP Commodity Loan Program 

CM Configuration Management 

CNMP comprehensive nutrient management plans 

CNPP Center for Nutrition Policy and Promotion 

CORP County Operations Review Program 

CPAP Community Programs Application Processing 

CR Office of Civil Rights 

CRE Coordinated Review Effort 

CRP Conservation Reserve Program 

CSREES Cooperative State Research, Education, and Extension Service 

CTA Conversation Technical Assistance Program 

CWD Chronic Wasting Disease 

DCIA Debt Collection Improvement Act 

DCP Direct Counter-Cyclical Payment 

DHS Department of Homeland Security 

DMZ Demilitarized Zone 

DNA Deoxyribonucleic Acid 

DO Departmental Offices 

DOE Department of Energy 

DOI Department of the Interior 

DOL Department of Labor 

E&T Employment and Training 

EBT Electronic Benefits Transfer 

eGovernment Electronic Government 

EFNEP Expanded Food and Nutrition Education Program 

EI Erodibility Index 

EMS Emergency Management Systems 

EPA Environmental Protection Agency 

EQIP Environmental Quality Incentives Program 

ERS Economic Research Service 

ERU Engineering Research Unit 

ESD Ecological Site Descriptions 

EU European Union 

EWP Emergency Watershed Protection Program 

EWRP Emergency Wetlands Reserve Program 

FACTS Federal Agencies’ Centralized Trial Balance System 

FAS Foreign Agricultural Service 

FCA Farm Credit Administration 

FCIC Federal Crop Insurance Corporation 

FDA Food and Drug Administration 

FDPIR Food Distribution Program on Indian Reservations 

FFAS Farm and Foreign Agricultural Services 

FFB Federal Financing Bank 
USDA Performance and Accountability Report for FY 2003 

Appendix D -- Acronyms 

291

FFIS Foundation Financial Information System 

FISMA Federal Information Security Management Act 

FLEP Forest Land Enhancement Program 

FMFIA Federal Managers’ Financial Integrity Act 

FNCS Food, Nutrition and Consumer Services 

FNS Food and Nutrition Service 

FS Forest Service 

FSA Farm Service Agency 

FSIS Food Safety and Inspection Service 

FSP Food Stamp Program 

FSRE Food Safety Regulation Essentials 

FSRIA Farm Security and Rural Investment Act of 2002 

FSRIO Food Safety Research Information Office 

FTA Free Trade Agreement 

FTAA Free Trade Area of the Americas 

FTBU funds to be put to better use 

FY Fiscal Year 

GAO Government Accounting Office 

GIPSA Grain Inspection, Packers and Stockyards Administration 

GRIN Germplasm Resource Information Network 

GRP Group Risk Protection 

HACCP Hazard Analysis and Critical Control Point 

HFI Healthy Forest Initiative 

HHS Department of Health and Human Services 

IHEI Interactive Healthy Eating Index 

IPPC International Plant Protection Convention 

ISO International Standards Organization 

IT Information Technology 

LDP Loan Deficiency Payment 

LRP Livestock Risk Protection 

MFH Multi-Family Housing Program 

MRP Marketing and Regulatory Programs 

NAHLN National Animal Health Laboratory Network 

NAHMS National Animal Health Monitoring System 

NAHRS National Animal Health Reporting System 

NAL National Agriculture Library 

NAPIS National Agricultural Pest Information System 

NASF National Association of State Foresters 

NASS National Agricultural Statistics Service 

NCIE National Center for Import and Export 

NDB National Data Bank 

NEPA National Environmental Policy Act 

NFC National Finance Center 

NFP National Fire Plan 

NFS National Forest System 

NITC National Information Technology Center 

NPGS National Plant Germplasm System 

NPDN National Plant Diagnostic Network 

NRCS Natural Resources Conservation Service 

NRE Natural Resources and Environment 

NRI National Resources Inventory 

NRI-CEAP National Resources Inventory Conservation Effects Assessment Project 

NSLP National School Lunch Program 

NSLP/SBP National School Lunch Program/School Breakfast Program 

NVSL National Veterinary Services Laboratories 

OBPA Office of Budget and Program Analysis 

OCFO Office of the Chief Financial Officer 

OCIO Office of the Chief Information Officer 

OGC Office of the General Counsel 

OIE Office International des Epizooties 

OIG Office of Inspector General 

OMB Office of Management and Budget 

OSEC Office of the Secretary 

OSTP Office of Science and Technology Policy 

PART Program Assessment Rating Tool 

PAS Performance and Accountability System 

PCAS Project Cost Accounting System 

PCIMS Processed Commodities Inventory Management System 
USDA Performance and Accountability Report for FY 2003 

Appendix D -- Acronyms 

292

PCMS Purchase Card Management System 

PMA President’s Management Agenda 

PP&E Property, Plant and Equipment 

PRMS Performance and Results Management System 

PSD Price Support Division 

RBS Rural Business - Cooperative Service 

RD Rural Development 

REE Research, Education and Economics 

RHS Rural Housing Service 

RMA Risk Management Agency 

RME Risk Management Education 

RRH Rural Rental Housing 

RTB Rural Telephone Bank 

RTE Ready-to-Eat 

RUS Rural Utilities Service 

SA State Agencies 

SBP School Breakfast Program 

SFA School-Food Authority 

SFSP Summer Food Service Program 

SOP Standard Operating Procedures 

SRA Standard Reinsurance Agreement 

TSP Technical Service Provider 

UPC Universal Product Code 

USAHA United States Animal Health Association 

USAID United States Agency for International Development 

USDA United States Department of Agriculture 

UST Underground Storage Tank 

USTR United States Trade Representative 

WHIP Wildlife Habitat Incentives Program 

WIC Special Supplemental Nutrition Program for Women, Infants and Children 

WRP Wetlands Reserve Program 

WRRC Western Regional Research Center 

WTO World Trade Organization 

WUI Wildlife Urban Interface