Page 1 GAO-13-69R Pigford II

United States Government Accountability Office

Washington, DC 20548

December 7, 2012

Congressional Committees

Subject: Civil Rights: Additional Actions in Pigford II Claims Process Could Reduce Risk of 

Improper Determinations

On April 14, 1999, the U.S. District Court for the District of Columbia approved the settlement 

of Pigford v. Glickman (Pigford I), a class action lawsuit brought against the U.S. Department 

of Agriculture (USDA) by African American farmers. In Pigford I, the farmers alleged that 

USDA had willfully discriminated against them and other African American farmers by (1) 

denying or delaying the processing of their applications for farm loans and benefit programs 

and (2) failing to properly investigate and resolve their discrimination complaints.1 The 

settlement was estimated at the time to be worth at least $2.25 billion, the largest civil rights 

settlement in U.S. history.2 By the settlement’s claim filing deadline, approximately 22,700 

individuals had filed claims for relief under the settlement; however, about 74,000 additional 

individuals submitted requests to file late claims, about 97 percent of whom were not allowed 

to proceed under the settlement.3 After congressional hearings, Congress passed 

legislation—the 2008 Farm Bill—which permitted claimants who had submitted a late-filing 

request under Pigford I and had not received a final determination on the merits of their claims 

to bring a civil action in federal court to obtain such a determination.4

After the legislation was enacted, 23 separate complaints were filed—together representing 

approximately 40,000 individual claims—which were subsequently consolidated into a single 

case commonly referred to as Pigford II.

The legislation made 

available $100 million for payment of successful claims.

5

 

1

See Pigford v. Glickman, 185 F.R.D. 82 (D.D.C. 1999).

After nearly 2 years of litigation, a settlement 

agreement was reached providing that $1.25 billion be made available for the resolution of 

claims, contingent upon congressional approval of $1.15 billion in funding beyond the $100 

million made available by the 2008 Farm Bill. The parties to the Pigford II settlement were 

USDA, represented by the U.S. Department of Justice (DOJ), and the African American 

farmers, represented by Class Counsel.

2

Id. at 95.

3

Pigford I Arbitrator, Arbitrator’s Ninth Report on the Late-Claim Petition Process (Washington, D.C.: 

Nov. 30, 2005).

4

Food, Conservation, and Energy Act of 2008, Pub. L. No. 110-246, § 14012, 122 Stat. 1651, 2209 (2008).

5

In re Black Farmers Discrimination Litig., 820 F. Supp. 2d 78 (D.D.C. 2011).
Page 2 GAO-13-69R Pigford II

The Claims Resolution Act of 2010, enacted in December 2010, appropriated the $1.15 

billion and mandated that GAO evaluate the internal controls created to carry out the terms 

of the Pigford II settlement agreement and report at least twice during the claims 

adjudication process.6

Scope and Methodology

On November 13 and 14, 2012, we provided a briefing to your offices 

in response to the first of these two reporting obligations. As agreed with your offices, this 

report formally transmits the November briefing, provides updates to that briefing, and 

satisfies the second reporting obligation. Our objectives were to examine: (1) the internal 

control created to identify and deny fraudulent or otherwise invalid claims under the 

settlement and (2) the extent to which the internal control design and operation provide 

reasonable assurance that fraudulent or otherwise invalid claims are identified and denied.

To conduct our work, we examined the settlement agreement’s legal framework; how it is 

being executed; and the views of the parties to the settlement agreement and those charged 

with carrying out its terms, among other things. We compared the internal control created to 

carry out the settlement with the federal standards for internal control.7 In addition, we 

conducted testing of a random sample of 150 claims drawn from those submitted as of June 

4, 2012, to determine whether selected controls were operating as intended.8

We conducted this performance audit from April 2012 to December 2012 in accordance with 

generally accepted government auditing standards. Those standards require that we plan 

and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable 

basis for our findings and conclusions based on our audit objectives. We believe that the 

evidence obtained provides a reasonable basis for our findings and conclusions based on 

our audit objectives.

We also 

discussed a draft of the briefing slides with USDA, DOJ, and the parties charged with 

carrying out the settlement’s terms before the briefing, and incorporated their comments and 

suggested technical corrections, as appropriate.

Summary

The parties charged with carrying out the terms of the Pigford II settlement agreement have 

created numerous internal control measures designed to balance various interests including 

accuracy, efficiency, and cost. Many of these measures serve to identify and deny 

fraudulent or otherwise invalid claims. For example, the parties conduct iterative reviews of 

each claim and identify potential fraud concerns. In addition, the parties told us that they 

plan to conduct final control measures after all claims are provisionally adjudicated and 

before payments are made. Those measures include identifying duplicate claims (to ensure 

no one is paid twice) and claims filed on behalf of the same farming operation (to ensure 

only one payment per farming operation) or same class member (to ensure only one 

payment per class member).

 

6

Claims Resolution Act of 2010, Pub. L. No. 111-291, § 201, 124 Stat. 3064, 3070, 3071 (2010).

7

GAO, Standards for Internal Control in the Federal Government, GAO/AIMD-00-21.3.1 (Washington, 

D.C.: Nov. 1, 1999).

8

We performed testing from June 7 to July 25, 2012. Controls applied after this time—such as final adjudications 

and those related to payment processing—are not reflected in our results. 
Page 3 GAO-13-69R Pigford II

In general, the internal control design provides reasonable assurance that fraudulent or 

otherwise invalid claims could be identified and denied; however, certain weaknesses in the 

control design could expose the claims process to risk of improper determinations. Some of 

these weaknesses are a result of constraints imposed by the terms of the settlement 

agreement, which were agreed to by the parties to the settlement agreement as fair, 

reasonable, and adequate. In addition, the terms were approved by the presiding judge, 

effectively ratified by Congress in the Claims Resolution Act of 20109

Finally, at the time of our review, the internal control design was generally operating as 

intended to identify and deny fraudulent or otherwise invalid claims. However, the design 

has not yet been fully implemented, and we cannot determine whether the remainder of the 

design will operate as intended. For example, control measures yet to be implemented—

either in full or in part—include (1) identification of duplicate claims and claims submitted on 

behalf of the same farming operation or the same class member and (2) verification of 

timeliness determinations.

and in some cases 

originated in Pigford I and were subsequently enacted in the 2008 Farm Bill. These design 

weaknesses, hence, cannot be modified by the implementing parties. For example, by the 

terms of the settlement agreement, most claims must be evaluated based solely on the 

information submitted by the claimants and, as a result, the adjudicator of these claims has 

no way of independently verifying that information. Another weakness is within the authority 

of the implementing parties to modify. Specifically, the Claims Administrator is responsible 

for determining class membership, including that claimants have not obtained prior 

judgments on their complaints. The Claims Administrator, however, has not established 

agreed upon procedures—beyond consulting two other settlement participant lists—for 

checking whether claimants already obtained judgments in judicial or administrative forums. 

Without such procedures, some individuals may improperly be found to be class members.

For additional information on the results of our work, please see enclosure I, slides 17 

through 29.

Conclusions

Identifying and denying fraudulent or otherwise invalid claims among tens of thousands of 

claims submitted is a daunting task. The parties charged with carrying out the terms of the 

Pigford II settlement have designed and operated a system of internal control that, in 

general, provides reasonable assurance of identifying and denying fraudulent or otherwise 

invalid claims. There is an absence, however, of agreed upon procedures to identify 

claimants who already obtained determinations on their complaints in judicial or 

administrative forums. Additionally, the settlement’s internal control design has not been 

fully implemented, and its effectiveness is contingent upon the remaining control measures 

being fully and correctly carried out. We note that internal control need not provide absolute 

assurance and recognize that accuracy must be weighed against other interests including 

cost. However, reaching agreement on certain procedures and implementing the design fully 

to provide reasonable assurance in accurate claim determinations is important, especially 

where funds are limited, and improper awards reduce the amount available for those truly 

entitled to relief—those harmed by USDA discrimination.

 

9

The Claims Resolution Act of 2010 made available $1.15 billion, the use of which was to “be subject to the express 

terms of the” Pigford II settlement agreement. Pub. L. No. 111-291, § 201(a)(1), (b), (c).
Page 4 GAO-13-69R Pigford II

Recommendations

We are making the following two recommendations:

• To improve the internal control design, we recommend that the Claims Administrator 

establish and document procedures to provide reasonable assurance of identifying 

claimants who obtained prior judgments on their discrimination complaints in judicial or 

administrative forums, including reaching agreement with USDA on the Claims 

Administrator’s request that USDA check its records of judicial and administrative 

determinations.

• To help ensure that the design operates as intended to provide reasonable assurance of 

identifying and denying fraudulent or otherwise invalid claims, we recommend that the 

parties charged with carrying out the terms of the settlement agreement continue their 

efforts to fully and correctly implement the remainder of the internal control design, 

including measures to (1) identify duplicate claims and claims submitted on behalf of the 

same farming operation or the same class member and (2) verify timeliness 

determinations.

Agency Comments, Third-Party Views, and Our Evaluation

We provided a draft of this report to USDA, DOJ, and the parties charged with carrying out 

the terms of the settlement agreement, for their review and comment.

In written comments, which are reproduced in enclosure II, USDA disagreed with the 

inclusion of USDA in our first recommendation—regarding the Claims Administrator’s 

procedures to provide reasonable assurance of identifying claimants who obtained prior 

judgments on their discrimination complaints in judicial or administrative forums. USDA 

stated that, under the terms of the Pigford II settlement agreement, USDA is not required to 

take any action other than to give loan information during the claims process. USDA also 

stated that our recommendation gives “the appearance that USDA has failed/neglected to 

work with the Claims Administrator on this issue,” which USDA said is not the case. In 

addition, USDA said the Claims Administrator has alternative methods to search for judicial 

records, and USDA is currently considering whether it is legally able to provide records of 

administrative decisions to the Claims Administrator. USDA also noted that the Claims 

Administrator could make a Freedom of Information Act (FOIA) request for the records. In 

response to these and earlier oral comments from USDA, we modified our recommendation 

to make clear that it is the Claims Administrator’s duty to establish the indicated procedures, 

which include reaching an agreement on whether USDA will assist the Claims Administrator 

with its request. However, whether the Claims Administrator obtains administrative records 

from USDA as a result of its current request, or as a result of a future FOIA request, USDA 

involvement is still required. USDA subsequently informed us in an e-mail that it would 

provide the Claims Administrator with information on administrative decisions, but that the 

Claims Administrator would need to obtain information on judicial decisions. USDA 

indicated, and the Claims Administrator agreed, that the parties would meet to discuss 

USDA’s involvement in early December 2012. These actions pave the way toward 

implementation of our first recommendation. In order to fully implement the 

recommendation, we continue to expect the Claims Administrator to establish and document 

the indicated procedures. 
Page 5 GAO-13-69R Pigford II

USDA also disagreed with our use of the phrase “USDA’s history of discrimination.” USDA 

stated that it never conceded liability regarding the discrimination alleged in either the 

Pigford I or Pigford II settlements. USDA suggested adding the word “alleged” before the 

phrase. We did not make this change because we attribute the phrase to the judicial 

opinions approving the Pigford I and Pigford II settlements, not to any concession of liability 

by USDA.

Finally, USDA stated that “the Standards for Internal Control in the Federal Government

were not considered during settlement negotiations” and that “the settlement terms need not 

meet these standards.” The Standards for Internal Control in the Federal Government

defines the minimum level of quality acceptable for internal control in federal government, 

and parallel standards apply to private industry. These standards provide the basis for 

evaluating internal control and are therefore the appropriate criteria by which to evaluate the 

internal control in the Pigford II settlement, as we were mandated to do under the Claims 

Resolution Act of 2010.

USDA, DOJ, and the parties charged with carrying out the terms of the settlement 

agreement all provided additional information and/or technical comments, which we 

incorporated as appropriate.

We are sending copies of this report to the Secretary of Agriculture, the Attorney General of 

the United States, the parties charged with carrying out the terms of the Pigford II settlement

agreement, the appropriate congressional committees, and other interested parties. This 

report also is available at no charge on the GAO website at http://www.gao.gov. 

If you or your staff members have questions concerning this report, please contact me at 

(202) 512-3841 or garciadiazd@gao.gov. Contact points for our Offices of Congressional 

Relations and Public Affairs may be found on the last page of this report. Key contributors to 

this report were Susan Quinlan, Assistant Director; Kevin Bray; Darryl Chang; Debra 

Cottrell; Alison O’Neill; Mark Ramage; Emmy Rhine; Tind Shepper Ryen; Kiki 

Theodoropoulos; and Monique Williams.

Daniel Garcia-Diaz

Acting Director, Natural Resources and Environment

Enclosures (2)
Page 6 GAO-13-69R Pigford II

List of Committees

The Honorable Debbie Stabenow

Chairman

The Honorable Pat Roberts

Ranking Member

Committee on Agriculture, Nutrition, and Forestry

United States Senate

The Honorable Max Baucus

Chairman

The Honorable Orrin G. Hatch

Ranking Member

Committee on Finance

United States Senate

The Honorable Frank Lucas

Chairman

The Honorable Collin C. Peterson

Ranking Member

Committee on Agriculture

House of Representatives

The Honorable Dave Camp

Chairman

The Honorable Sander M. Levin

Ranking Member

Committee on Ways and Means

House of Representatives
Page 7 GAO-13-69R Pigford II

Enclosure I: Briefing Slides

Pigford II Settlement

Briefing to Congressional Committees

November 2012

For more information, contact Daniel Garcia-Diaz, (202) 512-3841 or garciadiazd@gao.gov Page 1
Page 8 GAO-13-69R Pigford II

Introduction

• On April 14,1999, the U.S. District Court for the District of Columbia approved 

the settlement of Pigford v. Glickman (Pigford I), a class action lawsuit brought 

against the U.S. Department of Agriculture (USDA) by African American farmers 

who alleged USDA had willfully discriminated against them and other African 

American farmers by denying or delaying the processing of their applications for 

farm loans and benefit programs and failing to properly investigate and resolve 

their discrimination complaints.1

• By the settlement’s claim filing deadline of October 12, 1999, approximately 

22,700 individuals had filed claims for relief; however, about 74,000 additional 

individuals submitted requests to file late claims, about 97 percent of whom were 

not allowed to proceed under the Pigford I settlement.2

• After congressional hearings, Congress included a provision in the 2008 Farm 

Bill that permitted claimants who had submitted a late-filing request under 

Pigford I but who had not received a final determination to bring a civil action in 

federal court to obtain such a determination.3 

1See Pigford v. Glickman, 185 F.R.D. 82 (D.D.C. 1999). 2Pigford I Arbitrator, Arbitrator’s Ninth Report on the Late-Claim Petition Process (Washington, D.C.: Nov. 30, 2005). 3Food, Conservation, and Energy Act of 2008, Pub. L. No. 110-246, § 14012, 122 Stat. 1651, 2209 (2008).

Page 2
Page 9 GAO-13-69R Pigford II

Introduction (cont’d)

• The 2008 Farm Bill made available $100 million for payment of successful 

claims. 

• After the legislation was enacted, 23 separate complaints were filed—together 

representing approximately 40,000 individual claims—which were subsequently 

consolidated into a single case commonly referred to as Pigford II.4

• After nearly 2 years of litigation, a settlement agreement was reached providing 

that $1.25 billion be made available for the resolution of claims, contingent upon 

congressional approval of $1.15 billion in funding beyond the $100 million 

already set aside. 

• The parties to the Pigford II settlement were USDA, represented by the U.S. 

Department of Justice (DOJ), and the African American farmers, represented by 

Class Counsel.

• The Claims Resolution Act of 2010, enacted in December 2010, appropriated the 

$1.15 billion and mandated that GAO evaluate the internal controls created to 

carry out the terms of the new settlement and report at least twice during the 

claims adjudication process.5

4In re Black Farmers Discrimination Litig., 820 F. Supp. 2d 78 (D.D.C. 2011). 5Claims Resolution Act of 2010, Pub. L. No. 111-291, § 201, 124 Stat. 3064, 3070, 3071 (2010). Page 3
Page 10 GAO-13-69R Pigford II

Objectives

This briefing responds to the first of two reporting obligations for 

GAO during the Pigford II claims adjudication process, as mandated 

by the Claims Resolution Act of 2010.6 Our objectives were to 

examine the following:

(1) the internal control created to identify and deny fraudulent or 

otherwise invalid claims under the settlement, and

(2) the extent to which the internal control design and operation 

provide reasonable assurance that fraudulent or otherwise 

invalid claims are identified and denied.

6We plan to respond to the second reporting obligation in December 2012. Page 4
Page 11 GAO-13-69R Pigford II

Scope and Methodology

To determine the internal control created, we examined

• the legal framework prescribing the creation and implementation of internal 

control under the settlement by identifying, obtaining, and reviewing governing 

authorities including the 2008 Farm Bill, the Claims Resolution Act of 2010, the 

presiding judge’s orders and opinions, and the judicially approved settlement 

agreement;

• how the settlement’s legal framework is being executed by the parties charged 

with carrying out its terms—such as the designated Claims Administrator and 

Class Counsel—by identifying, obtaining, and reviewing the internal control 

policies and procedures created by those parties; and

• the views of the parties to the settlement agreement and the parties charged with 

carrying out its terms on the creation and application of the settlement’s internal 

control by identifying, contacting, and interviewing those parties.

Page 5
Page 12 GAO-13-69R Pigford II

Scope and Methodology (cont’d)

To examine the internal control design and operation, we

• compared the internal control created to identify and deny fraudulent or 

otherwise invalid claims7 with the standards for internal control prescribed in the 

Standards for Internal Control in the Federal Government,8 and

• conducted testing of a random sample of 150 claims drawn from those submitted 

as of June 4, 2012, to determine whether selected controls were operating as 

intended.9

We conducted this review from April 2012 to November 2012 in accordance with 

generally accepted government auditing standards. Those standards require that 

we plan and perform the audit to obtain sufficient, appropriate evidence to provide 

a reasonable basis for our findings and conclusions based on our audit objectives. 

We believe that the evidence obtained provides a reasonable basis for our findings 

and conclusions based on our audit objectives.

7Our review did not include an examination of fraud perpetrated on claimants. According to the settlement’s court-appointed Ombudsman, however, all complaints of 

fraud his office has received pertain to fraud perpetrated on, not by, claimants.

8GAO, Standards for Internal Control in the Federal Government, GAO/AIMD-00-21.3.1 (Washington, D.C.: Nov. 1, 1999). 9We performed testing from June 7 to July 25, 2012. Controls applied after this time—such as final adjudications and those related to payment processing—are not 

reflected in our results.

Page 6
Page 13 GAO-13-69R Pigford II

Summary

• The parties charged with carrying out the terms of the Pigford II 

settlement agreement have created numerous internal control measures 

designed to balance various interests including accuracy, efficiency, and 

cost. Many of these measures serve to identify and deny fraudulent or 

otherwise invalid claims. 

• In general, the internal control design provides reasonable assurance 

that fraudulent or otherwise invalid claims could be identified and denied; 

however, certain weaknesses in the control design could expose the 

claims process to risk of improper determinations. In addition, at the time 

of our review, the internal control design was generally operating as 

intended to identify and deny fraudulent or otherwise invalid claims; 

however, the design has not yet been fully implemented, and we cannot 

determine whether the remainder of the design will operate as intended.

Page 7
Page 14 GAO-13-69R Pigford II

Background

Claims Process

To obtain relief under the settlement, a claimant is to take the following 

steps:

• Obtain a claim form. Claimant contacts Claims Administrator via 

telephone, e-mail, or mail. Claims Administrator obtains preliminary 

information to determine whether claimant may be a class member, as 

only such persons are to receive a claim form. Claims Administrator 

sends claim form and information about how Class Counsel can help 

with completing claim form.

• Choose between tracks A and B. Like Pigford I, Pigford II provides 

both a “fast-track” adjudication process (Track A) and a track for higher 

payments to claimants who go through a more rigorous review and 

documentation process (Track B).10

10Under Track A, successful claimants may obtain a cash payment of up to $50,000, tax relief, and debt relief (i.e., reductions or forgiveness of certain qualifying 

USDA loans). Under Track B, successful claimants may obtain a cash payment of up to $250,000. Payments will be made after all claims are decided, with the actual 

amounts subject to the total appropriation cap of $1.25 billion—less the costs of administering the settlement and attorneys’ fees and expenses—and dependent on 

the number of successful claims, among other constraints.

Page 8
Page 15 GAO-13-69R Pigford II

Background

Claims Process (cont’d)

• Submit a timely and complete claim. Claimant, or Class Counsel on 

claimant’s behalf, files claim with Claims Administrator who determines 

whether the claim was submitted by May 11, 2012,11 with all required 

information and documentation.

• Be a class member. Claims Administrator determines whether claimant 

(1) sent a written late-filing request to participate in Pigford I on or after 

October 13, 1999, and by June 18, 2008, to one of five named officials in 

Pigford I and (2) did not already obtain a determination on the merits of 

his or her discrimination complaint. 

• Establish relevant elements. Adjudicators review each claim and 

decide whether it establishes, to the required standard of proof, the 

relevant elements for relief.

11On September 14, 2012, the presiding judge approved an extension of the claim filing deadline for specified groups of claimants. The order allows 

claimants that meet certain criteria to have their claims deemed timely if submitted within 30 days of being sent the claim form by the Claims Administrator. Page 9
Page 16 GAO-13-69R Pigford II

Background

Implementing Parties’ Roles and Responsibilities

The settlement agreement defines the roles and responsibilities of the 

following parties charged with carrying out its terms:

Page 10

Role Responsibilities

Lead Class 

Counsel

Coordinate and direct activities of all other Class Counsel in assisting class 

members in completing claims. Numerous other duties include, subject to court 

approval, retaining and dismissing Claims Administrator and Track A and B Neutrals.

Claims 

Administrator

Receives potential class members' claims. Determines whether claims are timely, 

complete, and meet class definition. Assigns claims to Neutrals for adjudication, 

among other duties.

Track A and 

B Neutrals

Adjudicate whether claims establish relevant elements of required standard of proof. 

In addition, the Track A Neutral retained a firm to serve as the Initial Track A 

Reviewer and issue recommended decisions on whether the relevant elements of 

each Track A claim are established to the Track A Neutral who then reviews the 

claim anew.

Ombudsman Addresses concerns of class members and the public about settlement 

implementation. Makes periodic written reports and recommendations on settlement 

implementation to the court.
Page 17 GAO-13-69R Pigford II

Background

Tracks A and B: Standards of Proof and Claim Elements

Track A claimants must establish by “substantial evidence”12 each of the 

following elements:

1. they are African American;

2. within the period from Jan. 1, 1981, to Dec. 31, 1996, they farmed or 

attempted to farm; owned, leased, or attempted to own or lease 

farmland; and applied or attempted to apply for participation in a USDA 

farm credit or program benefit;

3. if they submitted a written application for a loan or program benefit, they 

were denied participation; were approved for a lesser amount than 

requested; were burdened by restrictive conditions; did not receive 

appropriate loan service from USDA; or participation was provided late;

12Such evidence that a reasonable person might accept as adequate to support a conclusion after taking into account other evidence in the record that 

fairly detracts from that conclusion. Page 11
Page 18 GAO-13-69R Pigford II

Background

Tracks A and B: Standards of Proof and Claim Elements (cont’d)

4. if they attempted to submit an application for a loan or program benefit, they 

made a bona fide effort to apply, and USDA actively discouraged the 

application;

5. they suffered economic loss as a result of USDA’s treatment; and

6. they complained of discrimination to a federal official on or before July 1, 

1997.

Track B claimants must establish by a “preponderance of the evidence”13 that 

they:

1. meet the same elements required under Track A except they must have 

applied (not merely attempted to apply) for a loan (not a program benefit); 

2. were treated less favorably by USDA than a similarly situated white farmer; 

and

3. they must prove their actual damages.

13Such relevant evidence as is necessary to prove something is more likely true than not true. Page 12
Page 19 GAO-13-69R Pigford II

Background

Tracks A and B: Evidentiary Requirements

To establish the relevant elements, Track A and B claimants are to:

Page 13

Track A Track B

1. answer all questions in the claim form regarding the required elements (requiring some yes or 

no responses and some explanations and clarifications); 

2. declare, under penalty of perjury, that each of the statements made in the claim form is true and 

correct; and

3. submit a form requesting 

and authorizing USDA to 

provide information 

about the claimant’s 

farm loan program loans 

to the Claims 

Administrator, if seeking 

debt relief in addition to 

cash payment and tax 

relief. 

3. submit independent, documentary evidence for every required 

element, except that two of the elements (regarding the 

complaint of discrimination and the similarly situated white 

farmer) may be supported with a sworn written statement by an 

individual who is not a member of the claimant’s family 

describing his or her personal knowledge of the claimant’s 

complaint of discrimination or a specific white farmer in the 

claimant’s circumstances who was treated more favorably than 

the claimant by USDA.
Page 20 GAO-13-69R Pigford II

Background

Overview of Internal Control

As discussed in the Standards for Internal Control in the Federal 

Government, internal control

• comprises the plans, methods, and procedures used by entities to meet their 

missions, goals, and objectives;

• is not one event, but a series of actions and activities that occur throughout an 

entity’s operations on an ongoing basis;

• serves as the first line of defense in safeguarding assets and preventing and 

detecting errors and fraud;

• should be designed to provide reasonable assurance regarding prevention of or 

prompt detection of unauthorized acquisition, use, or disposition of an entity’s 

assets; and

• should be designed and implemented based on the related cost and benefits. 

Page 14
Page 21 GAO-13-69R Pigford II

Background

Overview of Internal Control (cont’d)

Internal Control Standards

The federal government and private industry have developed five standards for 

designing and implementing internal control.14 The standards define the minimum 

level of quality acceptable for internal control and provide the basis against which 

internal control is to be evaluated.

14See the federal standards (described above) in GAO/AIMD-00-21.3.1; see the private industry standards (organized within the same five categories with 

similar definitions) in Committee of Sponsoring Organizations of the Treadway Commission, Internal Control - Integrated Framework (September 1992). Page 15

Standard Description

Control 

Environment

Management and employees should establish and maintain an environment throughout the 

organization that sets a positive and supportive attitude toward internal control and 

conscientious management.

Risk Assessment Internal control should provide for an assessment of the risks the agency faces from both 

external and internal sources.

Control Activities Internal control activities help ensure that management's directives are carried out. The control 

activities should be effective and efficient in accomplishing the agency's control objectives.

Information and 

Communications

Information should be recorded and communicated to management and others within the entity 

who need it and in a form and within a time frame that enables them to carry out their 

responsibilities.

Monitoring Internal control monitoring should assess the quality of performance over time and ensure that 

the findings of audits and other reviews are promptly resolved.
Page 22 GAO-13-69R Pigford II

Background

Overview of Internal Control (cont’d)

Internal Control Deficiencies

A deficiency in internal control exists when the design or operation of a 

control does not allow management or employees, in the normal course of 

performing their assigned functions, to prevent or detect and correct 

impairments of effectiveness or efficiency of operations. 

• A deficiency in design exists when (1) a control necessary to meet the 

control objective is missing or (2) an existing control is not properly 

designed so that, even if the control operates as designed, the control 

objective is not met. 

• A deficiency in operation exists when a properly designed control does 

not operate as designed, or when the person performing the control does 

not possess the necessary authority or qualifications to perform the 

control effectively.

Page 16
Page 23 GAO-13-69R Pigford II

Objective 1: Pigford II Internal Control

Many Measures Aim to Identify Invalid Claims

The parties charged with carrying out the terms of the settlement agreement have 

created numerous internal control measures designed to balance various interests 

including accuracy, efficiency, and cost. Many of these serve to identify and deny 

fraudulent or otherwise invalid claims, including:

• Restrictions on claim form access. Only persons whom the Claims 

Administrator determines may be a class member based on a review of 

preliminary information are to receive a claim form (as of September 28, 

2012, the Claims Administrator reported receiving requests for 199,216 

claim forms and that 89,057 had been sent out).

• Reviews for timeliness, completeness, and class membership prior to 

adjudication. Before a claim may be reviewed to determine whether the 

required elements have been established, the Claims Administrator 

assesses whether the claim is timely, complete, and submitted by or on 

behalf of a class member. A claim may be denied as invalid on any one of 

these grounds.

Page 17
Page 24 GAO-13-69R Pigford II

Objective 1: Pigford II Internal Control

Many Measures Aim to Identify Invalid Claims (cont’d)

• Iterative reviews of whether elements are established. Track A claims, 

subject to a lower standard of proof, are each assessed multiple times. First, the 

Initial Track A Reviewer conducts two independent reviews of each claim and 

issues a recommended decision. Next, a Track A Neutral reviews the claim anew 

and renders a decision. If that decision is a denial, the claim is reviewed again by 

a different Track A Neutral. The Track B Neutral told us that it is conducting two 

independent reviews of each claim.

• Identification of potential fraud concerns. The Initial Track A Reviewer and 

the Track A and B Neutrals may mark claims as potential fraud concerns, 

sometimes indicated by similar patterns across claims, such as similar 

allegations, structure, or handwriting.15 For example, as of October 23, 2012, the 

Track A Neutral and Initial Track A Reviewer identified about 3,180 claims with 

potential fraud concerns. These claims were referred to the parties to the 

settlement agreement for concurrence on how to resolve them, which may 

include subsequent referral to the appropriate law enforcement agency for 

investigation.

15According to the Track A Neutral and USDA officials, some perceived patterns may not in fact be fraudulent and instead may result from appropriate 

circumstances. For example, similarities across claims may be attributable to a single individual assisting several claimants in completing their claim 

forms.

Page 18
Page 25 GAO-13-69R Pigford II

Objective 1: Pigford II Internal Control

Many Measures Aim to Identify Invalid Claims (cont’d)

• Authority to request additional information from claimants. Track A and B 

Neutrals may request additional documentation or evidence from claimants 

where the neutral suspects fraud or determines such information would be 

necessary or helpful to determine the claim validity (21 such requests had been 

made as of September 18, 2012, according to the Track A and B Neutrals).

• Consideration of material beyond that provided by Track B claimants 

where Track B Neutral determines a fraud concern exists. Under the terms 

of the settlement agreement, the Track B Neutral may consider any information 

or material that the Track B Neutral deems appropriate (in contrast to constraints 

imposed on the Track A Neutral who may consider only material submitted by 

the claimant, as discussed below).The Track B Neutral told us it will utilize this 

authority by taking into account standard information sources—such as those 

accessed via web searches—where the Track B Neutral determines there is 

reason to suspect a potentially fraudulent claim. Track B claims with fraud 

concerns will be referred to the parties to the settlement agreement for guidance 

on how to resolve them, which may include subsequent referral to the 

appropriate law enforcement agency for investigation.

Page 19
Page 26 GAO-13-69R Pigford II

Objective 1: Pigford II Internal Control

Many Measures Aim to Identify Invalid Claims (cont’d)

• Final control measures after all claims are provisionally 

adjudicated. No payments will be made until all claims have first been 

provisionally adjudicated, and final control measures are taken. Those 

measures include identifying duplicate claims (to ensure no one is paid 

twice) and claims filed on behalf of the same farming operation (to 

ensure only one payment per farming operation) or the same deceased 

or physically or mentally limited class member (to ensure only one 

payment per class member). 

Page 20
Page 27 GAO-13-69R Pigford II

Objective 1: Pigford II Internal Control

Many Measures Aim to Identify Invalid Claims (cont’d)

Selected Internal Control Measures Throughout Course of Claims Process

Source: GAO analysis of information provided by the parties charged with carrying out the terms of the Pigford II settlement, including the Claims 

Administrator, Initial Track A Reviewer, and Track A and B Neutrals. Page 21

Claims 

Administrator

• Provides claim 

forms to 

potential class 

members

• Reviews claims 

for timeliness, 

completeness, 

and class 

membership

Initial Track A 

Reviewer

• Performs two 

independent 

reviews of 

Track A claims 

• Identifies fraud 

concerns

Track A Neutral

• Reviews Track A claims

• Conducts secondary review of 

denied claims

• Identifies fraud concerns and 

reviews fraud concerns identified 

by Initial Track A Reviewer 

• May request additional information 

from claimants

Track B Neutral

• Performs two independent reviews of Track B claims

• Identifies fraud concerns

• May request additional information from claimants

• May consider material beyond that submitted by claimants

Claims 

Administrator

• Prior to payment, 

performs final 

controls to, e.g., 

identify duplicate 

claims and claims 

submitted on 

behalf of the 

same farming 

operation or same 

class member 

(these checks 

occur also as 

claims are initially 

processed)
Page 28 GAO-13-69R Pigford II

Objective 2: Design and Operation

The Design Generally Provides Reasonable Assurance, but Certain 

Weaknesses May Increase Risk

The internal control design generally provides reasonable assurance that 

fraudulent or otherwise invalid claims can be identified and denied, but certain 

weaknesses could expose the claims process to risk of improper determinations.

• The design addresses the five standards for internal control. For example, the 

implementing parties described and GAO observed the following:

o a positive and supportive attitude toward accurately evaluating claims;

o assessment of the claim form’s risk of eliciting inadequate information, 

leading to revision of the claim form prior to the claim filing period; 

o numerous control activities aimed at detecting invalid claims;

o regular communication and information sharing within and among the 

implementing parties, such as weekly meetings by the Claims 

Administrator, Initial Track A Reviewer, and Track A Neutral; and

o ongoing monitoring of control measures, such as statistical evaluations of 

Track A Neutral adjudications by an external organization and efforts to 

review and act on these evaluations. 

Page 22
Page 29 GAO-13-69R Pigford II

Objective 2: Design and Operation

The Design Generally Provides Reasonable Assurance, but Certain 

Weaknesses May Increase Risk (cont’d)

• We identified certain weaknesses in the internal control design 

that may allow fraudulent or otherwise invalid claims to go 

unidentified. 

o Some weaknesses are a result of constraints imposed by the 

terms of the settlement agreement, which were agreed to by 

the parties to the settlement agreement as fair, reasonable, 

and adequate. In addition, the terms were approved by the 

presiding judge, effectively ratified by Congress in the Claims 

Resolution Act of 201016 and, in some cases, originated in 

Pigford I and were subsequently enacted in the 2008 Farm Bill. 

These design weaknesses, hence, cannot be modified by the 

implementing parties. 

o Another weakness is within the authority of the implementing 

parties to modify.

16The Claims Resolution Act of 2010 made available $1.15 billion, the use of which was to “be subject to the express terms of the” Pigford II settlement 

agreement. Pub. L. No. 111-291, § 201(a)(1), (b), (c). Page 23
Page 30 GAO-13-69R Pigford II

Objective 2: Design and Operation

The Design Generally Provides Reasonable Assurance, but Certain 

Weaknesses May Increase Risk (cont’d)

Weaknesses Constrained by Terms of Settlement Agreement

Absence of procedures for Track A Neutral to consider information other than that 

submitted by claimant.

• Under the Standards for Internal Control in the Federal Government, control 

activities include verification.

• The Track A Neutral’s determination must be based solely on the materials 

submitted by the claimant and, as a result, the Track A Neutral has no way of 

independently verifying the information provided by claimants. Under the 

settlement agreement, Track A claimants are to establish their claims by 

“substantial evidence,” which requires that they answer all relevant questions in 

the claim form and declare that their statements are true and correct but not that 

they submit any supporting documentation. 

• As stated in the judicial opinions approving Pigford I and Pigford II, the lenient 

standard of proof for Track A claims is in recognition of USDA’s history of 

discrimination and class members’ lack of documentation—attributable in part to 

the passage of time and USDA’s not processing complaints in a timely manner.

Page 24
Page 31 GAO-13-69R Pigford II

Objective 2: Design and Operation

The Design Generally Provides Reasonable Assurance, but Certain 

Weaknesses May Increase Risk (cont’d)

Weaknesses Constrained by Terms (cont’d)

Absence of procedures for opposing Track A or B claims or reviewing the Claims 

Administrator’s or Track A or B Neutrals’ determinations. 

• Standards for Internal Control in the Federal Government states that internal 

control includes monitoring and review. 

• Under the terms of the settlement agreement, the opposing party—USDA and its 

counsel, DOJ—has no role in the claims determination process, and the 

Ombudsman has no authority to reexamine the Claims Administrator’s or Track 

A or B Neutral’s determinations.17 As a result, two mechanisms of monitoring and 

review are absent.

• According to the parties to the settlement agreement, these terms were chosen 

to reduce cost and accelerate the rate of claim determinations and payments.18

17In Pigford I, the government responded to every claim filed, and the Pigford I Monitor had the authority to direct claim reexamination and did so for half of the 5,848 

claims that were the subject of a petition for reexamination. For a full discussion of the Pigford I Monitor, see GAO, Pigford Settlement: The Role of the CourtAppointed Monitor, GAO-06-469R (Washington, D.C.: Mar. 17, 2006). 18In Pigford I, USDA incurred significant cost opposing claims (more than $48 million in administrative and staff salaries and expenses alone from 1999 to 2009, 

according to USDA), and the adjudication process lasted more than a decade. 

Page 25
Page 32 GAO-13-69R Pigford II

Objective 2: Design and Operation

The Design Generally Provides Reasonable Assurance, but Certain 

Weaknesses May Increase Risk (cont’d)

Weakness within Authority of Implementing Parties to Modify

Absence of agreed upon procedures to identify claimants who already obtained 

determinations on their complaints in judicial or administrative forums.

• Under the Standards for Internal Control in the Federal Government, control 

activities should effectively accomplish control objectives. 

• The Claims Administrator is responsible for determining class membership, 

including that claimants have not obtained prior judgments on their complaints. 

To satisfy this requirement, it checks whether claimants appear in certain 

records—indicating they obtained judgments in, or opted out of, Pigford I—and 

plans to check the participant lists of two other settlements. It also asked USDA 

to check its records of judicial and administrative determinations. USDA has not 

yet responded to the request.

• Because no agreement has been reached on these procedures, we cannot know 

whether the control design will provide reasonable assurance of identifying 

claimants who already obtained judgments in judicial or administrative forums20

and some claimants may, therefore, improperly be found to be class members.

19According to Lead Class Counsel, the proportion of Pigford II claimants that obtained determinations in judicial or administrative forums is likely small. Page 26
Page 33 GAO-13-69R Pigford II

Objective 2: Design and Operation

Internal Control Generally Operated as Designed, but Not Fully Implemented

At the time of our review, the internal control design was generally operating as 

intended to identify and deny fraudulent or otherwise invalid claims. The design, 

however, has not yet been fully implemented, and we cannot determine whether 

the remainder of the design will operate as intended. 

• Our testing of a random sample of 150 claims drawn from the 37,275 claims that 

had been submitted as of June 4, 2012 found, for example, that:

o The Claims Administrator consistently and accurately recorded in the claims 

database20 whether:21

 there were missing pieces of required information or documentation to 

determine completeness of the claims;

 the claimants appear in certain records from Pigford I—indicating they 

submitted late-filing requests to participate in Pigford I—or had 

submitted adequate independent evidence of late-filing requests to 

determine the first requirement of class membership; and

20The claims database is a web-based platform that tracks records, documents, adjudication decisions, correspondence, and other information related to 

implementation of the settlement.

21We found no exceptions in our testing of these claims. Because our sample is based on random selections, the resulting estimates are subject to sampling error. We 

are 95 percent confident that the actual error rate is less than or equal to 2 percent. 

Page 27
Page 34 GAO-13-69R Pigford II

Objective 2: Design and Operation

Internal Control Generally Operated as Designed, but Not Fully Implemented 

(cont’d)

 the claimants appear in other records from Pigford I—indicating they 

obtained judgments on their complaints in, or opted out of, Pigford I—to 

determine the second requirement of class membership.22

• The Claims Administrator consistently and accurately recorded in the claims 

database the claim submission dates for an estimated 95 percent of claims in 

order to determine timeliness. For an estimated 5 percent of claims, however, 

the submission dates were incorrectly recorded.23 According to the Claims 

Administrator, the final control measures will include verification of a sample of 

timeliness determinations by comparing actual with recorded submission dates.

• The Initial Track A Reviewer consistently performed two independent reviews of 

Track A claims, and the Track A Neutral consistently adjudicated claims after the 

Initial Track A Reviewer.24

22The Claims Administrator has not, however, completed other steps, as discussed above.

23We found 6 exceptions in our testing of 126 claims. We are 95 percent confident that the actual error rate is less than or equal to 9 percent. For the remaining claims, 

we could not evaluate the control due to illegible or not visible submission dates. 

24These estimates are based on 115 and 99 of the claims in our sample, respectively, for which there were no exceptions. We are 95 percent confident that the actual 

error rate for each does not exceed 3 percent. For the remaining claims, we could not evaluate these controls because 5 claims were not Track A claims, 20 claims 

had not been routed to the Initial Track A Reviewer for reasons such as incompleteness, the Initial Track A Reviewer had not yet begun review of 10 claims, and the 

Track A Neutral had not yet begun adjudication of 16 claims.

Page 28
Page 35 GAO-13-69R Pigford II

Objective 2: Design and Operation

Internal Control Generally Operated as Designed, but Not Fully Implemented 

(cont’d)

• The settlement’s internal control design has not yet been fully 

implemented because the adjudication process is ongoing. Therefore, 

we cannot know whether certain future control measures will operate as 

intended.

o Although internal control may be well designed, its effectiveness 

may be impaired if not fully or correctly implemented.

o Control measures yet to be implemented under the Pigford II 

settlement, either in full or in part, include (1) identification of 

duplicate claims and claims submitted on behalf of the same farming 

operation or the same class member and (2) verification of 

timeliness determinations.

o If the remaining control measures are not fully and correctly 

implemented, the internal control design cannot be expected to 

operate as intended in providing reasonable assurance that 

fraudulent or otherwise invalid claims will be identified and denied.

Page 29
Page 36 GAO-13-69R Pigford II

Enclosure II: Comments from the U.S. Department of Agriculture
Page 37 GAO

-13-69R Pigford II

(361398)
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